Business Studies: Government and location of businesses

• We have already looked at factors that affect where a business chooses to locate
• One of the principal factors to consider is the government’s policies,laws and regulations
• The government might pass laws prohibiting certain businesses from certain areas
• For example heavy industries cannot be located near residential areas and by city policies they are found on the western side of most towns as Zimbabwe has a prevailing eastern wind
• The government can also offer grants and tax incentives to businesses
• In Zimbabwe business that choose to locate their operations at growth points are normally given tax breaks
• This is because the government wants to encourage investment and development in these areas
• On a local level popular ways to influence where businesses locate is through
• Grants offered to businesses which locate in certain areas
• A grant is a bounty, contribution, gift, or subsidy that can be in cash or kind bestowed by a government or other organization (called the grantor) for specified purposes to an eligible recipient called the grantee
• Grants are usually conditional upon certain qualifications as to the use, maintenance of specified standards
• Other forms of incentives can also be offered for example loans at preferential rates
• Laws and by laws can be passed stipulating where businesses can locate their operations
• Large foreign investors such as Zimplats are offered tax breaks known as tax holidays
• A tax holiday is a temporary fixed period when a business can operate without paying certain taxes or receives a favorable tax rate during said period
• In return the business locates into Zimbabwe and locate in certain areas
• Certain businesses are also wooed as part of bilateral deals between Zimbabwe and other countries
• Such businesses receive favorable incentives to locate to Zimbabwe
• The government can also waive indeginisation laws allowing 100% foreign ownership in certain sectors of the economy
• The government can also market itself and create an image of a politically and economically stable country this can be done via traditional marketing as well as creating websites and on social media
• Passing laws respecting property rights can attract investors
• Devaluating the currency can also encourage businesses to locate to a certain country
• Building up national infrastructure such as roads, internet backbones etc can attract international investments

To access more topics go to the O Level Business Notes