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educational1tOok written to m.et the r.quirementS of the Miais.trY,
of Education, Sport and Culture Comm.rce '0' Lev.' ~labas.
Stud•• studying on tII.ir own can us. it

has:
.• K.y factS at the beginning of each chapter
MoHm and I~cal .x • of different com•• reial. COlIC••
• Attractiv. ancl~ucative Hluitlalions inthe fonn • _· •
. .dill...... ~... • post.rs to.· improve., ..

"'_"'-1_ pnlcticequestions at th8:•• Of

Approved by
the Ministry. of
Education Sport
and Culture in
August 2005
·
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,. IIIIIIIIIIF
Longman
Zimbabwe- --
~
 CONTENTS'
_ . -

Chapter

1 Production 1

2 Wholesale trade :............................ 7

3 Retail trade 13

4 Channels of distrib,ution : 25

5 Hire purchase : ~ 27

6 Business documen4s
.
7 Business

JLMon~y
. .:
organisation

and banking
; .-

: .'~:

,
.
30

36

59
. ¥

9 Transport ~ :,; .' 79

10 Communication 86
.-
11 Warehousing 96

12 Advertising , 100
._
..c13 Insurance 108 ~. ~

14 Consumer protection 119

,;.:.. .

15 Business calculations ~ : ,~.126

16 Intemational trade ·, 132

17 importance of aids to trade 148

Specimen paper and answers 150 I~"

. ..' ~~1f:
.Chapter .1
PrOduction
,. .

Production, is the provision of goods and services Basic human needs are food, shelter, clothes,
to satisfy human needs and wants. medical service, education and water which are
necessary for survival.
Goods and services
Human wants include cars, television, radio,
Goods are tangible items, e.g. desks, meat and
home theatres, entertainment. These are items
cars. one can do without. ~'.
Goods can be classified as:
• durable goods which last for a long time, Producen • consu•• n
e.g. motor cars, 'furniture and equipment.
• non-durable goods have a short life span e.g. Producers
perishable goods, clothes and food stuffs. • those involved in' obtaining raw materials or
• consumer goods which are finished goods manufacturing goods, offering services and
ready for use by the end user, ·e.g. ball-point trading .
pen, clothes, bread, furniture and refrigerator.
• capital (or producer) goods which are used Consumers
to produce.other goods, e.g. tractor, sewing • the end users of goods and services
machine, assembly plant, accessory equipment
The stages of production are illustrated in the
Services are iritangible items such as education diagram below:
and entertainment.

Production

Primary Secondary Tertiary

-t ~- t
Obtaining raw a) manufacturing or processing. l.e .
.materials converting raw materials
. (extraction), e.g. into finished or semi-finished goods
fanninq, ;9Y.,*"g. e.g. tanning, baking
fishing; QlWI'Ying. b) construction, i.e. assembling commerce direct
.:. . ~ ,....----;~
parts int'? whole units, e.g. services
. building houses, bridges,. ~ . distribution provided to
roads:~dams aids to trade of goods consumers
- banking & services direclly, e.g,
- insurance trade aC(:OUQting
- warehousing
en~~rtaining
- communication
teaching
- traosport
- advertising

.e
Fig.l.1 S14gesofproduction
 COMMERCE (distribution of goods and services)

Trade (buying& selling) Aids to trade (or indirectservices)

t ~ i ~ ~
advertising banking communication insurance transport warehouse
~
t.
hometrade foreign trade
I
t
retail trade
~
wholesaletrade
I'----"TJ-------,~
export import
~ ~
retailing wholesaling
Fig. 1.2 Distribution of goods and services

Forms of production •. goods are produced in surplus

• goods produced are of high quality
• leads to specialisation, standardisation and
Dired procluction simplification
• when one produces goods and- services for • leads to a wide variety of goods
own consumption, e.g. subsistence farming,
building own house, making own clothes Division of labour
Production activities are classified according
Advantages to two basic principles: division of labour and
• goods are produced to own taste specialisation. \ - .
• leads to self -satisfaction • division of labour refers to the break down
• full use of resources of work or trade activities into individual
.• saves on labour costs tasks, that is, into small tasks .done by
different people. '
Disad~antages Examples of division of labour are as follows»
• poor quality goods are produced • division into industries: shoemakers,
• lack of other related skills butchers, bakers, hairdressers, - cotton
• does not satisfy some of the basic needs fariners, tobacco farmers, gold miners and
• lack of variety . many other occupations.
•. takes long to complete the job • division into processes: the cotton industry
that starts from the cotton farmers to ginneries,
Indirect procluction . to weavers and to textile industries.
• geographical division of labour arising
from physical conditions of the region for
example, -availability of coal or forests or
gold in an area, or from climatic conditions
Advantages such as the dry areas of Matebeleland that
• goods are produced in large quantities have resulted in large scale ranching.

e·
 Specialisation is a result of division of work
that develops in the worker s particular skills:
The workers become experts in their specific
jobs.
• of division of • r • goods are always available
• . more goods are produced for various
markets
• large scale production.has resulted in more
people being employed
• mass production" has enabled people to
afford different types of goods, for example,
refrigerators; televisions, motor vehicles,
and computers resulting in a higher standard
of living in the country
• goods are produced at a faster rate due to
mechanisation and automation
• prompted the interdependence of workers
• leads to trade
• leads to lower production costs resulting in
low prices
DI• a•• of division of I_ur
• leads to interdependence of workers
• d~e to interdependence of workers any
disruption in any' part of the production line
may affect the process of production
• goods produced are. standardised
• tasks become repetitive and boring
• lack of job satisfaction
• mechanisation and automation have resulted
in unemployment
Specialisat!on.
-i<";' ., i., ;'0 - ,_
doing ijqti·in· whictrdir~iS<'taiente((at
\ -; . .-
Standardisation -~ .. ,
making of identical goods; e.g. ele€tnc
plugs, window and door handles
Simplification
process and tasks are easier-to perform
Mass production
• making goods in large quantities and
provision of services on a large scale
• low cost of production resulting iri. low
prices
• improves standard of living
• leads to automation or mechanisation
• leads to standardisation 'of products
• leads to simplification of processes
• leads to specialisation of workers .
• leads to trade -
• of spedalisation of labour
• workers and firms become experts in a
particular job or task
• training institutions have found it easy to
set up technical and vocational courses in
their curriculum for various traders, that is,
in skill training programmes
• workers acquire specific skills faster
• workers become more proficient and
productive in their areas of specialisation
• employers are able to fit workers with
.. particular aptitudes into well defmed job
categories
• specialist workers are able to communicate
and share ideas pertinent to their work, for
example, dentists can organise workshops
aimed at developing their skills
• firms and countries are able to focus in areas
of production they are experts in resulting in
high quality products being produced
• firms are able to employ and utilise
--. specialised machinery and equipment .
.
. saves time in training operatives
• the development of new technology has
progressed at a faster rate
pin • saves on use of tools and equipment
• surplus goods are produced
Disad"antages of_8peciaJisat!on of labour
• automation leads to unemploymern 1 :
 - interdependency • repetitive tasks are boring to workers
in immobility of labour • specialist workers tend to over protect
of craftsmanship themselves resulting in people not sharing
- to limited choice of goods ideas and skills, and not wanting to know
• re-training of specialist workers is what others are doing
expensive

Facto" of procluctlon

Factor DeSCription Reward

1 Land - the site on which production takes Rent

place including all the natural resources
used in the production of goods
- e.g. agricultural land, seas, lakes, forests,
air and mineral ore deposits

2 Labour - the effort put in by people in production Wages and salaries

of goods
- can be in the form of body (physical)
or mind {mental).

3 Capital - wealth put aside for the production of Interest

further wealth
- e.g money, plant and equipment investment

4 Entrepreneurship
or organisation - the ability to run a business Profit
or enterprise it requires people who are willing and
able to take risks in investing money,
time and effort in utilising land, labour ~
and capital

-
,

End of chapter questions

Fill in the.missing word or words in the following questions.

1 People who satisfy wants are caned .. : .

2 ... production occurs when a person spends most of his or her time producing his or her food or
building one's house.
3 Stages of production are ... , ... , and ....
 4 goods are·those purchased by a business for production purposes.
5 Professionally trained people offer ... to individuals for a fee.
6 The breaking down of each job or trade into small tasks done by different people is known as the
of
7 The standardisation of products has been brought about by production. .
8 Assembly and constructive.industries form part of the industries. .
9 Commerce is a branch of production engaged in the of goods from the to the

State whether the following statements are true or false.

10 A builder, retailer, teacher and musician all belong to the same branch of production, TIP .
11 Production not only involves the conversion of raw materials but.also the provision of services
to people. TIP
12 Installation goods are referred to as consumer goods, TIF
13 Hobbies are a productive occupation and should be included in the paid production services. TIF
14 Specialisation of labour reduces the occupational mobility of the worker. TIF

Choose the letter for.the correct answer in the following questions.

15 GOods required for personal use are called ...
A agricultural goods.
B capital goods.
C consumer goods..
D producer goods.
16 Which·ofthe following ~oes not belong to the secondary industries?
A baking
B canning
. C mining
D 'tanning
17 Commercial activities are concerned with the ...
A distribution of goods from producers to consumers.
B production of goods andServices. .
C provision of health services.
D provision of direct services.
18 Which one of the.following is a disadvantage of direct production?
A immobility'oflabour .
B lack of other related skills
C limited~hoire of goeds ....
D poor quality goods
19 Specialisation Occurswhen a person ...
A becomes an expert in carrying out specific tasks.
B changes occupations when the need arises.
C has no skills at all in any trade.
D is a jack of all trades. ;

j
_"....
< ·f
'..:.
20 What is meant by .division of labour ?
A getting goods from the manufacturer to the consumer
. B lack of job satisfaction at work
C the breakdown of work activities into individual tasks
D the conversion of raw materials into useful products
2i Which of the following is not true for. tertiary production?
A. advertising and teaching
B importing andexporting
C mining and-quarrying
D retailing and wholesaling
22 The name given to trade and the services that facilitate trade is ...
A assembly.
B commerce.
C industry.
D mechanisation.. .
23 Why would a specialist worker find his or her skills no longer relevant in a particular industry?
~ consumption of perishable goods· -
B development of new processes and techniques
C greater skill and greater speed at particular jobs
D mass production of standardised goods
24 Which one is a reward of capital?
A interest
B . profit
C rent
D wage

Structured' questions
25 Distinguish, between:
a) direct production and indirect production. (10)
b) primary production and secondary production. (10)

26 a) Explain the three stages of production. (15)

b) What is the difference between consumer goods and producer goods. (5)
27 What is meant by the term Commerce ? (20)
28 a) State 5 advantages and 5 disadvantages of specialisation. (10) .
.;.
b) .How is a producer assisted by the services of: .
.(i) ,transport?· . (5)
(ii) communication? (5)
29 Explain each of the four factors of production. (20)
Chapter 2
Wholesale trade

The wholesale trade includes all the various Functions of a wholesaler

activities that involve the selling of goods
to traders for resale to the fmal user, the To the retailer
consumer. Wholesalers buy goods in bulk
from several manufacturers, which they store The Wholesaler: .
in their warehouses until the goods are needed • buys in bulk from several manufacturers or
by retailers. Wholesalers sell to retailers in less producers.
bulk. Wholesalers are therefore a link between • sells goods to retailers in small quantities,
that is breaking bulk.
retailers and manufacturers or producers. The
• provides retailers with a wider choice
position of a wholesaler is illustrated below:- of goods obtained from numerous
manufacturers or producers.
Manufacturer/ Manufacturer/ • informs retailers of new product
producer producer developments. .
• receives complaints and suggestions from
retailers.
• stores goods.
Wholesaler
• conveniently situated near to retailers.
OR Wholesaler • evens out the flow of commodities
especially for seasonal goods.
• offers credit facilities to retailers.
• undertakes the following processes:
blending, branding, p1tckaging and bottling
• delivers goods to retailers.
(consumer)
Consumer • advises retailers on display techniques and
store layout.
To til • anufacturer or prOtlucer • have parcel counters.
The wholesaler: • sell a variety of products,
• collects orders from numerous retailers. • provide trolleys and baskets.
• provides manufacturers with market
• sell fast moving goods.
iriformation on consumer wants and • serve local markets.
competitor activities.
Tratillional or G•.•• 1.,.
• stores finished products.
• clears manufacturers' production lines thus These wholesalers:
allowing manufacturers to concentrate on • provide a wide range of merchandise or goods.
production. • store-goods. '
• bears risks. • pay cash to manufacturers (finance the
• advertises goods on behalf of manufacturers).
manufacturers. • sell on credit to retailers.
• . provides a ready market for manufacturers. • provide transport to retailers. ,.,
• finances manufacturers by paying cash. • employ sales representatives.
• blends, packages, grades, bleaches, dyes • provide information and advice to retailers
and brands goods. on goods. .
• bear risks. -,
To • e••. • even out supply of goods.

T"
•
"holes.ler:
ensures a steady flow of goods to
• steady prices for consumers.

SpecIal .••
consumers.
• prevents wild fluctuations of prices or "These wholesalers:
steadies prices of goods for consumers. •
specialise or are experts on one line of
• . advertises goods products e.g. sale of fruits.
• _offer expert advice to customers on the
• provides a variety of goods.
product,
• informs consumers on new products.
•
provide any other services provi~:-~
• takes consumer complaints to producers.
general wholesalers.
Types of wholesalers
Co-oper.tive vtrholesale soctet»
Call a • carTy .•• 1••.• • formed by producers (farmers) 'Orco-operanse
retail societies ' ....
These wholesalers: • buy from producers,
• sell goods on cash and carry basis, • can produce own-goods
• sell to both retailers and consumers i.e. sell • buy in bulk from farmers at low prices
.goods in bulk and case lots. • sell in 'bulk at low prices
• use self -service method of selling. • - sell to co-operative members - _
-. display goods. • each member contributes capital
• have, check-out points. • surplus piade i,S·iliared among membel'S
• have security measures. (co-operative rebIit' "eties or'fanIfm)'
• sell at low prices. • normally sell petiSbilJfes '
• sell household goods. • provide varie1Ym-g~
. IHIOIIS for • • of the
wIIol • I.r
• bulk buying by large scale retail organisation
such as multiple shops, hypermarkets and
department stores, who have:
adequate capital to buy on cash
. own transport ..
own warehouse _ ,
• .it is·cheaper to buy from mannfacturers
• all manufacturers' 'goods are branded and
are easy to selldirectly to the retailers
• to provide information on technical
goods that require expert knowledge,
manufacturers prefer to sell directly to
retailers or even directly to consumers
• a
. goods that have slow rate of turnover such Fig. 2.3 Farm stall where vegetables are sold
.:
as jewellery, aircraft, expensive cars, are
sold directly to consumers .• to control the selling and buying prices
• to even out the supply of goods
• to prevent shortages
• to facilitate a ready market for such goods
• to facilitate exportation and importation of
goods
• to promote researeh and development" of
agricultural products
. Fig.2.2 Agold ring • to inspect, grade and weigh agricultural
produce
• some manufacturers have opened their own
retail shops or factory shops for example, Types of lII.eII • "'nls
BATA SHOE COMPANY
• the appointment of authorised dealers or Grain Marketing Board:
official distributors who sell directly to • buys grain from farmers.
retailers and consumers • sells grain to consumers, millers and
• some goods are perishable and require importers.
speed in their disposal to the final user • stores grain.
• some goods are fragile such as glass which • evens out supply of grain.
need special handling • prevents shortages of grain.
• use of tied shops . . . • controls price of grain.
• collects grain from farmers.
I• nsfor • p IIItImell• boards • delivers grain to consumers.
These are set up by the government for the • finances farmers e.g ..provides inputs.
following reasons: • inspects; grades and weighs grains.
• to store agricultural produce • preserves ,grain.
• to reduce monopoly in selling of a good • processes grain.

'.
Tobacco Marketing Board:
• buys tobacco from farmers
• sells tobacco to local
companies.
• stores tobacco.
prevents shortages of tobacco.
• controls prices of tobacco.
and foreign • collects tobacco from farmers.
finances farmers i.e provides inputs ..
inspects, grades and weighs tobacco.

Fill in the missing word or words in the following statements.

1 A person who buys goods from a manufacturer for resale to a retailer is called a ....
2 . One way of fmancing retailers is by providing them with ... facilities.
3 One function of a wholesaler is to. bear ....
4 Large scale retailers buy from ....
5 ... wholesalers are experts in selling one line of products.

State whether the following statements are true or false

6 Breaking bulk is when a wholesaler buys goods from manufacturers in large quantities and
sells these goods in small quantities to retailers. TIF
7 Wholesalers occupy the last position in the channel of distribution. TIF
8 An example ofa marketing board is the Cotton Company of Zimbabwe. TIF
9 The packaging of goods is done by wholesalers. TIF
10 Direct dealing is most likely to occur where goods sold are branded. TIF

Choose the letter for the correct answer

11 One of the functions of a wholesaler is to ...
A provide a variety of goods to retailers.
B produce goods for manufacturers.
C sell consumer goods to manufacturers.
D sell goods for retailers to consumers.
12 Warehousing is when wholesalers provide ...
A advice to retailers on how to display goods.
B delivery services to retailers for goods bought.
C market information to suppliers on customer wants.
D storage facilities for different types of goods .
. 13 Why are wholesalers important in the channel of distribution?
They:
A are the last link in the chain of production.
B collect orders from several retail outlets.
C form part of the extractive industries.
D . specialise in the transportation 'of raw material.
 14 General merchandise wholesalers sell ...
A different types of goods to retailers.
B expensive goods to retailers.
C goods made to order.
D perishable goods only.
15 A wholesaler who does not offer delivery and credit is called a ...
A cash and carry wholesaler:
B mail order wholesal~. -
C specialist wholesaler.
D wholesale merchant,
16 Direct dealing is most suitable for goods that ...
A are affected by seasonal fluctuations.
B are produced by several manufacturers.
C can be delivered to wholesalers.
D . have a slow rate of turnover .
. 17 Which one of the following is a wholesaler?
A Dairibord Zimbabwe Limited
B Grain Marketing Board
C National Oil Company of Zimbabwe
D National Railways of Zimbabwe
18 Which one is not a reason for setting up marketing boards?
A to control prices
B to manufacture goods
C to prevent shortages
D to store goods
19 Which'one is owned by farmers?
A cash-and-carry wholesalers
B co-operative wholesaler society
C specialist wholesalers
D traditional wholesalers
20 Which one is not true of a wholesaler?
A branding goods for retailers
B delivering goods to retailers
C evening out supply of goods
D located near to customers

Structured questions
21 a) What are-the causes of direct dealing? (10)
. b) Outline functions of the Grain Marketing Board (10)
22 What are the functions of the wholesaler to:
a) manufacturer? (10)
b) retailer? (10)
23 What are the characteristics of the following:
. -- a) cash and carry wholesalers? (10)
6) co-operative wholesale societies? (5)
c) specialist wholesalers? . (5)
24 a) State reasons why the government has set up marketing boards, (10)
b) State the functions of a wholesaler. (10)
25 a) What are ,the functions of the Tobacco Marketing Board? (10)
b)' Why do large scale retailers buy directly from manufacturers? (10)
Chapter 3
Retail trade

Retail means to cut into small pieces or to reduce • giving advice and information to
the quantities. A retailer is .a: middleperson, customers
between wholesalers and consumers, who sells • advertising ~oods on! ~~behalf' of
in small or single units. manufacturers

Factors considered when

• providing:
local source of supply
establishing retail outlet personal service
delivery services
• adequate capital to start the business
credit facilities
• the demand for the type of goods to be sold
after-sales services
• good management skills
• opening for longer hours and during
."

•
accessibility to the retail outlet i.e. transport
and communication links e.g. roads, rail etc.
target group: i.e. the pepple intended to be'
~, . holidays
catering for individual tastes
attracted
Functions of the retailer to
• competition from other retail outlets
manufacturers and wholesalers
• legal aspects to be met e.g. trading
licences • buys goods 'from manufacturers and
• experience in the line of business wholesalers or provides a ready market for
• nearness to supply points like wholesalers the manufacturer :
and manufacturers, water and electricity • buys goods in bulk
• whether to buy, renrorbuild the premises • clears manufacturers' production lines
• the development potential of the area for • advertises goods on behalf of
future expansion manufacturers
• nearness to customers • stores goods
• labour required
Types Of •.• 11.n
• advertising costs involved
• storage facilities for the.g~. Retailers are divided into two groups (1) small":
scale retailers and (2) large scale retailers
""
Functions of the retailer to
consumers SmaU scale retallen
• are usually owned by individuals
Retailers performa vital role to consumers by • are found in the private sector
• breaking bulk of goods they buy from • - few legal formalities are required to
wholesalers and manufacturers establish them
• selling in small or single units ·
• in Zimbabwe the owners need daily or
• being conveniently located near customers monthly-licences from the town council in
• selling a variety of goods order to operate. Examples of these are:
 Roadside traders Flea markets
• sell old OJ' Used goods e.g.seeond hand
goods
• sell a variety of goods
• situated in open or closed shops
( .

. Market staII-holden
• occupy small areas
• sell a variety of goods ..
• pay rentals for space OCcuPied to the town
councils .

Mobile shops
• use vehicles as moving shops
• usually sell on cash basis
Fig. 3.1 A roadside ~r • sell a variety of goods
• usually go where there is business
These locate themselves where many people
pass and display goods on nlovable_ stalls or
Iqdependent shops '. . '"
cardboard boxes. They sell fast moving goods
They are owned by individuals and ere located
like sweets, or roasted maize etc. They only need
short term licences in order ope~. to in both rural and urban residentUn areas or
anywhere near consumers. The advaritages to
the consumers of buying from these stiops are .
Itinerant traders, e.g.laalfifers, pellars
that they: _.
• open for long hours or even during the
holidays
• sell .variety of goods
• cater for individual tastes '...~'.
• sell.in- very small units
• ~1 be spe&ialists.· ~J.J.iBg on~ tine of
.. . goOdB .
• . offili': .
tpersonal services
&livery services
";'-
after sales services
informal credit to well known :
customers

',. Advantages to the retailer

Fig. 3.i 'An itinerant trader selling sweets, Ull'riltgi. air time
vouchers
These traders move door to door selling goods
on foot, on bicycles or push carts. Products sold
include foodstuffs, or cheap jewellery.
• the retailer requires little capital-to establish
the business
• the retailer benefits by having low overhead
expenses
• there are less legal formalities required
• flexible to changes in the market
Disadvantages to consumers
goods are usually sold at high prices
slow in serving customers
goods sold may not be fresh
• choice of goods is limited
normally do not offer guarantees
Large-scale retailers
These are very large shops with large capital
to buy bulk goods in cash at low prices from
manufacturers. They have their own transport
and warehouses. They are able to pre-pack and
advertise goods on behalf of the manufacturers.
They have large shopping space and sell a
wide range of goods. Some offer credits to
customers.
Types of large-scale retailers
Supermarket
Fig. 3.3 The inside of a supermarket
It is a large shop of minimum floor area of 1
square metres, which sells household goods
and grocery on cash and carry basis. They are
mainly situated in busy areas like suburbs and
growth points.
• has many check -out points and a parcel
.counter or bays
• has security measures, e.g. guards, TV
circuits, mirrors
• offers trolleys and baskets for carrying
goods in the shop
• displays goods according to uses
• sells branded and pre-packed goods
• sells goods at low prices
• goods are individually priced
• goods are usually fresh
• has wide aisles
• offers self-service method of selling
• offers a variety of goods
• places daily used commodities at the back
e.g. milk and bread
Hypermarket
• a large shop with minimum selling space of
4500m2
• situated on the outskirts of town where:
land is cheap and plentiful
there are good communication links,
e.g. road network
• provides a car park
• sells foodstuffs and household goods
• sells goods at low prices (SPQR or loss
leaders)
• sells goods on cash and carry basis
• sells branded and pre-packed goods
• displays goods according to their uses
• all goods are individually priced
_. goods sold are usually fresh
• provides parcel bays or counters
• may provide restaurants, banks, satellite
shops, playing grounds and garages
• has large aisles
• has security measures e.g. mirrors, guards
• has off-peak shopping hours
• normally open during The holidays
• caters for car owning public
• sells variety of goods
Department store
• a multi-storeyed building with several
shops under one roof
• located in the city centre where land is -
expensrve
• sells a wide range of goods in different
departments
• each department sells one line of goods
• the buyer is responsible for the orders of the
department
• each department has a buyer or a department
manager
• sells high quality merchandise
• offers luxurious facilities, e.g. carpets, lifts,
music, restaurants
• employs trained, uniformed staff who offer
personal services
• offers delivery and credit services
• sells goods at high prices
• has centralised accounting, advertising,
purchasing systems.
Multiple shop
• located in busy shopping centres, e.g. growth
points, shopping malls
• a shop with several branches, e.g. Bata,
Edgars
• all branches have similar shop fronts and
use same name for easy recognition
• all branches have similar lay-outs
• sells narrow range of products or one line
of products
• all branches are controlled from the Head
Office
• each branch has a branch manager
• head office buys goods in bulk for all
branches from manufacturers at reasonable
prices and favourable.trade discounts
• branches benefit from economies of scale
• has own warehouses and transport facilities
• all branches sell at same prices
• quality of goods is the same in all branches
• - goods are usually sold at low prices
• stock and staff can be transferred from one
.branch to another
• may offer credit facilities
• accounts may be paid at any branch
• accounts may be transferred to any branch
• all accounts are controlled from the head
office
• head office advertises for all branches, as
one advertisement promotes all branches
at once leading to low advertising costs for
each~ranch '
• overhead ~xPenses are spread since each
branch pays for its rentals, rates, water and
electricity
• customer can return goods at any branch
• losses made by one branch can be shared by
other branches
• can manufacture their own goods, e.g. Bata
'lII'IetrcW •.•
• Has characteristics or features same as
multiple st~~ but offers variety, e.g. OK
andTM '
- '
• a large-scale-retail outlet found in the private
sector
• formed by customers to enable bulk buying
from manufacturing companies at low
pnces
• may buy from cooperative wholesale
societies
• sells, to both members and non members
• membership is open to customers by paying
a subscription or buying shares in the
cooperative
• each member is entitled to one vote i.e.
democratic control
• members electa management committee to
run affairs of business
• members are paid dividends after a year or
get a rebate which is an amount of surplus
shared in proportion to the amount they
would have spent in purchasing goods in
the cooperative society
• sells a variety of goods at low prices
• may offer special benefits to members e.g..
scholarships or death benefits
• members may be trained in business
management
• members may buy on credit
• raises a large amount of capital to start the
retail outlet
• members exchange information and ideas
Mall ord., finn
• a large scale retail outlet found in the-private .
sector
• located in the industrial area or outskirts of
a town
• operates from a warehouse
•, does not need expensive' displays
• has low rental expenses
• advertises through catalogues or
magazines
• employs part-time agents
• sells a wide range of goods
• may sell through samples
• orders are sent and received through the
Post Office
• sells goods on cash on delivery(COD)
• shopping is done at home at anytime
 • goods m~y be' returned if customer is not
satisfied
• incurs high costs of postage, packing and
advertising
DilCOUnt sto •.•
• a large-scale 'retail outlet found in the
private sector
• locatedin busy shopping areas and out of
city centres
• operates from cheap premises
• sells household goods e.g. electrical
appliances
• buys goods in bulk at low prices
• ..sells goods at low prices
.• sells' goods on cash and carry basis'
Voluntary 'chaln don.
• independent retailers may join together to
form a voluntary group,' e.g. Spar
• group buys in bulk from manufacturers and
enjoys large trade discounts
• group buys at low prices and sells at low
prices
• . group distributes goods among the group
members
• group advertises on behalf of all members
•. group members should comply with the
group's minimum standards
• members may get loans from the group for
renovations and decorations
• the groups are common in the grocery trade
• members sell a wide range of goods
n•• ...,.
• they sell products or offer services of only .
one manufacturer
• . usually use the name of the .manufacturer,
e.g. BP Shell filling stations -,
• have same decorations
Advantages of large-scale retailing
The retailers have large capital which enables
them to:
buy goods in bulk on cash at low prices
advertise goods
operate own transport
build own warehouse
employ specialists
• can sell goods at low prices
• can offer credit facilities
• enjoy economies of scale '':: '
• can pre-pack goods
Disadvantages of large-scale retailiiJ.g
• difficult to manage -.
• loss of personal touch with'eustomers
• . requires large capital to establish
• take long to respond to market changes or
,fail to make quick decisions .
• have large over-head expenses or running
costs
• suffer from diseconomies of scale
' •.• Iscount
• a deduction from gross invoice price or
catalogue price
• given by one trader to another i.e, to
customers who buy to sellagain and make a
profit
• varies with the quantity and type Of goods
purchased and is deducted at the poinfof.sale
• usually the rate is high '"
• not recorded.in the books of accounts
• encourages customers to buy from a
particular source .
Cash "Iscount
• an allowance from the net invoiGeJ.PiiCe
given to any customer who pays promptly
• deducted at thepoint of payment .:
• .rate is usually lower than that of the trJtde'
discount' .~
• encourages early payments of amounts dhe '.
• may increase the rate of stockturn . ,".'
• .helps redube the trader's bad debts .,
• saves cldicaI work due to early payments
• recorded in the booksof accounts .: ,. ~
..
 Ways of Improving sales In
retailing
• review prices and make them competitive,
i.e. lower prices
• hold· competitions such as the OK Grand
.Challenge.
• improve' quality of service by employing
trained staff
• sell quality products
• offer free samples to customers
• give gifts to' customers
• open for longer hours
. • . cater for individual tastes
• advertise continuously
.• give trading stamps to customers who
purchase goods worth a certain. amount for
arebate .
• sellIoss leaders i.e. products .sold at low-
prices at the expense of other products
• . manufacturers at times offer free t-shirts or
caps with company logo
• retailers carry out demonstrations on how to
. use the product, e.g. through road shows
• free gift coupons which are issued with or
without goods. Usually issued as prizes or
gifts. Coupons are swooped for selected
.goods. Company logo is written on the
coupons.
• ; provide personal service, i.e delivery, credit
and after-Sales service
. Modern. 'trends I" retailing
'These are developments which are-taking place
'in retailing due to changesin technology and
. other factors.
10(. • •.• ,.leilfHlc cO • )
It is. a system of ~uying and se1lip.g goods, and
services electronieally. The'· system operates
·tblOugh a comPuter connected to the internet or
a television which has satellite connections.'
~e products sold should be:
• coded
• fully described .
• in picture form
• individually priced
. The customer does the' Shopping in the comfort
of his or her home, selects goods using the
product codes and places an order electronically,
When making paynient the customer provides
the following details electronically:
• Customer's name, address and account
number or credit card, number
• Choice of delivery, i.e. COD mail or
personal
• Date of delivery
• Terms of payment
Total purchasing price is .displayed on the screen
for the customer, Payment can be done through
credit cards, COD or direct debit. Delivery of
goods is by mail, courier services, or personal.
The system does not require cash payments. It
reduces paperwork for the retailer and travelling .'
.expenses for the customers. The electronic shop
is open for 24 hours.
. Disadvantages of e-commerce
• leads to impulse buying and overspending.
• at times the pictures may not show the true
quality of the .items .
• lacks personal touch
' • 1••
These are machines, which are installed in
busy areas. An example is the Automated Teller
Machine. The machines may be hired or leased.
They operate for 24 hours and use the self-
service method of selling which saves on labour
and time. May sell variety of drinks and snacks .
Use of machines increases sales and profit.
.These are products which are semi-assembled
or in kits e.g. solar. kits"ar trinepon and are sold
with accompanying instructions. Consm:oiD
need few skills' for assembling the parts fn-IftIIII~
finished products. The products are mainly sold Disadvantages of Franchising
in supermarkets and hardware stores. With DIY • Franchisee pays the franchiser a share of
products consumers: profit based on sales
• save money by doing work for themselves • High initial charges by franchiser may be
• improve their standard of living very expensive to the franchisee
• gain self satisfaction by doing their own • Franchisee has little freedom to determine
work. management procedures
• Franchisee has to comply with rules and
SJiopping malls procedures of franchiser
• are areas exclusively ,devoted to shops e.g.
Eastgate, Westgate, Nkulumane Shopping
Branding
Centre is grving a distinguishing name, label or
They consist of a whole range of shops e.g. chain mark to a product, e.g. Surf, Sun-Jam, Stork
stores, supermarkets, specialist stores and small Margarine
shops, Some malls ban traffic from shopping
areas, a process known as pedestrianisation. Advantages of branding
• products look different and are easy to
Franchising identify
• shopping becomes easier
an agreement in which a trader (franchiser)
• facilitates self-service
gives the right to another trader (franchisee)
• advertising becomes easier
to use the name of the business and to sell the
• easy to order goods by quoting the brand
franchiser's products in a given geographical
names
area, e.g. Wimpy, Chicken Inn
• consumers are assured of consistent
quality
Advantages of Franchising
• manufacturers are assured of brand loyalty
Through franchising the franchisee would:
• goods look attractive
• enjoy freedom and profit of the business
• have high chances of success since the
business (franchiser) is well known or.
advertised
• enjoy legal protection from the franchiser
• no need to build own reputation .
• receive cheap supplies and training of staff
from the franchiser- .
• save on foreign currency neededto import
goods and services as this' is often done by
the franchiser
• be assisted by the franchiser in:
raising the capital for the business,
keeping accounting records
choosing the location of the business
advertising products and services
-
developing the product Fig. 3.5 Examples of branded products
Pr•..•• ackaging Self Service
Is the placing of goods into containers by the
manufacturers, wholesalers and retailers.

Advantages of pre-packing
• goods become easier to display
• some packaging protects goods against
damage
• prevents goods from deteriorating
• reduces soiling of goods from customer
handling
• goods advertise themselves because of
attractive packaging
• allows branding and individual pricing of
.goods
• facilitates self- service method of selling
• enables manufacturers to write instruction
and directions for use on the goods
• goods are easy to carry and handle

Fig. 3.7 Customer choosing goods in a supermarket

It is a method of selling goods which allows the

customers to:
• examine or inspect goods before buying
• choose, pick, select the wanted goods
• get goods at low prices
• shop at leisure
• calculate total purchase pnce before
Fig. 3.6 Pre-packed goods
paying
•. use baskets and trolleys when shopping
• remember goods not on shopping list
Self selection
• a method of selling goods used in department Goods sold on self -service should be:
, stores and variety chain stores • individually priced
• cash points are dotted throughout the store • well displayed according to use
• a customer can pay for an item at one cash • well labelled
point and then move to another part of the • sold on cash basis
shop, select a second item and pay for it at a • paid at check-out points
different cash point '. branded and pre-packed
 • Sender informs recipient of the value of
goods to be bought
• .The service is offered by cash and carry
• Sender discloses the answer to the recipient
wholesalers with many branches throughout
to the test questionthe. wholesaler will ask-
the country ,
• Recipient goes to his branch with positive
• Used when sender wants to purchase for'
identification
someone located in another area
• Recipient's branch contacts the, sender's
• The service is provided for the buying of
branch
grocery only
• Sender's branch asks 'the recipient the test
;. Sender visits thenearest branch and fills in
question .
a form
• ,Recipient's answer should match that
• Sender provides, ansW-efto the test question
provided' by sender in order to pass the test
,.the recipientwill be asked
• If incorrect" answer is .provided no
• Recipient should be residing near one of the purchasing takes place . ,
branches
• If correct answer is provided recipient buys
• Sender pays for the goods at the nearest
goods worth the amount paid for by sender
branch'

, ,..
Fill in the missing word or words in the foUowing statements.
1 , .. traders locate themselves where many people pass.
2 ... prevents goods from deteriorating.
3 The minimum selling space of a hypermaket is ... m2•
4 ... are products which are sold at-low prices at the expense of other products.
'5 In asupermarket or hypermarket payments are made ,at ....

State whether the foUowing statements are true or false

6 Retailers at times offer trade discounts to their customers. TIF
7 Large scale retailers normally buy from wholesalers at low prices. . TIF
8 A vending machine uses the self-service selling method. TIF
9 Shopping malls allows the selling of foodstuffs and household goods only; TIF
10 "Do-it-yourself' is.the process of producing, one'sigoods. TIF

Multiple choice questions-

11 Which one is not a large-scale retail outlet?
A department store
B independent store '
C retail co-operative society
'D variety chain store
12 Which retailer outlet offers self-service?
A ' mail-order firm
 B supermarket
C tied shop
D voluntary chain store
13 Which service is not offered by mobile shops?
A displaying goods in movable stalls
B going where there is business
C offering door to door selling
D offering informal credits to customers
14 Which factor is not considered when establishing a retail outlet?
A brands of goods
B competition from other retailers
C management skills
D nearness to consumers
15 Cash and carry services.are offered by ...
A department stores and hyper-markets.
B : discount stores and hypermarkets.
C hypermarkets and supermarkets.
D .mail-order firms and supermarkets.
16 .Which one is not a function of a retailer?
.A buying goods from wholesalers
B giving advice to consumers .
C enabling traders to ordergoods easily
D selling in bulk to wholesalers
17 Pre-packaging ....
. A assures consumers of consistent quality.
B enables trader to order goods easily.
C makes goods easy to "handle'and carry,
D makes products lookdifferent,
18 Which factor may not increase-sales ofa firm?
A carrying out market research
B improving quality of service
C lowering prices of goods
D selling to a few selected customers
19, Department stores are located in ...
A busy shopping areas.
B city centres.
C industrial areas.
D outskirts of cities.:
'20 With "Do-It-Yourself'products, customers ... .
A assemble parts using accompanying instructions
B get goods at very low prices' .
C should be knowledgeable of the products
D should produce their own goods
Str~cturecl questions
21 a) 'Describe the features ofa department store. (10)
b) Explain the importance of:
(i) branding. (5)
(ii) pre-packaging. , (5)
22 a) Distinguish between trade discount and cash discount (10)
b) Explain the functions of retailers. ' _',,:;" (10)
23 a) Differentiate be~een a variety chain store and a voluntary chain store, =: :, (10)
b) What are the advantages of buying from a small scale retailer? (10)
24 List the features of:
a) a mail-order firm. (to)
b) a hypermarket. (10)
25 a) Why is there an increase 'Oflarge-scale retailers who are buyihg'st.r.Ugbtfrom the
manufacturer? (10)
b) Give the characteristics of:
(i) tied shops. (4)
(ii) voluntary chain shops. (6)
26 a) Whatis meant by franchising? (4)
b) How does a franchisee benefit from franchising? (8)
c) Explain the self service method of selling, - (~)
'27 a) State the features of a-shopping mall. (4)
b) What is meant bye-commerce (electronic commerce)? (6)
c) State the advantages of e-commerce to the consumer. (4)
d) Describe the self- selection method of selling. (6)
28 a) State and explain six methods a retailer would use to promote sales.'j (12)
b) What are the disadvantages of large-seale retailing? (8)
29 a) Distinguish between a voluntary chain store and a mail order firm. (14)
b) Explain the term "Do-it-yourself' products - . (6)
30 a) What factors would one consider when establishing a new retail outlet? (12)
b), What are the advantages of vending machines? ' (8)
Chapter 4
Cbaaaeis of distribution

Goods and _~~)T9tm' ~~,n.Jri'primary or secondary producers are made available to consumers
through any 'of thcn·ono~g 'siX~routes shown in the diagram below:
.
. . :- . '. ,.
. .
PRODUCERS

MAN
OWN RETAILERS

"

1 2 3 4 5 6

TO CONSUMERS
Fig. 4.1 Rbllles Of distribtaion

Route 1 • Retailers sell in single units to consumers

• It is the traditional route
• Wholesalers buy goods in bulk from
producers
• Wholesalers break bulk for retailers
• Wholesalers provide transport, variety of
goods and creditto retailers
• It is suitable for non perishable goods
Route 2
• Wholesalers buy jn bulk form producers
and sell directly to consumers .
• Cash and carry wholesalers sell in case lots
to consumers

':\.
• Wholesalers provide variety
• Usually sell on cash and cany basis
Route 3
• Large scale retailers buy from producers in
bulk and sell to consumers in single units/ or
small quantities
• Examples of large scale retailers are
supermarkets or hypermarkets
• Ideal for the sale of furniture, electrical
gadgets and household goods
Route 4
• Usually done through agents
• Mail order firms advertise the products
• . Goods are ordered and sold through the post
office
• Cash on delivery (COD) method of payment
is used
• Sell a wide range of goods
• Packaging, advertising, postage and printing
costs are high
Route 5
• Producer's own retail outlets which get
goods from their producers and sell directly
to consumers e.g. Bata
• It is used where producers want to push
their own products
• Other products through this route are
perishable such as vegetables, fruits and
bread
Route 6
• Marketing Boards, are state organisations
that buy produce from primary producers
e.g. Grain Marketing Board.
• Goods sold through this route are usually
the country's essential primary products
e.g. grain.
• Marketing Boards sell to both wholesalers
and retailers
• Retailers then sell to consumers

1· Producer retailer consumer is the traditional chain of distribution. TIF

2 Perishables are best sold through the route: producers producer own outlet --"..
consumer. TIF
3 For what reason do some retailers buy from manufacturers?
A Retailers have enough capital to buy in bulk
B Retailers need to buy variety of goods
C Retailers want to buy on credit
D Retailers want to bay in single units
4 Producer large scale-retailers consumers
Explain why this chain of distribution is commonly used (10)
Chapter 5
H~,purChase
It is used when consumer durables, such as
furniture, motor vehicles and television sets are
sold on credit.
Characteristics
• . a written agreement is a requirement
• a deposit is paid followed by installments
• the rate of deposit is legislated
• a cooling-off period is required if agreement
is signed outside the trader's premises
• suitable for sellilig durable goods or goods
with a 'second - hand value
• - controlled by legislation (Hire Purchase Ac9
• buyer can cancel the agreement and return
the goods when at least half of the purchase
price has been paid ...•.•
• a court order is needed to re-possess goods
if buyer has paid at least one-third of the
purchase price
• seller. can re-possess the goods if buyer
defaults'- '
• buyer takes possession of goods on payment
~f a deposit . •
• buyer becomes owner of goods on payment
of last installment ie. buyer does not own
the goods during the hire purchase period
• finance charges are added ",
to the purchase
price .:;r
• seller insures the goods during the hire
purchase period
• . a long period of re-payment
• financed by a finance house
• buyer cannot sell the goods during the
period
Advantages to buyer
• there is no need, for buyer t.9 saxe full
amount for the' goods
-:;,
• buyer can use the goods whilst paying .for .
.them
• profits generated from using Jhe':,item (e.g.
sewing machine or mini-bus) ,~£e uS&! to
pay for the item ' .
• can buy expensive goods e.g. car or house
• payments (installments) are· spread over a
long time
• goods are under guarantee during the hiring.
period
• . enjoys an Unproved standard of living
• is afforded legal protection throughout the
hire purchase period
Disadvantages to buyer
• may overspend by buying on impulse .
• goods are expensive due to finance charges
i.e. insurance and interest
• seller may re-possess goods if buyer
defaults
• possesses goods without-owning them
Advantages to seller
increases sales and profits
• encourages impulse buying
• obtains commission from fmance company
• insures goods during the hire purchase'
period
• has the right to repossess the goods if buyer
defaults before payment of one-third of
purchase price
Disadvantages to seller
• .capital is tied - up in book debts
• repossessed goods may not be fit for resale
• . increases bad debts and clerical (paper)
work
• suffers from bad publicity resulting from
suing defaulters
Details shown on hire purchase goods
in hire purchase transadions
Importance of finance companies (houses)
pay ready cash by providing capital to
traders
buyer is indebted to the finance house
trader collects installments from debtors on
behalf of finance company
relieves trader of all risks of bad debts and
any legal responsibility
makes profit from interest charged

Credit Sales Agreement (or Deferred

Payments)
• credit sale is sale based on trust
written agreement is not necessary, i.e. an
informal credit
deposit is not required
buyer owns goods as soon as agreement is
made
seller cannot repossess goods if customer
defaults
seller can sue the customer for outstanding
amount
Fig.5.1 Stove being sold on hire purchase installments are spread over a few months
a short period of repayment
• cash price of goods contract is based on trust or there is no strict
total hire purchase price, i.e. cash price plus legislation
finance charges financed by the trader
• amount of deposit or rate of deposit customer can sell the goods
amount and number of installments ideal for non-durable goods, e.g. clothes,
finance charges grocery
types (description) of goods interest is charged at a low rate

Fill in the missing word or words in the following statements.

1 Hire purchase is used when customers buy ... goods.
2 A period is required when agreement is signed outside the trader's premises.
3 A funds a hire purchase agreement.
4 Edgars stores sell ... goods.
5 In a credit sale agreement the seller can ... the buyer to recover outstanding amounts.
State whether the following statements are true or false.
6 In a hire purchase agreement the buyer takes possession of goods on payment of a deposit. TIF
·7 In' a hire purchase agreement, a court order is required to reposess goods if buyer has paid one-
third of the purchase price. TIF
8 No written agreement is necessary in a Credit Sale agreement. TIF
9 A credit sale agreement is funded by a fmance house. TIF
10 Goods are less expensive when bought on hire purchase than paying cash, TIF

Multiple choice questions ," '

11 In which transaction do goods belong to the buyer, on payment of the last instalment?
A deferred payment
B factoring'
,~ hire purchase
D lease agreement
12 Which statement is true of a lay-bye agreement?
A· It must be in writing and signed by all parties.
B It must givethe date of.payment for each instalment.
. C. It must include a statement of cash price before interest is added. '
_,'
- 0 The goods are kept by the seller until the price is paid in full.
13 Which ~is a feature of credit sales agreement? "
A B# becomes owner of goods on payment of first instalment.
B Buyer becomes owner efgOOOs on payment of last instalment.
C Buyer cannot Sell the goods before the last instalment.
D Buyer is accorded legal protection.

Structured questions
, -
14 Differentiate between hire purchase and credit sales. (20)
15 a) List five disadvantages and five advantages, to a customer, of buying goods on hire
purchase. .- (10)
b) What details should be shown on goods sold on hire purchase? (5)
c) Of what importance are finance companies in hire purchase transaction? (5)

,~
Chapter 6
Business documents

Letter of inquiry Pric. Usl

• a letter written by a buyer to a supplier or
several suppliers
..• a reply to a letter of inquiry
sent by seller to buyer
• shows:
• requests for the following information about
a list of goods sold by the wholesaler
goods:
shows unit price-of each item
types of goods available
information is brief
size of goods
• suitable for well-advertised brands
prices of goods
• shows terms of payment
- terms of payments or whether credit
subject to unexpected price fluctuations
and discounts are offered
terms of delivery (dates and costs)
• shows the names and addresses of buyer
and seller
• indicates the date of issue

Quotation
• a reply to a letter of inquiry
• sent by seller to buyer
• shows; ,
date of issue
full description of goods
prices of goods
terms of payment including discounts if
any
terms of delivery
quotation number
names and addresses of buyer and
seller
terms or period over which quotation is
valid
• sent to a potential customer
• enables buyer to compare prices from
Fig. 6.1 A price list
several suppliers
• enables buyer to choose one supplier with
eatalogu.
favourable terms
• for regular. supplies, standard catalogue or colourful pamphlets which carry illustrations
price list can be produced of the commodity
 shows prices of goods Proforma invoice
• states terms of sale and after - sales
services • send by supplier to a potential buyer
• used as an advertising medium • a document in the form of an invoice
• usually accompanied by order forms • contains details of goods send on
• shows codes of products consignment
• may be used as a quotation
• shows terms of payment
• shows quantities of goods
• used when goods are sent on approval
• shows unit pnces, total prices and
~ (on~ But soon hef
discounts
emotiorwII ife is in h.n'IOiI as ft G
courted I:P;three ciffel'l'J'lt mm ... • used to apply for foreign currency
Set 11 his powertut W~ \aod5cape,
HaIdr' """'" combines
• used to request for payment before goods
~--"""'__'!!'<J CDnlOdy."", tragedf. •
are delivered

S2 000 000.00
Invoice
POSTA~ ADDRESS DBIVEI\' ADOIID$

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amY'!S as governess et the borne of the

broocing Me Rochester Before lOng he

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Fig. 6.2 A catalogue

£.&O.E.

Order note Fig.6.3 An invoice

• written by buyer to the supplier

• summarises a single transaction
• prepared in at least two copies
• an evidence of contract of sale
• buyer states the description of goods which
• a bill sent by supplier to buyer
includes:
quantity • used when goods are sold on credit
size • shows details of goods in terms of:
name/type unit prices
colour total prices
quality quantities of goods supplied
• shows names and addresses of buyer and terms of payment i.e discounts, if any
seller description of goods (colour and size)
• states expected time of delivery and method date of purchase e»

of payment VAT (value added tax)

• quotes the catalogue number or quotation invoice number
number interest to be added on specified
• shows the quoted prices periods
 names and addresses of both supplier
and buyer
~£IIS--~ 3 ~-t
_--
CONSIGNMENT NOli
• used for accounting purposes w~

.•-
1MB A B
:11(· J
• includes the phase" errors and ommissions -* __ a
""""""*
excerpted" E &OE =1:r1~1=
- -. .
-- . --
m~ __ .-...
,
Advlc. not. _, I
..•.• I"W«...,
..
..._, . .. ._.-
• sent by supplier to the buyer :!."!...-::=... ...- •...• _ •.• .,__ ..•.....

-.
• notifies the buyer that goods are on the way
helps the customer to make arrangements to
I
I
I
I
-~-
---"""_._
=OI'ACC8"11IIG -
-~ ~
l='

.-.=-
,
i •§ 1
~OI'

receive the goods ~ anywfJere on lime

• . enables to prepare storage facilities

• enables buyer to check whether correct order
has been despatched Fig. 6.4 A consignment note

• - shows:
• issued in triplicate
the date of despatch
• sent together with goods
method of despatch
• is a contract of carriage
terms or despatch
• states the terms and conditions of carriage
description of goods
e.g insurance and liabilities
n~es and addresses of buyer and seller
• specifies the party responsible for the
Deliv.ry note .: payment of carriage or possible damage
• signed as proof of delivery
• issued by supplier to the buyer • sender is known as the consignor and
• written in duplicate recipient, the consignee
• used when seller uses own transport to- .' .shows:
deliver goods description of goods
• sent with goods quantities of goods
• u~ed to check state and quantity of goods on markings or crate numbers
arrival freight charges
• provides proof of delivery if signed names and addresses of consignee and
• shows:. ' consignor
names and addresses of supplier' and addresses of delivery
buyer date of delivery
description of goods
quantities of goods Credit note
date of despatch
• issued by supplier to buyer
method of delivery .~
• printed in red or pink .
. used as a record or proof of delivery
•- used when supplier owes buyer money
Consignment note • shows flow of money in opposite direction
• shows:
• used when transport is hired names and addresses of buyer and
• issued by transport firm or carrier e.g. Swift, seller
Clan or rail credit note number
 the overcharged amount Statement of account
the reduction of amount owing
• summary of transactions over a period of
date of issue
time ( usually a month)
• used to correct an overcharge arising from:
• issued by supplier to buyer
return of empty bottles
• issued when goods are bought on credit
overstating the invoice
• shows:
return of unsatisfactory or shoddy
date of issue
goods names and addresses of buyers and
short supply of goods suppliers
return of damaged goods amount due
return of wrong type of goods balance carried forward _.
• allows use of gift vouchers issued amount paid
credit notes and adjustments
debit notes and adjustments
rate of interest
interest charged on overdue amounts
invoice numbers and their individual
amounts
instalment
instalment due date
arrears, if any
terms of payment
• a request for payments
• reminds customers that payment is due
~
Fig. 6.5 CreJit Note • assists buyer to check records or query
before making payments
may be used for advertising.
D•• no••
• used as a source document for accounting
• issued by a supplier to a buyer purposes
• shows:
names and addresses of buyer and
(~AIMCI"·'
supplier f __ • ,.._ •

amount of undercharge or amount to be ! ~MO: . .,_. \.

paid,
date of issue
I
debit note number
• used when:
requesting to top up payments of goods
aiready delivered
correcting an undercharge
goods are under invoiced
(.&0.[.
goods are over supplied
• acts as a supplement invoice Fig. 6.6 Statement of account
 eceipt Till slip
• issued by supplier to buyer • issued by supplier to buyer
• used to acknowledge cash payments • shows cash payments
• shows: • evidence of a cash sale
names and addresses of buyer and • Shows:
seller date and time of purchase
date of issue description _ofgoods
reasons for payments unit prices
description of goods -cash sale receipt total prices
prices of goods and unit prices codes of goods
• evidence of cash sale total paid
change, if any
name of supplier
name of un operator

Fill in the missing word or words in the following statements.

1 A ... shows pictures of goods on offer to potential customers.
2 The prices of various items available for sale are shown on a ... sent to potential buyers.
3 A is a person who sends goods to a ... who receives goods delivered by a hired transporter.
4 A is used when goods are sent to a potential customer on a sale or return transaction.
5 For paying promptly for goods bought on credit, a customer is given a ... discount, and a ...
discount is given by one trader to another.

State whether the following statements are true or false.

6 Credit customers receive purchase invoices regularly at the end of each month. TIF
.7 A credit note is sent to a customer by a seller to correct an overcharge on an invoice. TIF
8 Transactions payment details such as dates, receipts number and amount paid are always shown
on a pro-forma invoice. TIF
9 VAT on an invoice means Value Added Tax. TIF
10 A pro-forma invoice is used when goods are sent on approval. TIF

Multiple choice questions

11 Which of the following documents is used to inform a customer on the delivery of goods?
A advice note
B consignment note
C credit note
D delivery note
12 Which one of the following documents is used as a source of business information?
A consignnient note
B letter of inquiry
 C purchase order
D statement of account
13 The following details appear on a price list except ...
A brand name of a product
B customer order number
C product price per unit
D value added tax .
.. ,
14 A document that provides proof of dispatch of goods to a customer is ...
A an advice note.
B a credit note.
C a debit note ..
D· a delivery note.
15 Goods sent to a customer on a "approval" or on a "sale or return" transaction are detailed on ...
A debit not.
B a pro-forma invoice.
C - an advice note.
D an invoice.

Structured questions
16 Show the differences between:
a) an advice note and a delivery note (10)
b) a debit note and a credit note (10)
17 a) Describe an invoice (10)
b) What is the importarice of the following documents in trade:
(i) pro-forma invoice?
(ii) receipt?
18 What is meant by the following on a consignment note:
a) carriage forward? (2)
b): carriage paid? (2)
c) cost, insurance, freight (CIF)? (3)
d) free on board (FOB)? (3)
19 a) Why is it important for a customer to receive a statement of account regularly? (14)
b) When is a debit note used? . (6)
20 Explain the importance of the following documents in home trade:
a) quotation (6)
b) delivery note (7)
c) credit note (7)
Chapter 7
Business or.anisadoDs

Business refers to the activities carried out in Private sector _.".' ,

order to make profit such as: • have clearly identifiable ow,ner 'or group of
• manufacturing for sale. owners
• buying and selling for profit • principal objectives is to make surplus or
• providing services profit
• extractive work for sale
• producing primary products for sale . Factors to consider when studying each
business unit
.Business organisations are divided into two
• . formation
groups namely private and public sectors.
• ownership
Public'sector • control or management
• have no owners • raising of capital
• belong to the community as a whole' • distribution of profits
• principal objective is to provide services or • advantages and disadvantages
goods . --.
• no profit making motive

. Business·org.~ations

Prhrate Sector Public Sector

• . $~le traders Public corporations
-. Partnerships Public utilities
• Private Limited Companies .
• Public Limited Companies
• Multinational Companies

Fig. 7.1 Business organisations

TyPes of businesS units in private and public sectors

Fig. 7.2 1'yjJu of business iu.;ts iit privase and public sectors

PriYat.~or enterprise. • bears unlimited liability

• has flexible opening and closing hours -
Sole 'IraM 'er Proprietor) • Advantages _
Characteristics • can be set-up with a small amount of
• -owned by one person who provides the capital
capital . .• has a few legal formalities
• a profit-making enterprise _ • _easy to run and control _
~ tends to be small in size • there is Closesupervision of workers
~ has less legal formalities because it only • operates for longer hours in order to increase
requires a tniditlg (general.dealer's) licence . _ sales _.

• , easy to establish _because it requires less • there is direct close personal contact with
_ capital to setUp customers
• controlled and nin on a daily basis by the • offers personal service to customers e.g.
owner -r. credit to well known customers and delivery
• may employ a few workers _or may be to near-by customers _
assisted by family members - • owner is able to make quick decisidJis and
 no partner' must claim interest on capital
or salary for-working in the business
books of accounts must be kept at the
placerwhere business is conducted and all
partners have the right to -Checkdiem
• Importance: ' .
used to form a partriership
applicable in the absence of (or where
there.is no) Partmfrshi~'~eOO ':,
Fo•.• atIon
'. by written or verbal agreement between
partners ."
• formed by 2 to 20 for trading partnership
and 2 to no maximum for, professional
partnership (e.g. lawyers, teachers, doctors)
• has a few legal' formalities '
• requires a trading licence
• 'governed by the Partnership Act or
Partnership Deed
Ownership -: c,
ownedjointly by partners '
Control and manage~ent.
• controlled and managed jointly by partners
• activepartners manage the, Business ' enjoy limited liability
• , sleeping partners contribute capital only and
- it!" # 7"
do not manage the business.":
• I#"
, ":--
• decisions or-agreements (contracts) made
by one partner ~e binding on ail partners
• leasing equipment
• buying on hire purchase from finance houses
• purchasing goods for resale on credit '
Distributlen of profits
• shared among partners ac~ording. to the
Partnership Deed ,','
• may also be shared equally as per Partnership
Act, in tbe:-absence"ofaP~p'Ueed ;";'._
• are used to pay interest-en aap'itll ' ,
• are distributed -as. .share of PJ'o.S.ts to
partners, '
Types of ptlrtnenWps
Ordinary (general) partnership- ,
• all partners (active or general) bear unlimited
liability for the debts of the partnership, that
is, their personal possessions may be sold to
repay the debts of the business '
• active partners take' part in the day-to-day
running of the business becausethey bear
unlimited liability
Limited pa-.;tnership
• Limited (or sleeping or dormant) partners
contribute capital only
are not active in the running of the
.
business
• the Partnership Act requires that at least-one
partner bean ordinary (active) partner who
runs the business
bears unlimited liability

Advantages , _, _
'. . management is sli~.:b'eeause, e~~artfier
controls his own 4ePartment '.! .
• ' , more capital ismade.available to 3llo}v:'for
rapid expansion of-ihe 'business 1, " . .....

Rais~g ~f capital ' • wider .experience (mPre skills);' atl<t 'some

• p~~ pe{SOnal,SilTIrigs' degr~jtr.sj>eCI~dii~~-mj~ji(e', ,
• loans.and overtJrafts fiom,commerciaibirrb, business.'
• mortgage l~arls~i!:om D.liil4itig Societies ", '. more Saeas an(r;ffii~ative 'crcilte.~~ ,
efficiett'Cy;
,. ploughing back profits --_
• decision making is consultative, that is, • -govemedby the CompaniesAct, .'
making of decisions is shared so as to • involves. complex legal formalities i.e.
reduce the burden of management Articles' and memorandum of Association
• easy to set-up because there are less legal _,and Statutory Declaration must be submitted
formalities to the registrar of companies
• losses are shared • must be registered through the issue a ot
Certificate ~f In~~~¥.-f9.~ .~~!. ~
Disadvantages ofCompames ,";';.: .: , .. ', , '
• disputes (disagreements) may ·lead to • name of the company ends with ''Ltd'' or
partnership dissolution , "Pvt" Limited
• active partners bear unlimited liability for • has a separate legal entity:
the debts of the firm . exists as a legal person
• consultative decision-making delays independent of its owners
implementation of ideas enables a company to be sued or to sue
• - lacks continuity due to a change in the in its own naine
number of partners allows co~fto make contracts
• agreements made by one partner are legally
binding on all partners and can be costly to . Ownership
the firm if they are wrong decisions • owned by shareholders
• capital raised from partners' individual
contributions may not ,be adequate to Control and management
expand business activities . • controlled and managed by a Board of
• sharing of profits with lazy partners Directors
may discourage some' who are honest, elected by shareholders
resourceful and hardworking elected at an annual general meeting
• Managing Director, who is chosen from and
Limited companies -by the Board of Directors, runs the busbless-
on a day-to-day basis '. " , •
' ~ _- •. "'l<; .•. ~

• must have at least ,

one director
•.. ,..(![.,.
" "~ '-,:1.. J .,' - .

u • _ • 11Ity • directors
.
report. back ._. td shareholders",- at least:
• shareholders enjoy limited liability once a year
• shareholders only "lose amount of capital • ordinary shareholders vote at an -annUal
invested in case of bankruptcy general meeting to p8$.S resolutions,-~'..•,...'
• personal property is safe-guarded • annual accounts are D,~tpubtished)~t- "
.,
with the regi~ Qf~,~~p~~v:~. :.'tVAT
purposes ',', ". . ~. . ..;'
• strict
• • -'.
on transfer of shares
-A ~~ '. .: ,. ~ - • • .• :./-
.
/~~:>1 r-
• njay'o);,maynot ~1pt an a~tbr '
a..r.ct.rIstIcS • r; '. • • ~ _- ~ <,'~, . il.

'.. \
Formation' . Llabillty :' .-.. ,'.
\ /

• formed by 2 Shareholders to 50 under the ~, all s~h6Iders:·~jox.,Ii#t&i 'llabffi,Jr'i.e,

Zimbabwe CompaniesAct ' : sharehokters .QrlIy ~oie .lhct;, capital/they
• formed,by 2 sharehol~ to no maximum . have invested h1the', iness'imdlili their
limit under the British CompaniesAct . personalproperty .. ,,'" , ~-,.

"t.. . -I'
Raising of capital
• selling shares privately to invited
individuals
• ploughing back some profits
• obtaining loans and overdrafts from banks
• obtaining mortgage finance
• obtaining trade credits' -
• buyingonhirep~hase
• leasing of assets (fixed)
• factoring debts
Distribution of profits
• _used to pay dividends to shareholders
• ploughed back into the business
• _used to pay taies
• set aside as-general-reserve
• _used.to service loans and overdrafts
• ~ed to sponsor activities, e.g. charity
organisations
Advantages . ~'~f
• - . a separate legal entity which: ' "<,
can make contracts
can sue and be sued in its own name
• shareholders enjoy limited liability
• can raise more capital by-selling-shares-
• has continuity of exi~Ce
• founder members can retain control of
company by hold-ing a majority of its
shares
• financial affairs are not published
Disadvantages
• there are too many legal formalities
• lack of capital limits growth of compan~
• shares cannot' be sold on the Stock
Exchange
• accounts must be audited yearly and it is
expensive to employ an auditor
• c~ be more expensive to set-up
• a copy of audited results must be submitted
to the registrar of companies
PubliC Limited Company
Characteristics
Formation
• Membership is open to the public
• Membership _is by invitatio~, _~ough a
prospectus .'... ',
• formed by at least two shareholders to an
upper limit of authorised share capital
• governed by the Companies Act
• promoters of the company draft and
submit to the registrar of companies the
prospectus, articles and memorandum of
association and statutory declaration
• the registrar of companies having approved
these documents will issue a certificate of
incorporation
Ralsi • f capital
selling shares to members of the public
• issuing debentures to members of the
public
• loans, overdrafts and mortgage finance
from: banks
• ploughing back some profits
• factoring (selling) debts to banks
• leasing (hiring) equipment
• buying goods on credit for resale
• buying consumer durables on hire
purchase
Control .nclmanag • nt
• controlled and managed by a board of
directors
elected by ordinary shareholders gt an
annual general meeting
• the board of directors
decide on the company's policy
choose amanaging director
• managing director is in charge of the day-to-
day running of the company
 /, ,.',

• ",oiajn_t • _~;,~~ • :t'~;!t ~ Disadvan~ges

decisions ' • involves 'complex legal, formalities before
• annual accounts are audited, debated in commencing business activities i.e, needs a
parliament, published in the press and lot of documentation
'submitted to registrar of companies • financial affairs are made public
• decisions take long to-make and implement
because ofburea~:..5 ~j
or consultations -
• ) - ~ .~- ~~~ ~ ,

• no personal contact with customers" and

employees .. .
,, "
_;:t}. i' 4:
• separation of control from pwnership causes
conflict of interest '
can be taken over through 51 per' cent
majority shareholding
• there are legal restrictions in areas .of
operation, that is, what the, company, can
and can not do
• there is double taxation on the same net
trading' profit oil',both the company and ,
individual shareholders
• as the company grows large it becomes
• can be invested to generate more income
difficult to manage
• used to pay corporate tax ,~',' .'
• large capital is required
Advantages '. ,_"
• the company is a separate 'legal entity which Multinational corporation'
~!Ut sue and be, sued in its own name ' - (enterprise)
• shareholders andthe compap.y:enjQYlimited
liability , -: ..•~':... htdWNs
-j f .•
• S~~S,;8;I;~ifreely ~sfeITed on.-~e, Stock
Bxchange " ~ ,", ' ". • found in the private sector
• mem~hiP..;~ ~W ~"~~ p~biid.,e: ~\'hares • a large limited liabilj,t)r oUsiness with "
are sola tQ~lI?-~~ of the putili,<:: at the ~ subsidiaries' -''c.~perating in' other
Stock ExcJiaD.g~ , -" . countries
• more capitai'1s'k~~i' e:l.im.it' is placed headquarters in one parent country
~~ t~e ~UItlber ~ ~~~~ :,,' , • ~!:bidiab'
anw'ees
are managed by local boar~ in
• centimnty Of usmess:•. ,IS' assured if a '_' " .
shareholder dies or reiirei~ '. • subsidiaries may IDem loss but may continue
• ordinary shareholders ha¥~ tlle niht to vote . '- opell~g at,a !Oss , ./, '
;miiua
',;;_ at aft ~gerieral'm~lf~~ ': ' ':~ , -"_ - ~'subsi'di~ paYs-.aroyalty for use on
~esign.
• the cOlnlJ8llY.'bas more borrowing powers or formula '.,.._
from.finaneial distitutions ~ ': • the royalty paid1s,l)l$oo on number oftlmts
• can employ ~ed '.-and ~enced sold
managers . , , • ~bSi~ niamifacturer is -'-lictmsed 'to
• shareholders, who are also employ~, are ,~oouc,t goods :to the original design for
loyal to the company' ' '~le on local markets
• has large capital
• brings advanced technology (machinery) to
Zimbabwe
• subsidiary repatriates some -profits to the
parent company
• there IS centralised control by the
headquarters
Advantages
• pays taxes to increase revenue for the host
government
• creates employment to local people
• brings, to Zimbabwe, technology and skills
• obtains foreign currency for Zimbabwe by
exporting locally manufactured goods
•. enjoys economies of large scale production
Disadvantages
•. pay competitive salaries hence attract
skilled and experienced employees from
local companies . ,.
• submit, in foreign currency; pt~fits made in
Zimbabwe to their parent company abroad
• centralised control, which is foreign based,
does not. consider needs of Zimbabwean
people-
The Zimbabwe S,Ock Exchange
• controls and regulates admission of new
members
• acts as a barometer of the well-being of the
economy of Zimbabwe
• a market, for buying and selling shares,
stocks and bonds and other second-hand
securities
• establishes prices for shares depending on
supply and demand
• quotes and publishes prices for shares
• educates members of the public, through
its outreach -programmes, on investment
on shares
• gives incentives to investors because
investment in shares is easily marketable
• sets out a code of conduct for dealers to-
protect investors against unfair business
dealings
• compensates investors who may be
defrauded by dealers
• lists and delists some companies after
examining and. assessing their performance
• prepares reports and information on
companies dealing on.the Stock Exchange
• allows companies and government to raise
funds
• provides investors with names of reputable
companies
• approves shares of companies to be bought ~
and sold
Th. stock Itrok.,
• an agent (middleman) between.members of
the public and the stock jobber
• buys and sells existing shares on behalf of
the public ,.
• gets the best prices for clients
• advises clients on market conditions
• arranges payment for shares traded
• atranges-transfer of share certificates
• drafts a contract note
• a trader (merchant or wholesaler) who buys
and sells shares, stocks and bonds and other
second hand securities /'
• trades in special types of shares e.g. shares
in mining industry
• deals directly with stockbrokers (and not
member of the public)
• works on the Stock Exchange floor
• displays prices for shares
• earns a jobber's - tUm as profit (which is
the difference between the selling pricer- fUld
buying price)
 Speculators on the stock exc"'n •
• bear:
anticipates that share prices will fall
and therefore sells the shares he has
now in order to buy later
a bearish market occurs when prices of
shares, in general, are falling
• bull: .'
anticipates share prices to go up and
buys some shares now in order to sell
them later
a bullish market occurs when prices of
shares, in general, are rising
• . stag:
buys all the new shares of a company
which have not been bought by
members of the public
Below is an example from The Herald of 25
March 2005 of how bulls and bears operate:
r
\
Bulls increase spe.d on the equity 'iNuket
Having grappled with marauding bears during the
months of February and March 2005 on the back
of the effects of the monetary policy measures that
were introdUced by the Reserve Bank Governor
at the end of last year, the stock market is now
enterta_iningbulls.
During the month of February and March the bears
fed on thefollowing:
• high interest rates;
• turmoil in thefinancial sector;
• absence of asset management companies
pending their registration and
exchange rate developments on the auction
market.
High interest rates caused by the introduction of
the RBZ Financial Bill on February 23 mopped up
the hitherto excess liquidity on the money market
thereby driving up-rates to as high as 250 percent
for 90-day paper.
Financial sector turmoil was mainly concentrated
during theperiod before March 31 when the Reserve
Bank was· expected to suspend the Troubled Bank
Fund (I'BF) and let weak banks that had failed to
effect mergers with sound banks go under.
In the case of asset management companies the
delays in their registration by the RBZ has aiso
negatively affected the equities. market, as these
companies are the major player on the market.
Lastly, exporting companies were not happy with
the exchange rate regime prior to April 21 which
had a low blend rate.
In his Monetary Policy Statement the RBZ Governor
had announced that exporters would retain 50
.percent of their foreign currency earnings for
operational requirements, but surrender 25 percent
for sale atforeign currency auction system.
The remaining 25 percent of exporters' earnings
goes to the RBZfor national imports at a fixed rate
.Q/$824 per US dollar.
This last condition lias negatively affected viability
due to the low blend rate, a situation that has seen
some. exporters scaling down or stopping export
business.
All these factors are now a thing of the past as
interest rates have softened significantly while the
.TBF has been extended to September.
Eligible asset management companies have been
registered while the exchange rate regime, although
it remains a thorny issue, has been adjusted since
April 21.
With the passing of the factors stated above, bulls
have been sneaking in since April and have since
changed their speed from trotting to galloping. .
Having increased by 12.7 percent in April, the
Industrial Index rose further by 30.2 percent in
May and 35.9 percent in June, which gives a
total o.f99.3 percent to. close at 693147.07 while
the Mining Index rose by 68.3 percent to. close at
155767.78 during the same period.
The bulls are not showing any signs of tiring
yet as shown by an 8.8 percent increase in the
industrial Index during the first week of July to.
753947.47 while the Mining Index has risen by a
similar magnitude of 8_percent to. 168264.35.
The following factors have influenced the return
of the bulls, which are a reflection of how the
monetary authorities are fairing in their quest to.
achieve a steady state growth for the Zimbabwe
economy.
The first one relates to. how the Reserve Bank is
managing liquidity while the second one concerns
the activities of bargain hunters ahead of the
announcement .o.ffinancial results for the period
ended June 30, which are expectedtastart coming
in August. ' .
In the case oflow interest rates, the Reserve Bank,
after dumping the Financial Bill in mid-April for
cost reaso.ns, reverted {o. the Treasury bill that it
had abandoned in mid-February as its instrument
o.f liquidity management.
However; low yields on the Treasury bills
incapacitated the financial instrument, as tenders
were being under-subscribed.
As a result, excess liquidity conditions have
characterised the money market since the end of
April, as the Treasury bill has failed to. mop up
excess liquidity and create the necessary shortage
needed to. drive up. interest rates in a bid to. keep
speculators at bay and control inflation.
The excess liquidity situation was worsened by
the maturity of RBZ financial bills that started on
May 24. The bulk o.ffinancial bills, totalling about
'.'.'
$2.2 trillion matured during the month of June, a
development that prompted the Reserve Bank to.
introduce a special financial instrument o.n June
16 to. deal with the maturities called the o.pen
market special Treasury bills.
The measures did not satisfactorily control
liquidity on the money market as the liquidity, .
which peaked at $948.3 billion qn June 21 had
by July 5 been reduced to. -deficit levels of $8
billion, thanks to. the corporate tax payments that
occurred at the end of June. -
As a result, interest rates have remained below
100 percent for 30, 60 and 90-day instruments.
For instance, having plunged to.25 percent on June
21, 90-day paper had by July 5 only risen to. 70
percent, which is below the 118 percent indication
rates for the 91-day Special Treasury bill.
In fact, according to. the current inflation figures
90-day interest rates should be hovering in the
150-200 percent range if we assume the 10-2V
percent real interest rate policy announced by the
Reserve Bank Governor in his Monetary Policy
Statement.
Equity investors are aware of this interest rate
inflation mismatch, hence the current bull run.
Given the authorities' inflation outlook that seem
to. have been accepted by investors, the negative
real interest situation is likely to. continue in
the short to. medium term, thereby providing a
continued conducive environment for the' equities.
Bargain hunters are interested in financial and
exporting counters: .,'
This document has been prepared from sources
we believe are reliable .. While reasonable care
has been taken to. ensure that the facts given
,
are correct, no. .responsibility of any kind can be
accepted by Kingdom Financial Holdings Limited,
 any of its directors, employees or associates
either as to the accuracy or completeness of any
information herein or that material facts have or
have not been included.
Colli Storage Co.pan,
• buys cattle, sheep and goats from fanners
• sells meat and meat products
• operates ranches for beef cattle
• operates abattoirs (slaughter houses)
• carries out research on beef production
• stores beef and beef products in
(refrigerated) cold rooms
• regulates supply of beef i.e. prevents
shortages or oversupply of beef
• processes beef into beef products e.g.
\ . sausages
transports cattle bought and beef to
.. butcheries
• grades and inspects beef
• sells . hides to shoe manufacturing
companies .
p
• fmances cattle projects
Da••.• U•• etI Zimbabwe
• buys, collects and stores milk of marketable
quality frOm registered farmers
• pasteurises and packs milk
• processes milk into milk products e.g.
cheese, yoghurt
• markets milk and milk products locally and
internationally
• conducts research and promotes
development in milk production
• regulates supplies. of - milk and milk
products
• stabilises prices of milk and milk products
• pays fanners regularly to enable them to
plan ahead
• "promotes small-scale dairy projects in
communal and resettlement areas
• provides transport to fanners under the milk
bulk collection scheme
• provides community services e.g.
sponsoring sporting activities, scholarships
• promotes consumption of milk and milk
products
• delivers milk to consumers at convenient
times e.g. in the morning
Private business corporation
• found in the private sector. .
• governed by "Private Business Corporation
Act of 1993"
• a cross between partnerships and limited
companies
• a legal entity or corporate body which can
sue or be sued in its own name
• formed by a minimum of one to a maximum
•
of twenty members
prepares an "incorporation statement" and
"
drafts by-laws
• pays a fee, to the Registrar of Companies,
for the registration and processing of an
incorporation statement and by-laws .
• has continuity of existence upon death or
retirement of a member
• members enjoy limited liabilities
• name ends with the words "Private Business .
Corporation" or capitalised abbreviation
"PBC"
• must display its name on the" outside of
every office or place in which its business is
carried on and on all its documents .
• all members are directors and choose a
chairman to run the affairs of the business
• every member is an agent of the PBC
• every member takes part.in managing the
affairs of the business
• no remuneration is paid to· a member for
taking part in managing the business
• any contract entered into by one member is
binding on all members
• any difference (dispute). arising between
members in connection with the affairs of
the business is decided by a majority vote .
• each member contributes capital in the form' "Private Business Corporation" or PBC
of cash or property or services towards the postal address of the PBC
formation, registration and functioning of physical address of the registered
$ePBC office
• can be converted into a company or a full name and national identity number
company with not more than twenty of each member
members can be converted into a PBC each member's capital contribution
• no partnership, association or corporate in cash, property or services to be
body or other legal person or any person rendered
convicted of theft, fraud, or forgery can be a full name and postal address of an
member accounting officer
• any member may, at any time, convene a date of the end of fmancial year
meeting by giving all members reasonable objects (purpose) of the business
notice (not necessarily in writing) of the • each member is entitled to a free copy
time, place and purpose of the meeting • signed by all members and the. accounting
• chairman of the meeting can be the member officer (to acknowledge correctness of each
elected as chairman of the PBC or the item)
meeting can choose its own chairman • original and duplicate (photo) copies are
• chairman does not cast a vote at meetings sent to the Registrar of Companies
• . each member has a vote corresponding • . the Registrar of Companies upon registering
to the percentage of hislher contributed the incorporation statement
capital gives a number to the PBC
• does not pay any dividen~. make any endorses each copy to certify
distribution, repay any contribution, make registration of the PBC
any other payment or transfer any property returns one copy of the statement and
to any member by reason only of hislher issues a certificate of incorporation
membership • original or certified copy is kept and
• financial ~records are prepared at the end displayed at the registered office
of the fmancial year (annually) by the
accounting officer . Trade asscJciation
• the audited fmancial records:
• an organisation formed by traders in the
remain private
same line of business (or same industry),
are sent to the Registrar of Companies
e.g. Bakers' Association of Zimbabwe.
are approved and signed by one or
found in the private sector
more members who have an aggregate
capital contribution of more than fifty • protects interests of member traders
percent establishes a code of practice (rules)
governing operations of its members
Incorporation statement represents members when dealing with
other organisations
• drafted by members of the Private Business • a centre for exchange of information for
. Corporation members
• contains: .. an advisory services bureau for members
name of' the Private Business organises, places and pays for collective
Corporation .•• hich ends with the words' advertising campaigns in the media .

':t.
• organises trade exhibitions
• stipulates prices of commodities
(manufactured and sold by members e.g
bread)
• ensures that stipulated prices are
maintained
• restricts competition ~" prices among
members,
• carries out market research, on behalf of
member traders, in .the production and
distribution of goods and services
• publishes a trade journal for the particular
industry
• maintain a' fund for the association from
subscriptions contributed by members for
the sustainance of the association
Public sector enterprises
• surpluses made can be re-invested '
• audited fmancial accounts are debated in
parliament and published annually in the.
press
Advantages
• government controls the provision of
strategic goods and 'services :~:,'
• provides goods and services at cheaper
prices
• provides employment to a lot of people
• reduces duplication of services and
unnecessary wastage of resources
• enjoys limited liabilities
• implement government policies i.e. on
prices of essential goods and services
• a source of income for the goveriunent
hence reduces burden on tax-payers'
• enjoys economies of large-scale production

Disadvantages
• operates at below full capacity (or at a loss)
and sometimes are inefficient and wasteful
• established byan act of parliament • tends to provide poor quality goods and
• provides essential goods and services ~.,g. services because of monopoly
transport • a lot of political control and interference
• aims at providing a service at affordable • expensive to establish and run
prices ", • lack of initiative among workers leads to
• has no profit-making motive. inefficiency
• a separate legal entity which can sue and be • a lot of bureaucracy and "ted-tape" lead to
sued in its own name inefficiency
• owned by government on behalf of the
public -""Ilc utility corponitIons
• controlled .by government through a
minister \ ~ • provide essential goods and services
• run by a Board of Management appointed • provide transport, water and electricity
by government or . minister cheaply
• .chairman of board of management runs the
affairs of the'parastatal on a day-to-day basis
.......•........... ~,
• government provides initial capital through • can be a city, rural and district council
'selling of stocks and bonds or gilt-edged • controlled by central government
securities " • owned by local government
• policy decisions are made by government • set up to administer a city, rural or district
• subsidised and given grants by government council
 • provides amenities to communities they serve
e.g. refuse collection, water purification,
'sewage disposal, road construction
• affairs are run by councillors who are
elected by residents. of communities in
which they live ~
• affairs and accounts are made public
• set by-laws
Sources of revenue
• the local authorities raise revenue through:
rents, rates and licences
taxes (levies) and subsidies from
government
fines, profits and fees
sale and servicing of land
Why .•• parastatal •.• coM •.• into
poWic n.1tecI ..,. •
• to reduce burden on the taxpayer i.e. there
will be no subsidising of industries through
taxes ':(_ . . the price for each share
• to improve efjcienc~ of' the company
through competili~!l
• to reduce state monopoly by competing
in supply of goods and services with
companies already in the.private sector
• to improve quality of goods and services
• to free the firm from political. control and
. I
mterference thus allowing the new company
to:
pursue profitable pricing
reap rewards for success
shoulder resultS of failure
• to -raise revenue for the government by
selling the parastatal
. Documents use.d -In fOrmation of
limited compan'les
• prepared by company promoters or issuing
house after '. the registration of a public
limited company
• sent for approval to the registrar of
companies' before members of the public
are invited to subscribe for shares
• issued to members of·the public by public
limited companies only
• contains:
an application form for members of the
public who wish to buy shares
a closing date .for the application
a narration (an account) of the history
and back-ground of the company up to
the present time-
a summary. of the future plans of the
company
the current financial position of the
company
the profit record of the company.
the authorised and issued share capitals
of the company
the number of shares to be sold to the
public
a statement to the effect that a request
has been made for permission to quote
shares on the stock exchange
• Importance:
an invitation (advertisement) to
members of the public to buy shares
~ful to ali investor who wants to
assess his risk in making an application
to buy shares
•.• of • dation
• used in the formation of private and public
limited companies.
• prepared by the company promoters .
• sent to .the Registrar of companies for
approval
• contains: .
the name of the company followed
by the word' "limited" for private
companies and "plc" for public limited
companies'
the-address of the company and thatof
 its registered office (i.e. if these two
are situated in different places)
the purpose or objects of the company,
i.e. what the company intends to do
when it is established
thenamesofthe firstcompanydirector(s)
and the first: company secretary
the amount of share capital to be issued
to shareholders
the classes of shares to be issued
a statement whether a company IS
either" private" or "public"
a statement that the liability of
shareholders is limited
an undertaking by the promoters
to form a registered company and
purchase a stipulated number of shares
• __ Importance:
an application to register a company
used during the formation of a company
a company's charter which governs
the company's relatio~hip with the
external world
ArtIde. of Association
• prepared by the promoters of a company-
• sent to the Registrar of companies, together
with a memorandum of Association, for
approval
• contains the rules and regulation pertaining
to:
the rights, duties and powers of
directors
the method of electing directors
the number of directors
the procedure for calling (annual
general) meetings of shareholders.
the voting rights of each class of
shareholders _ contracts
the issue, transfer and forfeiture of
shares
the method of dealing with any
alteration m the amount of share
capital
..
the method of distributing profits and _
carrying out auditing of the company
fmancial records
the borrowing powers of the company.
• shows the name and address of the
company
• Importance:
Lays down the rules and, regulation
for the internal affairs of the company,
i.e. governthe internal running of the
company.
Certificate of Incorporation
• prepared by the Registrar of companies
• sent to a company which applied for
registration
• contains:
date and place the co~pany was
registered
name of the company and address of its
registered office
signature of the - Registrar of
Companies
• Importance:
a 'birth certificate' which shows when
the company was formed i.e. certifies
that a company has been registered
issued when the registrar of companies
has read, analysed and approved
the contents of the Articles and
Memorandum of Association and
the Statutory Declaration declaring
that they are in accordance with the
provision of the Companies Act
establishes a company as a separate
legal entity that can sue and be sued in
its own name
allows a company to engage; in
allows a public limited company
to raise capital by selling shares to
members of the public
enables a private limited company
to commence trading but a public
 limited company must additionally
obtain a Certificate of Trading before
commencing any trading activities
Certificate of Trailing
• Prepared and issued by the registrar of
companies
• Issued:
to public limited companies only
after the certificate of incorporation
has been issued and minimum capital
has been raised
• Contains:
date and place of issue
name of the company and address of
the company's registered office
name (or signature) and address of the
~Registrar of companies
• Importance:
issued when the Registrar -of
companies is satisfied ll9.dconvinced
that a public limited company has
raised minimum or sufficient start-up
capital by selling shares to members of
the public
allows public limited companies to
start trading
used by a publiclimited company to
.apply for listing on the Zimbabwe
Stock Exchange
Statutory lIeclaration
• prepared by the company promoters
• submitted to the Registrar of Companies
• contains:
name of the company
address of the company's registered
office
address of the registrar of companies
.,. names and signatures of the company's
promoters .
• Importance:
shows compliance with the provision
of the Companies Act
-,
'.'
a signed statement by the company
promoters that they have acted in
accordance with all the requirements of
the Companies Act
Private enterprises
• businesses owned by private individuals
or a group of individuals
• found under theprivate sector
• formed in order to make profit
• include sole traders, partnerships, private
limited companies, - public limited
companies, multinational corporations and
trade associations
Public enterprises
• businesses organised' and controlled by
government on behalf of its citizens
• found under the public sector
• provide essential goods and services at
competitive and affordable prices
• have no profit making motive
• include public corporations, (parastatals),
local authorities and, public utility
corporations
T-.rms used in business organisations
"Private"
• membership to a private limited company
is by invitation
• shares of a private limited company are
sold only to invited members i.e. friends,
relatives
• shares can not be' bought, sold or
transferred publicly on the Zimbabwe
Stock Exchange
• fmancial records of a private limited
company are not made available for
public inspection, perusal or consumption
but are submitted only to Zimbabwe
Revenue Authority for tax purposes -
• a private limited company is usually a .
family owned business
"Public"
• membership to a public limited company is
open to (members of) the public
• membership is by public invitation through
a prospectus or advertisements placed in
newspapers . •
• 'shares of a public limited company can be
bought, sold or transferred publicly through
the Zimbabwe Stock Exchange
• audited financial records are published in
the newspapers
Shares
a share is a unit of capital
- - business capital is divided into several units
owners of shares are called shareholders
-Type. (a•• ) of.r •
Ordinary Shares
• are also known as equities
• receive dividends at varqible rates which
depend on profits made' - -.
• receive dividends after preference shares
• are a form of risky investment because if
profits made are not adequate they are not
pail' any dividends '
• "Ordinary shareholders have voting rights at
,annual general meetings
• can be deferred or participating ordinary
shares
• issued by both private and public limited
_companies
".NI
D•.•.• (orill_,,)
• are also known as management shares
• bought by the promoters of a company so as
to control the company
• carry voting rights i.e. founder members
of a company have voting rights at annual
general meetings
• receive dividends after ordinary shares
• converted. to ordinary shares at a
determinable future date
":;"
" Blue Chips"
• These are ordinary shares of a highly reputable
and profi!-making publiclimited company.
Preference shares
receive dividends at a fixed rate
• receive dividends first, before ordinary shares
are paid
• shareholders have no voting rights -therefore
less control of business
• are a safe form of investment i.e, less risky _
investment
• can be basic, cumulative, participating or
redeemable preference shares
Basic preference shares
• receive dividends at a fixed rate if a company
_has made profits
• however, if in any given year the company
does not make profit, the dividends payable
are lost for good
Cumulative preference shares
• receive dividends at a fixed rate -
• receive dividends first before Ordinary shares
• shareholders have no voting rights at annual
general meetings since they are privileged in
receiving fixed rate of dividends
• dividends not received in anyone year will
accumulate and are carried forward and
paid in the following year or later when the
company has made enough profits
Participating preference shares
• receive dividends at a fixed rate
• entitled- to a further share of profits if
dividends paid to ordinary shares surpass a
certain amount .
Redeemable preference shares
• receive dividends at a fixed rate
• issued for a specific period of time
• can be lJought back (redeemedrby a company
at a later date
• used to obtain start-up capital for a company
Distinguish between ordinary and preference shares:
"
Ordinary shares Preference shares
-

• Receive a variable .rate of dividend i.e. • Receive a fixed rate of dividend

dividends depend on (vary with ) profits
made
• Receive dividends last, after preference
shares have been paid
• Can be management (or founders") shares
• Ordinary shareholders have voting rights
so as to control the running of the
company
• A risky form of investment
• Are also known as ·equities
• Receive dividends first, before ordinary
shares are paid
• Can be basic, cumulative or redeemable
preference shares'
• Preference shareholders have no voting
right as they are privileged in receiving
fixed rates of dividends
• A safe form of investment

Stocks • the managing director reports to the board

• sold by government or local authorities to _ • powers are stated in the articles of
members of the public .•.. association
• these. are government shares, -which are • composed of 2 to 6 members
sold in bundles of 100 shares (i.e. stocks) or • draws tip the policy of the company
multiples thereof • headed by a chairperson
• guilt-edged securities • powers and limitations are stated in the
. a very secure form of -investment articles of association of the com~y
backed by government • members mayor may not be shareholders
• board chooses the managing director
•
/
members of the board are elected. by the
I•
• " •
.•
..•
.•
.• '1•
• ) shareholders at an Annual General Meeting
,
• a legal requirement for limited companies
Debentures
under the Companies Act ;:'

• must be attended by all shareholders or by • are loan capital or money borrowed from.
proxy fmancial institutions and individuals
• held once a year • earn interest at a fixed rate ..
• where Board of Directors are elected • interest is paid whether or not a company
.has made profits
• decisions are made
• debentures holders are creditors to the
company
Board of Directors .
• must hold ordinary shares in order to be
• a safe form of investment .

elected
• they control the business
• elected at an AGM
• responsible for the day-to-day running of
th~ business through the managing director
• may be mortgaged (secured) against the
company's assets
• can be naked, floating, mortgaged or
redeemed debentures : -'.
• debenture-holders can force a company into
liquidation if interest ~ not paid
Types of debentures Redeemable debentures
• issued for fixed period of time
Naked debentures
.• can be bought back (redeemed) by the
• issued without any property attached to them
company
• not a very safe form of jnvestment
• the. amount borrowed by the company can'
be repaid on or before a fixed date
Mortgaged debentures
• are pledged (secured) against company assets
Irredeemable debentures
(property), e.g. buildings can be a form of
• can not be bought back
security against mortgaged debentures.
• the amount of money borrowed remains
• is a safe form of investment to the loan lender
unpaid (outstanding) up until the time when
• iocase of liquidation ofa company:
the company is liquidated
the attached property will be sold and .
the proceeds of the sale are used to settle
the debt or payoff the debenture- holders

Difference between shares and debentures

Shares Debentures
',-
• Contributory capital i.e. capitalcontributed • Loan capital i.e. money borrowed from
by shareholders fmancial institutions and individual
• Shareholders are owners of the company. investors
• Earn ffividends • Debenture holders are creditors to the
• Dividends may fluctuate (for ordinary company
shares) • Earn interest
.- Dividends are paid only when profits are • Interest is at a fixed rate
made • Interest is paid whether or not profits
• Are not attached to or secured against are made
company assets • Are mortgaged against company assets
• Dividends are paid after interest on loan • Interest is paid first before dividends on
has been paid shares are paid
• A risky form of investment or capital • A secure form of investment or loan
• Can be ordinary or preference shares • Can be naked or mortgaged
• Shareholders cannot force a company into • Debenture holders can force a company
liquidation of a company (if dividends are into liquidation (if interest is not paid)
not paid) • Debentures are paid first before shares on
• Shares are re-paid after debentures on liquidation of a company
liquidation of a company • Debenture holders have no voting rights
• Ordinary shareholders -have voting rights at annual: general meetings
at annual general meetings • Are redeemable .
• Are irredeemable

'\.
Fill in the missing word or words in the following statements
1 A business which involves less formalities and is easy to establish because it requires less
capital is called ...
2 A partnership act states that profits or losses are shared ... among partners.
3 The day-to-day affairs are run by a ... in a public limited company.
4 A ... has subsidiaries operating in other countries.
5 The ... is a market for second-hand shares.

State whether the following statements are true or false

6 Shareholders run the affairs ofa partnership. TIF
7 A sleeping partner enjoys limited liability. TIF
8 A bullish market, on the Stock Exchange, occurs where prices of shares ate rising. TIF
9 A memorandum of association is an invitation to the public to buy shares. TIF
10 Blue chips are shares ofa highly reputable public limited company. TIF

Multiple choice questions

11 What name is given to shares entitled to unpaid dividends out of future profits of a business?
A basic preference shares
B cumulative preference shares
C participating preference shares
D redeemable preference shares
12 What is the advantage of converting a partnership into a private limited company?
A the promoters can advertise their company in a prospectus
B ' the government can easily control important sectors of the economy
C the business will have continuity after death of a shareholder
D its capital will be provided by the state through taxation
13 Which one is not a source of finance for a company?
A factoring debts
B buying goods on credit
C paying off an overdraft
D leasing equipment
14 A bear, on the stock exchange, is a speculator who expects share prices to .,.
A fall and buys now in order to sell later.
B fall and sell~ow in order to buy later.
C rise and buys now in order to sell later.
D rise and sells now in order to buy later.
15 In a limited partnership; who are the partners with limited liability?
A sleeping partners-
B nominal partners
C general partners
D active partners
 Structured
.•.. ~ -
questions
...•. .
": .
16. 'state the contents andimportance 6fthe""f~llowing documents:
.a) Prospectus
b) Articles of Association
c). Memorandum .ofAssociation
17 Explain the features of a private limited company under the following headings: .', '..
a) formation . r , ' •

b) raising of capital
c) -management and control
d) distribution of profits
e) liability (20)
18 . Distinguish between:
a) shares and debentures (10)
b) public corporation and public limited company (I(JJ
19 a) What are the functions of the Zimbabwe Stock Exchange? (10).-.
b) Why has the government privatised some of its parastals? (1())
20 State the characteristics of the following:
a) public corporations (6)
b) sole trader (7)
c) partnerships . ~£.. . '(7)
21 State the importance and con~ts of the following documents:
(i) partnership deed (10)
(ii) certificate of trading . :(4)'
(iii) certificate of incorporation . (6)
22 a) What are the features of a public corporation? (12)
b) Explain the term preference shares C (8)
•. ~ • .. '. ...L
.23. a) State and explain the functions ~fthe Stock Ex~hange ?f Zimbabwe. ~Q2)
b) Why are some parastatals converted in public limited companies? . ,. (8)
24 a) In connection with business organisations explain the followingterms:
(i) AGM' '. " '. (4)
(ii) Board of directors (4)
(iii) Legal entity .1.. .•
(4)
b) Outline the features of a multinational corporation. (8)
25 a) What are the features of a public corporation? (12)
b) Explain the term ordinaryshares. , (a)

. "
,,,,,,p.
.. '..~.~
..i: " ..~.': .. ~

/ ..
!.::.",.

'.~
.. '~
 Model answer to question 20
20 a) Characteristics of Public Co-orporations
• tn~are found in the public sector
• tj1e:y.are established by an Act of Parliament
• they are meant to provide essential goods and services to the public at low
prices e.g.,transport
• the corporcltions do not have profit making motive
• they are usuaJIyoWRedand controlled by government through a minister
-r • the minister appoints a board of management --;.'.'
• the board -chairman runs the day to day affairs of 'the corporation
• government provides initial capital through selling of stocks or bonds
• capital maY be obtained as grants or subsidies from government through
sale of treasury bills. ,
• corporation policies are made by the government
• if there ar:'e'anysurpluses the corporation can re-invest them
• audited financial accounts are debated in parliament and published annually
~~p~~ "
Any 6 of the above points would be correct (6 marks)

20 ~~ Sole Trader characteristics

• ,tt;ltJrader is found in the private sector
~~!lx':twned'~_one person
• W._lnaking a profit ,
very ~w documents are required for its formation such as a trading
Ii~ence
• . ~\ needs little capital to establish a sole proprietorship
the: business is run by the owner
• sol~'pr&ptietor's working hours are fleXible '.
f --
workers may be family members .
• the owner loses personal property when the business becomes bankrupt.
Any 7 of the abov.e:points would be correct (7 marks)

20 c) Partnership characteristics
• the business organisation is found in the private sector
formed by
2 to 20 partners if traders
-: 2 to no maximumif professioncls such as doctors., tawyers or teachers
• requires' few legal formalities in order to operate
partners may agree verbally or in writing .
for written agreement a partnership deed is drawn up . r

• before the partnership starts operating a trading licence is required

'. capital is raised through personal savings, loanS,hire purchase or leasing of
fixed assets

CD
~{;:
~.'
 • partnership is owned an~ controlled by partners .
partners may either be sleeping or active partners
• decisions made by one partner bind on all partners
• profit is shared among partners according to agreed profit sharing ratios ._
• partners are liable for the debts of the business incase of bankruptcy according
to profit sharing ratios
AnY-7of the above points would be correct [l marks) '_,.
. ~..

.'

• I

"
Chapter 8
Money and banking

Before the introduction of money, barter was Money

used.
To overcome the problems of barter, money was
''1troduced. Money is in many forms, such as:
• bank notes and coins
• cheques
• bills of exchange
• money orders
postal orders

Legal tender
• bank notes and coins are legal tender
• these are issued by government and must be
accepted by anyone in settlement of debt or
in payment of goods or services
• coins are in two forms:
Fig.8.1 Barter standard coins: contain metal worth
face value
Barter Transaction token coins: are not worth the same as
• the exchange of goods and services for goods the metal they contain
and services e.g. a bar of soap for a bucket of
maize, a skirt for a bucket of beans

Problems of barter
• only applies where there is a double
coincidence of wants e.g. one with IOkg
of rice needing a 50kg of sunflower would
hunt for someone in need of rice and has
sunflower
• goods were difficult to divide e.g. goats or
cattle
• some goods were too heavy to -carry e.g.
grains
• goods were not easy to evaluate and
compare e.g. clothes and cattle
• it involved long distances in order to get the
person with the required product
• there were no storage facilities for
perishables Fig. 8.2 Coins

Fig. 8.3 $10, $20, $50,$100, $500 and $1000
Functions of money
• a medium of exchange
it can be exchanged for goods and
services e.g. dress for money or labour
for money
• a measure of value
value of goods and services is expressed
in monetary terms e.g. pair of shoes
worth $60 000
• a standard of comparing values, e.g.
50 kg of maize worth $30 000. 00 as
compared to 50 kg of beans worth
$350000.00
• a store of value
.surplus goods can be sold and stored as
money
perishables can be sold and stored as
money
money can be saved in savings, current
or deposit accounts
• a standard of deferred payments or future
payments
goods and services are valued and
paid for later e.g. paying debts at some
future date
a unit of accounts
all transactions are expressed in
monetary values
Charaderfstlcs of money
• For money to carry out the stated functions it
must have good characteristics which are: .
• acceptability .
money can be anything as long as it is
acceptable in settling payments
people should be free to accept it
• divisibility
it must be available in different
denominations or divided into small
units (for purchasing small items or for
change)
• durability
money must resist quick wear or
deterioration
should maintain its state for a long
time
• portability
must be of convenient sizes to carry or
must be easy to carry around
• recognisability
notes and coins of different sizes must
be easily identified
• uniformity or homogeniety
notes and coins of same value should
be the same or identical in all respect
• scarcity
money should be limited in supply
• stability in value
it must have a faiify constant value over
a time to avoid inflation
Financial institutions
• these provide fmance to businesses
Types of financial institutions
• Building societies
e.g. Cabs, Beverly building society in
Zimbabwe
hnctlons
• they keep safely the customer's deposits
through savings, deposits, and fixed share
accounts
• provide mortgage finance or building loans
• provide Automated Teller Machines (ATM)
• provide purchase points e.g. in
supermarkets
• provide cash and switch cards
• issue certified cheques on request
• operate stop orders for their clients
• give advice on investment portfolios
• give loans against paid up permanent shares
(pUPS)
• . facilitate automatic transmission of funds
(on line Realtime computer system)
• nt •
ego BARD, Discount Company of Zimbabwe
Functions
• raise money over shorl-:'~od from the
public and business organisations
• lend the money to government and private
companies .
• inves; in securities e.g. treasurer bills. and
Bills of exchange
• buy and sell treasury bills
• accept and discount Bills of exchange
• offer banking services e.g. accepts deposits
Mere""''''''
e.g. Merchant Bank of Central Africa (MBCA),
Syfrets Merchant bank
Functions
• specialise m accepting and discounting bills
of exchange
• lends money on short' term to large
importers
• may raise long term capital by. arranging the
issue of new shares . •
• act as underwriters when they purchase
unsubscribed shares
• source and keep foreign currency for
businesses
• export and import goods
• confirm orders
• arrange letters of credit
• offer banking services
POlt OM•• SavI•• Bank.
F.nctlonl
• accept deposits from individuals and
companies
• operate savings accounts on which tax free
interest is given
• operate stop order facilities for clients
• lend money to large organisations such as
discount houses
• invest money in treasury bills and municipal
stocks
• issue cheques on request
• provide Automated Teller Machines (ATM)
• provide money orders and postal orders
Mon., orcl.r
• a means of payment suitable for paying ,
large amounts •
• sender fills in ink the amount to be sent
• state the name of payee
• sender is given a certificate as a proof of
postage
• money is paid at the sender's post office
• money is transferred to the payee's nearest
Post Office for payment
• payee is sent a slip notifying him of the
•
amount to be paid
payee is paid on production of positive
identification and provision of correct
information about the sender
• can be crossed for security
it is a safe way of sending money
• money orders are valid for 12 months from
the date of issue
 • offer credit and ATM cards
ZIMPOST
• provide automated teller machines (ATM)

ZIMPOST
_,.

,_"
OFfICE TELEGRAPI1I1ONEY0RIlEIt

Rusap~~ 'p'g.!1:gtti~e ."~ ~. ~__••.• . Q8/Q5LQ6_ __

• safeguard valuables such as title deeds or
• __ 111••
certificates .
$

.---.········.·.·· •
Andrew Takudzwa .
~;M;.,~h_04-'_·';;;';:-';;;"'-.:i~----~"-.....: •.• give fmancial advice

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Three million dollars • offer night safe facilities

•
0
accept .and discount Bills of Exchange

M~~
~.

~"........-t""""'"
- -
I .:i~-
-licHA1UM:~- .__._
( •
•
•
provide Bancassurance
provide tele-banking facilities
act as trustees and executors
,... K 700492
• offer interest on account balance
• offer point-of-sale in supermarkets
Fig. 8.4 Example of money order form • issue letters of credits
• act as underwriters
Postal orders
Bank overdraft
are suitable for sending small amounts of
money through the Post Office • an informal way of borrowing money
• these documents are issued in lieu of cash • given to current account holders only
• they are printed in fixed denominations e.g. • usually borrowed for short periods when
$5,00 $2,00 one needs short term capital
sender buys the denominat_i<;mequivalent to • interest is charged daily on the overdrawn
the money to be sent . amount
sender fills in the payee's name and posts to • interest rate is very high
him • repayment period is not fixed
on receipt of the postal order, payee takes • repayments are irregular
the postal order to the named Post Office • collateral security is not needed
and cashes it by signing
• if crossed, payee willhave to deposit it into Bank loan .'-
a bank. account
• a formal way of borrowing money
Commercial Banks • interest is charged on whole amount
• collateral security is needed from borrower
e.g. Standard Chartered, Barclays, and Agribank. • is for long term capital projects, e.g. for 3
etc years, 5 years or 6 months·
• loan account is opened for the customer
Services offered • repayment period is fixed
• accept deposits in form of current, savings • repayments are by instalments
or fixed deposit accounts • interest rate is low
• 'receive or make payments through cheques, • interest rate is fixed
direct debit, credit transfer
• provide fmance through 'loans -and Information needed by a bank manager
overdrafts before granting a loan to a customer.
• provide foreign currency, travellers cheques • .customer's personal details, i.e. name and
or bank. drafts ·address and date of birth, current payslip

.,.
~.
'.'
• amount of loan required
• period of loan required
• proof of residence
• .details of previous record with bank or other
institutions
• customer's currerit commitment e.g. other
forms of borrowed money or c~editors.
• tax returns
• purpose of loan
Procedure iDobtaining a loan
• customer contacts the bank manager
• customer is interviewed by the bank
manager
• ~urpose of loan is stated
• customer reveals the amount of loan
• customer states the collateral security
• application form is filled by the customer
• application form is assessed and if
successful bank manager and customer sign
the agreement form
• loan account is opened in'lfie_ name of the
customer ".:
• loan is credited in the customers loan
account
• collateral security the client can offer e.g.
assets ~ch as vehicles; house or equipment
• current economic climate, e.g. government
.
Differences between a bank loan and a bank overdraft
Bank loan
• formal way of borrowing
• available to anyone who meets
•
the requirements
collateral security is needed
, ·•
• loan account is opened
• interest is charged on whole account
• interest rate is fixed
• repayments are regular by instalments
•
•
interest rate is low
used for long term capital projects
• repaymentperiod is fixed .
monetary policy, i.e. Reserve bank
controlling all the foreign currency
• local trading conditions such as trade bans
or embargoes
• profitability or viability of project
• financial position or standing of the
customer
Night Saf. FadlifJ
• safe guards money for traders who do their
business during the night
• they lock their money in wallets or bags
• bags are slotted into bank chutes
.• bank tellers deposit the money the next
day.
Safe guanllng of cudomer's valuables
Banks store valuables such as policy documents,
deeds, wills, share certificates or jewellery.
Customers get the service on rental policies.
Bank credit card
• . enables customer or card holder to buy on
credit up to limited amount on card
• used to draw cash from the customer's
bank
Bank overdraft
-,
· informal way of borrowing
· available to current account holders only
collateral security is not needed
interest is charged on the money
overdrawn daily
• interest rate is variable
• repayments are irregular
• .interest rate is high
·
•
used on short term working capital
repayment' period is·not fixed
• customer does not need to carry cash around
• guarantees limited cash withdrawals at other
banks
• allows customer to obtain loans from any
bank operating the scheme
• used for encashment of cheques at any of the
bank's branches or correspondent banks
• used in both home and foreign trade
• allows customers to pay several bills, using
one cheque once a month, thus saving on
bank charges
• guarantees payment of cheques drawn by the
customer
• enables request of statement on account
• uses a PIN for security
.- can be used to transfer funds from one
account to another'
• allows the provision of an overdraft facility
• the card shows:
name and signature of holder
name of bank issuing the card
expiry date "
terms and conditionsof use
account number
Cheque card or bank card
.•. :
• shows on the card: ,.
name and signature of card holder
name of bank issuing the card
expiry date
terms and conditions of use
card number
limited amount
enables card holder to draw cash from the
customer's bank
, guarantees limited cash withdrawals at
other banks - •
• allows customer to obtain overdraft facility]
• guarantees payment of cheques drawn by
customer
• enables request of statement on account
• uses PIN for security
• can be used to, transfer funds from' one
a~count to another or make payments of
electricity etc ' card or passport
• customers make .enquiries or give
instructions with regards to their accounts
over the telephone
• instructions are usually given by- the
customers who operate call accounts
• customers on opening, call accounts _sign
indemnity forms _",. ,
• indemnity protects the banks from claims
resulting from misrepresentations '
• instructions to move funds from one account
to another require verification
• verification of the authenticity of instructions
•
is done by calling back the customer
after verification the bank then executes the
instructions _'
.' customers may request for the following
over the phone:
cheque books
statements
ATMcards
deposit books
• banks have special departments for such
instructions.e.g. call centre for the Standard
Bank
for security reasons a password is allocated
and .used whenever enquiries are done to
one's account
Savings Account
• keeps customer's money safe
• suitable for small savers with regular
incomes
• has low opening and minimum balances
interest is paid p,¢odically, i.e. after 3'
months or yearly ,
• withdrawals are on demand
• cash can be obtained through the ATM or
use ot passbook, '
• deposits are made through deposit slip
• on opening, one is required to c~mplete an
application form and produce an identity
 Dep~sitAccount • the debtor and creditor must agree and
• keeps money not wanted for immediate use complete the banker's stop order form
• ,high interest is paid • the system avoids bad debts
• interest depends on the amount deposited • payee receives prompt pa)'ment
• withdrawals need 7 days' notice • it reduces paperwork
• no ledger fees are charged • saves on the cost of postmg cheques 'or
cash
Fixed Deposits Accounts ' • debtor initiates payment c

• deposits are of stated minimum amounts,

e.g. $10 million Credit transfer
• deposits are of a period of one to twelve • a method of payment
months • used to pay' many accounts using one
• customer is not expected to withdraw until cheque
expiry date • a multiple transfer form is completed
• - interest rate for the period of deposit is ., payee must have an account
fIxed • ideal for several payment at one time
• .earn high interest rates • payment is made to any bank in the
country
Budget Account • the method is used to pay wages or
• customer totals all regular bills for the dividends
whole year ·"·f
• the total is divided by twelve to get cost of Direct debit
'bills per month • a method of payment initiated by creditor
• at the end of every month one twelveth of • direct debit authorisation form is filled
the bills annual total is transferred from the to settle bills of telephone, water or
(' customer's current account to his budget electricity
account • used for payment of varying amounts
• Isome banks issue' special cheque books for • used ivhere intervals between payments
the budget account vary
• the customer uses budget account cheques • payment is prompt
to pay monthly bills • minimises bad debts
• ' creditor does not need to send reminders to
Bank payments in home trade customers
'. these may be done using the following
banking services
,.,..nt layIa.nkl Inforeign •.• ,
Standing or stop order The following methods are used:
• a method ,of payment used tq-pay fixed Bank draft
amounts to creditors at specified times Bill of Exchange
during the year, i.e. the last day of each Letter of credit or documentary credits
month for Hire Purchase payment Cable transfer' known. as' homelink in
• .an arrangement between a customer and a Zimbabwe
banker See International Trade for more details. '
..
G
Differences between direct debit and credit transfer

Direct debit Credi~ transfer

• used to pay amounts where intervals • uses one cheque to pay several accounts

•
between payments vary
used when cred$>r wishes to initiate
·• debtor initiates payment
payee must have an account
payment to minimise bad debts • payment is made to any bank ill the
• both creditor and debtor must have country
accounts · multiple transfer form is completed
•
•
payment is prompt
direct debit authorisation form is filled
· ideal for payment of wages or dividends

• ideal for payment of water, telephone or

electricity bills

Other services possible amount to be withdrawn

bank balance
Automated Teller Machines (ATMs) mini-statement
• save on labour and space
• a fast way of dispensing cash and
information
• reduce paperwork
• customers use PIN for security
• one is able to change PIN
money can be transferred from one account
to another
• reduce the need to carry cash around
• customer is able to
make payments of electricity or
airtime
request for a cheque book
make deposits
Fig. 8.5 A customer withdrawing money from an ATM use Zimswitch card
• sources of revenue -for the government
• are fitted on the outside walls of banks and
are used to withdraw cash Current Account
• operate for 24 hours • opened by both businesses and ordinary
• use the self-service method people
• follow or listen for instructions from the • allows use of cheques when making
host payments
• no personal assistance is provided • holders do not need to carry cash around
• on request the machine verifies and displays • holders may make and receive payments by
the following information: stop orders, credit transfer or direct debit
• cheques may be used as receipts for The cheques are written PAY BEARER on
payments made demand ..
• holders have access to overdraft facilities • they are payable to anyone who presents the
• interest is received on credit balances cheques to the counter of the drawee
• banks send statements on regular basis • the cheque does not name the bearer
• bank offers trade references • bearer cheques are not safe
• current account holder is provided with • have expiry dates
night safe facilities
Cheques Order cheque
There are two types of cheques i.e. bearer and The instruction on it reads "Pay or Order"
order • the payee's name is stated
• the named person can obtain cash from the
Bearer cheques bank on production of positive identity
• named payee can transfer the cheque to
--- ...._
.-~N~I'lt"1'4
someone else by endorsing it at the back
~ ~-
..
:.~'
Order cheques may be open or crossed

Open cheque
• does not contain parallel lines on the face
• can be cashed over the counter
• anyone in possession of it becomes the
owner
• it is not a safe cheque
• payee signs at the back of the cheque
• usually used to pay a payee who does not
have an account
Fig. 8.6 Bearer cheques

Fig. 8.7 An order cheque

 Blank cheque
• may be an open or crossed cheque
• signed by the drawer without details on the
cheque
• issued to drawer's trusted people so that the
payee would fill in the details
• it is not safe _.
Crossed cheques
A cheque may have a general or special crossing
on its face
General crossing
• cheque will have two parallel lines across
its face
• it cannot be cashed over ~ counter.
'. the crossing cancels the, '6I\ler to pay on
demand
• it must be deposited into a: bank account
• it is safe to use because it can be traced if lost
.;, payee must have a bank account
Special crossing,
'~
• the cheque has two parallel lines across its
face
• has the name of payee's bank and branch
Written in between the lines
• it is written. "not transferrable" ~
• this makes the cheque more secure against
theft
• the cheque must be deposited into a bank
account at the stated bank branch
• it' cannot be cashed over the counter
-.
~,'
• one does not need to use registered post
when sending it
• it is easy to trace if stolen.
Rea • ns for dish • rIng chetlu •
Cheques may be dishonoured for the following
reasons:
• the amount in words is different from the
amount in figures .
• the cheque is stale or it is 6 months from the
' date of issue without being cashed
• there are no funds in the drawer's account
• the cheque is tom or dirty or mutilated --
• the signature on the cheque' differs :'f!'oni
specimen in the bank 5~~;:.~~
• the drawer is insane or dead ~ ,
• there are unsigned alterations ~
• there are incomplete details, e.g. no date
• account is closed
• the drawer is declared insolvent or bankrupt
or specified'
• drawer has requested for stop payment
• when cheque is post-dated
Advantages of making payment by cheque
• convenient than carrying cash
,;,~.•. • payment can be stopped if necessary
• it is safe if crossed
• one does not need to count notes
• cheque can be drawn anytime
• can be endorsed in favour.of a third person
or it is negotiable, ~
• cheque may be pO~t-dated "'0,
• cheque can be traced if lost "
• can be posted cheaply •
• customer is sent a statement at the end of
each month
Disadvantages of cheques
• cheques are not legal tender, one may refuse
to accept them in payment
• they may be valueless if drawer bas no
money jh his account
• depositing cheques into an account wastes
time
• cheques are not suitable for small amounts
e.g. when paying for a box of matches
people without bank accounts will be
inconvenienced by crossed cheques
• bank charges for issuing cheque books and
dishonoured cheques
• At the HQ cheques. are sorted according to
their branches '
• Cheques are sent to their branches '
• Drawer's account is debited.
H payee and drawer use difJerent banks

a..n.• of C• U., Payee's bank branch

~~/~':
• A cheque may be cleared under any of the
Payee deposits cheque into- his account.
three conditions .Payee is credited.
Cheque is sent to Headquarters (HQ)
-H payee and drawer use the same bank
branch Payee) Bank HQ
. -~. ' - .. -." '::""'e;' " , . -., ;;:::-:
Payee deposits ¢lieque_into IDS
. -.-""W
Payee, is credited'[
, Drawer is debited:
aCcount
, ( Cheques are sorted according to
banks and sent to clearing house
,
. Clearing House
H payee and drawer use the same bank but
difJerent branches All banks have accounts
Representatives from banks settle
•To

Payee branch bank indebtedness and physically

exchange cheques and take them to
~~----------~--------~'
their banks HQ
Payee deposits cheque into
his! her bank account
Drawers' Bank HQ
Payee's account is credited .,
~,
Cheques are sorted according to
bank branches and sent to branches
Drawer and payee bank headquarters
, " Drawer's Branch
,;

Cheques are sorted according to Drawer's account is debited

bank branches in~senNa ,-
.
respective branches. '
. Reserve Bank of Zimbabwe'
Drawer b~ch 1 It is the Government bank or the Central bank.

Drawer's account is debited Functions

• Payee deposits cheque into his or her
account at the bank branch
• Payee's' account is credited at his branch
• Cheque is sent to the payee and drawer bank - •
headquarters (HQ)
• issues notes and coins through commercial
banks
• a banker's banks i.e. it keeps minimum
deposits for commercial banks
a banker to the Government i.e. revenue is
paid into it and payments are met out 'of it
• carnes out the government's monetary
policy by controlling interest on debt and
the value of the Zimbabwean dollar
• a lender of last resort to commercial banks
and discount houses
• acts as a clearing house in settling interbank
debts
• rations foreign currency and controls the
issue of foreign currency
• acts as advisor to Government on economic
issues and ways of controlling inflation
• sells Treasury bills on behalf of government
• withdraws and replaces worn out notes and
corns
• a custodian of the nation's reserves of gold
and foreign currency or foreign assets
• keeps state departments accounts
• acts as an agent for State to borrow funds
from the public
• controls and regulates the supply of money
• manages the national debts
• offers banking services to commercial
banks
• controls the lending rate

Fill in the missing word or words in the following statements

1 ." is a characteristic of money which allows it to be carried in convenient sizes.
2 Loan repayments are by _...
3 ... is the lender of last resort to commercial banks.
4 Letters of credits become documentary when accompanied by ....
5 Three parties to a cheque are ... , ... and ....

State wh-ether the following statements are true or false

. 6 On a promisory note the drawer is 'same as the payee. TIF
7 Automated Teller Machines (A T Ms) provide statements on request. TIF
8 The drawer on a cheque is the person to whom the cheque is made out. TIF
9 Postal orders are issued in lieu of cash. TIF
10 Cheques are sorted according to their branches and banks at the bank headquaters. TIF

Multiple choice questions

11 Barter is buying and selling of ...
A goods for cash.
B goods on credit.
C "goods for goods.
D goods for money.
12 Which one is not a characteristic of money?
A acceptability
B. accountability
C divisibility
D portability
13 Which one is provided by a Building society?
A current account
B loans for house purchase
C overdraft facility
D printing of notes
14 Which finance house is well known for discounting bills of exchange?
A Building Society ,
B Commercial Bank
C Merchant Bank
D People's Own Savings Bank
15 Which one is not offered by an ATM?
A bank balances
B cash
C mini-statements
P overdrafts
16 Credit transfer js ...
A ideal for the payment of electricity and water bills.
"
B used to pay several accounts using one cheque.
C used when both creditor and payee have accounts.
D used where intervals between payments vary.
17 Which method of payment gives the importer a period of credit?
A Bank:draft
B Bills of Exchange
-,
-·-·or

C Credit transfer
D Direct debit
18 Stop older method of paym~nt allows .. ~:_
A payment at irregular intervals.
B payment of fixed amounts.
C; payment of large amounts..
D payment to unknown creditors.
19 Which one is an advantage of paying by cheques?
A bank:charges for issuing cheques
B cheques may be drawn any time
C cheques may be valueless if drawer has no money
D one may refuse to accept them
20 Which one is regarded as a special crossing?

~.
'."
Structured questions
21 a) .What were the problems of barter? (10)-
b) State and explain the functions of money. (10)
22 . a) State and explain the six characteristics of money. (12) .
b) Give the functions of building societies. (8)
23 a) . Describe money order and explain how it is used. .(8)
b) Give the four services offered by Merchant Banks. ':~ , (4)
·····1 ';
c) What are the functions of the Post Office Savings Bank? (8)
24 a) Describe the services offered by commercial banks. (12)
b) Explain the information required by the Rusape Standard Bank manager before
granting a loan to Mr. S. Kamusasa -..,.' (8)
25 Explain each of the following bank services:
a) bank draft - (6)
- b) bank overdraft . .(7)
c) bankloan (7)
26 How would a trader benefit from the following services offered by a ,building society?
a) fixed deposit account .(5)
b) savings account (8)
. c)· Automated Teller Machines . (7)
27 a) Describe and explain the importance of a bank credit card. (10)
b) Explain the followUi'g_inconnection with banking:
(i) Financial advice and information (3)
(ii) safe guarding of customer's valuables (3)
(iii) night safe facility (4)
28 a) ~What is a bill of exchange and of.what importance is it to a trader? (10)
b) . Howwould an importer in Zimbabw~ banking with Barclays Bank use letters
of credits when buying goods from an exporter in the United Kingdom banking
with Standard Bank? (10)
29 a) When.is a stop order method of payment used? '(6)
b) Describe and give the importance of the following:
(i) bearer cheque (6)
(ii) crossed cheque (8)
30 a) . Under what circumstances would a cheque be dishonoured? '(5) .
b) M.Fungai who banks with Barclays Bank Mutare, pays M.Zenda '$3 million by
cheque. M. Zenda deposits the cheque into her account at StandardBanki-Rusape
Explain, how this cheque will be cleared? . '. (10)
c) How are importers and exporters assisted by commercial banks? (5)
Model answer to question 30
30a) A cheque would be dishonoured for the following reasons:
the amount in words is different from the amount in figures.
A cheque becomes stale i.e. a cheque takes 6 months from the date of issue
without beil'\9l~e.sented for payment
when the drawer;'s account has no funds.
cheque is torn, dirty or mutilated.
the signat~re'~n cheque and the specimen kept by bank differ.
the drawer is insane or dead.
there are incomplete .details such as no signature or date
the drawer's account is closed
the drawer has required for a stop payment.
a cheque is post dated
the drawer is declared insolvent, bankrupt or specified.

Any 5 of the above points are possible answers (5 marks)

30b) Clearing of Fungai's cheque

o M.Zenda deposits Q\eque into her account at Standard Bank, Rusape Brandi.
o Zenda's account is d·edited.
Cheque is sent to Standard Bank._Standard Bank headoffice sorts out all
"-
cheques from different banks according to their banks
o Fungai's cheque is buridled together with those from Barclays Bank.
o -Standard Representative willtake all cheques from other banks to the dearing
house together with Fungai's
At the clearing House all banks have accounts .~
o All bank representatives will meet and settle the bank indebtedness using bank
drafts.
o Cheques are physically exchanged
o Fungai's cheque with other cheques from Bardays Bank will be taken by the
Bardays Bank to Barclays Bank Head office
o At Barclays Bank head office the cheques are sorted according to branches
. Fungai's cheque together with those from Mutare branch will be sent to
Mutare
Mutare Barclays Branch willdebit Fungai account.
Any 10 of the above steps are possible answers (10 marks)

30 c) How commercial banks assists exporters and importers

• they provide them with foreign currency for their imports

o convert the exporter's earnings into local currencies for importers and
exporters e.g. from US dollars to Zimbabwe dollars.

'-\.
 • maintain foreign currency denominated (f.c.d) accounts
• provide travellers cheques to employees or employers who go out on business.
• receive and make payments on behalf of exporters through cable trOnsfer or
bank drafts
• provide both importers and exporters with foreign trade information
• may give trade references to the importers or exporters
.• accept and discount the exporters's bills of exchange
• safe guard the exporter's bill exchange .
• safe.guord the exporter's and importer's money through savings, investment or
current accounts
facilitate credits by issuing letters of credits

Acceptable answers :- ~ny five of the above points. (5 marks)

. ~ ... ", .

• I

-.~..
Chapter 9
Transport

Movement of goods and people from one place • the possibility of return loads i.e. any goods
'to another available that can be. carried when the mode
of transport is going back to its base
Importance of transpOrt to trade • the availability of the mode of'transport i.e. .
. ';,.. is the mode readily available to be used
• Carries:
• the security of the mode of transport i.e. are
raw materials
goods safe from theft and damage
equipment and machinery
finished goods
partly finished goods
Modes of transport
workers to and from work through
road, rail, sea or air Roadtransport
Fadon- "Ich determine ihe • od. of Advantages
tra••.• .,.., • • fast over short distances
• cheap over short distances
• the nature of goods: • offers door-to-door delivery service, i.e. it is
perishable goods such M-. ._, bread, meat, direct
. milk or fish ".__. • there is a wide network hence:
bulky goods such as minerafore, grain, vehicles can be re-routed
coal or timber remote areas are accessible
heavy goods such as quarry or coal
• operates on flexible:
liquids such as water or fuel
time tables hence goods can be carried
fragile goods e.g. glass.
any time
valuable goods such as gold and
routes. since vehicles can travel
, diamonds
anywhere.
explosives, e.g. gas
• there is minimum handling of goods thus
• the urgency of delivery such as food to a
reducing risks of theft of and damage to
starving nation or-drugs to patients
goods
• the distance involved in transporting the
goods i.e. long and short distances. • suitable to carry:
• the cost of transporting the goods, i.e. some perishable goods such as bread
modes are determined by: or flowers because they need to
distance involved be delivered urgently before they
risks involved deteriorate
insurance costs fragile products (such as eggs, glass)
labour involved because these are brittle and can break
cost of mode, rail is cheaper than air easily .
• the accessibility of the area to which goods loads of different shapes and sizes e.g.
are to be ferried, i.e. can the area be reached furnitute
by the mode of transport to be used e.g. in • there is no transhipment of goods i.e. goods
remote areas need not be unloaded and reloaded
 • is possible to organise return loads • goods in transit are safe from theft and
• can carry advertisements on the sides of the damage
vans • minimises delays of goods which are ready
• may use special trucks for special cargo i.e. to be ferried
there is a wide variety ofvehic1es which suits • there is personal contact with customers
most loads or distances for road conditions • the delivery persons:
• vehicles can be owned by individuals and . can deal with queries from customers
companies have good knowledge in handling the
• low cost of maintenance firms' products
conduct transactions en route (on the
way) i.e. collecting payments and
Disadvantages
empty crates
• slow over long distances-
• relatively expensive over long distances
• return loads are possible, e.g. carrying
empties
• not suitable for carrying heavy goods and
bulky loads.
• can advertise on vehicles
• there are special vehicles for special cargo
• can be affected by: • vehicle can be hired out to earn income for
poor weather conditions, e.g. rain, the trader
mist, fog • the status symbol of running own fleet of
traffic congestion vehicles
• cheap and cost effective if vehicles are used
Advantages to a trader of operating own fleet sufficiently
of vehicles ., • can be used to ferry the firms workers
• goods can be collected and delivered at any • independent of public transport strikes and
time delays

Fig. 9.1 Loads of different sizes and shapes carried by road

-,'..
Fig. 9.2' An example of own fleet of vehicles

Disadvantages to a trader of operating own heavy goods ego quarry, mineral ores
fleet of vehicles bulky loads e.g. coal, grain
• high start up (initial) capital cost of buying • operates on scheduled time-tables. and fixed
vehicles routes
• high cost of maintaining or,...servicing and • is not easily affected by poor (bad) weather
repairing vehicles condition such as rain, or mist
• vehicles depreciate in value • saves on use of labour
• high cost of insuring the vehicles • can carry a variety of goods
• vehicles may be under-utilised • can carry containers
• vehicles may be misused • traffic congestion and accidents are rare
• can be electrified to achieve greater speed
Rail transport
Disadvantages
Advantages • high initial capital cost
• fast over long distances • high cost of installing railway lines
• cheap over long distances • slow over short distances
• suitable for carrying: • not suitable for carrying small loads

Fig. 9.3 Goods train showing open wagons and tankers

 • accidents can be costly or fatal Advantages
• it is not direct, therefore: . • is a direct mode of transport:
does not provide a door-to-door provides a door-to-door delivery
delivery service service egowater taps in our homes
requires road transport to move goods there is no need for transhipment' of
. to their final-destination
", . ,. - . . goods
" . • is ideal for transporting ligu~ds and gases
Fr•• n egowater, diesel or petrol':' .'
• 'these are trains
._- • it is a fast mode of transport
• travel over very long distances at great •. provides a continuous flow of fluids
speeds • moves large volumes of liquids
• carry mixed cargo or a variety of goods • protects liquids from· pollution,
• carry passengers contamination, rust or heat
.• - carry goods in containers • prevents fluids from freezing "
• operate on:
fixed routes
.
• is very safe, therefore:
less danger of loss of the liquid
scheduled (fixed) time-tables enroute
• they link: risk of theft of the liquid in transit is
inland cities with seaports
reduced
cities .~:
-
inland cities with ~ ...... inland
• cheap to maintain because of very low
operational costs
• saves on labour
• can be used for carrying alternative
-. liquids

Disadvantages
• it is expensive t~ set-up a pipeline
• is not ideal for transporting small and
irregular cargo
• is limited to the transportation of liquids.
only
• is a one-way traffic system where return
loads are impossible
• can be attacked easily 'by enemies in times
of war where it is exposed
• requires numerous pumping stations over
high gradients
• loss of liquid may be high when there is a
leakag'
• leads to unemployment resulting from
Fig, 9.4 Theuse of a pipeline saving on labour

~.,
Air transport • high operational costs of maintenance and
repair
• high air freight charges
• not suitable for canying goods in large
quantities
• not a direct mode of transport hence requires
another mode of transport to move goods to
fmal destinations .
• not readily available and accessible to meet
individual requirements
• personal ownership-by individual traders, is
less likely
• affected by poor weather conditions e.g.
fog, mist

Reasons for increase in volume of cargo

carried by air '
Fig. 9.5 An Air Zimbabwe plane
• Air transport is fast over long distances.
Advantages Air transport is very safe
• fast over long distances • an increase in:
• safe mode for transporting goods, the number of aeroplanes now
therefore: available
there are less risks of theft of and international trade
damage to goods during transit. • development of:
ow insurance costs specialised aeroplanes to ferry special
low cost of packaging cargo ego meat, flowers
modern aeroplanes with larger canying
• ~deal for carrying expensive and valuable
capacities
goods ego gold or diamonds
• suitable for fenying light-weight goods e.g. • construction of larger and modern airports
flowers with advanced cargo handling facilities
• suitable for transporting perishable • availability of more airports
products ego meat or vegetables • introduction of containerisation
• product carried can sustain (bear) the cost • competitive air freight charges
of transport • recent technological developments in
• operates on fixed routes and computerisation and advanced loading and
off-loading facilities
• fixed (scheduled) time-tables

Disadvantages Airway Bill

• expensive over both short and long Importance
distances • a document used when goods are
• not suitable for short distances transported by air
• aeroplanes are expensive to buy • a contract of carriage or an agreement to
• initial capital costs are high cany goods

4.
 • a receipt for goods aboard an aeroplane Sea transport
accompanies goods

Contains:
• a detailed description of goods egotypes,
quantities and weights of goods
• the. airports of origin and destination of
the cargo
• the name of the airliner or carrier e.g.
Affretair
• the names and addresses of the consignor
and consignee
• the flight number, e.g. UM 2004 for air
Zimbabwe .
• -the air freight charges .
• the terms and conditions under which
goods are to be carried Fig. 9.6 Ship carrying containers (containerisation)

• Functions of an airport authority Advantages

The Civil Aviation Authority of Zimbabwe
(CAAZ) performs the foIloWm$_functions:
• controls and directs air traffic by use of a
radar
• provides:
a.good and well _levelled runway .•.,,·--. • different types and sizes of ship are
a warehouse or goods shed for
storage of cargo
cranes and fork lifts for loading and
off-loading cargo
repair and maintenance facilities
refuelling points for aircraft
information o;{departure and arrival
times of aeroplanes
information. to' pilots on weather
conditions
office space for traders and customs
and immigration officials
duty-free shops
walk-ways for passengers
car parks
h'\Pgers
security
• cheap mode of transport
• suitable for the carriage of:
bulky cargo i.e. timber, crude oil
heavy goods egomineral ores.
mixed cargo i.e. different types of
goods
available
• special vessels for special cargo i.e.
refrigerated ships or tankers
• carry containers
• there is no need to construct a route
• can be re-routed easily
Disadvantages
• a slow mode of transport
• the use of cranes and fork-lifts leads to:
high cost of loading and unloading
goods
unemployment as less stevedores are
engaged
• there is need for special packaging as goods
are prone to deterioration due to salty water .
• harbours, docks, quays and ports are
expensive to construct

':

~,
-c-
• .' various levies are charged, e.g. wharfage, ·••.• (0.•• 0) •
dock and harbour dues, warehousing
• requires road, rail and air· transport to •
these are specialised types of ships (tankers)
which carry special types of cargo .
bring goods to their 'destination or does
not provide a door-to-door delivery
• these are bulk carrier ships which carry: '
explosives '
service .
oil e.g. crude oil or ~~!e~. .
• over-handling of' goods due to. ores e.g. unprocessed'mineral ores, coal
transhipment bulky cargo e.g. grain
• is' not a safe mode of transport because examples are tankers for the carriage of
there are high risks"of piracy, theft and petroleum ..
damage of goods . . • these have been designed to:
taI[eadvantage of their huge structureor
Types 'of vessels or ships realise economies of scale :
'~ .... • use mechanical handling in loading and
off-loading goods
T•.• ,.
·
• they do not have fixed:
• cargo ships which are meant for hiring routes
• carry mixed cargo . .time-tables
• travel anywhere in the world in search of
.. cargo to carry . ' ...~ loll on I • (10-10) "Ips
• freight charges are: ?~~, • these are specialised types of vessels
fixed by negotiations • allow lorries or vehicles loaded with their
low own cargo:
• do not have: to be driven onto the ship (roll on) at
- fixed routes the port of loading and
fixed time-tables to be driven out of the ship (roll-off) at
.•.,:-' have no permanent home port the port of destination (off-loading)
• can be hired for 'a specific time and • carry variety of vehicles which· carry
journey . different types of cargo
•. can be chartered at the Billtic Exchange in • have parking bays for vehicles .
London • ferty;bOth heavy goods and bulky loads on
vehicles .
U•
•n • they are safe mode oftransport because:
there is' no transhipment of goods
• cargo ships which are not meant for i.e. neither the goods nor the loaded
hmng vehicles are transferred from one mode
• follow strict time-tables thus enabling of transport to another
suppliers .to plan deliveries in advance there are less risks of theft of and
• travel on fixed routes damage to goods . '
• may be specialised e.g. refrigerated ships • <they save time and'labour for loading and
to' carry fresh produce . off-loading ,
.• have permanent home ports • they follow:
• freight charges are fixed at conferences fixed routes
• carry passengers and variety of' cargo strict time-tables

-r.
Tankers sealed in presence of customs officials,
• are large in size . at the point of loading 'Ordispatch
• type of bulk carrier specialised in carrying opened at the point of destination
liquids t stored (stacked) before transportation
• safe way of carrying liquids used in air, rail, road and sea transport
• simplified toload and unload liquids
• designed ~9carry large amounts of oil Advantages of using containers ;';....'
• can be carried cheaply' .
Docu•• nts • are sealed during transportation therefore,
Charter party . goods are safe from theft and damage
• a contract document used to hire a ship i.e. • can be transferred easily from one mode of
a tramp , transport to another i.e. from rail to air
• ca.:nbe a voyage charter when hiring a tramp • enable quick turn-round of, vessels or
for a specific jotimey vehicles at purpose-built terminals
• can be a time charter vitlen hiring a tramp ." may be refrigeratedto carry perishable goods
.lor a specific period of time i.e. specialised containers may be provided
• can be a charter by demise when hiring a for special cargo
tramp together with its crew • are collapsible when empty thus making it
• shows the names and addresses of the hirer easy to transport them
and ship owner -:: :', r": • can be stacked to save space
• shows the cost of carrying g'~ • minimise customs checks at border entry
• contains lay days i.e. the stipulated number points since they are sealed in the presence
of days for loading and off-loading cargo of customs-officials
• when cargo can not be loaded or unloaded, • protect goods from deterioration due to bad
within the lay days, the hir~r pays a fin~· ", weather conditions
. called "demurrage" • are numbered or marked for easy
• if· goods carried do not fill" the whole identification
tramp, the hirer pays "dead freight" for the • . allow low insurance costs to be charged due
unoccupied space . to less risks
• allow groupage of less than a container load
i.e. where one trader, whose ,goods cannot
Bill of Lading
fill a container, combines with other or
• A document· used w-hen goods are others to fill it
transported by sea. • 'J

• . involve minimum handling of goods

NB. Details of contents and. importance are • allows convenient storage of goods
described under international trade
ConIalnerl • on
• the carriage of goods in standardised large
containers (boxes) made of metai
• the containers are:
filled with goods .ready for
transportation..
resulting in low risks of theft and damage
• can be hired out to earn income
• speed up movement of goods
• allow use of .eranes and fork. lifts
(mechanised handling) therefore:
quicken loading and off-loading of
goods. .
. reduce cost of loading and off-loading
of goods

~.
-c-
Disadvantages of using containers • ensures efficient handling of both imports
• containers: and exports
require special handling "equipment • maintains approaches to a port by dredging
which is expensive to hire and using buoys
are not ideal for small loads because . • maintains the general state of efficiency of a
they are expensive sea-port
are expensive to buy or hire " • charges and collects dock, harbour and port
may lead to unemployment dues and wharfage
may be costly where there are no return • license pilots
loads • provides:
• some towns or cities are not ideal to be warehouses
used as container terminals re- fuelling facilities for ships
• some technical problems, resulting from loading and off loading facilities eg
using containers, have led to the need to cranes, fork lifts, quays
construct and re-design purpose - built enough dock labour force i.e.
wagons, ships and vehicles stevedores
• large amounts of capital are required pilots to assist in stirring ships to the
to construct special terminals which harbour.
accommodate containers offices for customs authorities
• there might be congestion or over-crowding ship repair yards e.g. dry docks
at terminals if containers are not cleared supplies of fresh water and food
quickly quarantine for animal in order to
maintain public health
Functions o' a Sea-Port Authority storage facilities i.e. warehouses
• ensures that seaports are accessible from docks
inland by road \nd rail links accommodation

~~ ---

End of chapter questions

Fill in the missing word or words in the following statements

I ... transport is fast over short distances.
2 Rail transport is able to carry ... and ... goods.
3 Fast-moving long distance trains are called ....
4 An ... bill is a document used when goods are carried by air.
5 ... are specialised types of ships which carry crude oil.

State whether the following statements are true or false

6 Containers are inspected at border entry points. TIP .
7 Sea port authority provides accommodation for stranded passengers. TIP
8 Liners are ships meant for hiring. TIP
 9 A tramp. can be hired together with its crew. TIF
10 Pipeline transport provides a continuous flow offluids. TIF

Multiple choice questions

11 Which types of goods are suitable to be carried by ship?
A bulky and heavy goods .
B heavy.goods of low value
C light goods of high value
D Light goods of low value.
12 What type of vessel would be used to carry large volumes of fuel over long distances?
A coastal ships
B container ship
C ferries
n tankers
13 . What is the wo& of a port authority?
~A- collecting customs duty
B compiling records of imports and exports
C controlling bonded warehouses
D providing customs and immigration offices
14 ~c~ type ~f ship allows l~ vehicles to be driven on and off the ship?
A . liner ship , .,
B O.B.O ship
C ro-ro ship
D trampship _
15 Which goods are least likely to be carried'b)'- air?
A flowers
B jewellery
C mineral ores
.....
D newspapers: ~.;:..

Structured questions
16 a) State and explain any five factors which determine mode of transport to carry goods. (10)
b) List six advantages and four disadvantages of road transport.' (10)
17 a) State five advantages and five disadvantages of using pipeline. (10)
b) Why has the volume of cargo carried by air increased in recent years? (10)
18 a) What is meant by the term 'freightliner'? (5)
b) Describe and explain the importance of the following documents used in transport:
i) - airway bill. (10)
(ii)' bill oflading. i , (10)
19 a) What are theadvantages to a trader of owning a fleet of vehicles? (10)
b) State the advantages of containerisation. (10)
20 a) Distinguish between tramps and liners. (10)
\

'e
 b) What is meant by the following terms:
(i) containerisation? (6)
(ii) tankers? (4)
21 What are (i) oil-bulk ore ships and (10)
(ii) roll-on roll off ships? (10)
22 a) Explain the term charter party. (10)
b) .What services are provided by port authority? (10) .
23 a) Explain six advantages and six disadvantages of rail transport. (12)
b) W?at is the importance of transport to a producer of milk? ·(8)

:. ..

~.,

.:".
 Chapter 10
CommunicadoD

.'
Communication means to send.. or receive Air .all
information from one person to another through
• sent by air
. postal or telecommunication services. • mail carries air mail stickers
• short time of delivery
Importance • high postage cost

• allows sending and receiving information

• enables making of contracts with suppliers
_ and buyers .
• allows receiving and making payments Martin t1'li"'1
• allows sending or receiving of documents, FlemnlnqoH'art 29 {r?;)
.e.g. orders, quotations, etc 117869 ~ockhoiM
• allows lodging of complaints and settlement Swede!!
of queries through letters or telephone
• enables contact with buyers, suppliers and
employees ,..'C...
.,
"
Postal COmmunication Services Fig. 10.2 An air mail envelope

• These are services offered by the Post

Office, Zimpost in Zimbabwe. .•~. -. Private bags
• are used by people without street addresses
.••.• n to receive and send letters
• 'mail is sent by land to destinations • bags are made of canvass' and are rented
• uses ordinary envelopes from the Post Office
• low postage costs • each bag has its own number and is lockable
• long time of delivery • allows mail to be collected from the Post Office
anytime and only during working hours.

Mr Poul M aSVJd~
1780 GaYdi. Stree.t
Dombatombo Town-'Ohlp
MDr~:

Fig. 10.1 A swface mail Fig. 10.3 A mail bag

'
..
.
'0
:"-
'":;.,
Post Office Boxes Postage paid
by licencee
• used by people without street addresses to
receive mail
• boxes are rented from the Post Office'
BUSINESS REPLY SERVICE
• boxes are built on the outside walls of the
-LICENCE NO. 54
Post.Office "
• each box has a number ~d a key' .
THE DIRECTOR: KANGA INVESTMENTS
• mail is collected anytime of the day PRIVATE BAG A6107
AVONDALE: HARARE

Fig. 1O.! A business reply envelope

Free post
• the service is a variation of business reply
service
• user needs to seek-for approval from the
post office
• if granted, pays deposit
• all free post mail is written "Free post"
before the address
• sender does not pay for postage
• recipient pays a surcharge on usual postage

Fig. 10.4 Post office boxes [ Frtt p•• ~ I

,
Business r.ply service -
• the service is used in market research: Brenda Kangausaru
Free post
to ,encourage responses House No. 5125
I
respondent does not pay postage or CHINHOYI
postage is prepaid by sender.
• sender first obtains a licence from the post
office andis required to pay a deposit.
• mail is written Business Reply Service Fig. 10.6 Afre~post mail
• the respondent uses printed envelopes or
cards bearing name and address of sender,
and licence number
Franking machine
• used' by mail order firms, • the machine is rented from the Pos Office
• licencee -only ,pays .postage on mail • used when sending large volumes of- man
returned regularly-by large organisations
• the machine has a meter for recording total
postage
• the hirer pays a deposit before using the
machine
• the machine prints the postage paid on each The Headmaster
ICaduyaPrimary School • _
envelope. (liru;ttSpo~e impression PPQ
• has a device' to check if someone has Box 19
NyQZU"(J
tempered with the machine
.. BlIsapL,

Fig. 10.8 E.M.S. article showing clellrly ~ sticker

• restant.
b)

Fig. 10.7 a) Franking machine and b)franked letter .

Savie Rambisai
~
Poste Restante -
bpedItetI_ ..mat ,. Rusepe post office
• -used when items need" to .reach their
destinations quickly and safely Fig. 10.9 An example of poste resante mail

• used when safety is necessary .•'~ ..•. .

• used to send valuable articles e.g. certificates • the service is mostly used by people with no
or documents fixed addresses e.g. salesperson, tourists.
.' sender hands the parcel over the post office • letters or parcels are addressed to the-nearest
counter .,. post office
• the EMS consignment note is filled in • must be written "Post Restante"
triplicate ~ • mail is held at the post office
• . one copy: 'bf consignment note is stuck on • mail is collected by the addressee on
the article '. .: \ , . ' production of.positive identification,
• second copy is kept at the post office
R••.•
• third copy is given to the gender as proof of
postage • used to send cash and valuables like
• postage rates are high certificates
• mail is delivered to final destination by a • 'special envelopes are-used
post office messenger and EMS'vehicles • articles must behanded over the. counter
• there is ~d to hand transfer. of mail • a receipt is obt8:ined as proof of 'postage
• recipient produces positiye .identity on • a ~ipt is' signed as proof of delivery
receipt" of articles " • can: be traced if Iost '~.
• recipient 'signs 'to acknowledge receipt of • can 'be compensated-if lost
~el • each article has a registered number

•
 :-J
I•
.
•
I~'-'
I:a
II ., ~_.
aJ..
REGIStERED ~
=:=r::
__ =>.
R514

~I'I~I~'~~~_&~"~~.-_~~~ __
-_------~----~
":,,,,~~!'!_~t... ~ -"":'_
: li _NtN.yt{A_
__. :..,;_
__
1
I
-I!'!~--_-- __-'-._:-_ L ~::::::'::'~ ~ • _

I~
1
I'

Fig. 10.10 An addressed registered __ lope and a receip: signed as proof of postage .

, ,

i•
• ..., • sender reveals money to be paid at the Post
~.. ,.~ uri ~d~~t documents e.g. ). Office
• :: •. ~ • e-e .•; )-_" • Post Office collects tJayments for the goods
certificates, SUJ\lIIlODS ..
being delivered before they are handed
~- - -lias proof of~e and'(lelivery .,
over
'_ , can be 'traced if lost but no compensation
paid • sellers do not keep .money tied up in bad
debts nor do they need to send reminders
• each article has a register+UJDbet"
•. articles must be:handed·ov~ counter • customers need not send money In advance
I
• articles are delivered personallY- . .
• provides security for items in transit.
Telecommunications services
• provided by Tel One in Zimbabwe
• po•• '_"

• surface mail parcels limited to a mass of 10kg , • p••

• ideal for trade samples and goods in mail
I
.order
. ~ • rented from Tel one

• parcels from other countries are opened

• allows dialogue

to comply with customs and other legal

• reply is immediate, if attended
.• calls can be dialled directly using STD ..
requirements of each country.
• . calls can be made locally or internationally
•
• •
subscribers are allocated numbers
subscribers numbers are listed in the
• computer data collected is delivered door to . telephone directories
door I
• offers variety of services e.g. free phone,
• ensures Speedy delivery of data time call and reverse charge calls
• overnight delivery
• useful for businesses such as banks or the
• fast in sending and receiving messages ,-'

stock exchanges,
• can be used with an answering machine

Disadvantages
ea•• _·D.~(COD)
" no written record • ?:
• used by mail order firms • information may 'be wrongly interpreted - .

'_
• parceis are written COD • no privacy

Fig. 10.11 A woman using a telephone
,.I.I
• uses a teleprinter and telephone
• messages can. be recei red and sent at
anytime
• fast way of sending and receiving
information
• information can be received even if office is
closed ...
• can operate unattended
• )'rovides written record
• has a telex number
• message can be corrected before sending it
Video - conferencing (teIHonferencing)
Fig. 10.13 Household satellite dish
• uses satellite dishes and television screens
to transmit images to distant places
• used by company executives to hold
conferences
• enables face to face dialogue
• - fast in sending and receiving information
• cheap and saves on transport, accommodation
and conference expenses
Facsmile (FaI)
Fig. 10.14 Afacsmile machine (fax) receiving information
• machine consists of a photocopier and a
telephone circuit
• fast way of sending and receiving
information
• used when speed is required
•: produces information as it is (exact copies)
• ideal for detailed information e.g. plans or
diagrams
• provides a written record
• message is received even if office is empty
• subscribers have fax iumbers
from one computer to several computers
at the same time
• it uses modems
• each subscriber has an electronic mail
address e.g. maggie@yahoo.com·' ., ' .
• each subscriber has a secret code
• information received can be stored,
retrieved and printed
• quick transmission of messages
• a cheap means of sending messages

~
.•
~.
used to communjcate business information
using a compute; "i.
• via a telep"'e cirpuit
• used in banking and forex markets
• stores and displays data on computer
• information can be reprinted
• uses modem equipmemf consisting of
'.•..•...
modulator and demodulator, . "
• fast way of transmitting information
• transmits "computerised accounts/ Fig. 10.15 A' computer showing an e-mail address
information

• 1•• .Cellular '••

e· .'; . que
way communication system <,

• ~ internal means of corsmunieation

• used by people in an organisation only
• hired form the post office
• a public address system e.g. used in
supermarkets, hospitals'and factories etc
• it provides a beeper
• message may be displayed on the screen
Fig. 10.16 Cellular telephone
• message sent is of limited number of
characters • used when speed is required
• sends brief messages • allows dialogue
• subscriber can dial to or receive calls from
another subscriber or telephone subscriber
• communication of information: • can receive up to five calls at a time by
using a computer putting them on hold
via a telephone circuit • it is portable
• the information is sent from one computer • subscriber can be reached anywhere, :
to another anytime
-,'.'
 • used when subscriber wants to use two lines • receives information
on the same phone • stores information
• has a secret PIN for security • information can be retrieved
• shows time when call was made • information is displayed on computer
• shows time spent on each call • it is a library for world-wide information
.• shows cost for each call. e.g. sports, quotations and fashion
• shows missed calls, dialled calis, received • it is cheap and fast way of communication
calls and caller's number or name
• can be diverted or directed to another Telemeisages
number • quick means of communication
• can send messages bye-mail, voice mail or • message is dictated over the phone
fax • message is transmitted by telex to the post
._• ringing
volume is adjustable
tones vary
office nearest to the addressee.
• message is sent by post office messenger to
• extra services are diary, directory, dictionary, the addressee
reminder, alarm, time, games, calculator, • suitable for short messages
internet access, camera etc .
• allows access to news bulletins, financial Prest+1
. - and sports highlights
• system which enables subscribers to have
information extracted from computer
Internet ~
-, through telephone network
• uses' satellite dishes, computer, telephone • information is displayed on adapted
circuit, and modems television set
• sends information • used to check on prices and interest rates
'- ..
~ 'l.'
~---~-

End of chapter questions . .

Fill in the missing word or words in the following statements

I In Business Reply Service ... does pay for the postage.
2 The machine which prints postage impression is called ....
3 Poste Restantemail is addressed to the ....
4 Telephone subscribers' numbers are listed in the ....
5 For sending detailed and exact information one would use a ....

State whether the following statements are true or false

6 The most suitable communication service for sending seventy thousand dollars from Kadoma
to Rusape is recorded delivery. TIF
7 Video-conferencing allows messages to be received even when the office is closed. TIF
8 Selling through COD service reduces bad debts. TIF
9 A respondent is required to obtain a licence from the post office when using business reply
service. TIF
10 Franking machine service enables a large retailing organisation to send thousands of letters to
its customers monthly. TIF

Multiple choice questions

11 A means of communication which uses a tele-printer is .:.
A datel.
B fax.
C telephone.
D telex.
12 Which statement is not true of a recorded delivery?
A can be traced if lost
B compensation is provided iflost
C provides proof of postage
D suitable for sending valuables
13 Datel requires the use of ...
-A modulator and demodulator.
B photocopier arid telephone.
C _ teleprinter and telephone.
D television screen and telephone.
14 Which of the following is a postal service?
A cellphone
Be-mail
- C expedited mail service _
D radio paging
15 Which one is true of tele-conferencing?
A allows users to carry market research _
- B allows dialogue between users in different places
C enables users to watch a video
D leads to high hotel and travelling expenses
16 Yellow pages in the telephone directory show ...
A government departments.
B non-government departments.
C subscribers names and telephone numbers.
D subscribers who provide services.
17 Radio paging may be used to ...
A call for a fire brigade.
B call a doctor for emergency.
C call the police to attend to an accident.
D call the shareholders for an AGM.
18 - Which one is true of Cash on Delivery (COD)?
. A sellers have money tied up in debts
B sellers often send reminders to debtors
C sellers pay-for the delivery services
D sellers reveal to the Post O~ce money to be collected

-.~
..
19 nte advantage of freepost service is that
A the addressee pays for the replies received.
B the addressee pays for all mail.
C the respondent pays for the postage.
D the respondent pays for part of the postage.
20 In communication STD stands for
A secondary ~ dialling.
B services through dialling.
C standard trunk dialling.
D subscriber trunk dialling.

Structured questions .t

21 State, giving reasons, the most suitable form of communication which can be used
- in each of the following situations: .
a) sending "0" Level school certificates from Zimsec in Harare to a school in the
rural area of Masvingo. (5)
b) . sending urgently needed quotations from Harare to Cape Town (5)
c) sending statements of accounts for electricity bills to customers every month (5)
d) discussing a change in venue for a music competition to be held in three hour's
time (5)
22 Give the advantages of~s~ each of the following communication services:
a) radio paging "c (8)
b) tele-conferencing (6)
c) parcel post (6)
23 Under what circumstances would a ~rllse:
a) a post office box' (8)
b) a telex _- (8)
~ a~~ ~
24 Describe and explain the importance of:
a) electronic mail (e-mail) . (10)
b) datapost (4)
c) fax (6)
25 a) Distinguish between P.O. Box 1 Rusape and P. B. I RUSAPE. (12)
b) Why do mail order firms use the COD service? (4)
c) What are the disadvantages of using a telephone? (4)
26 a) State and explain the communication service that could be used to send $50 000.00
from Mutare to Harare. (8)
b) Explain the functions of cellphones. (12)
27 a) Distinguish between a surface mail and an air mail. (8)
b) Why is communication important to a trader? (12)
28 Describe and explain the advantages of using the following communication services:
a) poste restante' (7)
b) business reply service (7)
c) internet (6)
29 Describe and explainthe importanceof:
a) freepost (6)
.b) freephone (6)
c) expedited mail service(EMS) (8)
30 a) Explain the use of the yellowpages in the telephonedirectory. (8)
b) State and explainthe servise used to transmitcoded computerisedbusiness
information., ,
c) Under what circumstanceswould a telegram be used?
(6)
(6).
Chapter 11
Warehousing

It is the storage of goods prior to sale, use or • provides collateral security m obtaining
delivery. loans
• meets unexpected demands arising from:
arehouses increase in school children needing
more uniforms
• buildings used to store goods before increase in wages which would mean
distribution more money to spend on demands and
• have facilitated production of goods ahead leisure
of demand • meets demands at any time at different
volumes, i.e. warehouses c~ surplus
Importance of warehousing supplies and release them onto the market
when needed
Enables storage of:
raw materials
• protects goods from weather elements such
as ram, sun
fmished goods ..f
• clears line of production
partly finished goods
goods in transit
• allows bulk purchases by businesses
• stores dutiable goods until duty is paid
goods in entrepot trade
• reduces risks such as theft, damages
seasonal goods
goods prior to sale or delivery -..
• enables even distribution of goods i.e. natural
resources are produced in abundance, stored
and distributed to areas of need
• stabilises prices i.e. in times of plenty,
prices are low and in times of shortages
prices are high and by storing goods for all
. times, prices stabilise
• enables grading, packing and branding of
goods
• enables preservation of perishables in very
large cold storage rooms e.g. fish, fruits, or
meat
• enables goods to improve on quality or
enables goods to mature e.g. wine, spirits,
fruits or tobacco
• prevents shortages, in the event of some
machinery breaking down, drought· or
manufacturers running short of raw
materials Fig. II.I The inside of a warehouse
 Types of warehouses

• .., protlu.r •.•

'GnUDsHo
~ ,run by Grain Marketing Board '
• provides safe storage of grain
• grains are graded and prepacked
• grains can be distributed evenly when
centrally controlled "
• grain Imported is stored ' to prevent
shortages Fig.Tl.B Inside a manufacturer's warehouse
• .stabilises prices of grain
.
'.(1
Whol••.• h••
• stores variety of' goods from different
manufacturers '
• stores goods in bulk
• enables goods to be srade(f'aud'packed
• allows goods to mature
• ,evens out flew of goods
• stores goods in transit
• stores goods awaiting demand
• stores seasonal ~
• clears lines of production
• steadies prices of goods
• prevents shortages

Grain Marlreting Board wareltor!.se Vtowinggrain silos La,.•• ........,_' warehou •

Tobacco auction floors • these are warehouses for retailers such' as

supermarkets, department stores.
• ' tobacco is stored for sale
• stores goods for distribution to branches
• tobacco is graded
• stores gOOds:, . '
• tobacco is packed into bales after sale
awaiting demand ,
awaiting replacement stock of
".~''''''''''''''
,• stores equipment and spares
• stores equipment and machinery

,• stores manufactured goods (or finished • Ie sector w.r.hou •

r,'.
r
goodS)', ,
stores raw materials
• these are run by parastatals and local
government authorities:
., stores partly 'finished goods store building materials, medical drugs,
~ ,'::'eaablesgoods to be branded and packed machines, spare parts, raw. materials,
:~: " situated in industrial areas water, fuel, stationery '!

• ' :' clears iin,e'Qf,production- - _''store goods awaiting distribution "

 Bonded warehouses Distribution warehouse
,
• these are located at ports, boarder posts, • used by manufacturers who cannot afford to
large railway stations and big 'cities have own warehouses to store goods such as
• are privately owned but supervised by the clothes and electrical appliances
Zimbabwe Revenue Authorities (customs • stores goods from several manufacturers
• distributes goods to customers
authorities)
• stores goods awaiting collection by
• stores dutiable goods whose duty has not
manufacturers customers
been paid
• goods are released after duty has been paid "Removals" warehouses
• customs warrant is issued when duty has
• owned by removal companies such as
been paid and provides permission for
Biddulphs, Glens or Stuttafords
goods to be released
• store household goods for individuals and
• . goods can be sold whilst in bond companies
• goods can be removed in small quantities as • the "removals" company:
needed thus saving on working capital collects goods for storage
'. while in bond goods can be graded, packed, deliver goods when required
tinned or bottled but not manufactured • owners of goods pay storage costs
• goods can be moved from one bonded Goods in a warehouse can be
warehouse to another by bonded carman • packed
• goods are allowed to mature • graded
• inspected
• stores goods for entrepot trade
• branded
• left to mature
• sampled
.•.. .

Fill in the missing word or words in the following statements.

1 ... provides a storage function in the chain of production.
2 The Grain Marketing Board operates ... in various parts of the country.
3 Dutiable goods are stored in .. , warehouses.
4 Warehousing is necessary in the home trade so as to ... the supply of seasonal goods.
5 The re-exporting of bonded goods is known as ... trade.

State whether the following statements are true or false.

6 Depots are warehouses that allow production of goods to take place. TIF
7 Cotton Company Limited of Zimbabwe has depots in several major
centers in Zimbabwe. TIF -
8 Warehousing facilitates production to continue ahead of demand. TIF
9 Distribution warehouses enable suppliers of goods to constantly supply customers at short
notice. TIF
10 "Removals" warehouse stores goods for the public. TIF
Multiple choice queltions
11 Itriported goods that have duty not yet paid on them are stored in ...
A bonded warehouses.
B customs drawback.
C depots.
D distribution centers. .
12 Storage is necessary because production and demand ...
. A are always seasonal. .
B are constantly the same.
C determine the type of customer.
D patterns rarely match. .
13 Which of the following is not important of warehousing?
A It ensures.that goods are always available when required.
B It is not able to provide storage for goods in transit.
C It reduces Ii~e fluctuations ..
D It stores seasonally produced goods.
14 _ Which one'W not true for-warehousing?
A clears factory space for further production
B increasing utility of products
C produces capital goods
D stores bonded goods ';~ .
15 Which one of the following is a Rrimary producer warehouse?
.•
A distribution warehouse
B Glens Removal and Storage (pvt.) Limited
. C Grain Marketing Board
D manufacturers warehouse·

Stoa~ured questions'
16 What is the importance of warehousing? . (20)
17 Describe the foJIowing types of warehouses:
a) manuracUler'srwarehouse (5)
b) wholesaler's warehouse ' (10)
c) distrib¥~on:warehouse· (5)
18 a) What is the importance of a Grain Marketing Board Depot? (5)
b) Explain the importance of a-bonded warehouse. (5)
 Chapter 12
Advertising

Advertising -is ..the spreading of information and • government uses it to educate the consumers
the drawing of attention of the public. on health, safety and consuiIi~.ngts
• used to introduce new produ~~-" '~
Importance of advertising to .~
consumers
Informs consumers about:
• prices of goods. ~.
• n~w products
• . where to get the goods
CLASH 'OF THE,I
• how to use the goods GIANTS .
. , 1
• changes in the goods .O!Y@llil [])~ W~ . ,;
• variety of goods
• promotions and sales taking place [IDO(ID@~ ®~@llil@'
• terms of payment and delivery 1tc~tf,( $Mt4 s~
• job vacancies .,......r ~"""'9:~
• events taking place :'~~, ,u... $/5()()()()
~"" I1$()()()
Importance of aclYertising to
producers ..
.
,.~";,\ t " ,-.- c-
Fig. 12.1 An example of informative advertising

-
• attracts customers
• '. increases sales
•.• ~ eo.,eliliw. ~ •
.'
• "'1ntreases profit an example of perssasive advertiswg , '.
• maintains sales - advert on Bata shoes, Royce' soup or
• ..reminds customers about existing goods, stork magarine ' .
• educates consumers on health and safety • undertaken by an individual company:
• fights competition '~ to promote 'itS own products using
• improves company image brand ~ "at the expense ~of other
• -coUhters adverse publieity manufacturers . producing : I. similar
products I
..--~TYPes
s;~
of .~dverthdng • producers will be competing with each other,

....•...••. ..".,....
•.
~ ..
provides' .precise details of goods to the
•
•
e.g. Heinz beans vs Cashel Valley HeaDs
advertiser uses .attractive
.techniques e.g. colour and music ,
d~ces

advertiser only gives the' good points about

or .

public on new products, prices, where :to . a product • ."

buy and how to use the product • competition among producers oftcn results

•.
• gives details of future events, e.g. football
match or burial of a hero

, . '
•
in improved quality and reduced .,~ces
each producer finances himself ,i

. ."
 Differences between persuasive and informative advertising:

Persuasive Informative

• Only gives the good points about a product
• Encourages customers to buy the advertiser's
prbduct' , •
• U~es trade marks or names
• Used where producers provide similar
products
• Uses attractive devices e.g colour and music
• Aims to increase and maintain sales and
p hfits
• Gives precise details of goods as well as
dangers
Informs the public about prices, quality,
where to buy, etc
• Used by Government to educate the public
on health safety, rights
• Used to introduce new products
• Used to notify the public about major events

Col)ective or Generic advertising For effective advertising the producer needs to

use appealing methods like:
\• used by a number of producers in.the same
• Ambition: When a successful person is
.industry: used to advertise the product.
- 1 who jointly advertise a product in
• Romance: the technique tries to connect
general
the use of product to success with opposite
without using brand. names e.g.
sex. Examples of products advertised this
\ producers of milk may advertise "Take
.way are perfumes and jewellery.
a lot of milk for good healili."
• there is no competition among producers
• group of producers may form a Trade
Association which finances advertisements
on behalf'of its members
I· .'_
Tec'~iquesOf advertising,

Fig. 12.2 An example of ambition method of appeal Fig. 12.3 An example of romance appeal
• Comedy: usually comedians are used to
advertise in order to amuse the audience.
• Social acceptance: it is believed that the use
of a product would get numerous invitations
to go out e.g. deodorants.
• Personality appeal: prominent people
are used to praise or recommend certain
products e.g. soccer stars
• Desire for easy li(e: usually used to
advertise labour saving devices e.g. washing
machines i.e. life is made simpler and easier
through such products.
Advertising agencies
Many companies cannot afford to have their
own fuH time advertising departments.' They
lack experienced personnel. In most cases they
hire advertising agencies to do their advertising.
Advertising agencies have specialised staff
to help with all the necessary ~ements of
advertising.
Functions of.~""'sing •
' ~~
• to carry ~ut market res~ch ~n consume.f~ '._.
tastes ana prefet:ences.· •.
• to create the ~eftisement e.g. formulating •
the.words, pictures; colours, music.' • producer
• to producethe'advertisement e.g. combining
words and sounds with pictures and
drarnatise.
• to book space and timefor the advertisement • advertisement can be produced in several
in one of the media, e.g. on radio.
• to place the advertisement
• to monitor success of advertisement
F.dors to b. co~sid.r.d'''''' c••
b.st adv.rtising m~dlum :- '-..
'. i •
• the size of the market: areas to be covered
by the advertisement, whether it is national
or regional and radio is suitable for wide
.'. iii
coverage .
• cost of advertising: television lihd radio may
. be expensive but n:i.oreeffective
• expected profit revenue: revenue should
cover all costs
• effectiveness of the medium: television has
greater impact because of sound and vision
• target group: whether men, women or
children
• nature of goods: goods like bricks are cheap
and diamonds are expensive. '~It is best to
advertise expensive goods' on ' expensive
media
• urgency of message.- if speed is required
to spread the information, radio is the best
medium
• accessibility of market: whether the market
has access to the media
Types of advertising media
Advertisements can be placed in any of the
following media:
..•
Radio
provides sound
has personal impact or effect on people's-
emotions
has a wide coverage
advertisements can be repeated and timed
can target the' group:
advertisements can be placed duririg &rtain
programmes
• message-is transmitted fast
languages
• caters for the illiterate and blind
. '.I.vI •
tile
• produces sound arid vision
provides a wide coverage
• advertisitig on colour television is attractive
- 'and has greater impact on the audience
•
• advertisement CaDbe repeated .
• detailed information can be given
• demonstrations arepossible and.results of.'
using the product can 1:k showfi .
 • advertisements can be placed on daily,
weekly or tnonthly newspapers
• provides a wide coverage
• can be passed on for readership
• can be timed or placed in weekly or daily
newspapers
• advertisements can be detailed '
• ' advertisements.can be in colour for greater
impact
• provides a written record
• advertisement 'can be 'placed in several
languages .
.• caters for selected-groups
• cheap to advertise in the newspaper

Trade Journals .'

• used to advertise specialised products, e.g.
Fig. 12.4 1V advertise1fJe1ll. on blue angel soap> computers, farming equipment
• advertising
possible
in different languages is
- .
• advertisement is usually in great detail
use technical terms which are readily
appreciated by readers
• audience 'can 11ifatgeted
• .can cater for both illiterate amlliterate • may use colourful pictures. for greater
impact
• wspap.r '-,
• offer selective coverage
• advertisement may be repeated for greater
impact ..
• provide ~cord of advertisements
• advertisement lasts long

Posten
• give vivid impression of show or match, or
event
• can target potential consumers

-
•->
maybe used for captive audience in halls or
'on buses
, , • .suitable for local advertisements
! • .provide record of advertisements
• _ may be. '-tixed to,,-}ill boards or buses for

.. -several days or moriths

allow a reasonable amount of iQiO$lation ..,
to be given
-:. - • are cheap to produce
Fig. 12.5 Advertis~ friJin a IfeWspapei - sports stCtiOn • can' be easily replaced
 Leaflets
Don't miss • are cheap and easy to produce
the biggest show,.of • have low distributions costs -
. the year • may not reach the intended group
• are easily destroyed or discarded
2006
Window displays

. Fig. 12.6 Poster advertisement of the Harare Agricultural Show

.~
, Fig. 12.7 A shop window display

Magazines
• include window displays and displays
• Advertisements in magazines may be: within the shop y

in colour for greater impact

detailed
.•. •.
,~ -
aim at customers who walk in and out of the
shOp
repeated if necessary . • display techniques encourage impulse
of high quality production buying
passed on for readership
made to cater for selected audiences Point-of-sale display .
• the cost per exposure is usually low
• usually used in supermarkets
• they provide a wide coverage' and less
• goods are displayed near the check-out
wasteful circulations point
• advertisements lasts long • goods are displayed attractively at eye-level,
• provide a written record

Mail order ·and Dired mail advertising

\ . e.g. chocolates, sweets, batteries
encourage impulse buying

• usually done by multiple shops, mail order illuminated or neon sign

firms or publishers of textbooks Illuminated signs:
• pictures of products and their prices are sent- • are usually used by banks, building societies -
to the customer / ~ and service stations .
• ' direct mail advertisements are selective • flash changing ~olours· .intermittently
• order forms may accompany the attracting passers-by .
. advertisement to allow interested customers • provide wide coverage to all those who pass
to place their orders immediately, near them

-.'.'
, , ?
 How branding ,has Influenced Disadvantages of advertising to the advertiser
advertising .: • advertising is wasteful
• advertising' costs could be used for more
• branding makes goods easy toidentify useful things like expanding business or
• "because g9QdS 'are given names or trade increasing salaries or improving products .
marks •.• .,
.' if unsuccessful it becomes expensive
~ , makes goods attractive to the consumer
• goods advertise themselves CCHI. of anertlslag practice .
How pre:pac6'lng lia. Importance
influenced .~itisi'~g, , • ,it establishes basic standards of advertising
• it ensures that advertisements are:
• adv~erit"caD. be written on the packag~ legal: set advertising laws and set out
• colourful and transparent packages or penalties for offenders .
.wrappers 8tttact Customers- ethical: realistic e.g. 'milk lifts you up'
• ' marks or labels can be shown on goods

.
moral: advertisers should consider
• goods can.be disi)layed national or societal values
\ goods are judged by appearance rather than
not misleading: making untrue claims
- quality f·
about their products
decent: when advertisers show
'The disadvantag.f advertising to consumers
naked people it becomes indecent in
• . leads 'to overspending ','
• leads to impulse'buying # ""~ Zimbabwe
• leads to ~fiigher. prices if" ' vertising truthful: say the truth about products
campaign is unsuccessful • it guards against disparaging advertising:
'it advertised goods'may be harmful producers should not say negative things
• some advertisement undermine social about other producers' products
standard' or may be unethical, false an~" .....•. it ensures that there is fair competition '
misleading among producers
• advertisements' .interrupt "programmes on
'television ancP'radio ' -

End of chapter questions

------

Fill iii the missing word or words-m the following statements

1 ... advertising is done to promote a product in general.
2 'Vaseline Blue Seal is t4e Best' is an example of ... advertising.
3 The method of appeal, which uses.a successful person to advertise, is called ...
'4 Finding out about the consumer tastes and preferences is called ... '
5 Television advertising provides' the senses of ... and ...
6 The medium which caters for both the illiterate and blind is ...

,,_
7 For detailed' and specialised information a producer wouldadvertise in ...
'8 Captive audience refers to ...

~.

• -','.
 t '

9 Advertising leads to higher prices if the' advertisement is .,. and lower power prices if the
advertisement is ...
10 When an advertisement statesbad points about another producer's product it is called ...
11· ... is used to ensure that advertising is legal, descent, ethical and moral
12 The process of formulating the words, pictures and colours of an advertisement by advertising
agencies "iscalled ...
.. ..
.' .

State whether the follDwing statements are true or false.

13 Competitive advertising is undertaken by individual companies to promote their own brands.
TIF -, . .
14 Impulse buying is an advantage of advertising to consumers. TIF .
15 One of the factors'influencfrlg the 6b.oice ,of advertising media is the nature of the product. T~
16 An advertisement in the newspapers gives a wide coverage. TIF .
17 Producers of farm equipment would want to advertise in a journal because it gives detailed
information about the' product. TIF

Multiple choice questions

18 The purpose of advertising is to, .'.
A control the prices of goods.
B ensure that goods ar~~ on cash.
C fight adverse publicity ~ompetition.
D improve the standard of living of consumers
19 Which one is not a method of appeal?
A desire for easy life;
B personality or hero-worship ,,'->;0. ', • ,

C persuasive advertising
D social acceptance
20" "Mag is the best toothpaste for'tfie children" is an example of ...
A collective advertisement.
B generic advertisement
C informative advertisement.
D· persuasive' adviiffisement.
21 Branding has influenced advertising by ... J.
.'
A allowing advertisements to be Written on the package.
B enabling consumers to judgeproducts by quality.
C enabling goods to be displayed on shelves.
D making goods easily identified.
22 Which one is not a danger of advertising?
A Adverts may brainwash"'b~risumers
B Goods advertised may be harmful
C Sales and profits are incteilJed'
D Selling prices may be increased'
23 'Why would a manufacturer advertise usin~ television?
A It appeals to both literate and illiterate
, ,
.B It has low cost p~r exposure,
.
-,
~.'
":
 C It is not suitable for those in rural areas
D The advertisement lasts long
24 Which factor does not influence the choice of advertising mediuin?
A cost of advertising
.B, owner of the business
C size of market
D urgency of message
25 Which is not a function of an adverting agency?
A branding goods
B conducting market research
C placing advertisement
D producing advertisements
26 Why do producers of tractors prefer to advertise in a trade journal?
A It accepts short advertisement.
B _It allows use of technical terms.
-C . It gives a wide coverage.
D It is not passed on for readership. .
27 The best medium to advertise a new type of sweets is ...
A journal.
B newspaper.
C radio.
D television.

Structured questions
28 a). State the difference between collective advertising and competitive advertising. (6)
b) Why would the producers of combine harvesters advertise in a trade journal? (6)
c) What are the dangers of advertising to consumers? )_
(8)
29 a) Why is advertising important to a retailer? (10)
b) State and explain five functions of an advertising agency. (10)
30 a) Give reason why the producer of a new flour would use television to advertise. (8)
b) What should one consider when choosing an advertising medium? (12)
31 a) Name and explain six methods of appeal used in advertising. (12)
b) What are the advantages of informative advertising to the consumer? (8)
32 a) In each of the following, state and give reasons for type of advertising:
(i) 'A Maths teacher wanted at-Nyanga High w.e.f Jan 2005'.
(ii) 'Coca cola is the best drink'.
(iii) 'Fresh potatoes at your disposal'. (18)
b) Give reasons why many companies have company logos on their ehicles. (2)
Chapter 13
Insurance

Meaning"of insuranCe Insurable risks

• insurance is regarded as "pooling of risks" • have past consistent rec_[$""
• can be assessed
Importance of insura.p:e
•
. . .
covers against a financial loss which may (or
•
•
.and probabilities calculated
afair premium can be fixed
• to cover claims :
may not) happen resulting from an insurable • and earn a profit for the"insurance
risks such as fire, theft or accident. .
lotH • ,.bl. risks
Pool•• of risks
• have inconsistent
.
records e.g. bad
.' -' many people join an insurance company management and war
. and pay premiums into a common pool
or fund
• cannot be assessed accurately

at regular intervals .
• their probabilities cannot be calculated

• . when loss occurs

• a fair premium cannot be fixed
insurer draws money from lhe pool of • and cannot be insured
<premiums
Pr.mium
to compensate the unfortunate member
. lea,!ing profit for the insurer • payment made by the insured to the insurer
the remainder fromthe pool is invested in return for an insurance cover
• - burden of loss is shared-among members • determined by the type of risk e.g.
• '.. thus
.I
the .fortunate members helpunfortunate the greater the risk, the higher the
member . premiums

In u anc
co pany

Fig. 13.·1 Pooling of risks - burden of loss is shaffd

 • if one insures property of another, one might
be tempted to deliberately cause the risk to
occur in order to make profit e.g. one cannot
. insure
, a neighbour's car' , .
\~
_e'
• .by.pro loss
~ittrillg or ,_ of ttl' .~ • insured must .reveal truthfully. relevant
• '~b1~,~r'~,qts;~ by the details concerning ~.~ item in the -.
. insurer" -'.- c , .' .- . .' ". '
proposal form' or~~ form ' .' .
• insurer must reveal all details or conditions
'about the contract to be insured; .
in the policy,~t. ,
• failure to disclose the relevant ~ makes "
the contract void -~ "

.,
.• allows assessment of risks
• and fixing-of a fair premium
.•
.....•. ,

•
compensation paid to tli¥ insured after loss
• insurailce ~. m:e ~~, on the. •
restores the insured to hisprevious financial·
StIIisri(rf: ',~ ":- ,;~: "- position" . .
• - risk is ~Sed t(j·,determine wh~ther: • insurer will pay only t:ii~aln~~t of loss
- ;. it can be accepied or not "
help in ~g a fmr premium
'. suffered
doeS •.
not apply to life assurance
at,'Pa articillaf . . p'~kce" ". •. ' does not allow the iiIsur¢ to make profit
~,."-.,,
in a particular year ': includes contribution where a risk is insured
.• ~~~~s insurance compMiies to:_ .'. ..' with two ~ more companies:
1. .; ". >COver against claims froDi th~ ~ - in the event of a' loss occurring,
. ". ' d ";. ~ce companies pay in
~~ ..

~s' 'incurred bf,~~ -inSUtan~

,)_.f.
proportionate to premiums paid e.g.
. ~~..
- .' _-.1'
f'
1
risk' of fire is insured with FirstMutual
i ..
•

._ Cover" "profit 6t' the' insurimce , and Zimnat insurance- companies. The
compani~.:' . two companies contribute towards the
::..,_~.!.,~I . .-f
compensation of-loss if fire occurs
•
includes subrogation:
gives all rights Q.Vet' the. damaged
property to the company settling the
claim"
damaged property belongs . to the
insurer
and the"insured eaDi{ot sell it
prevents insured person' from making a
profit out of a loss "" . "

" '.
 e.g. A man insures' his cat against one cannot make profit out of insurance
accidents." The man later gotinvolved in only insurance', company should make
a car accident arid the car got damaged profit e.g. .a television set valued at $9
beyond repair million 'was insured for $12 million
The insurance company compensates against therisk of theft. The TV set was
, theinsured the val~~of th~ car ~ the later stolen. Calculate-the!1 amount.paid ~
. ,_ . ,
time of the accident. Insurer takes as compensation :;:: .
" _. '. ~. ·~ti!::~: .&- ~,

o\vndSiiipJoftlii.rSCrap, ,thus 'preventing

the insUr@d from getting profit by Answ~: cl'~on .:
$9'mjJJj~
selling the'scrap" . i, , TV was over insured,
insured should not gain from; the
Average clause :':~ insurance company
• which prevents the insured rm'm niaking
- profit by:, "
Proximate cause
(i) , under-insuftng a risk or paying less
• compensation is,, paid if root cause is
premiums: I,
immediate
when loss occurs' the <insurer will not
• or ifloss was causedby risK insured
indemnity the :full value of the loss
. the insured will become his own-insurer • no compensation is paid if loss results from
an uninsured risk .e.g. if' a radio ~
for the remainin~
e.g. household coil, ' valued.at $60 against fire is stolen no compensation is paid
million were insured . r $40 million
against risk of fire 'and when fire How to take ollt 'an Insurance
occurred con~is v8tbed at $36 million policy
: were bumt. ~~~ how m~ W;~
• one contacts' the insurance company or
paidas compensation .
obtains an insurance prospectus
average clause formula
l • discusses the risk to be·ii:J.sW.edWith broker
false valucf x ' loss or damage
actual value '1 • obtains a quotat:i~
• completes !l propOSal form in ufii}oSt good
faith ' :-
40 36 millions
'60 1' . • proposal form is assessed by actuaries
• if risk is accepted ,.
$24 million is the OOmpensation a fair Premt"!JlD.is fiXed
r: a cover note is issued
- the insured becomes own- insurer for a policy is,later' issued
(36-24/miltion)' ," r-.
12 million . DOcuments'ililea 'IliiIhsui ,',}'

(ii) over-insuring
one cannot claim mOl1Jthan the actual • •

loss • shows type[. I~kS fuJt ~an be ~y-~

one is .restored to former., position • shows name otthe insurance Co~
in accordance with::-the 'principle of • contains prerDium to be paid ,,_, ·.l

indemnity - • states com~~~ to be Paid. ",

J~ ~
 loss incurred (details and value of the
, ,
loss, dates, police report)
• an application for an insurance cover
policy number
• forms the basis for an insurance contract
policy holder
• gives details of items to be insured
cause of risk
• ,~.~~e~ in utmost good faithjfaithfully) ,
• .other details relevant to item to be insured • information provided enablestheinsurance
are also provided freely company through assessors ~!:;,
• asks questions about item to be insured assess the exact cause of the risk
• if information given is false it jenders the calculate the amount of compensation
contract, v.oid
I( i
' ' " .
pd'-
• completed in utmost good faith
• the information provided enables the
.• >.Jl:J" tlt-' ,
<I •

msurance company to: Steps taken for compensation to

.: , asseSslde&ils of risk , be paid
.. - - decide whether or not to accept the
risk . '-\' . • insured contacts the insurance company or
, calcul~te' farr
premiums insurance- broker and:
determine 'whether or not' there is completes a claim form giving details
insurable interest of loss, honestly
and provides a police report
• insurer checks on the provisions of the.
agreement to ensure if there is no breach of
• - a temporary insurance certificate
• i~ while-Jnvestigarionstare in progress the contract
pending issue of actual policy • insurer considers if the loss is a result of the
• used when-imniediate cover is required e.g. ~"', . risk covered
vehicle insurance • insurer assesses the loss:
.' =issued after payment of a first premium calculates the amount of compensation '
• contains terms or conditions of contract to be paid
,. used to claim compensation in the event of indemnifies the insured in accordance
a loss ' With the principle of indemnity

a.•• ..,.,
• issued' after' a cover note • work for insurance companies
~, 'a cbtl1.iact of insurance • when a risk has OCCUlTed they:
• gives details of the risk covered , assess details onjhe claim form
• states premium to be paid examine the damaged item
• contains terms and conditions applicable ascertain the exact cause of theloss
calculate the cost of the (Image '
determine what has 'been damaged
.• completed 'by.the insured calculate and recommend the amount "
• when claiming compensation of compensation to be paid
.' asks questions about: ' negotiate amount to be paid out
risk insured against a claim,

"\"
Types of InsUrance • provides .security to employer against
embezzlement or misappropriation of funds
and forgery , .'
I•
• '•
•
• insurer restores money stolen by the
Transit insurance ,. employee
• covers goods during transportation' froin usually only after the employee has, .
the timethey ~l~ to time ,theYare off been convicted in the courts of laws ,."
loaded at then destination: ,
• policy niay be 'specific (st8tes cargo being· PubHc Liability ~~'.;'··;l·'

carried) , . '. .. • taken by employer :!

• ~ ~ comprehensive policy (covers all • .covers claims made by the public .
risks) . c; • who get injured withia the ~'s 1?~~
Employer's HabiHty, .;i--c . .
e.g. buyer injured by the
. falling
. ...
sliel~es.
.
.• II legal requirement under the workman's
co~~~;g. National Social Security Pluvius poHcy
Authority (Zimbabwe) . • covers against outdoor .activities
._ , taken out by the employer ._: disturbances by rain,pr storm
to cover employee's claims ., .
against' injury or ~ at work or Plate glass
diseases caused by employment e.g. • taken by building owners, e.g. shop o~.
asbestosis l . • to cover against damage of display Windows
• covers injury due to n~ce of the
employer . Export Credits Guarantee Department·
• compensates the eroployee " , (ECGD) or Export .Credits Guarantee
Corporation (ECGC) in Zimbabwe
Con~uotiaiioss " ,; .i:'~,<__
• taken by the employer in conjunction with' • covers risks of non-payment ·DY~importers·
fire or theft insurance policy due to:
• . covers: lack of foreign currency .
loss resulting from an insured loss political instability
loss resulting from temporary closure outbreak of'war
of business after a fire damage
overseas state interferences
loss of revenue, income from Tents,
costs of salines J)a~le to employees, •
provides comprehensive policies:
cost of leasing the building and standing to cover whole of export business for at
charges e.g. infereStortaebentures least 12 months .
,

• ensures that, a 'fum' ooiftimies to receive • provides specific policies: '.-, ,I' •
to cover, sifig(e transaction iiiv,~ving .
reasonable payments m,lieu,of profits '
• assists business to pay .rent.or tates whilst construction projects for- which
business is closed payments is spread over a numbet. of
years
FideHty gu~tee:
• taken out by employer
-, . •
•
compensates exporter if importer ae~ts
investigates credits - worthineSs of
• to cover against dishonesty of employees importers
who handle money • monitors the importer's risk change
 • collects overdue debts • can be voyage policy: cargo is insured for a
• finances the 'e~ in the interim particular journey
_ policy acts as a' Collateral security for loans • can be open: giving cover for goods worth a
given stated value or amount . .
. -, ;:..
.y~""';'nce. Hull insurance
. . • covers damageto.a ship itself, its fixtures or
Third party insuraD:ce
• 'compulsory under the Roti((Traffic Act (RTA) .machinery and other ships '. .
• applies to motor vehjcle insurance • fleet insurance covers 'a number of ships'
• covers claims from the public who may be under one policy : .
.·irij~ by the'vehicle~ ... ' . .' . . . • voyage policy Covers"a Ship for a particular ..
.•
...
• cOvers" public prOperty~ d8Jiiaged . by the
! journey _ .'
, vehicle. . • . time policy covers a ship or a fleet for a ..
~' ~.1

• ..does not cover specific period ',

injury to owner of the' vehicle, .
dairlitge'hf<vehlcfc'itseli' l';~ Freight insurance .;
claims from fee .•paying passengers who • taken out by the shipping company where
may be injm-e(t'whl1st'ii('tbe vehicle freight charges have 110tbeen prepaid
I

• covers non-payment of transport costs, by

Third Party Fire and Theftiniurance the ship~ to the ship owner
• covers. r , • .'~. ,." .

loss~Qr·~e q;,i~ed vehicle Shipowner's liability insurance

due to fire or theft '"
• covets damage due to. collision with other
loss of the. third party's ,be~gings
vessels: .
• premium is higher than that of the tfiird party
/claims by injured crew and passengers
pollution of beaches
Comprehensive policy. . . ",'
damage caused to docks
• covers wide range of risks against
injury of' third , pany i.e .. hospital
Prop.", I~nce
expenses ',' "-
theft of vehicle Household btsurance
. damage to the insured;s9~ _\)ehlcle .' . taken by individuals
personal injury to the driver 1'" • covers household movable jtems such as
• an expensive tY,peof.motor.vehicle .,
... . . ~. I. r ~ furniture, television sets, video. or.jewellery .
• covers. towing expenses. • covers against Iosses from theft and fire .
• compensation is ~ on the value of items .
~~IIJ. ( at the time the risk occurs (after wear and
• ' .covers several risks occurring at sea .t,.,'"' tear or depreciation ~. been deducted)
. ." ".~: " .. ':. '.

Types •. tid •. ~
" ,
~ . .- Building Insuraaee
, . Cargo Ini~ee' • taken by owners- of buildings i.e, shops,
• . covers against-loss of goods transported by houses .. ', _ .~
sea or goodscarried by $bips . . • covers against damage-to buiktitigs
• covers ~=
cIaJna#s"or loss of goods . • compensation is based ~O~ the.··.valUe of
• nowv:>tta'tiOri",
during •.~~~ -'
" ._~,.,i: buildings at the time the risk occurs
I· /.

,.
'.. /
.. -'e"-; .:-
<.
. ,
. ...
"', '.'
 Icdd_ illlllrance • if assured dies before maturity date, sum
assured is paid to herlhis dependants '
Personal accident • if -assured lives up to end. of period (up to·
• taken by individuals . maturity date) sum assured is paid to herlhim
• covers against total disability arising from • regarded as an investment
accidents, e.g. sports stars r ,
• _policy maybe with or without profits

Group personal, a~~i.de"t, . Retirement annuity assurance

• . taken by, a group as'
one policy, e.g, football • provides regular payments to tJ:i~'asSUred:
teain ,;, from a fixed. future - date usually
• covers' injuries which .pfevept members to retirement time until one dies
work for ~ certain period or ptfunaneiitly . • premiums are paid up t.9the retirement date _
• members are paid compensation forfhe loss
of income due toinjury ;-.,_ Funeral Assurance
• . taken out by individuals
Health insurance policy • covers burial expenses of assured
• ' taken by .individnals
\ • covers medical expenses functions of'insurance •.• k.n
• - bring into contact the public seeking
insurance cover and insurance companies .
• covers agairist events that will certainly • are agents of insurance companies -
occur such as death - .i~ __ . • gather information on insurance companies
• - principle of indemnity does ~~piy or type of policies they offer
- because no monetary value can.replace • give expert advice to prospective policy
loss of life or restore one to life holders
• benefits spo~ and ·\childreiJ. who are • advise on how losses can be avoided'
beneficiaries "-~'-'-.• obtain several quotations from .different
insurance companies
Whole-life policy _-' 1• • choose the best policy for their clients
• one assures his/her life for a certain sum of • obtain best terms for their clients
money _ • assist clients with- the completion of
, which matures at the time of death proposal form f' ;

• sum assured is paid~ beneficiaries . • effect a policy for a client

• assured does not-enjoytfie benefits '
• assured pays premiums for his entire
working life or until death
• insurance company calculates the premium '
basing on age and sum to be assured
Endowment policy
• - taken for a specific peried 0\
time, e.g. 10 •
years
• premiums are paid up at 'the end of period -...
or upon death; oft· assured before policy - -.'
matures :..---
• charge commission- OIi contracts made
• assist clients in claiming compensation
-. arrange re-insurance for clients
FvnctIonsof u•• .......,.
• are insurers (insurance companies) who
provide insurance covet'
assess risks (examine details ip the proposal
form)
cover or accept risks (e.g. marine risks) by:
- signing their names against risks they -
have agreed to cover

• ~. .~. ,-.
. "<
• charge and collect premiums • found at the Lloyds of London
• specialise in different types of risks e.g. fire • form syndicates to cover big risks
• sell insurance policies to merchant through • can re-insure big risks
brokers • have large capital to pay big
• pay commission to brokers compensation
• earnprofit as remunerationq«
~ • ensure unlimited investment
• pay appropriate compensation when loss • suffer unlimited liabilities for losses
or risk occurs .insured

End of chapter questions

· Fill in the missing word or words in the following statements

1 The amount that is paid as a monthly or yearly contribution in order to.be insured is known as

2 A policy which requires the insured to pay premiums for as long as he lives is called ...
3 A situation which allows an insurance company to take over the rights of an insured item is
called ....
4 The principle of ... provi~ that no person may make a profit out of a loss.
5 A motor insurance policy that-eovers all risks is known as a ... policy,
6 A document given as a temporary measure of cover in insurance is called ....
7 A. .. is a reduction in premium as a:reward for non claim over a period.
8 Members of Lloyds of ~ndon who Nit~ their names under the amount of risk they are
prepared to take are called. :.. '
9 A. .. is a contract under which a life insurance company agrees to pay someone a monthly
income for the reminder of the person's life.
10 ... are those who assess a proposal form and fix a fair premium.

State whether the following statement are true or false

11 You have insurable interest in everything you own. TIF
12 A person who receives the proceeds of a life insurance policy on termination of the policy is
called a beneficiary. TIF
13 The National Social Security Authority provides workers with a disability income insurance. TIF
14 Actuaries are mathematicians who study statistics of births and deaths to calculate the average
length of life. TIF
15 A proposal is an application for work with an insurance company. T IF

Multiple choice questions

16 The risk that a bank teller may steal the bank's money is covered by ...
.A accident liability' insurance policy.
B fidelity guarantee insurance policy.
C household insurance policy.
D marine insurance.

-,~..

•
 ...

17 A third person mentioned 41 a third party insurance policy can be ...

A a pedestrian.
B the driver of the vehicle.·., .
C the insurance broker.
D the-insurance Company. -
. 18 Employers Cover themsetvCs against any claim- from their emplQYCC;S
injured at work by baving
..•. ."_ .
A a comprehensive motor insurance policy:
B a health care insurance. Policy. .'
C a whole life insurance policy. ,
D an accideat ~ilitY ~~policy'- .' /. ,:-..
1~ The Di<mey.paid to an assUred's ~ficianes' at his or her death is called ..•
. :""A, co~on. ', .
B indemnity: .
c.premiums,
· D sum. assured.
. ..
20 Which one of the following does not belong to a household risk? :
A accidental breakage of mirrors .
·B embezzlement of~ •. '\0

C. loss of.fiuniture due. t;,~tning

D theft of clothes. .:
·21 A person covered by-an insurance policyiscalled ...
...
A the.insurer.
B the insurance broker. .
I .

C the insured.
·ID the underwriter, . .
22 Experts who write their names under the amount of risk they are prepared to take are called ... -l"
'. ~ I . t .
A agents: .... ... ..
· B brokers.
C negotiators..'
D· underwriters ..~,
23 A fire may iDierrupt a profitable busiBess. E~ of the business bare to be met. Ittthis kind
a
of situation, fire insurance policy can be extended to a policy known QS • .
A consequentialloss .. · ....
B comprehensive personal liability,
C . vehicle damage.
. D . vandalism. . .r:
24 Which oftJtefoUoWing risk$t3n a business-insure against? .
" A . decline of profits
B out-of-date stock
C rising costs
D ..theft of money
' ..
; .
 25 Which of the followtg is true for insurance?
-A Insurance ~ a quick way of making money.
B Insurance is very expensive to workers.
C Insurance is not necessary for any thtiving business.
D - Insurance removes Unc;ertainiy in the minds of business people.

Structured qu.~tl~· ;-"-

&...J~ ,,~.

- 26 a) Explain what1is meantb.r~ling of risks" as used in insurance. (6)

b) Why are statistical records important in insurance? (6)'
c) Wb8t steps are taken when obtaining a policy? (8)
-27 Explain the following insurance documents:
a) proposal form (10)
b) cover note . I:' .... - (6)
c) policy (4)
- 28 What is meant by the term indemnity? (20)
-29 it) Explaineach of the followinz insurance policies:
(i) empleyer's ~ility (4)
(ii) consequenti€loss '. " (4)
(iii) fidelity guarantee (4) ,
b) Outline the functions of underwriters. - (8)
30 a) What is meant by fusurable risks? .< -(6)
b) Explain eildowment'~y, _ - _ .. - ", (4)
c) Stock.valued at $75 million was insured for $60 million against the risk of fire.
Later stock valued at $30 million was accidentally-burnt by fire. State, with
reasons, how much was paid as compensation. (10)
31 :a) Outline the steps taken in order to obtain a claim from, an insurance company. (10)
b) What are the functions of an insur8ii~e1)roker? -' - - .- - (10)
~2 'a) State the difference between insurance and assurance. (4)
- ,\l) What is the importance' of. insurance assessors? + (6)
c) Explain the following principles-ofinsurance:
(i) insurable interest (5)
(ii) utmost good faith (5)

-!

-,

-~.~
\. ~'

~. - \
'-
 Model answer to question 30
30 a) Insurable risks
• These are risks which have past records e.g. theft or fire
• Their occurrences are consistent
• Their probabilities can be calculated
• Actuaries are able to fix Jair premiums , '.

• The premiums cover claims made by the insured

• .Premiums enable the insUrance company to earn a profit after compensation
(maximum5)

30 b) Endowment policy
• its a type of life assurance policy
• taken out by an individual for specific period e.g 5 years, 10 years and 15 years
• payable to the beneficiaries at the maturity date or. after death whatever
-comes first
• assured may or may not enjoy his benefits
• amount paid as compensation

False value of goods x

loss
True value of goods
v~
12 '\....,
$ 2 ",
= . :x 36 million ""
-s,

..: $24 million ; ,..'~ z: -c-

• goods wer,e underinsured .

• according to the principle of. indemnity
• no one should gain from the insurance company
• therefore average clause is applied since not all goods were burnt,
Only 24 millionwas paid as compensation
• and insured became his own insurer of 6 million.
. .

'.
 Chapter' ,14 c'

C::oniumet
~.' protection
.

",&!:.

Importance of
t t· , ,~"
.'er co'" •
conditional selling of goods, i.e. in times'
of economic hardships, 'some traders may,
pro ~c IO~", ~ \l"t,I': ,to. ~ force consumers to buy ~otheritem before'
.•-
• 1-"

Theneclt to pro~~' ' en rise toa being allowed 10 buy the required product.
movement referredmJ~t~~~protection. • 'unhygienic 'premises, and food i.e. food
Consumersneed to be proiectal'against: outlets failing to meet-health standards.
• misleading advertisements which make • high pressure, salesmanship, e.g. sales
" false claims "Be surrounded by more men, representatives, _ including , insurance
useAKAromatic Perfume!" brokers, use persuasive language to entice,
, .' ,< ~fudkent or immoral advertisements which consumers to buy their products.
, undermine our African social standards e.g. • consumers are gullible (foolish)
'the use of naked women bathing' using a • , hoarding of goods ,b~ some traders so as to
new brand of soap. create an artificial shortage of the product
• some goods advertised are harmful to health, with the hope of increasing prices. .
-:
i.e. "smoking' may be hazardous to your • sales of goods which are not safe for human
.•f"1':-. '1".,. 1"j...J, •,

health", a ~~ammg to"" " q>nsum~ consumption.

written onan 'Cigarettes C -' .' packets.
complex goods, i.e. some brands of drugs
.• some advertisements) -:.
~y
'I"'__ 'oconsumers •
• ~c:"" and their description may be explained
.'~ •

to overspend and 1?~ ~lsi!ply: , ' in scientific terms which are' beyond the
~ .11"1incorrect or improper labelling of goods, ie.
'." J..J ,.
comprehension of ordinary consumers. ~
_ •

galtmay be found in sugar packets. ,,~~~~.

refusal, by some manufacturers, to' honour
-. .incorrect or '. wrong ; ~eighfs and • ,
guarantees, i.e. some manufacturers of
.. measurements, t.e. .beef bought. over, the
teievisioh sets may refuse, to repair a faulty
", ~~ter from a butcher ~.c)la.y weigh
slightly less than the required amount, < televisiorl..set,
• ,ov~charging, or profiteering by some • disclaimer clauses, e.g. at supermarket
I, )'f'~" .e.g, due to shortages of certain parcel counter it is inscribed, "Parcels left
commodities, some unscrupulous retailers at owner's risk", thus a trader refuses to be
.' ~y prey on consumers. , responsible for the loss of, 6r damage to,
• ' false ~g ,Qf..prices, e.g.. "Reduced parcels left in his custody.
", ! .prices: .was ::$JlO 000; now $60()Q~, w.!ien
" the price has.always been $6000, "SALE! HOw consumers are protected by:
\~ , SALE!~'.disp~x~on>a, shop window' by
some retailers~all"yearround. Ih.Gov •.• nt
'. unfair and wlIaw;fuI- repossession of goods
'bought on·minJrcha8t-: The government, through parliament, passes
• shoddy (sub-standard) goods resulting from some pieces of legislation to protect consumers.
adulteratiOfrJiIt~chisorile fnanufactiifers • Hire Purchase. Act. guards, against unfair
-use inferior ingremehtS' to" cut' 'costs: of and unlawful -repossession' of goods
production. bought on credit
• Consumer Safety Act ensures that products
are safe for human consumption
• Fair Trading Act guards against false price
cutting, hoarding and conditional selling of
goods '.,
• .Sale of Goods'~ct specifies that goods must
fit the purpose or description for which they
are sold
• '"Trade Measures Act, or' Weights and
Measures Act guards against underweight,
incorrect weights and measures '
• Foods and, Drugs Act guards -against
adulteration, of products' and improper
• recommends:
testing -of goods by' the Standards
Association of Zimbabwe and
.publishing the results of goods tested '
reputable shops to consumers
appropriate consumer 'legislation ,to
goveaunent e.g., The ~~;~J~~ ,
Court ."'"
• Acts as a watchdog against profiteering by
overcharging. For example, the following
article is an example of how the consumer '
council works.
. '/

,labelling of goods How to take ycxr case to the Small, ~tnS ,Ccxrt
• Price Control ~Act safeguards against
overpricing of goods, Having written about ,.,dispute settl~ I
arbitration last week, it thus becomes imperative
this week to focus our attention 0';, the avenues
available to consumers when seeking redress.
• receives complaints from Consumers and Government efforts in the' formation of the
then investigates them ' .f 'Small Claims Court, as well as the ena~ent of
settles disputes (arbitrates' between various consumer protection legisl,atio,;ha.ve,gonea'
consumers and traders .-.' -\ " . longway in ensuring that c~nsumers get redress ..
• ,files lawsuits with the' police or' law However, sometimes, in-spit~ of the various
enforcement agents on behalfof consumC{\,_ protecti~~ mec~anisms in place, ~o~ers'.
if a trader persistently exploits 'consumers .vuln~rablhty to. diverse forms of explOitation ~
• educates consumers on'theii rights, e.g. the unfal: transqc~.lons by unscrupulous market ~ents
ight t edr . /'. .' remains apparent.
n . 0 r e~s , .' '. '. The plight of the consumer is further wo'i-sened
• provides advice to co~~, -i,e. ad~ by ignorance of the simple'juc.ficiaryproceCrlireof
consumers to buy WIsely by comparing representation in court in the form of the Smc;lIl I

prices and quality of goods from different' ClaimsCourts. :

,"_shops 'The Small Claims Court currently' haS .
• conducts-spot-checks to make sure that: jurisdiction to 'deal with Claims.of .upto $16 million.
stalld3.rdsare maintained. .Contrary to public expectafions;' the 'Ccz.:is not \
prices recommended, by government mandated to r~present conSumers in court: Thi .
are adhered to ' CCZ can arbitrate and· .When this proc~ fails;
• encourages fair .competition ..: among consumers are advised'·to fake their complaints
manufacturers when advertising through the court. , r.,i
It is agaihSt this background that fhe CCZ·
• promotes:
manufacturing stan~dS f ood would like to give 'consumers a few -guidelines on
o g : how to go about makingCtikiim. i.L"of
quality products .' When a person makes a clqim in court, he/she is
proper labelling of goods suing. ..
ethical, moral and decent advertising of . The person who makes a ~Iaim is called the
goods and services plaintiff. n

".
r
 • The ..person against whom the claim is being The plaintiff must arrange howthe payment will
made is the defendant. be made in consultation with the court.
• Letters of Demand·seC If the defendant wants to argue against the
·If you want to'mak£ a claim against someone claim, he 'or she will fill in the section on the back
.who has wronged you, the first thing you must do is' of the Summon Form entitled Appearance to
to write,a,lettu of demand. Defendant .
. The letterS shouid state what claimyou want to They willalso write downtheir side of the story
make-~inst the defendant. ~' . explaining why they disagree: This 'is;khown as a
.' A draft copy of h~~ ~C?,write yo. r c.laimcan Plea.
be purchased from Gov~' Pub IcatlOns and If the defendant fails to answer the notice, the
t!aims eout;,-wRere '+~
.shC)~d be-sent to the'Clerk of C6u at the Small
inust be ~ '!)ed. claimant ~an ask the court for: a default judgment,
.: "Afe p~intiff deli iIs in per$On;a cepyef the obliging the defendant to pay the claim.
letfd- ot~ to'.ffte difendOhf. ~- . The defendant will be told to pay the m~neyto
Aftv delivery:'the defendant will~ given 14 the Clerk of Court within a stipulated· time, after
working days to ~,..~ ~ i which, the plaintiff can collect it from the court.
It-he/she does.~t respohd~!th£\applicant must If the defendant still does ~t pay, the
\ th~ iSSUe'summonsthrough the ccxrt against the claimant cen apply to the- court to have the
individUal.. <; - defendant's property sold and the proceeds paid
A,StI'M\ons m4St indicate the ~ ,~hy a to the claimant.
,.laim is being. mape.against the defendant, the This is called a Warrant of Execution.
details of the claim'cIndthe amo~' .~. c,laimed. If the defendant has no money, but is working,
. After writing ~ns, it ," attached an application can be made to the court to have
together with revenue stamps,.and a " of an some money taken from his salary every month·
affidavit (SCC 2 FOrITI)"ariCf submitt£a to tli~ Clerk until the whole amount is paid.
of Court. ' ' ".,.' This is called a Garnishee Order.
The Clerk- 'of coUM ~will'ilf Qc~tedgemerq~ '._, Next we willtalk about budgeting.
of receipt of the documents stamp all the ". The ccz. welcomes questions, c~mments and
documents. contributions to this column.We can be contacted
The, claimant will .be given 'ti1e other on ~x UA582,--Rarare. Tel 04-740438, 758264 or
documents. the followingemail addresses:
The Messenger of Court will deliver the prdept@ccz.org.zw, headoffice@ccz.org.zw
summons to the defendant with a cpurt date for ~
the matter. Th. Code .•• practl••
The messenger of court will sendthe summons
to the plaintiff, stating how the summons were • this code is enforced by the Advertising
served to the defendant. Media Association ( ADMA) of Zimbabwe
The served summons is called a Return of • sets out the basic ininimum standards of
Service. advertising i.e. establishes advertising
After'the summohShaVebeen delivered to the . standards
defendant, the comPlainant wil,1then wait for the • ensures that all advertisements are:
defendarTt!S'~nse: . - . legal i.e. as required by law
• He or she'may a9rU to pay ~t you ask.
··He or she may deny'your claim..
decent or moral or' ethical
'. He or she m<iY.:nOtanswer at all. truthful or honest or not misleading ,
, If the difendairr agrees to pay, he or she will • ensures that there is fair competition among
. sign the section on the back of the Summons Form traders when advertising
where it says Consent to Judgment. • guards against disparaging ad~ertising

' ..•
.,.".
 The Hire Purchase Ad • adopts or adapts and then modifies
international standards _ of products'
• during the hire purchase period:'
performance, safety and quality
goods are insured by seller
goods are owned by seller
• prepares standards of product for
Zimbabwean manufacturers
• allows consumer a "cooling-off" period if
• issues copies of standards specification to
the agreement was signed ~utside the traders
producers
premises in which case the consumer may
decide to cancel the agreement
• tests products for quality
• authorises companies to use the SAZ seal
• if buyer defaults in payment, seller can (mark) of approval
repossess the goods through a court order
if one- third of the purchase price has been
• ensures that the quality of products is
maintained as approved
paid
• encourages standardisation or uniformity of
• guards against unfair and unlawful products
repossession of goods
• rate of deposit is legislated Consumers themselves:
I • the following items are' exhibited on the • prepare a shopping list and budget what to
- goods to enable the customer decide ifhe or buy so as to avoid impulse buying
she is able to hire the goods: • do window-shopping in order to compare
number and amount of instalments prices and quality of goods from different
cash price of goods . shops before buying.
hire purchase price of goo • read carefully the advertisements so as to
description of goods >
distinguish truth from lies
• examine labels before buying goods
The Standards Association of • check on guarantees before buying
Zimbabw~( SAZ) !. ";'~". exercise caution in credit commitments

Quality Silver or Jewellery Timber

Products in genera! SAZ. Logo Gold Environment

Fig. 14.1 SAZ standards marks

':;.' .
• read and understand credit agreements Consumers must also 'be represented in
before signing. them government and other policy -making
check if spare parts .and after-sales services bodies to enable them to put across
are available their views. .
• check .and carefully inspect goods for • The right to redress
quality, quantity, faults and expiry dates Consumers must be accorded a fair
before buying settlement of just claims.
• know their rights and legislation Consumers - . must be compensated
• get consumer education so as to buy wisely for sub-standard goods and services
• check for the standards seal of approval purchased.
• The right to consumer education
Consumer rights Consumer must be provided knowledge
of their rights.
• The right to basic human needs
Consumers must have access to basic
• The right to a healthy environment
Consumers must be protected
needs such as food, clothing, water,
against environmental hazards i.e.
shelter, education and health care.
consumers must live in a clean and safe
• The right to safety environment.
Consumers must be protected against
goods and service ~ production
processes which are dang~ to health.
• The right to be informed .-
Consumers must be given facts and
figures required to make informed
choices and decisions. .•,
• The right to choose
Consumers must-have access to a wide
range of goods and services.
• The right to be heard
Consumers must be allowed to express
themselves and lodge complaints.

Fig. 14.2 A factory polluting the sky

 - -

End of chapter questions

Fill in the missing word or words in the following statements

1 Buying on the spur of the moment is called -.-..
2 . .. recommends to the government legislation affecting consumers.
3 ... tests products for quality.
4 The need to protect consumers has given rise to a movement called .-..
5 "Parcels left at owners risk". This statement is called ....

State whether the following statements _are true or false -

6 Consumers need no protection when buying goods. TIF
- 7 Sale of Goods Act guards against overpricing of goods. TIF
8 A code of advertising practice promotes ethical advertising. TIF
9 Consumers can protect themselves by reporting to the Consumer Council of Zimbabwe. TIF
10 The SAZ ensures that quality of products is maintained. TIF

Multiple choice questions

11 The Standards Association f Zimbabwe uses the standard marks shown. Which standards
-mark is used for wood?

A ---B C D
12 Which product is represented by the Standards Association of Zimbabwe (SAZ) mark shown
below?

A silver.
B quality
C gold-
D animals
 13 _i'he SAZ environmental.management system mark is shown below. Which of the following
. . \ioes not repreiennhe tfiark? - . ~ . '. . .," . . '. .

.; . .~
-.~." f .
. ::,;.'.I-~.

J,.
efficient utilisation.of'resources.
B '; improved quality of operations
• ?~ - mjnjn~:i~ w~~9f~urces
:a reduced environmental risks
14 -How can a co~er prp~~~lf from unfair trading practices by unscrupulous retailers?
. -A. . blow the whistle by reporting to the police. '. ~ . .
- . B compare prices of goods by window shopping .
C join theConsumer Council of Zimbabwe
D .sue the retailers through the Small Claims Court.
15 wruh is a functi~n of the ~~ :Associati~n o~ Zimbabwe (SAZ)?
A recommending approp?~consumer legislation .
B making follow-up checks on approved products
C conducting research into consumer exploitation.
D prohibiting the sale ofharmful goods

Structured questlQns
16 a). Why "doconsunl"ers require protection? (10)
. b) What are the functions of the Standards Association of Zimbabwe? (5)
17 a) Explain the laws which protect consumers against exploitation and unfair trading
by some retailers .: (10)
b) .How does the ConsumerCouncil of Zimbabwe protect consumers? (10)
18 a) How can consumers protect themselves against exploitation by some traders? "{I 0)
b) In whicb-way are consumers piOtected by:
{i) Code of Advertising Pnrctlse (5)
(ii) Hire Purchase Act 1 (5.)
 Chapter 15
Basilia. ,arithmetic (Ca1~«OD.)'

The following balances appeared 'in the books of Cost of (sales) goods sold
M. Mukai at December 31,,2004 • The cost price of goods which have been
sold.
sates , .24 700
Sales returns 200 Rate of turnover (or stocktorn)
Purchases 13660 • The number of times in a given period that
Opening Stock 4000 stock (goods) has been bought and sold (the
Closingstock 6000 number of times a company orders and sells
I Expenses, , 5900 its stock in a year).
• A measure of how quickly goods are sold
- - (and replaced or bought) in a given period
M. Mukai: Tradbig and Profit and Loss Account
of time, usually a year.
for the year ended December 31, 2004
• Rate of turnover = Cost of goods sold
Sales 24700
Average stock
~ Sales returns 200 " ~
lumover 24500 e.g. Cost of goods sold ;$30 000
~: Cost of Goods Sold Opening stock.. . . . . 5 000
Opening Stock 4000 Closing stock............... 7 000
Add: Purchases .1.3..§§Q
,17660-'
~ Closing Stock §_QQQ .l1...§§Q
Gross profit 12840
• Average stock = opening stock -+- clqsing stock
2
.J.u.s.;. Expenses 5900 = '$5000+7000
NET profit 6940 2
s 12000
2
'I'ulnover $6000
• the net sales of a business • Therefore:
• sales minus sales returns (returns inwards). Rate of turnover = Cost of goods sold
• thenet value of goods sold during the year Average stock
= 30000
Gross profit
6000
5 times
• Net sales (turnover) minus the cost of goods
sold during a given period.
Methods of Increasing net profit
Net profit • lowering prices expecting that the extra
• Gross profit minus expenses incurred by demand created more than covers the fall
the business in a given trading period, i.e. . in value (i.e. the use S.P.Q.R. - small profits

'.
Usually a year. 'S but quick returns)
• increasing prices, expecting that the For a limited company:
. customers wiiI stijI buy at the higher prices (.. aR.O.C.E. = Net Profit x 100
• more advertising " Total shareholders' funds 1
• sales promotions i.e. competitions, free gifts "Return" means ''Net Profit" for a given period.
etc usually a year.
• selling loss leaders e.g. sugar
• selling goods on credit i.e, increases sales 'Mark-up·
hence profits • Profit' when expressed as a fraction or
• keeping goods which are more likely to sell percentage. of cost price (cost of goods
sold)'
Measurlng'PrOfltiiblflf;-(lIquldlty) • Mark-up .Profit . x 100- ,
ofabuslness Cost price 1
Margin (trade discount)
Gross profit percentage = Gross Profit x 100 • Profit when expressed as a fraction or
Turnover (sales) 1 percentage of selling prices (or sales or
Net profit percentage Net-profit x 100 turnover).
Turnover (sales) 1
• Margin = • Profit x 100
Selling price 1
Return on capital employed {invested) • Converting Mark-up to Margin
• shows how much a business person gets = =
fromhis investmenj (ie. the capital invested -1 1 -
1
5 5+1 6
333
- -
• ::!~~~uch ~i.~"~) net profit 10 10 +3 13
he gets per every $100 invested • Converting Margin to Mark-up
• for a sole trader: i 1 1 1
"i! -• 8 8-1 7
R.O.C;E. Net Profit x 100 3 3 3
Capital employed 1 10 10-3 ·7

Me MpVii Balance Sheet as at 31 December 2001

Fixed Atsets
Capital Owned:
Capital 4300 Premises 14000
&td;_Net p(Ofit ~ Furniture 2.JKlQ- 6000
4700
. ~DraWIng'S ", .1QQ
4600 Currant Atsets
Long-tenn liabilities Closing stock .2000
DebtOrs 1000
Loan - Z1mbank 4000 Cash at bank 600
_m .
curr9ni liabJllties
. ,
Cash in hand.

Creditors'
• ,":.~!' \f,j- ~.! ~ '.~'~' !" .....
~I: 1.. "'~t .Jf.
--r.,.
 "

Balance" sheet • the owner's equity

A statement that shows the FINANCIAL position . • capital invested by the owner to start a
of a business ~ a given period, usually a year. business . '
f'

• total assets minus total liabilities'

Assets • capital balance in the balance sheet
.. '

• what the business owns

• the properties of a business
• capital being used by the business in its
,• . divided into fixed and current assets working life .. , .
• total assets minus debtors

• stay in a business for a long time

• depreciation is the' tall (loss) in value of a
• ' capital which is more or less permanent in
fixed asset
nature
" value changes slowly over the years- I
• consists of the fixed assets of business
• - stay in the:business for less than one year
It-
• value changes from day-to-day CIraI~ •. '
• consists of current assets of a business
- Llabilitle. • current assets constamly change (circulate) in
• what the business owes value fiom day-to-day, i.e. ci:mSt8IitiYchange
• its composition therefore it circul3teS .
mon<?, owed by ~ ',~, (~ompany) to
suppliers and financial ~tion's • required to finance production, holding of
goods (stock) and their movement
• divided into long-term and current (short-

•.•
term) liabilities

tI~I •
• assets that can 00-' quickly converted into
cash
• repayable over a long period of time (or
• liquidit¥ means the ease with which assets
over a number of years).
canbe chaJiged nita cash .
• cash is the most liquid asset
J

• repayable in less tban:~year e.g. creditors

• amount of capital used for the ~~;-to-day
Type. of capital running of a business, i.e. circulating capital
of a business
C•• II•• • current assets minus current liabilities

• a measure of the val1iC (net worth) of'a

I"'portance
business -
• amount. owed' by the company to its owner • capital which is over: and above the fixed
(or proprietor) . assets available for'worXfu~tli~;~m~
• can be, increased by profit or. decreased by • adequate working capital enables cieditors
loss
-
or drawings
.... to be paidwithout much difficulty '. .

. ..•
 .•. • ~. • ,.4 - • •

• enabl' a'~tct,operate wntiOut costly b) Net invoiceprice

~Wiiig "r:( ,r - , = Gross invoice price _' trade discount
• a
enaqles business to meet SPay)its day-to- $60 000 _ $ 15 000
day working expenses e.g. = $45 000
purchase of raw materials, " Cash discount = $45 000 x i
payment of wages, creditors 1 100
maintaining stock levels or stock can $2 250
be replenished (or replaced)
obtaining cash' discounts for prompt' c) Actual amount paid '" Net .fuVolceprice
.payment 'withotiiL·''~ling further _ cash discount.
financial aid : = $45 000 _ $2 250
used torun the business on a day-to-day =}42 750
,'< > basis '(used to',Pi~v/&riif1HeXpeDSes)
enables a business to maintain its',· Why wholesalen allow trade and cash
credit-wortruness','" discounts to retailen
measures the~licpridity'Ofa business

A lack of .working , capitd (called

,..........
•
.'

a deduction from the gross invoice price or

OVER~ING) "
catalogue price or price list
• restricts' (prevents) the expaasion of a
• an" allowance by one trader to another
. • business. ~ ,
~,.' . trader
• - causes cash-flow problems
• an allowance to a customer who buys to sell
• leads to borrowing 'Yhic~~ expensive .
again in order to make a profit
• the traders profit margin
~
Trade and cash discounts . ~~"

•. ' encourages customers to buy from a

T. T.qbinga. a trader, bought goods on .April
particular source
10,,2~, from Jaggers Wholesaiers,,'valued at ...l.

$60 0()()on credit. The terms ,of payment were:

• encourages bulk purchases
25% trade discount; 5%- cash discount. The
goods were paid for in full on 27 APrU,2004
Calculate: • an allowance (or a deduction) from the NET
a) the trade discount INVOICE PRICE
b) the cash discount • an allowance for prompt payment
,c) the actual amount paid • encourages customers to pay early the
amounts due "
a) Gross invoice price = $60 000 • reduces bad debts '
Percentage trade discount = 25% • saves on clerical work {no need to prepare .
$~ Q90 x .zs. = $15000 and send reminders 'if accounts are settled
r 100, early) .'
•, improves ~e ~~-flow cf a firm
• 'increases rate of turnover (s~k-turn)
"
Trade discount ~.
=l15 000
;/'<
,

.......
Fill in the missing word or words in the following statements
1 Net sales minus cost of sales equals to .
2 Net profit is found by deducting ... from .
3 ... is the number of times that stock is bought and sold.
4 SPQR means ....
5 When profit is expresses as a fraction of cost of sales, this is called ....

State whether the following statements are true or false

6 A balance sheet is a statement that shows the financial position of a business. TIP
7 A long-term liability is paid back over one year. TIP
8 Current assets form part of circulating capital. TIP
9 When a business lacks working capital it is "overtrading". TIP
10 Cash discounts are offered to traders for buying in bulk. TIP

Multiple choice questions

11 What name is given to gross rofit minus expenses?
A cost of sales
B net profit "-
C stock turn
D turnover
12 What is represented by this procedure, 's<v~s,l'urchases-expenses'?
A cost of goods .
B gross profit
C, net profit
D turnover
13 The following trading figures are for a small business for a given trading period:
Sales---------------------------$27 000
. Cost of goods sold-----------$12 000
Cost of average stock------- $6000
Total expenses--------------- $9 000
What was the gross profit for the trading period?
A $ 21000
B $ 15000
C $9000
D $3000
14 The rate of turnover was ...
A 2 times.
B 3 times.
C ·4 times.
D 4.5 times.
<.
15. The table below shows financial records for a trader as at 31st December 4,Q04.
· Fixed aSsets------'-------------- $ 100 00b '. . ~-."
Current asSets------------------ $50 000
-Current liabilities ------------ $20 000
Long term liabilities---------- $45 000

.~ The trader's capitalis ...

A $30 000.
< •

'~,~,
, ., , . .'
B $65 000. -.
C $85'000. '.
rF $150 oeo' -:>,,~:.p
1'61' ~t wasthe trader's walking capital?
· A $5000
B $25000
·e $30000·.
D $50000'_
"
Structurced questions .
,
17 a) Defme the term 'working capital' (2)
b) Of what @portance is working capital to a trader? (8)
18 a) How <fan'3 'business' . ease its net profit? (6)
b) Diff~#a~'betw~.tti~lIowing:
(i) capifM owned ~d circ~la~g capital (8)
(ii) _assets apd liabilities (6)
19 a) Why do wiloles8lers allow trade and. cash discounts to retailers? (14) .,.
J
b) Explain the following terms: ,'I!~"
(i) turnover f.;j ...;
(3)
(ii) rate of turnover ..,.........
-+I (3)
. I

'1'"
. iI :~

L"

•
 Chapter .;,'!' _.

IDternadonai trade
.. "
.1

. -,,-
• lhute is 'thebU'YJng and selling.~f goods-and .
~~ .,.!._-,-.in order to satisfy the needs
'.
and
w~ pf"consumers. ' :', '
•. Trade between two countries is known as bi-
lateral trade and that among many nations in
multi-lateral trade. ,
• Both:bi-lateral and multi-lateral trade are
classified ~ interiUdionaltrade.
WhyZllilbabwe trades with other
countrl.s
• Zimbabwe, like any other country in the
• Zimbabwe also sells (exports) goods and
services to other countries in.or<Jer,tQ:[.,' ,
• increase sales by wid~g':ftS Inarket
hence 'creating employment for its
people within and outside tlie country
• allow for specialisation ~in the
production of goods and services it is
" best at, e.g. tobacco
• get rid of the excess goods it produces,
e.g. beef
• obtain foreign curtenby needed to
pay for imports thus: riiaintai:iringi th~
, country's balance of trade or balance
of payment }I"...,

'world, does not hive all that i~' es to • keep its local indusiri~ busy producing
feed its people. Zimbabwe therefo is not more goods thus 'additionally' creatulg
self-sufficient, For this reason. Zirii .abwe more employment opportunities for its .
buys (imports) goods and, services from people , .
other countries in order to : " • force local industries to mariufacture
• obtain ~what it doeS'lJotp6Ssess due to ~,,- goods of high, q,willty beCa~ '1
difference in climatic. conditions e.g. international markets are highly
.~1 - fuel, raw materials such as --bber
. • ..-,~6t what it can not manufac~'liecause competitive -.'. I

• foster peace and .frieti"dshipso as to

of differences in or lack of technology
_. machinery, motor vehicles
• ,iccess a wider range of- goods and
services thereby uplifting the living
standards of its people
• augment (supplement) shortages"
for example,. in agriculturav'where
insufficient quantities 0.( gtain. have
been produced in a particular season
• obtain goods of high quality at cheaper
prices
• benefit from comparative cost . Differences between homa\tracte
•.."'~...•:. wuvantage
'.~~
improve its image abroad
• promote cultural, scientific and
economic co-operation' with .other
countries such as China, Malaysia and
Mozambique
• benefit technology by;trading with more
developed countries, that is, Zimbabwe
may exchange raw materials ~th Japan
in order to obtain computers \

and intetnat~naltrade i
" '. make available, through out the year,
. gqogs out of season (seasonal goods) • home trade .is the buying and selling, of

...•
./

:
.since different countries have' -different
, seasoDi
goods and services among people within
Zimbabwe '
 • intemational ' (foreign) trade involves buying and selling of goods and services between and
, :~~. among ~le of Z!~~we arid those of other countries.
.: .;

\_;~C;~
~tw~ ~~me ~e and foreign trade
""
r rr e:
Foreign trade

,Trade among c~-'~thin

• the same • Trade between citizens' I of different
country countries .
• Short distances ate involved, i.e. from • Long distances are involved' i.e. from
Chinhoyi to Bulawayo" Harare to Paris in France
• Fewer or no midafemen'are involved • More middlemen are engaged' .
'''~ No tariffs (levies or ~eS)may be charged ." . More tariffs are charged' because the
because there is-IeSistate interference government may levy customs duties or
Less·transit ris~'are eacountered'(i.e.less , impose trade embargoes . , .. '"
...
-, :
tHeftand'damage 6fgoods) hence cost of • More risks are encountered on the way
r'
I insuring the goods i~rower hence the cost.of insurance is higher r,

• Local currency is used'by citizens within • Foreign currencies.are used by citizens of

the same country i.e. Zimbabwe uses the different countries i.e. ~JBritisb pound
Zimbabwe dollar . sterling, Japanese .•yen. -,South, African."
• Citizens within tb~e country speak rand .. ' .
the lQc~l'~guage or !' . .fficiallanguage • Citizens of different countries speak;
e.g; En'glish . - "~ .' . difference official languages "
• Costs incurred, jri-,~g, goods • Costs incurred in transporting goods out
locally aJe lower; . of the country are high
• Bocuments used are {ewer e:g. ~~, • A lot of documents are involved thus
quotations ~. making foreign trade more -cOmplicated.
r

• Involves retail and ·wholesaletrade e.g. 'indents, bills oflading charterparty.

.. , Ie
Uses the same units 'fOr-weighing and • Involves import and export trade
measuring products .;,.' • Uses -differenr units for 'weighing and
measuring products "
' .:' {;". , ~.'

makes it difficult to compare quantities

and convert to the required local
measurement e.g. feet to metres
different cultures and religions: .
- ~fferent ~?!~ in tpe ,w?r!d ~?eve in
different 'religt()~jid are of differel}t.
cultures _.. ': , '0, . " •

a Zimbabwean trader can not 'export

niini-skit6; to MalaWi odx~ef~1ndia
. because their c~s __ 'llgions
. forbid theuse b. ~tibn of these
.products

,
,'.;

' ...•
. "\;:
:. ..
.. \ .'."
 • different laws and regulations:
each country has its own laws and
regulations which govern the activities
• trade in services only e.g. tourism, freight,
insurance
of its citizens
Zimbabweans drive on the left and
• calculated for given periods of time, usually
one year
Nigerians use the right-hand size.
• invisible balance exported services
• difference in technology: minus imported service
some countries (e.g. Japan; America, • Example 1 ,_
China) have acquired" advanced transport servicesprovided to foreigners
technology in the production of high by Zimbabwean companies $3Oni ~ _
quality goods ;.;. insurance services, provided by,
developing countries' therefore face foreigners to companies inZimbabwe
- stiffer c9~tition on international' $2Oni i~''r\(''''?'''_::' ,

markets froni'.developed(industralised) tourists to Zimbabwe from other

countries. countries $7OrnIYnf"?
• -conducting market research, to' establish tourists from Zimbabwe, to other
the demand for goods in another country, is companies $6~L-'
expensive and di:fficult for the exporter to
obtain such information markets • on" invisiblebalance= $30+ 70)m- $ (20+60)m
- $100m - $ 8Om, " ,
through agents > ~ •

$2Orn
• the exporter expetieit~.delaxs. in 'payment
the invisible balance was .favourable
and in some
,;
~cesl
races:'nsks of non- •
~ I ~ "
(surplus) because the value of services
payment.~ythe importer due ~ ~ars or statq,);..,.
rendered to foreigners' were more than
interference "
expenditure on serviC¢S' provided by
• a lot of docum~,whi~;,~metimes "r - •. / _........ . foreigners i.e~ exported services were more
diijipult to understantlfneed1oJ!e~COJlI)leted than imported services . ' ,
e.gbill oflading . . ,
• long distaDcelili'e'involvedfeStiltingin:
higher transport.costs • trade in goods only _~.g. tobacco, wheat,
more transit risks ;
,clothes, cars,'machinery
higher insurance charges '
• calculated for a ziven y~ ,'1 ~<'
difficulty iii provi Ariin after-sale • C>'".r.
visible balance (balanceof'trade) ='ex~
>
.

.'
UU-.l6
• I~ .
. '1 ~
SerVIces , ." " goods minus imported g~ , , •
the 'govertunent may' 'impose trade
,
• Example 2
'restrictions by enforcing tiubbiSlli an-effort goods exported to other countries
'to reduce expenditure on fdrtigb ;'currency $200m .
• political instability, e.g. ci~ ~wars and - " goods imported.from other countries
. ,disorder, .in a: country," 1 political 1!n~ $310!1t, ',_" . .'. ,
..' interference br.,the government'may restrict, • "Balance of trade (b.o.t) :;::,$200m- $31Orn .
, trade; , ' , ,~ = -SHOrn " :
ct'.: .' ~11f" ,~/
• there is ~p.~?n " "~ • ,'The, balance of trade was unfavourable
• packaging is expensive
._ '. 1:-«
':, (deficit) because .the yalue' of! exported .

~..
 -'goods was less -ttian that of'imported goods • reduce imports by -rationing or reducing
_i.e. the country spent more foreign currency foreign currency allocation to importers
than it received - • reduce the number of importers by
controlling issue of import licences
•.• .'
01,.,.•• ,
,-' J
• discourage domestic consumption of
• the difference between -Zimbabwe's total specific products and avail more goods
earnings (receipts) and total expenditure for export by introducing (or increasing )
(payments) , ,; excise duty ,
• exported -'goods and :' l~ces minus • discourage consumption of imported goods
iq>orted goods and services ~ by charging high customs duty
• , calculated for a given year • limit quantities of goods to be imported by
• ]CaD. be.surpluso(favourable,)·if exports are enforcing quotas -
. more than imports. • attract foreign buyers by participation in
•. can be ..•a ..-deficit (unfavourable) when trade fairs and exhibitions
imports are more than exports ~ • increase exports-by giving tax concessions
•. examples to exporters
Balance of payments (B.O.P) = exported • assist exporters by establishing export
(goods + services) - imported (goods + promotion programmes and processing
zones
services) - - "1Ki~
, = $(~OO+~~70)m ~ $~~. 20+60)m
- ,= $300m - $39Om! '- ':,
1=-SQOrn . • a group of countries that has removed trade
i ,-'f~1 '
The - balance -' of payments was restrictions between and among member
states in order to facilitate trade
• examples of such groupings include SADC,
AU, EU, COMESA, scowxs, ACP
countries, Commonwealth of Nations
The Government' of Zimbabwe mayimpose the
following measures to correct its balance of
R_sons for 10•• Ira•• Woe .
payments position whenever a.deficit occurs: • to reduce reliance on countries outside the
• reduce expenditure on foreigncurrency by: bloc i.e. thus encouraging the bloc to be
- "reducing imports independent
negotiating debt cancellation with our • to promote trade among member states by
creditors e.g. World Bank, International reducing tariffs
MonetaryFund . • ,to foster peace, friendship and understanding
substitutiJlg imports with home made among member countries
goods • to assist each other economically in times of
• increase inflo:w Offoreign currency by: problems
increasing exports' • to bargain powerfully .as ' a group when'
attracting foreign 'investors negotiating for financial ~ce or debt
•. make itnpOrtS' mote'expensive by devaluing cancellation ~. . -.
the local Current:;: - {.' - - • to mobilise reso~:'-:'~, and share
• " mMce- exports' ~ by Stibsidising them ")
ideas or technology as a group

-e-
 Trade (tariff) barriers Functions of,customs and exciSe
• . these are measures taken by government to authorities - .
reduce imports and in some cas~~b8n trade .
completely with some countries ~ • collect revenue for the government by
charging customs and e~cise duties
Customs (Import.) d~tY ...:'.; -', , . • collect, keep and 8naIYse. records of
• a tax leviedon 'ihipOrreQ dutiaJ>~&tlods· imported and exported goods and services •
• . makes imports more expensive'iiian locally .' control bonded warehoUses to ~ that
produced goods . duty is collected on imported dutiabl~ goods
before releasing them - .
Quota • supervise public health by arranging
• . a limitation on the qUantity of goods to be quarantine for animals (e.g, pets) coming
.
unpo rted . into the country thus controlling infectious
• reduces the quantity of imports diseases
--' ..
!- J
•. supervise entrepOt (re-export) trade to
'Elpbargo" . ~. ensure that no duty is c~ed and Collected
• '. a complete ban forbidding trade with other on goods destined to another country
countries either for- political or health .- :

reasons • 1 •.• of 1••.•.•

• reduces imports to zero
The customs and excise authorities collect and
r .-
keep records of goods entering and' those leaving
Foreign ex~hange control _ :.:•
the country for the following reasons: ..
.. ~ the ~Qvernment, thro~_ the ~~ _ ,w
, of Zimbabwe, may ~Oh o~ refuse to 01~: • .to show trends in (or pattern of) trade with
regards to: .
foreign currency to unporters - _ .
volumes or quantities, value and types
• restricts imJtorter from buying g~ . ;i'~'~.
of iinported and exported goods .
bnpoit "cences / _. countries' to which our exports are
• th«(g"o{rernment may' refuse to isSue new going (country of 'destination) and
licences.or renew c;xpired~~ licences those countries from which imports are
• reduces the - number of importers and coming (countries of origin)
Consequently impOrts • to enable the govenmient·to: .'
realise and be aware. of its trading
Subsidies " position with individual countries and
• 'the government may subsidise (grant mOney the rest of the world' -
to ) exporters . . ,~ . calculate I the balance. of trade' and
• exporting becomes c~ 8nd importing balance ofpa~ts "
remains expensiverc tale corrective -Ii:J.e8sureswhen there
• ,J" • "~-:'- • ~~-: " is an unfavourable balance of trade or
Devaluation oflocalcarrency -.:'d. balance of Payplellts -; .
• our own '.local:®rnmfy wjll"J;M~ rless in evaluate the effectivenesS' of' its . tax
value as eq~ to soll\C.;~onal collec~o.".sYs~ -'_.. . " ,
currencies _J,.... . .., assess the results ~eff~) of its-trade
~, ,irpports ~ . _ exp&siv~;an9 exports _:policies with other countries', '. .'
remain ch~ ~~.\- '. .:; -- - _ •.. ~ theneeds~f\~~;~

"_
). ~ ...

~.
 W!iy··clisto • uthorltle. control consumption in the home market in. order to:
bonded wa •.• u•• :· • raise revenue' for government' .
. . • discourage. consumption of dangerous
Bonded warehouses store dutiable goods, that products .
is, goods on -which' duty .bas· not been paid. • reduce domestic demand
Customs authorities therefore, 'COntrol activities • release more goods for export
of these bonded warehouses in.order to: .
•. +collect import duties bef0re goods are Methods of calculating duty
released Ad valorem duty . ..' .
• ensure that goods in entrep6t (re-export) • . This is calculation based ~~n'the value ~f
trade are released without payment of duty imported goOds.. .
• prevent smuggling of gOOds~er bond • e.g-75 percent on luxury goods'
• allow goods to be packed, branded, sampled, Specific duty . . I' .

bottled but not to-be manufactured • This calculation is based on quantities or

•. make possible the movement of goods volume of imported goods e.g. 40 percent

..•.•.................. ,.....
..between bonded warehouses per litre of imported diesel.
'_ .MI•• I•• n in i••.• 1 tracIe
.'
•to keep dutiable goods or gOOds ~ri'which Brokers
. ~duty has not been paid • work in foreign trade 'as agents
.• 'to" afio:W 'goods' to 'be packed. branded, • bring' buyers and sellers into contact
sampl~' boftled or~' '''::BUt goods are • buy or sell goods on behalf of their
not manufactured ;..t(·· . principals (who are either manufacturers or .

-.' fQ ~le' govertu:rient iaise.:'.reveilue by exporters)

collecting customs duties • do not possess the goods they sell, but sell '
• to allow goods 'to-be- removed in small goods by sample or description
quantities thus saving on working capitD." • buy or sell goods in the names of their
'. to allow certain goods to mature or ripen principals
',_. e.g, fruit, wine, spirits, tobacco . '. .• do not-deliver the goods they sell
.":~' to enable 'goods to be' transferred from • have Ifo insurable interest on the goods they
one bonded warehouse to' another by .a buy or.sell c .. -

bonded carman. A warehouse warrant is a • receive brokerage as. commission based {in
total value of Sales -v-
document of title that allows dutiable goods- • do not enter into contract
to be released,
• to store g~ for enterpOt trade .Faetors
,. to enable goods to be sold. whilst in bond
• . possess the' goods they sell . '-/;''-
thus importer Can avoid paying .customs
• - sell goods in their own names
. duty.' A ~~. .draw.•back is a refund on • collect goods for sale' ' .
. ~,~~,.pm;~~·,pajd ,~oilgOods.meant for • deliver goods to their c~tnim; .
're-export trade. • have insurable': ..•·ih~,on the goods they
sell '-'. . '. . . ~,_ '. ';
WIrf • ·• : , •
may sell on credit
'Ex~
pnXtu~ gbOOk(e:g."tO&~
duty
~·mxeaon ~ specifiedhorne
liquour) meant for
•
provide' warehousing and . equipment for
handling of goods ' .
,-

."
 ". I collect and forward payments to their • reduce manufacturers problems of exporting
principals less their commission goods because they: -5"

•
•.... ·~·...·.I·....
possess the goods they seq
transport goods on their own
store these goods
handle customs clearance
advertise the goods abroad
.• have ~ble interest on the goods in their
possession . :'", . . • provide manufacturers.with information on
market conditions overseas, e.g.: .on how
• sell goods on behalf of their principals
well goods are selling abroad
• sell goods in their .own names
• . deliver goods to their customers
•.,." • rcha •
• may borrow lpans from financial institutions
using the goods as collateralsecurity • act as traders
• guarantee payment to their principals • buy goods from manufacturers abroad
• receive a high commission • sell these goods locally
• pay cash promptly for the goods they buy --
.•• .:a•• (ii, •.• fonranlen) • buy and sell goods using-their own names"
l
•
:
collectgoods from consignors' premises
• sell these goods to ~ ,a profit
• .warehouse the goods w' : ,
• carry goods to their warehouses
• warehouse (store) the goods
• advertise the goods

.• send goods to consignee .

",' • handle customs clearance
• inform the manufacturers overseas of goods
• provide facilities for export ~g with a fast rate of turnover locally
• - arrange insurance for the igoods : .-
• fill in the necessary documents used when Documents used in international
goods are transported by ship e.g. bill' of trade
lading •.
• - provides information on: .
'"' export and import formalities •• ."
";".. transport services/available : , • an order to buy goods abroad
• book .space on a ship for goods . • sent by an importer ~cipal ) -to an ag~t
• .ensure that goods are delivered to the overseas
. importer (consignee) by instructing their • gives details of:
representatives overseas for mal delivery types, quantities and prices of goods
of goods required -
• earn a fee for the work they perform how the goods are to be forwarded
marking or numbers ~ crates for
identification "-
• $ti"
cost of insurance
• perform the functions Qf' traders (i.e. how goods are to be packaged s .

wholesalers or retailers) . place and address to which goods' are to

• buy goods from local maaufacturers be delivered
"
.• sell these goods abroad terms of payment
. '. .- . . I
• buy and sell goods in their own names • can be an oPen indent, where: '_'
; '. sell goods at a' profit the indent does not state the source from:
• . pay cash immediately fQr- gpods bought which the goods are ¥>. be o~tained r-

".
 the' agent must obtain quotations from Certificate of origin
several suppliers or manufacturers
the agent musf inform the principal • specifies the name of the country in
which goods being exported have been
about the orders placed on his behalf.
manufactured e.g. made in Hong Kong
• can be a closed indent, where:
it specifies the typesIand brands) of • required for the assessment of amount of· '
duty to be charged on imports from that
goods required and'~' manufactures
. " t.,
. ''''(1 Jo country of origin ,
from whom the agent"tnust buy the
:.....•.:.:::,m
..
g\l\.lWi'
;'''Hl~''t'f''J!....
- '
,I • required when customs.authorities want to '
~ -:. ..0"'1; enforce an embargo
bport, ,•• • signed by an exporter or a consul to certifY
• I _ • . _# ~'~AiJ:'- the origin of goods ,_' ",
• prepared fi:om various ~v~L~ for goods • send together withfor-accompanies) the,
.purchased and "expensesi:cmc~ (on goods being exported '
.transportation and warehQjJsing.ofgoods) • contains: ~ ,~
~ .: .summarisesthegcKKkboUght.-andexpenses ' description of goods (i.e.>. types,
,, . ,mcurr. irred ' , 1,:c. "
• quantities)
• , copies of the original invoices received from names ~and addresses Ofjmporter ,and
, ,

- suppliers of goods and ~Ces .l",a,t are attached exporter, ,

to'the export invoice (for reference) SIgnature of exporter 'or consul
• accompanies the goods when being exported name of country of origin of goods
~ the copy is attached to the ,~:. ,fla4iog ,
• form part of the Aocumenta;Y. t ', I ' •
Consular Invoice
speed up checking an4,cl~Ji' 'goods by
i~" '

customs authorities.fi.e there.is no need to

• assist customs official to calculate customs
dutYwhere this duty is charged on the value
check details from the , various individual of imported goods (as valorem duty) ,
• . d\ ' _, .!::'~' ~
mVOlce,,), ' , ' '!'i:.. '~"r • signed by a consul of the importing country -
~. contains:.
~
.-. . l. certifying and confirtning that the prices 'of
b f, _, ,p. summary of the details of goods i.e. goods to tie correct: '
",' ,,{.types .and quantities ' ~ prices of these goods being exported
marking or numbers on' crates (or have to, be authenticated because
packages) exporters or agents falsify the prices by
II ,L :-:~, , name of vesselcarrying the goods understating them so that the importer
- when and where invoice was issued :is charged less customs duty ,
freight charges or dock dues, a consul is a trade representative of _ "
insurance costS,;; ," the importing country resident.in the, - .
names and' addresses of importer and exporting country ,
exporter ,~,-0,' , '- -, :
• "there is no need 'for 'customs "officials to
,t" .•• , i~ignittUredfhporter who compiled the " inspect the goods when calculatiIigcustoms
" ',invoice"'. ';, ': ,: - duty ,
_' unit price for andtotal 'amount payable • prevents cheating when assessing duty
on g'~-it~~'d: "~I' " .
• speeds up clearing arid delivering of goods '
. . - 'JlJ.!"!.' l' '.1 .
~, terms of P.8ypi~t e.g. .free on board
-~,::.:~:': ~(folfjt),,:,-,>(j 'rt~i.f'f!:n;:n, " :. ,
• assists cUstoms' officials to (prohibi;t.
importation of banned, goods '';' .: ',"
, ' _ (.cost, insuiah~ a'Hd~igJif(tif) , • accompanies the goods being ~ ,',

't,
.
,
·~it
, -
 • - contains: • can be made, in at _least three copies"
description of' goods .'(i.e. types, distributed as fo~ow~: ,'£~~;~r-" ."
quantities) - one copy remains vrlli, th~ exporter'
prices of goods (consignor) . -..•,_ ,
declaration by and signature of consul second copy sent,,~ the -importer
of the importing country , (consign~) by:;," ft1Ii1frt ~?~h
, names and addresses of importer and ~ before g~i5~e~,,! ~.':. .,
exporter " third copy, given ~.,.~~ ~ap~ 'of the
;. -'oJ
ship, accompanies~the consignment of
CertIfIcate of Insurance goods
• provides proof that goods being transported • shows: ~<,

detailed description of gOOdS i.e. types

have been insured (or an insurance policy and quantities of goods { - ',,-,,' ,
certifying that goods being imported or 'condition of g f.,' \'VIien ;~tti:8'!lfjiiJ. is
exported have been insured against transit, i
described as eit1H!r'Clean or.'-tlirty..A
· . risks) ',' " clean bill of ~__. ~';issuecYwheD:.
• I 'has to. be produced when making a claim-
goods received .are mtac_t.A dirty bill
to tli~insurance company, if a risk _insured is endorsed wheilg~-'received are .
against has occurred damaged. .., .,' 't:!'
• can be an open (floating) insurance policy: port of loading imd~l'iitI-lo3dingthe
to ~ver a~ exports wi~pul~ goods ''t: -;,:
penod of time 0 :~

cost of transporting the:goods- .;

to avoid individual cover fdi-~each numbers or markings on the Crates,
consignment name of the shipping- company arid
• can be a specific insurance policy to cover details of the ship . -'~, .
a particular :Cargo ! <,
__ •
names and addresses of consignor and
• accompanies the goods being transported consignee " ",
• req~
t-f as part of a documentarycredit anticipated date of arrival of-the ship;_
"of, • ~::e~rt ~;;=~ todock '

•
required whenever goods are transported total value of the good( •
by sea on~ who pays for ~ce _
.-
an agreement, entered into between an signatures of the ;expOrter and captain
of the ship "_.,,,' .
exporter and shipping company' _' , .
• an evidence (acknowledgement) of receipt '" --''-
. t -.".~. "
.- , '-
for goods on board the'ship ., , tlnrllJ W••
• a document of title, which gives'the bearer ';• completed when gOOds1a,rC carried by air- ,
ownership 6f g~ -_2, _ ~ =,' , • a contract to ~ goods ahoar~~~' aiJcraft.
• -a quasi- negotiable instrument which allows ';,' an" evidence lot receipt of _gOOdS on board
ownership .of goods to be.transferred to the aeropl~e,," I' :":,:, "U ',"

"another person by endorsement -. .' "'., goes tog~~i~ith::~&~;-

¥ • forms part of a documentary Credit • shows: ~'" _ -, -_~
• allows goods to be; bought or, so)d whilst ' ,full description 'of' .goods, i.e, ,types,
, in transit quantities and ~~~> :~t:~d6ds' "
'if
(~ -r ..

. ~ .•.•.. :: ", . .. _- ',.

r-, (.
 airports of loading and unloading the .Letter of Credit
gO<Mis .
air freight> charges,' i.e. cost of
transportiilg~.goodS by air ProcetIwre of _kI. ,.,..nt ., •. of '
terms and -conditiens upon which cretIt .
,,; goods are.,calried
name of carrier, e.g~:-Air Zimbabwe,
• used when importer requires a period of,
! credit -
South African Airways; Qiiantas
_.u!. " l ;._ • the importer and exporter agree to use it
- lligl]t 1i:~llp»er'I'e'8..;r!ill" ' Zimbabwe letter of credit ;.
numberUM 3152 • the importer asks his bank-: to draft a
-'iL ~~'rlW:i~:~;,:~'i-.;.' . , ,~" , letter of credit, 'On his behalf, to be sent
l,nt~1J:1I""-~J1j~
,rf1J~f:.. ~)'.j,.~'f:-:. to the exporter showing details of goods

'"_'"
'}~b'
• ''''1iti'(t~Qv8;1 ~ri~~._

.:;t _~l~
tbe"'~g-~~-'
iin~ u(db~(:totei8n
"8"oount;ry

currency
exporter must supply-where to ship goods,
conditions or documents to be produced in
order to obtain payment
.wJMP.Ily..for.tberiihpOnS ":::;',::;; .' • the importer then requests his bank to
·~~i".\
' ,'""
• c, __ G"_;< .: ' forward his letter to the exporter's bank '
':cntiiI: • _:- _ • upon receipt of . this Ietter, the exporters
"'. _exporting ,country ~ :'~.customs bank advises the exporter of this credit
specifications : facility at his disposal, the exporter then
ships the goods to the importer "
• ,importing country requires customs entry
_. '~slwws ~:o£;goods being traded ' • after shipping the goods, the exporter
. .' !. • presents to his bank the documents stated
• ~ to detem;J,1g.e
customs es payable _.:
.• source doeum:enrJfo~ qrawing a balance • in the letter of credit e.g. bill of lading,
- sheet _,,' {" . c' -:-: c~cate of insurance . ,
_' • the exporter is then paid by his own bank
l)Ietliods of niaklng~ym.nts In. • the ship~ing documen~ are the~ sent,by the
t'· d
,"-';"-.1.. _. . "<. ~~, • exporter s bank to the unporter s batik
-....-~n
- ~~ ra e ", . •- th·e, unporter ,s b-";'I-'
iWA remits payment . to
,-~.~ the exporter's bank upon receipt of the
·W"~""'lc).~,"''''- •
shipping documents .-
after 'advising the importer of the shipping
'. .called "HOMELINK" by the Reserve Bank documents in its possession, the importer's
,'ofZimbabwe
bank 'is paid by the importer
• ~,:.;J;Ilethod of sending and receiving • finalJy, the importer's bank releases. the
-payments. , shipping documents to enable importer
.' payments are •. made using. telegraph, cable claim ownership of-the goods
or telephone
.• 'payment is made-in foreign currency Importanc. of • I.ner of credit
• .money is' ~ferred from the debtors
i (imponer.'s)' account to the creditorls
• • a document that facilitates payment in
.~ I . (eXJM?rter's~;~ },;!; ,'. . foreign trade
• . .a Safe anCl·faSt_way_oj making payments • .•- can be a documentary letter of credit if
_f'~ _ money ~be-~~:duriDg ~it accompanied by shipping documents, e.g.
J, an expensive. m~~ of sending money, bill of lading, certificate of inslgance,'
-:,':because banks, charge service fees export invoice

t-,
.'
:• the importer is ~ J;; ~~ .y.tle.~to
_(ownership of ~ the goods is assured before
payment is made i.e: the importer does not
rnake payment until the ·shippihg documents
are in the possession of his bank. . before cancellation of payment.
• useful when the:
importer requires a short period of
credit --" ='. :~<.~~
q ~.~~t~
# ~:
exporter: .is not' williIig :to release
.goods to an unknown .or-untrustworthy
. . .' iB;tpOrter befofe,"receiving payment
• ~e exporter is guaranteed prompt payment
by his-bank upon handing over the shipping
documents .,
• the importer is ~ced by his bank
• this' credit can.be~'='·.;
revocable i.e. - the bank's authority to
_ .. make payment may be cancelled by the
- importer anytime without notifying the
. exporter.. .
irrevocable i.e. _ the bank's. authority
to' make payment cannot be cancelled
without the consent of the exporter.
The exporter must be' consulted first
confirmed i.e. _. :!he,. exporter it
guaranteed early.' "yment ; by his
bank on handing over '~~,~~pping
documents representing
... ;~:';;:-
~e!ga&is '
• The Bill of Exchange Act (1882) defines the .
bill of exchange as "An unconditioti8.¥oMeriiD
writing, addressed by.t9Il~person to another,
singed by the person giv_l.ng.jt, requiring the'
person to whom it is-addressed to-pay on
demand, or at a fixed er-determinable future
time, a certain sum of money to or to the
order of a specified ~ dr' a beater".
• .D~afted by an exporter and sent to an
nnporter _J

Bill ~ Exchange

Nd.3152 Eco-Systems (Pvt) Limited

P,O. Box CHN 600
CHINHOYI
Zimbabwe '
July 31, 2004
. i

-"'- .. 'f.o: '

ZS 3 000000.00
»,

Six months after date; pay·to me or my order the sum of three million Zimbabwean dollars for the value of
Q09ds received.
To: .J

The Managing Director

Computex Limited
P.O. Box 003
..
Nairobi
.Kenya Si~~!u':e:rlo"8"~T~
/ TA:SHiNGA KANGA
; - '"
(C.E.O) .
 • Drawn .for a, period of tbree:~inonths (or • supplies information to exporters in which.
". . f
multiples thereot) . , exports from developing coun'tries (sach as
. .• Must first be accepted.by ~ (who then Zimbabwe) to developed co~es (such as
writes "accepted" across 14e face of bill) China) receive preferential hiiff charges
J.. J " •
• provides information on overseas countries
~I•• rta... of • of bela • on:
• an unconditional order used to secure credit worthiness of overseas importers
payment
Fo' economic conditions overseas
• a method of settling debts used mainly in • . provide means of payment and receipt by:
foreign trade use of documentary (letters of) credit
.• . ~uire(Jas<part of a dotumentary credit accepting and discounting bills .of
• .~ ~{'~&imce of debt when accepted by exchange
. J.

,.
~1_~ ;.'~,..._ _.
.:jo.'
';..:_
'$. ~
•
•
- . arranging foreign currency. exchange
•- CiinQ; HiScomillid1 fOriit £natures to enable sending .and receiving ·P.l~ents
the exporter to obtain early payment. through telegraphic money transfers
• discounting the bill. prevents working and bank drafts. .,
capital being tied-up in book debts offering financial. assistance through
• \ enables imported goods to be sold before loans '
the-bill matures keeping money and documents safely
• allows importer a period of credit before acting as guarantors or
making payment .
• ~les trade ~ exist among ~es. of Functions of Zimbabwe
vanous countnes . '., ,: International Trade Fair (ZITF)
• can be a quasi-negotiable ~t 'When
endorsed by exporter in favour of someone The fair is advertised extensively both locally
else and internationally .
..' -~~~ilitates trade between Zimbabwean and
F.-nctions of ZIm-Trade foreign companies
(Government promotion of • enables local and foreign manufacturers of
foreign trade) goods and providers of services to;
exhibit (display) their 'goods and
• carries out market research in other advertise their services
countries to ascertain whether or not fo sell their products
export to those countries widen their markets "
• examines and investigates, together with have personal contact with prospective
potential exporters, the possibilities buyers \
available to invest in those countries demonstrate how their .products are
• invites interested companies and finances used or give detailed. 4Cscription of
their delegates to visit and explore investment their products
opportunities in other countries .
•' ,receives inquiries from importers abroad and Functions of Export Processing
passes the information to potential exporters Zones Authority (EPZA)
• helps companies in Zimbabwe to take part
in trade fairs and exhibitions organised by • conducts market research in other countries
other countries • identifies:

...•
'\.
 countries T_pquiringspecific products • exporters of products have the following
from Zimbabwe, e.g. Europe requires incentives:
beef from Zimbabwe - enjoy tax concessions
.industries which+ produce goods receive preferential treatment m
. mainly for exportso as to earn foreign foreign currency allocations
currency and assists in funding. them, import machinery and equipment duty
e.g. mining industries free .
• facilitates trade between Zimbabwean and explore investment opportunities in
. foreign companies other countries.

End of chapter questions

Fill in the missing word or words in the following statements

1 Trade among many countries is known as ... trade.
2 .... trade involves buying and selling of services only.
} SADC, COMESA and E<;:OWASare examples of ....
4 Dutiable goods are stored in ... . .•
5 ... duty is calcul~ted ott the total value of goods.

State whether the following statements are true or false

6 A factor sells goods by sample or description. TIP
7 A del credere agent brings buyer and seller into contact. TIP
8 An indent is an order to buy goods. TIP
9 Homelink connects the Reserve Bank.q Zimbabwe with Central Banks in other countries.
TIP
10 A Bill of Exchange is an unconditional order used to secure payment. TIP

Multiple choice questions

11 Why does Zimbabwe trade with other countries?
A to benefit form comperative cost advantage
B to conduct market research in other countries
C to earn revenue for the government
D to provide after-sales services to importers
12 Which one is not a problem faced by exporters?
A climate
B currency ..'
C distance
D language
13 Which method is not used by government to rectify a deficit on its balance of payments?
A increasing exports.
B increasing imports
C subsiding exports
D substituting imports

-,'.'
14 The devaluation of the Zimbabwean dollar ...
A makes both exports and imports expensive .
. 8 makes exports less expensive than imports.
C makes imports more expensive than exports.
D makes imports less expensive than exports.
15 Why do countries form trading blocs?
A to conduct market research
.:--:' '.
B to import more goodS '
C to mobilise ~es efficiently
D to obtain foreign currency.
16 What riame is given to the re-exportation of previously imported goods?
A entrepOt trade
B export trade
C import trade
D retail trade
17 How does a forwarding agent facilitate international trade?
A advise manufacturers of goods with fast rate of sales abroad
B brings buyers and sellers into contact with each other
C completes detiirs on 'ati'1h~ necessary shipping documents
D guarantees p~~erlf~ 'f.'M" pri:ncip~f that goods will be sold.
18 What is a trade embaigo~_
A A ban on trading with>'~! countries for political reasons.
B. A limitation on the quantity'of goods to be imported,
C The rationing of foreign currency to importers of goods.
D The substitution of imports with home made' products. .
19 If a leiter of credit is confirmed, ... 4.",,_ . .
A the 'exporter is first ~nSulted before payment is cancelled.
B the exporter is guaranteed early payment by his bank . ..L
C the importer can caDctfpa:ynient after notifying the .exporter, .
D the importer can cancel payment without notifying the exporter.
20 Why is a certificate of origin required by customs officials of the importing country?
A It certifies as correct the stated prices of goods. .
B It gives a summary of the description of goods.
C It prevents inaccurate calculation of duty.
D It specifies the country of manufacture of goods.

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 Structured.questlons
21 a) Why does Zimbabwe trade with other countries ? (10)
b) Why do countries form trading blocs?_ (5)
c) Below are foreign trade figures for country K

$million
Goods bought from other axmtries 60
Goods sold to other countries 200
Tourists from country K 140
Tourists to country K . 100
T~servIces~to~:~ 60
Insurance services provId8d to COi'npaIIiesin &"ntry. K eO

Calculate, sho~g the ~orlcings:

{i} invisible trade . _, (2)
(ii) balance-of trade (2)
. (iii) balance of payment .' . (1)
22' State and explain the problems (difficu1ti~) fa¢ed by importers and exporters. (20)
. 23 What are the functions of the following middlemen in international trade?
a) forwarding agents .. ' i~ (8)
b) del credere agents . ~~_ (6)
c) export merchants .. .• (6)
24 a) Distinguish between brokers ~ factors, (8)
b) Why do customs authOrities control bonded warehouses? . (1)
c) How do commercial banks "assistImporters an":f'exporters? (5)
25 .a) Explain some measures taken by government to correct an unfavourable.balance .: ' ..
of payment. ' .', .. . (10)·
b) What is the importance, to the..govermiient, of the statistical records, of
imports and exports kept by custotns authorities? . (5)
c) State five functions of ~ aDd'excise authorities. (5)
26 Ofwhat importance are the folloWing·dooumentsUsed in foreign trade?
a) indent . (6)
b) export invoice (6)
c) consular invoice (4)
d) certificate of ori~ .. (4)
"Model answers to question 24
240) DistingUish between brokers and factors
Brokers:
• work in both foreign and home trade.
• sell goods on behalf of their principal.
• do not possess the goods they sell.
• sell goods in the names of principals.
• have no insurable interest on the goods they sell. '
• receive commission knownas brokerage.

Factors:
• work in foreign trade.
• sell goods in their own names.
• " possess the goods they sell.
• coll~ct goOdsfor sale.
• provide warehousing facilities.
• 'offer creCfitto customers.
• c-ollect and 'forward payments to principal less their commission.
• haVe insurable interest on the goods they sell.
• are able 'to' , er into contracts.
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NB any four points under each agent would be' correct answers. Maximum marks per
agent is 4. The key word in the question is distinguish.

b) Why customs authorities control bonded warehouses.

Bonded warehouses ~nables customs authorities to:
• ensure that allduticible goods are paid for.
• collect duty as revenue on behalf of the government.
• ensure .that duty is not paid for goods in'entrepot trade ..
.• allow goods to be packed, graded,' sampled but not manufactured within the
warehouse.
• 'ensure that goods in'bond are transferred from one warehouse to anoth~ by a
'bonded carman:
• check for goods being sold whilst in bond. l .,..

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 Chapter 17 .•.
.F~
Importance of aids to trade
,"

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Warehousing;",' : .f, •
keeps money safe through 'current, savings,
deposits and fixed accounts
• enables the safe storage,of: ~~., '" • acts as trustees and executors
raw materials • acts, as underwriters .when they, buy
equipment and machinery unsubscribed shares of public limited
finished goods. compames
partly finished goods • provides night safes' r

spare parts, , • provides fmance .through loans and

- .goods in ~ overdrafts
• enables raw ma.terlaIs,to be ordered ahead • offers trade information ,
of demand • provides financial advice to clients
• enables continuous production of goods • provides safe custody of valuables such as
" • enables' goods to. ~ produced. ahead of , , title deeds or certificates ;;
demand ,11 ~,,:: ' • , offers interest to savings and deposits,
• stores seasonal goods .~' ' accounts ..•
• prevents shortages or evens .o~ow of • obtains foreign currency "
" ,~goo4s ..• ~ ',c '" ,'_ ,.;,r. . s
• provides credit cards, ATM's '
~ o
, '.

• protects goods from weatlwr,~lements such • accepts and discounts Bills-of Exchange
as rain or heat ,\' _ , " _ , ,. prov~desbank-ass~ance 0: bank-insurance
• stores impOrtedgoods in bonded warehouses ij1l'~.provides tele-banking services
Untilduty has been pat'ci <V':
•
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,Advertising
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• goods in bonded wareheuses.ean.be sold m

bond lor in small quantities thus saving-on . ,. provides information on:
working capital .< " goods available
• 'stores goods in entrtp.Ort-trade~ •.•-:1" prices of goods .'
• ~s 'pacbgjng;i~g, grading, and types of goods seld e.g quality of
, btepding but goods are not manufactured goods "
• :-;jJleventsprice'fluttuations;,,' .. where to buy the goods
1"

• ,allows bulk purchasing • persuades (or attracts) 'customers to buy

• preserves perishables. in refrigerated :: :• launches new products or fashion
warehouses • ,increases sales '
• allows goods to mature or ripen such as '. increases profits ,
wine, fruits, tobacco and spirits • enables a trader to fight competition
.• reduces risks such as theft and damage • reminds customers about existing goods or
maintains sales
Banking • used to recruit employees
• allows suppliers to be located
'. enables making of payments • improves the company's image
• ' enables receiving of payments through • fights adverse publicity
, cheques, stop order,'Orbill of exchange • can be placed on radio or television
?
~.
 . .
• goods can be carried -by road. rail, air; sea,
. pipeline' , ',~'- _...~. . :.'t;~
.' enab es traders to contact;' • gives goods added value
buyers
suppliers Insurance
employees
• to receive and send payments • provides health ins~~ "cOver through >

• to receive and send orders medical aid. scheme and' covers:

• to settle queries against risks of loss to goods <dueto fire
• to arrange contracts or theft
• to lodge complaints employees at work through employer's
• to give and receive information liability
• can be through Ietter, telephone? etc goods in transit
,- embezzlement "Offunds through fidelity
Tr~nspott ~. guarantee policy , 1

members oHlie'. public through 'public

- ~ . enables one to carry: liability policy
raw materials bad debts through ECGn or ECGC
finished goods motor vehicles, premises and equipment
partly finished goods- 'loss resulting" from an insured' loss
spare parts .• ".'. through consequential' loss .
•. equipment and fuachinery
executives * • instills confidencein business'

sales persons whilst at work

• provides compensation or indemnity- when
loss occurs
.workers to and fro~ work. ~'-."",.
• can be used to advertise .
• provides health insurance cover 'through
medical aid schemes
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'0' Level specimen question paper 1

I

Multiple choice questions

1 Trade is ...
A buying and selling of goods.
B obtaining raw materials.
C producing goods.
D satisfying human wants.
2 An example of primary production is ...
A constructing.
B fishing.
C manufacturing.
D warehousing.
3 Production is complete when .goods ...
\ A are manufactured.
'B ...ar€? stored.
C reach the shops.
D are used by consumers.
4 Barter is defined as ...
A exchanging goods.
.
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B _ distributing goods.
C manufacturing goods.
D transporting goods.
5 What is the reward for labour?
A interest
B profit
C rent.
D salary
6 When services.are provided on a large scale, this is called ...
A economies of scale.
B mass production.
C subsistence.
D specialization.
7 Construction is classified under ...
A indirect production.
B primary production.
C secondary production.
D tertiary production.
8 A manufacturer can differentiate his goods from those of a competitor by ...
A branding.
B blending.
C describing.
D pricing.
 .;

9. Which feat6re does.bot -&pplyto run; purchase agreement?

A BuyerhecOmes .~on paYment offust-inspllment
B Buyet'be(X)mes owner on payment of last instalment.
C Goods cannot be re-sold before payment of fast instalment.
D Goods can be repossessed when buyer defaults on payment.
10 A discount store ... . .
A has many deparbnents.
B sells goods on credit.
.C sells high quality goods.
D sells low-priced goods.
11 A mail order firm spends less money on ...
A advertising goods.
B printing catalogues.
C ~goods.
- D rentibgprem.ises.
12 How·have.S#uill-scale retailers survived competition from large-scal~ retailers?
The small-scale retailers:
'. A can afford expensive advertising.
B can access credit finance.
C offer a wide ~e of goods.
D emphasise on ~ service.
13 Branding ~pre-pac~ of goods have resulted in the growth of ...
A flea dets. .
B hypermarkets.
C mobiIe11alops."'·
D ~single shops. \'. " ,".,~.
14 Which factor does ii()j1OOntributeto the eliiDination of a wholesaler?
A growth of cash~ shops .'-
,B sale of do-it-yomselfptoducts
C sale of goods with high turnover
D . pre-packaging and branding of goods
15 The service provided by wholesalers to manufacturers only is ...
A clearing production lines.
B evening-out prices of goods;'
C offering storage of goods.
D providing advice and information.
16 Cash.and~wholesalers ...
A do not offer credit to customers.
B do not sell to members of the public.
C offer ~ to customers.
n . SeU'a narrow range of goods.
17 Ad vij.orem duty is clJarged on ...
A . qUality of goods.
B quantity of goods.
C types of goods.
D value of goods.
 ;~

tl 8 c
:~
re-exportation 0(3~ously~-g~'is called ...
A: exporttrade,
. . ~" ":;{~l.;~-" " " " . .
B etltrepOt trade. : {1~[:,
C import trade. .
D retail trade. " ~'i[\ ~ I
r "

1.9 "Why is a certificate of origin important to customs authorities?

A It certifiesthat ~ being.exported have been insured.
B It prevents falSificatiOri of Prices of goods by importer.
C It shows' condition of-goods on board a vessel.
D It statesthe country iil which "goods have been manufactured.
" 20 When is a letter of credit rev~le?' z, '_
A When exporter is guaranteed early payment by his bank on handing overthe shipping
~enm. . .
B . When exporter is not willing to release goods to an unknown. importer before receiving
payment, . . .. .' . . '.
c
"When:~~ 'cy to;m8ke'paymenl maybe cancelled by importer anytime without
notifying exporter. . ~
n 'WhOO bank's authority to make payment cannot be cancelled by importer without the
consent of exporter. ."
~1 Wmchfunction is performed by tire Zimbabwe International Trade Fair (zITF)?
A enables local andforei~.JI'~~ to exhibit their goods and advertise their services·
B identifies industrl~ wliici{ ~goOds mainly for export so as to eam foreign currency
-and assists in funding them . ". .
C invites interested companies and finances their delegates to visit and explore investment
opportunities in other countries
D receives inquiries ~m ~roa4 ~3lses the information to potential exporters ,
Why is a freight forwarder important in foreign trade? .
A -He completes shipping documents,
B .He delivers goods to his customers.-
C He guarantees payment to his principal.
D . He pays cash promptly foriOOCJs...~gllt.
23 What is the importance of a quotation in home trade?
A to enable buyer to.compare prices from several suppliers
B to notify the buyer that goods boaght are on the way
~C to .request for tynes _of.goods a-vailabJe from several suppliers • I .-

D .to show proof of delivery. of ,goods if signed by buyer

-24 Under what circiunstake would, a proforma invoice be used? .
,A '\yhen buyer inquires about terms of payment from suppliers
B when customer wants to choose 'a supplier with favourable terms
C when illustrations of commodities are required by buyer
D when seller requests for paytfienl before goods are dispatched
'.'.25 ~
< .
is 'a delivery note-Used? ""
A .~ a supplementary invoice is requested by buyer
.B _when it transport firm is hired'to cariy goods .
 C when goods are sent to buyer on a "sale or return" basis
D when seller uses his own transport to deliver goods
26' In which document would you find'the words "errors and omissions excepted" written?
A advice nOte'! .
~ letter of iIiquiry
C invoice
D order form r ~
27 -Which one is not an adv8DtageofbU,ying'goods on:hire purchase? ) ..; -
A customer can buy expensive goods .
B customer is afforded legal protection
C goods are expensive to buy
D goods are under guarantee
28 What action can management of Edgars Stores take to recover amounts due from defaulters?
. A cancel the,~ent -
B report to-the CCZ
C repossess tKe,godds
D' sue the customer
29 - Which one is no~a function of warehousing?
A to even out flow of goods
B to increase prices of g~
C to reduce theft of g~:
D to stabilise prices ofg~ _
30 How are profits and losses shartd among partners in the absence of a Partnership Deed?
A according to each partner's purchases
B equally according to the Partnership Act
C in proportion to capital contribution ~~"- .
D in proportion to each partner's drawings
31 Who enjoys limited liability in a limited partnership?
A' active partners ~
B all partners
C ordinary partners
D . sleeping partners
32 Which one is an importance of the Zimbabwe Stock Exchange?
A acts as a barometer of the well-being of the economy of a country ,
B acts as a trustee and executor of wills upon death of the assured
C acts as a watchdog against unethical and indecent advertising
D acts as an underwriter for unsubscribed shares of a company
33 Which one is ~ot a characteristic of money?
A acceptability "
B accountabilitY-
C homogeneity.
D 'scarcity
34 Which method of payment is initiated by a creditor?
A banker's order "
B credit transfer

•
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 C direct·debit·
.D homelink .
35 . What is the'advantage Ofusing ro-ro ships to carry goods?
A. They allow lorries loaded v.jth'own cargo to be driven in and out of the ship.
B They are specially ~igrted remgemted ships which carry fresh produce. .
C They have ~ desiped so Q. to prevent leakages and explosions. "
D They travel'anywIiefe atounci~ world in search of cargo to carry. f
'36':' Whichdocument~tIie~1bbepaldby,anexporteruponfai1uretoloadandoff-load
goods within the lay daYs'l ;;
A Charterparty .
B Bill of exchange
C Bill of lading
- .D Proforma invoice .
,37 Whic~ communication service enables a trader to send statements of account monthly to his
customers? . ' .
N business reply .
-, B friInkin8 machine
C poste restante
, . :i'D registered mail
'.. What is the advantage of recorded ~ over registered mail?
.,. A' articles are delivered personally ,
. ~ .B articies can be traced if lost ".
~C COmpensatiotl'iS pald for1~ ~Jes
P used to send valuable articI.,.
,39 Institutional advertising ... " ".
A informs customers of prices ,pf goods.
B launches a new prOduct /" '
C promotes a company's ~e. 'll, <, -
D ieminds customers of existing goods. '
40 The code of advertising practice ...
A condUctsmarket researChon CODstimer tastes.
B encourages customers to bby adveii1iser's products.
,C establishesbasic~of~ ,
D produces advertisettleiitsby ~ words 'and sounds.
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,·21' A
22
23 "A
24 D
25 D
26 C
27 C.
28 [)
29 ~
30 B
31 D
32'A
33 B
34 C
35 A
36 A
37 B
38 A.
39 C .
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'0' Level specimen question paper 2

Paper consists of nine questions

. Answer ·any four ·Questions
, .

1 a) State four advantages of specialisation. (4)

b) Why are the following aids to trade important to a producer?
(i) banking (8)
(ii) advertising (8)
2 a) Outline the features of a su~~ket (10)
b) Why are most retailers by-passing wholesalers? (10)
3 a). Define balance of payments. (4)
b) State. and 'explain the difficulties aced by importers in foreign trades (16)
4 .: a) . Explain the following terms used-in business organisations:
- - - (i) separate legal entity .. (2)
(ii) limited liability (4)
(iii) partnership deed (6)
b) Outline the features.of.a ~ublic corporation. (8)
.5 a) Why is communicatiommportent to the producer of exercise books? (8)
b) Describe and explain the importance of cellular phone. (12)
6 a). Distinguish between an insurable risk and a non-insurable risk. (10)
...b) What are the functions of actuaries
\ .
in insurance? (4)
c) Chib.era's stock valued at-$300 million was insured for $400 million against
fire: Accidentally. the stock was completely burnt by fire destroying all the stock.
. Giving reasons, state how much was paid to Chihera as compensation for the stock. (6)
·7 Describe and explain'the importance of each of the following documents:
(i) quotation (4)
(ii). proforma invoice (6)
(iii) statement . (10) r
8 a) Explain the following methods of payment:
(i) stop order (4)
(ii) direct debit (4)
b) . State and explain six characteristics of good money. (12)
9 a) Why is advertising important to the consumer? (1.0)
b) State six advantages and four disadvantages
\ ~ of using a television
..., -,
as a medium
of advertising. (10)
 , Possible answers to question 1
-
1 'a) Advantages of ,specialisation
• specialiStS get empI~t. "
• it leads-to 9reater' ProfiCiencyamong workers
." speCialised'rnaQiinesare used in the production process
• short Periods -are--~ to train workers. .,,'
• goods are prod~fn, iarge:quantities which results in lowproductio,i coSts and
, prices _ ,
• the precess enables '9r.eater and fuller use of equipment which economises on.
capital expenditure ,- , .:
• .it provides quality goods which leads to a high ~andard of living
• employment is according to ability, aptitude or skills learnt.
NB:,An, of the above points are possible solutions. (max 4)
'4

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b) ~t1"':',}-:,""._,-';~~~:,~f i?ankingto a pr,oducer ' ,

• It 'eriab!~ c11~~t~ __ make and receive payments,-through stop order, bill of
,-, ,exc~,:di,.elh:.etJit or credit transfer ' '
• producer mCiy'J<eep fti~money safe by opening savings, fixed deposit and deposit
accounts. " ,
• night safes are-~ f~ :the-after hours sales or collection
• provides finance tO~Ucer in the form of loons or overdrafts,
• trade irjforrnation and--d8viceare given at no cost
• producer can open a correrit ~ccouiTt , '
• farei9ttfurrency- is provided fot' .importation of goods '
• .the ~ ,Cana~ctpt.'qnd disc~, producer's Billof Exchange
• VaIugt,I~,such.as titr~:,deedscan ~'J<ept safely .
• enable.S:c~~~r§Juter"'fo uSe;credi-tcards tiitd·ATM.J
NB. Any 8 oftlie aOovi;point8 (!!f! possible solutions. (max 8)
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(ii) - Importa"u of advel"tisingto a producer '.
• producer is able:fa provide information to buyers on the following
goods availab1e' -... " '
quality of goods (~YSold '
prices of goods ' ' ,
location of producer ' _,' " '
• ' enables-producer to atfract or persuade customers to buy her products
• a way of launchingtheprodecer's new products '
• producer's',sales and prqfits are increased
• enables'~f!Wto fight competition from other producers
• custo~'" are reminded of goods which they have been buying
• enableS.pr;roducerto locate her ownsuppliers of raw materials
• prod!Jcer can a8vel"tise for employees or vacant posts
• through:4cfvertising producer's sales are maintai~_
• prod~ may use radio, posters, newspapers, televisions to advel"tise
NB. Any 8-o/the above points are possible solutions. (max 8)

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