NAME TINOTENDA PROSPER DZVAIRO

REG NUMBER R192635F

COURSE CODE AGEC 444
PROGRAM HAABEAM
ASSIGNMENT 1

TOPIC- List the regulations, policies and practices which are part of government regulatory
which are part of government framework, which tend to impede the establishment and
operation of small businesses in Zimbabwe.

The National Institute of Statistics (NIS) classified enterprises with fewer than 10 employees.
Small and sized Enterprise (SME) development is crucial for sustained and equitable
development of the Cambodian economy. Evidence from more economically developed
Asian nations demonstrates that SMEs have considerable potential for driving economic
growth. Under the right conditions, entrepreneurs, regardless of background, can start and
grow SMEs, generating profits and creating employment opportunities. According to
Brittinica regulation refers to the promulgation of targeted rules, typically accompanied by
some authoritative mechanism for monitoring and enforcing compliance such as tariffs and
quotas which will in turn affect the establishment and growth of small businesses. Policy
Framework in small business are rules that hopefully better guides decisions resulting in
positive outcomes that enhance the community or unit e.g., fiscal policies such as taxes and
monetary policies such as interest rates.

The implementation of a policy by the government can alter social behaviour of small
businesses. For instance, the government can impose taxes on the use of fossil fuels and
provide financial aid to large companies that use renewable energy sources. This action by
the government will hinder the establishment and growth of small businesses as they have
limited finances to comply with the government taxes. Investors will become disinterested in
investing in small businesses too if additional taxes or tariffs are imposed on them. Like tax
and tariff exemptions on a certain sector encourages increased investment and could lead to
growth and survival of these small businesses. A high tax rate on imported items, for
instance, can promote local manufacture of the same commodities. On the other hand,
domestic production is hampered by a high tax rate on raw materials.

Government expenditures may also impede the establishment and operations of small
businesses in Zimbabwe. According to Loizides and Vamvoukas (2005), an increase in the
government spending will in the short run lead to an increase in the growth of the economy
but will inturn lead to an increase in prices. A general increase in prices will result in
inflation, an inflationary economy will to a larger extent disadvantage the operations of small
businesses in Zimbabwe as it will result in low purchasing power resulting in large
enterprises to bulldoze and dominate the market.

Small businesses are impacted by high borrowing rates since they almost certainly have tight
cash flow. Small business owners must save more money in order to be able to pay back any
loans and debt, which lowers the amount of income the company can generate. High rates can
reduce asset costs and make it more difficult to sell them for cash. According to Ezra (2012)
Almost all small businesses have loans that are still outstanding, and as interest rates increses,
the cost of those loans increases. As these are typically lengthy loans that will take years to
repay, any increase in the interest rate on them will result in you having to carry the debt for a
longer period and pay more. Also, increased interest rates will make it more challenging to
obtain additional short-term loans to assist with covering unforeseen costs or expanding your
firm when necessary. This will result in small businesses to take many months to repay their
loans therefore hindering their establishment.

Government regulations such as imposition of tariffs will hinder the establishment and
operation of small businesses who import their raw materials. The main issue with tariffs is
that they merely raise prices of goods and services in the domestic markets which makes
them undesirable as compared to goods and services from well-established Multinational
Companies. If one is a small business in the construction industry, one could see how rising
timber prices could increase the firm’s costs or the entire cost of a project. Steel, aluminium,
and solar panels are some items that have recently been subject to new tariffs in Zimbabwe
and therefore if they increase their prices this will result in a decrease in demand of that
certain product causing the small business to become insolvent and due to stiff competition it
will lead to its demise before reaching its full potential growth.

Bureaucracy which is the excessively complicated administrative procedure of the

government also cripple the establishment of small business. A great deal of quality amount
of time is wasted in queues and moving from one government department to another. The
systems and process put in place and too much paperwork required is too much and it leads to
slow decision making. This is discouraging and leads to corruption, as to skip lines people
tend to not follow the correct established procedures which will bore heavy penalties and
small business being forced to close before reaching their pinnacle. Which in the long run
disadvantages the economy at large because nurturing these small businesses can result in an
increase in our GDP.

The government Policies, regulations and practices are in one language which is our official
language English, this is discouraging to other entrepreneurs as they are not quite familiar
with English, so they might have brilliant ideas and small businesses with a potential to thrive
but due to language barrier are focused to shut down because they were not fully aware of the
policies to full and honestly subscribe to them.

However, it is worth noting that some effort by the government and other stakeholders to
promote small businesses is being made through the SMEs ministry, SEDCO and other
initiatives to relax the policies, procedures, and practices in line with the vision 2030. But that
effort is certainly inadequate.