Natural resources

After you have worked through this section of the learning unit, you should be able to:

  • describe and identify natural resources and the income that is derived from the ownership of natural resources

Read through the following extract from Stats SA:

Environmental economic accounts for South Africa

The natural environment provides resources – such as water, land and minerals – that drive the economy and other human activities. The effective measurement of the extent of resource use is vital for ensuring the development of successful environmental management policies and sustainability. The United Nations' System of Environmental and Economic Accounts (SEEA), adopted by Stats SA, is the international standard for measuring the amount of natural resources a country has in reserve, and how quickly these reserves are being used.

Stats SA has developed the following environmental economic accounts for South Africa: energy (the amount of energy produced by coal, crude oil, gas, hydro, nuclear, petroleum, waste and renewable resources), minerals (physical stocks and flows, depletion rates, sales and resource rent for gold, coal and platinum group metals (PGMs)) and fisheries (the physical stock of hake, lobster, abalone and horse mackerel caught over time). These are published in the annual Environmental Economic Accounts Compendium report. Discussion documents on the compilation of water accounts have also been published.

http://www.statssa.gov.za/?page_id=5992&paged=2

At current production levels, South Africa has only 39 years of accessible gold reserves remaining, whereas the country still has 335 years of platinum group metal reserves and 256 years of coal reserves. This is according to Stats SA's latest Environmental Economic Accounts Compendium.5

Once the world's top producer of gold, dwindling gold reserves have implications for future policies related to the economy, mining and employment.

The influence of mining, as well as manufacturing, on the economy has waned over the decades. Manufacturing was the largest industry in 1980, contributing 22% to GDP. In other words, for every R100 of value add that the South African economy produced that year, R22 was due to manufacturing. By 2016, its contribution had fallen to 13%.

Mining’s contribution increased during the 1970s and peaked at 21% in 1980. Contributing to the upward surge in 1980 was a relatively high gold price. In 1987, mining employed just over 760 000 individuals. In 2016, the industry contributed only 8% to GDP, employing 438 000 individuals in the third quarter of that year.6

Agriculture also slipped in economic ranking to fall from seventh to tenth place, contributing 2% to GDP in 2016.

http://www.statssa.gov.za/?p=10718

A natural resource is anything that people can use which comes from nature. Because this factor of production is not created primarily by human endeavour, most of the various natural resources are given and can often not be increased at will.

Note the following examples of natural resources:

  • air, water and soil
  • biological resources (e.g. plants and animals)
  • raw materials (e.g. minerals)
  • space and land
  • wind, geothermal, tidal and solar energy

Natural resources are often classified into renewable, flow and non-renewable resources.

Renewable resources are usually living and can therefore renew themselves, assuming they are not killed off or overharvested. Good examples of renewable sources are trees (forests and woodlands) crops, and livestock like fish. Water and soil are also renewable sources, but they are classified as non-living.

The tides, solar power and wind can be classified as flow renewable resources. They are all renewable, but they do not need regeneration or re-growth.

Non-renewable resources are those which cannot be replaced once they have been used up or harvested. This includes fossil fuels, coal and petroleum.

Most natural resources are limited, but with the aid of technology, they can be made more productive. For example, fertilisers have improved the quality of land, thus making more land available for agriculture, and improved drilling technology has opened up oil deposits in frozen areas such as Alaska. Nevertheless, as natural resources are limited (in fixed supply), exploiting them should be carefully considered. Overexploitation or rapid (fast) exploitation can cause terrible environmental damage as well as long-term economic, environmental and human suffering.

The owners of natural resources earn an income in the form of rent from it. In everyday usage, the word "rent" has different meanings. Many people rent their houses, offices and shops. Included in this rent is the rent for both the land on which the house, office or shop is situated and the building itself. The concept of rent is also used in connection with the rental of a car or computer.

When we use the concept of rent in the field of natural resources, we refer to the payment made to the owners of natural resources for the use of the natural resources. It excludes the rental payments for the improvements on the land, such as a building or factory.

Activity

Do the following activity before you proceed:

Which of the following is not an example of a natural resource?





Think again.

It is a cell phone. Bear in mind that natural resources are not made by humans. They are “gifts of nature”.

Indicate whether the following statement is true or false:

Many natural resources come from the earth and are therefore unlimited.



Think again.  The statement is false.

Natural resources do come from the earth, but they are scarce and must be used with great care.

Indicate whether the following statement is true or false:

Owners of natural resources receive rent as income for making natural resources available for the production of goods and services.