ZIMSEC O Level Business Studies Notes: Aiding and influencing the business: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

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