A Level Business Studies: State Intervention in Zimbabwean Businesses: Assistance and Constraints
- In another post we mentioned the fact that the government of Zimbabwe is considered to be a stakeholder by all businesses that operate in Zimbabwe
- This is because the government of Zimbabwe often intervenes and interferes with the way businesses operate in Zimbabwe
- The way the state intervenes can be considered as assistance or a constraint
- In the context of the impact of state intervention on businesses in Zimbabwe, “constraints” refer to the ways in which the government actions limit or restrict the ability of businesses to operate and grow. Examples of constraints might include high taxes, bureaucratic obstacles, economic instability, and competition from larger firms.
- On the other hand, “assistance” refers to the ways in which the government provides support or aid to businesses in order to help them succeed. Examples of assistance might include tax incentives and subsidies, access to finance, infrastructure improvements, training and support programs, and political stability.
- Below is a list of ways the Zimbabwean state has intervened in businesses, including both ways it has assisted and constrained businesses of different sizes
State Assistance to Businesses:
- Tax incentives and subsidies: The Zimbabwean government has offered tax incentives and subsidies to businesses to encourage investment and stimulate economic growth. A popular example is tax holidays granted to businesses that enter into build-to-operate (BOT)arrangements with the government of Zimbabwe. SMEs in Zimbabwe often get what is known as a Special Initial Allowance where they pay less or no tax during their early years of operation. Tourist facilities in Zimbabwe do not pay Value Added Tax on items sold to non-residents of Zimbabwe. Also manufacturing businesses that set up shop in Zimbabwe pay less tax under arrangements with ZIMRA if they export whatever they manufacture
- Access to finance: The government has provided support for small and medium enterprises (SMEs) to access finance through programs such as microfinance and crowd-funding. The government of Zimbabwe has set up various input schemes that make it easy for businesses especially in the manufacturing and agricultural sector to get loans. For example, several banks have been set up for this purpose including Agribank, Empower Bank, and Zimbabwe Women’s Microfinance Bank. The government has various input schemes such as Command Agriculture and Pfumbvudza. During times of acute foreign currency shortages the government gives foreign currency to important businesses through the Reserve Bank of Zimbabwe
- Infrastructure improvements: The government has invested in infrastructure improvements, such as roads, ports, and telecommunications, to help businesses reach customers and access resources. The government constantly repaves roads such as the Beit-Bridge road which is being repaired. The government has also sought to revive the NRZ, has invested in fibre and issued licences to mobile network operators such as Econet.
- Training and support programs: The government has provided support for training and development programs to help businesses improve their skills and grow their businesses. This is done through state-owned colleges such as the University of Zimbabwe and also through changes in the curriculum such as the new ZIMSEC syllabus
- Political stability: The government has taken steps to promote political stability and reduce uncertainty, which can create a more favourable operating environment for businesses. For example, after the turmoil of 2008 the political parties in Zimbabwe formed a Government of National Unity (GNU) from 2009-2013. These were some of the best times for businesses in recent memory
State Constraints on Businesses:
- High taxes: The Zimbabwean government has implemented high taxes, which can increase the cost of doing business and reduce competitiveness. This is often seen by mobile network operators in Zimbabwe who have to pay a plethora of taxes at various levels including an airtime tax
- Bureaucratic obstacles and corruption: The government has been criticised for bureaucratic obstacles, such as corruption and red tape, which can make it difficult for businesses to operate and grow. Zimbabwe has ranked high on the corruption perception index for several years running
- Economic instability: The Zimbabwean economy has been characterized by high inflation and economic instability, which can create uncertainty and make it difficult for businesses to plan for the future.
- Lack of access to markets: Some businesses, particularly SMEs, face challenges in reaching customers and accessing markets, which can limit their growth potential.
- Competition from larger firms: Smaller businesses in Zimbabwe often face competition from larger firms, which have greater resources and can offer lower prices and better products. This can make it difficult for SMEs to compete and grow. businesses in Zimbabwe: A Study of Assistance and Constraints for Businesses of Different Sizes”
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