Introduction

The South African economy is highly dependent on its natural resource base historically for mining and agriculture, more recently for manufacturing and tourism. Economic activities are increasingly placing pressure on the ability of the environment to absorb waste. The economy uses natural and environmental resources as essential inputs in the production process. During the production process, resource material and energy are transformed from one state to another (Kneese, Ayres, & d'Arge 1970). Humans utilise the goods and services produced during this transformation process. This process has, however, serious environmental implications such as resource depletion, waste generation and pollution (see also Sections on Climate and Atmosphere Change, Terrestrial Ecosystems, and Freshwater Systems and Resources). A flow diagram depicting the DPSIR model for this sector is presented in Figure 6.1.

Figure 6.1 Flow diagram of the DPSIR model of the economic environment.

Economic theory and its application have been extremely slow to recognise the above-mentioned links and therefore fail to reflect environmental and social impacts adequately (Atkinson & Hamilton 1996). The very nature of sustainable development, with the economy and the environment inextricably meshed, argues for an approach that takes cognisance of these linkages. Treating the environment as a separate sector, separated from the overall economy is short-sighted and counterproductive. Existing evidence suggests that:

• economic instability leads to environmental degradation and economic stabilisation is necessary but not sufficient for the attainment of sustainable development, and

• the effects of macroeconomic policies on the environment are generally ambiguous and difficult to predict, but sometimes straightforward and significant (Munasinghe & Cruz 1995).

Environmental economics should act as a bridge to incorporate social and environmental concerns into the structure of economic decision-making by demonstrating the value of natural resources in economic terms. This role can be illustrated as the integration of society's needs, economic theory and the natural environment and can be portrayed as follows in Figure 6.2.

Figure 6.2 Integration model of environmental economics. Source: Adapted from Munasinghe 1996:3.

>     Economic Environment: Driving forces

There is also information about the Economic Environment in the following reports:
Metropolitan reports:
	Cape Metropolitan Council (1998 edition)		Durban Pilot Study
	Greater Johannesburg Metropolitan Council (1999 edition)		Greater Pretoria Metropolitan Council (1999 edition)