WAREHOUSING

The protection given to goods from the time they are produced until when they are needed by

consumers. IMPORTANCE OF WAREHOUSING

 It protects goods from damage due to bad weather /theft therefore reduced chances of loss to the
business.
 It helps to stabilize prices by preventing either shortage or excess developing on the market hence
efficient budgeting
 Ensure a regular supply of goods to customers hence customer satisfaction.
 Help the business to be able to produce/buy in large quantities thereby enjoys economies of scale.
 It provides space necessary for the preparation of goods for sale by repackaging, branding labeling and
blending.
 It provides space for the display of goods for customers to inspect the goods before buying them.

TYPES OF WAREHOUSES AND THEIR USES

1. COLD STORAGE WAREHOUSE: A form of specialist warehouse used mainly for the storage of
perishables like fruits and vegetables, fresh milk, meat etc. they enable perishables to be exported
throughout the world without the fear that they would go bad on transit.

2. MANUFACTURE’S WAREHOUSE/DEPOTS: These are warehouses used by manufactures to store

raw materials, components, tools and machinery necessary for production to take place and also for
storing finished products before selling them.

3. BUILDERS TOOL SHED: A temporary warehouse used by builders/construction companies to keep

their tools/equipment, building materials, site rations as well as their uniforms and protective clothing.

4. PUBLIC SECTOR WAREHOUSE: large depots used by government departments and parastatal bodies
to store their supplies and government strategic reserves.
E.g. the central Medical Stores used by ministry of health to store medical supplies,
Silos used by Botswana Agricultural marketing boards to store grains

5. SEAPORT AND AIRPORT AUTHORITY WAREHOUSE: Warehousing facilities provided by port

authorities to facilitate the worldwide distribution of goods in international trade by storing goods while
on transit awaiting customs clearance and transport.
6. WHOLESALE WAREHOUSE: Warehouses used by wholesalers to store their goods, break the bulk
and prepare the goods for sale.

7. LARGE SCALE RETAILER’S WAREHOUSE: Warehouses used by large scale retailers to store their
goods in order to supply to the branches after buying them in bulk through their central purchasing
department.

8. BONDED WAREHOUSES: Warehouses used for storage of dutiable goods on which duty has not yet
been paid. They are under the control of BURS department

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  They are important as they help economize the working capital of traders as those who do not
have enough working capital may sell their goods while still in bond in order to avoid the
payment of duties.
 Goods may also be prepared for sale while on bond.

Bonded warehouses may be preferred to other types of warehouses when:

 The imported goods are dutiable and the trader does not have sufficient capital to pay the duties
immediately.
 The goods imported are not required immediately and they therefore need to be stored under the control
of the customs authorities without payment of duties until they are removed.
 The goods are to be re-exported on which in which case the importer would not have to pay duty.
 The goods need to be prepared for sale bottling/packaging/blending/labeling.
 The trader does not have the correct license in place for the imported goods and needs time to obtain
them.

DOCUMENTS USED IN WAREHOUSING

 Bill of sight: A form from customs authorities giving an importer permission to examine imported
goods in the presence of a customs officer.
 Warehouse warrant: a form used to claim goods from a warehouse after payment of duties.
 Goods inward declaration: a document showing details of goods delivered to the warehouse.
 Goods outward note: a document showing details of goods leaving a warehouse.
 Packaging note: a note giving details of items contained in each box/carton.

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 INSURANCE

Insurance is the protection given against a risk that we are not sure would occur but which if it occurs would
cause a financial loss. Examples of risks include: fire, accident, burglary theft, death etc

Nature & Insurance Pool

Insurance works on the principle of “pooling of risks” This means that the premiums of many people pay for the
loss of a few people. Every business or person is faced with risks, pays a small amount of annual In this way a
fund (collection of premium or pool) is created at the insurance company out of this pool, compensation can be
paid to those who suffer financial losses. Thus the premium of many compensates the loss of a few.

Dividends to insurance company shareholders (owners)

Premium paid Surplus funds

sured public and businesses or (policy holders) Investment in business activities or lent out
Insurance Pool (Premiums, Interest and Profits)

Claims Paid out Interest and profits

Running costs and expenses

(Salaries, rent, tax, stationery, transport

Importance of insurance

1. Insurance enables the business to be compensated in case of financial loss that resulted from the
occurrence of a risk.
2. It provides businessmen with confidence to continue trading knowing they will be covered in case they
face a risk.
3. Insurance provides a saving plan and benefits the dependents of the assured in times of loss of loved
ones hence as they cannot remain suffering.
4. Insurance companies work as investors as they also lend money to businesses which generates interest
for the company to be used in different activities of the company.
5. Insurance helps individuals to overcome misfortunes like theft, damage of property as they get
compensated upon suffering a risk.
6. It is an invisible export and it brings income to the country as well as improves the balance of payment
position.

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Business Risks:
A risk is an event that causes financial loss. It could be fire, accident, burglary theft, death etc. There are two
types of risks:

1. Insurable risks: are those whose likelihood to occur can be predicted with accuracy. The prediction on
occurrence can be easily calculated on the basis of past experiences and statistics. A fair premium can be fixed.
For e.g. the incidence of robbery in a given region can be calculated on the basis of past statistics. It is therefore
possible for insurance companies to fix a fair premium, which will cover most claims.

2. Non-insurable risks: are those which cannot be assessed due to lack of records as their likelihood of occurring
is not known, hence cannot be calculated on the basis of past experiences and statistics. A fair premium cannot
be fixed so; the insurance companies do not provide cover for such risk. For e.g. Risk of losses due to low sales
cannot be accepted by insurance companies as they cannot be calculated on the basis of past statistics. The loss
of profit due to bad or poor management.

The importance of statistics and other information on in calculating risks and premiums
Statistics and other information are required to enable the insurance company to estimate the number of people
to be insured against a particular risk. It is therefore possible for insurance companies to fix a fair premium
which will cover most claims and even earn profit.

THE PRINCIPLES OF INSURANCE:

The operations of insurance are governed by a set of principles failure to comply with the principles may make
the policy null and void, in which case the insurance company would not pay any claim. The main principles
are:

1. The principle of indemnity:

Indemnity means that the insured must be restored to the same position as before the risk occurred. Indemnity
does not allow the insured to make profit out of insurance by over insuring or under insuring as it is limited to
the sum insured. It does not apply to life and personal accident.

i. Over insurance occurs when the insured insures his property for an amount more than the actual worth of the
property. E.g. A man insures his property which is worth only P10, 000 for P12, 000. Even if his property is
totally destroyed, the maximum compensation given will be only P10, 000 and not 12,000 as insurance is a
contract of indemnity.
ii. Under Insurance: is when the insured insures his property for an amount less than the actual worth of the
property. E.g. A man insures his property worth P10, 000 for P8000.00 if his properly is totally destroyed, the
maximum he could get is only P8000.00 and not P10, 000.

Indemnity works through three rules: namely, subrogation, contribution and average clause.

a. Subrogation: this means to take over the remains or scrap of the damaged property by the insurance company
so that the insured does not benefit from it as well. After paying the compensation by buying Mr. Ben another
car of similar value, model and the insurance company will subrogate the scrap because Mr. Ben is not to make
profit by selling the remains of the old car. This principle confers the rights of an owner onto the insurer once
the insurer makes payment of a claim.
Eg.2. if Mpho has insured his car against fire and in case of fire then Mpho gets compensated for the loss by the
insurance company. The damaged car remains can now be taken away by the insurer who can sell it to the scrap
yard for a price.

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b. Contribution: Contribution applies when the same property is insured under two different companies. In case
of loss, each company would contribute half the value of the damaged or lost property to prevent the insured
from making profit out of insurance.
E.g. Mr. Ben insures his goods worth P1000 against fire with 2 insurance companies (P1000 with each
insurance company) In case of fire, Mr. Ben would receive a maximum of P1000, from both the insurance
companies jointly and P1000 from each insurance company because he cannot make profit from insurance.

c. Average clause: A rule that prevents the insured from making a profit out of insurance by under insuring their
property. If the property is partly damaged, the company will only pay a fraction of the repair costs since the
property was partly insured and the insured will have to pay the balance.
E.g. if one insures a car worth P18, 000 for only 15000 and if it is later on partly damaged in an accident such
that it needs P6000 for repair, the insurance company would pay only P6000

Calculation: insured value x cost of

repairs Actual value
P15000 X P6000
P18000
= P5000 since the property was partly insured

2. Principle of Utmost good Faith; The principle compels both the insurer and the insured to be truthful or
honest to each other. The proposer must disclose fully all material facts known, in answering all questions in the
proposal form. Failure to disclose the whole truth will make the policy void and the insurance company will
refuse to pay compensation should a loss occur. The insurer must also show utmost good faith by explaining in
detail the nature of insurance contract and terms of the contract i.e. when the insured may or may not be
compensated.

Utmost good faith should be observed since the answers or information on the proposal form enables the
insurance company to:
- Assess the risk
- Decide whether to cover the risk or not
- Fix a fair premium
- Come up with an insurance contract which is fair to the insurer and the insured.

3. Insurable Interest:
It prevents the people from making profit out of insurance by insuring property that they do not own i.e.
property they have no direct interest and legal right to. The principle allows people to insure a property for
which they would personally suffer a financial loss if it is stolen or damaged.
Example: If you buy a car and later it is stolen, you will certainly suffer a financial loss [lost the money you
spent on the car]. This means you have insurable interest in your car, your sister or friend cannot suffer any
loss if the car is lost because she has no insurable interest in it.

4. Proximate Cause:
The insurance company will pay compensation if the loss suffered was caused by the risk that was covered by
the policy and the cause of the risk is within the precise terms of the policy.

E.g.1 If the goods stored in a warehouse are insured against fire and flood then the goods are lost or damaged
due to an earthquake, then no claim can be made.

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E.g.2. If your house is insured against accidental fire then you deliberately decide to burn it down yourself in
order to get compensated, the insurance company will not pay any compensation because you deliberately
caused the fire, yet the house was insured against accidental fire.

CLASS EXERCISE

Q1. Mr. Jones insured a house worth P12000 with 3 insurance companies against the risk of fire. Unfortunately
the house caught fire and was totally destroyed.

a. How much would he be paid as compensation?

b. Calculate how much compensation would be paid by each insurer.
c. Give reasons why each insurer would not compensate him fully.

Q2. A house worth P12000 is insured for P10000. Later the house is partly damaged and the repairs cost P9000.

a. Calculate how much compensation the insured would get from the insurer.

b. Give reasons to support your answer.

Q3. Mr. Pule rents a house in Gaborone. Explain why he can insure his property inside the house against risks
and not the house.

Q4. Mr. Pule insured his car against the risk of accident at P14000 and yet the actual value is P17000.
a. How much would Mr. Pule receive as compensation if the car is totally destroyed in an accident?

Q5 A business insured its machine against fire and the building was broken into and the machine was stolen

a. What do you think the insurer would do and why?

Q6. Frank insured a house against risk of fire. The house caught fire one day and in the process of putting off
the fire the next house was partly damaged.

a. Who would be compensated by the insurance company and why?

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The insurance Premium – it’s the monthly payment made by the insured to the insurer in return for an
insurance cover.

Factors that determine the amount of premium to be charged

1. The amount of risk involved; the greater the likelihood of the risk occurring, the larger will be the premium.
The amount also depends on individual circumstances. E.g. A 50 year old driver with a clean 30 years accident
free license will be charged a lower premium compared to an 18 year old with one year ‘s driving experience
and has had 3 accidents.

2. The total number of people insuring against a certain risk: the more people come to insure against a certain
risk the lower the premium each of them will pay because the larger the number of people contributing a small
amount in premium leads to a large pool being created.

3. Claim free grouping: customers are grouped on how frequent they make claims; customers who do not make
a claim are rewarded by being put in a claim free group which entitles them for discount next time they renew
their policies.

4. Other factors depend on individual cases

e.g. –When insuring a car: they may consider age of the driver, type and cost of the car e.t.c.
- When insuring a house they may consider method of construction, contents location e.t.c
-When assuring life they may consider record of health, occupation, lifestyle e.t.c.

TYPES OF INSURANCE COVER

There are two types of insurance namely General Insurance and Life Assurance

GENERAL INSURANCE - it involves the following: Fire Insurance, Marine Insurance, Aviation Insurance and
Accident Insurance.

1. FIRE INSURANCE: It covers property against the risk of fire. The insurance company agrees to compensate
private individuals and businesses for damage to their buildings and contents caused by accidental fire and not
deliberate fire. The cover also caters for lightning and explosions are also covered here and natural events like
storms, floods and earthquakes.

The damage caused by water used to put off a fire on neighboring property is also covered by fire insurance.
For example, if fire had started in second floor of an apartment, and the water used to put it off flows down to
damage properties for people in the first floor, they would also be compensated.

2. ACCIDENT INSURANCE: It covers the risks of accidental damage to property and personal accident and
even burglary. There are two types of policies under this which are: Personal accident and Group personal
accident.

- Personal accident insurance: It covers the insured against partial or total disability arising from accidental
cause. E.g. Professional sports stars can take this insurance cover such that if they get injured or get disabled
while playing, and cannot play permanently or for a period of time, their income may be compensated.

- Group personal accident: This policy provides a similar cover as in personal accident but only for members of
a particular group, e.g. a football team, dance troop or tourists.
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3. LIABILITY INSURANCE: The branch of insurance provides cover against claims arising from the deaths of
or injuries to third parties as well as loss or damage to their property.

There are four policies under liability insurance which are:

 public liability insurance: The policy covers the business against claims made by members of the
general public who have suffered losses as a result of the fault of the business.
For example, a trader may put floor tiles, some of which are loose, on his or her shop floor and as a customer
gets in to buy goods she/he trips, fall and breaks a leg. The injured customers would claim compensation from
the trader.
 employer’s liability (workmen compensation): This policy covers the business against claims arising
from the deaths or injury of an employee while on duty. This policy is necessary because some
occupations are very dangerous and may cause injury or illness to employees. This policy is required by
law and all businesses must have liability insurance certificate displayed at the work place, preferably at
the reception.
 Fidelity bond: This insurance covers the business against losses resulting from the dishonesty of the
business own employees. The insurance company can compensate losses arising from employee theft
provided it can obtain satisfactory reference about the employee’s character.
 Professional indemnity insurance: It protects businesses that sell knowledge and skills against claims
sought by a client if they have made mistakes or are found to have been negligent in some or all of the
services that they provide them e.g. law firms, advertising agencies.

4. PROPERTY INSURANCE: It includes household insurance, which is divided into two types namely content
insurance and building insurance.

- Contents insurance: It covers all moveable items in the insured’s home, e.g. Furniture, carpets, sports
equipment, records, TV and videos, jewellery, etc. against losses resulting from theft, fire, flooding, lightning
accidental damage and the like. The insured gets compensated the money equal to the value of the goods at the
time the risk occurred considering wear and tear. i.e. they will give you enough money to replace exactly what
you have lost.
E.g. If your five year old LG flat screen TV gets stolen from your house, you will be paid enough money to buy
another five year old LG flat screen TV not a brand new one. However one can take a policy that is called ‘new
to old’ contents policy which offers a new replacement for lost items.

- Building insurance: This insurance covers you against any risk occurring to your house For example, fire,
explosion, damage by vehicles or aircraft, flood, Lightening and subsidence. It may also cover claims for
personal accidents and liability, especially if the building collapses and injures a person.

5. CASH IN TRANSIT: -it covers the loss of money from the business’s premises as well as when it is being
taken to the bank due to armed robbery or theft. The term money does not only refer to bank notes and coins
but it also includes cheques, postal orders, credit cards, vouchers e.t.c.

6. MOTOR INSURANCE
This covers the risks of fire, theft, accidental damage to the vehicle as well as loss to third parties who happen
to be traveling in the car or knocked down by the car of their belongings damaged in a car accident. It has three
main policies:

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-Third party policy: It covers the death or bodily injury caused to third parties (passengers or other road users)
as well as damage to their properties. The policy is compulsory and a minimum legal requirement for anyone
buying a car.
-Third party fire and theft policy: It covers the insured against a risk of fire and theft, damage to the vehicle and
loss of properties in the vehicle as well as injury to or death of the insured. The premium is higher than that in
third party insurance.
- Comprehensive Policy: This is the most secure policy which covers third party, fire and theft, damage to the
vehicle and loss of properties in the vehicles as well as injury to or death of the insured.

7. MARINE INSURANCE
This is the insurance of mainly ships and their cargoes against perils at sea. These perils include fire, theft,
piracy, jettison, capture, and seizure, detention by government, bad weather, foundering and collision. There are
four types of marine insurance which are:

- Hull insurance: This form of marine insurance is useful in the event of loss of ship due to fire, accident and
sinking of the ship on the sea. It can be a time policy lasting twelve months or two years, or a voyage policy
lasting from port of departure to port of arrival.

- Cargo insurance: it covers goods which are being transported by a ship against loss or damage at sea. The
insurance may be covered on a particular trip or voyage. E.g. from London to Durban, or it may be open to
travel anywhere.

- Freight insurance: It covers the transport charges by the shipping company for carrying the goods. It is usually
paid in advance but the shipping company is entitled to it only if the cargo is safely delivered. If the goods are
not delivered for some reason, maybe because it was lost at sea, the shipping company may face a claim not
only for compensation for the goods lost but also for the refund of the freight charges (if it was prepaid).

- Ship owner’s liability Insurance: It covers the ship owner against claims from third parties like injury/death of
passengers travelling in the, damage to loss of their property and damage to port facilities or other ships.

8. BUSINESS INTERRUPTION/ LOSS OF PROFIT DUE TO FIRE / CONSEQUENCIAL LOSS

It covers the business against loss of profit due to fire which may lead to the business being temporarily closed
or forced to restrict production waiting for repairs to be completed. It also extends to cover risk such as
breakdown of machinery, accidental damage by vehicles/aircraft, power failure e.t.c

9. GOODS IN TRANSIT: It covers goods transported against risk of theft or damage by fire, water or careless
handling that may occur during transit.

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 LIFE ASSURANCE
The insurance of people’s life so that when they die their dependants may have some money to sustain their
needs. Principle of indemnity does not apply to life assurance because a dead person cannot be brought back to
life.

Types of Life Assurance Cover

1. Whole life policy – This is a policy under which a person assures his life for a certain sum of money
which will be paid to his dependants upon death. The assured decides the amount of money they wants
to assure their life for, and pays a certain amount of premium their entire working life until they retire or
dies.

2. Terms policy: This is a policy which covers a person for only a fixed period of time say 20 years. If the
assured dies within the period of cover, the money is paid to their dependents but if they live up to the
end of the policy nothing is paid to the assured. The premiums here are cheaper than in whole life policy
because the insurer does not have to pay the insured anything if they live up to the end of the period
covered.

3. Life endowment policy: - Under this policy the assured is covered for a specific period of time e.g. 20
years, if the person dies before the maturity date, the money is paid to him/her personally. There are two
types of this policy:

4. i) With profits policy assurance: the policy pays the assured the sum assured plus a bonus or profits.
ii) Without profits: pays the assured a lump sum upon expiry of the cover.

5. Annuity Assurance: This policy provides regular payments to the assured from a fixed future date until
the person dies. A person may arrange for such payment to begin at his/her retirement time. It is suitable
policy for self employed people who have no pension plan.

6. Group Policy – this policy mainly provides funeral expenses to members of a group. E.g. Employees of
a company.

7. Family Income Policy – under this policy if the policy holder dies, his dependants will be paid an agreed
sum at regular intervals for a specific period of time. This helps the spouse to continue providing for
kids until they can fend for themselves.

8. Educational policy: taken out by people for their children’s education in future. The policy pays out
educational expenses.

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INSURANCE BROKERS AND AGENTS

1. Insurance Agents: Agents who work on behalf of the insurance company. They never handle premiums but
are paid directly to the insurance company. They are paid commission based on the number of clients they
have found. They deal with life policies only.

2. Insurance brokers: these are also agents but mostly companies whose work is to link those seeking insurance
cover and the insurance company. They are paid a commission based on the amount of collected from the
insured (usually 15%)

3. Underwriters: Underwriters are people who accept insurance risks (i.e.) they insure by themselves. This
means that they receive insurance premiums from their clients in exchange for the insurance cover and if the
risk occurs they pay out compensation from their own pockets. However if no risk occurs they enjoy the
premiums collected.

INSURANCE DOCUMENTS

1. The proposal form: It is an application form supplied by the insurance company where the proposer fills it,
answering all the questions asked in good faith. Its purpose is to collect the information from the proposer
which would assist the insurance company to make an assessment of the risk and calculate a fair premium to be
paid.

2. Cover note: This is a document that proves that the two parties have entered into an agreement. It is issued on
the same day the contract is signed and acts as a temporary policy document.

3. Insurance policy: The insurance policy is the final document that is issued by the insurance company. It
clearly states the terms and conditions under which the contract has been entered into as well as the obligations
of both parties.

4. Claim form: It is a form used for making claims when the risk has occurred. It is filled by the claimant giving
all the details of the risk and amount of loss suffered.

5. Police Report: A document from the police that a claimant must get which explain the cause of the accident
and point whose fault it was and the actions taken to try and reduce the loss. It accompanies the claim form. The
police carry out a thorough investigation to determine the circumstances and cause of the accident.

PROCEDURE OF BUYING INSURANCE

To insure one’s property:

1. The proposer must approach the insurance company directly or can go through an insurance broker.
2. The proposer would be given a proposal form to full in, where he has to give full, accurate and detailed
information about the risk being insured against.
3. The insurance broker then investigates, assesses the risk being covered and calculates the premium to be
charged.
4. Upon payment of premium the proposer is now insured, who is then given a cover note.
5. The full policy would be issued within a month or so.
6. At the end of period of cover, the insurance company issues a renewal notice to remind the insured to pay a
further premium.

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PROCEDURE INVOLVED IN MAKING CLAIMS.
If the risk insured against occurs, the insured shall at his own expense
1. Inform the police of the event or loss of property
2. Notify the insurance company as soon as possible
3. Complete a claim form giving full details of the loss suffered.
4. The insurance company will arrange to inspect the damage to assess and determine the extent of loss
suffered, and compare it with the sum claimed. This is done by qualified assessors.
5. An agreement of loss is signed by the client.
6. The insurance company then settles the claims by paying out a monetary compensation to the insured.

BOTSWANA EXPORT CREDIT INSURANCE: (BECI)

This insurance covers exporters who sell goods to foreign buyers on credit against the risk of not being paid by
their foreign customers BECI thus enables exporters to sell on credit to foreign buyers knowing that they would
be compensated in case their foreign customers fail to pay.

REASONS WHY FOREIGN CUSTOMER MAY FAIL TO PAY

i. Lack of foreign exchange or insolvency
ii. Due to political problems such as civil wars or the foreign government has prevented the buyer from paying.

BECI in Botswana is offered by Export Credit Insurance and Guarantee Company, Botswana (PTY) Limited or
(BECI) for short. It is a 100% wholly owned subsidiary of Botswana Development Corporation (BDC) formed
to underwrite export credits and develop non-traditional exports. BECI’s new function includes the protection
of exporting businesses and private businesses selling locally against the risk of loss due to non payment by
their customers.

ADVANTAGES OF BECI
It diversifies the export market of the country, Export credit insurance enables exporter to take on more business
and reach new market by offering competitive credit terms without having to worry about being paid.
1. BECI can help exporters to obtain information on their prospective foreign buyers.
2. The insurance can provide useful security for exporters to obtain export finance from their banks.

Reinsurance: Reinsurance is the spreading of risk to other insurance company. E.g. If an insurance company
accepts a risk which is considers to be far too big for it to cover alone, it can reinsure it with another company,
in which case the premium collected would be partly passed on to the other company. If the risk occurs the two
insurance companies would share it according to the percentage of cover granted by each.

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 TRANSPORT

It is the movement of people, goods, raw materials and equipment from one place to another.

EXPLAIN THE IMPORTANCE OF TRANSPORT

 It enables workers to efficiently move to and from work so as to start production on time[1]
hence increased productivity.[1]
 It levels out supply by transferring goods from where they are produced to where they are
needed[1] thereby preventing scarcity which can push the prices of goods.[1]
 Enables goods to reach the right place at the right time and in the right condition [1]so as to satisfy
human needs and wants.[1]
 It provides opportunities for mass production and foreign trade[1] leading to cheaper goods
for consumers hence high standard of living.[1]
 Reduce the amount of capital and storage of space required by producers[1] by delivering
goods regularly and quickly.[1]

IDENTIFY THE MODE OF TRANSPORT SYTEMS USED IN HOME AND FOREIGN TRADE

a. land- comprises of road transport and rail transport

b. pipelines
c. air transport
d. water transport-made up of sea and inland waterways

EXPLAIN THE FACTORS AFFECTING THE CHOICE OF TRANSPORT

 Cost- as transport cost is going to be included in the final price of goods so it must be
considered seriously. Expensive transport is suitable for valuable goods like diamonds, medicine
and jewellery while cheaper transport is suitable for cheap and bulky goods such as grains, coal,
timber and bricks.
 Urgency/speed- if goods are urgently needed the quickest means like air is used but if goods
are not urgently needed then slower modes of transport like rail and sea can be used in order to
cut costs.
 Distance- for short distance road transport is preferable as it offers door to door service,
for longer distances rail and sea transport are more economical.
 nature of goods- some goods such as pottery and glass products are fragile while others such
as meat, bread and fresh milk or fish are perishable and need quick delivery ; therefore
specially constructed trucks are used fort the goods.
 size and weight of the goods- bulky goods such as coal, iron ore, timber are transported by rail
and canals in home trade and by sea in foreign trade. In some cases road transport can be used
where big trucks specially designed for carrying heavy abnormal goods are used.
 Safety- the chances of theft and damage of goods are more in some other modes of transport. As
for fragile goods rail transport cannot be used. This kind of risk can be reduced by using
containers.
 Terminal-it means where the journey begins and ends, such as railway station, sea port or airport.
Terminals may not be an important consideration in road transport as it offers door to door
service, but in others they will be a need of other forms of transport to complete the journey,
which will increase the overall cost of transport.
 The reputation of the carrier.

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 1. ROAD TRANSPORT

ADVANTAGES OF ROAD TRANSPORT

 It offers door to door service[1] which help reduce chances of damage and theft[1]
however crossing national borders can be slow and inefficient.[1]
 It is flexible[1] as different shapes and sizes of vans and trucks can be used to all kinds of
needs[1] however the capacity of haulage is always limited to few tones.[1]
 It does not follow a fixed time[1] schedule so goods can be moved as and when ready and on any
route to meet customer needs on time[1] however it is more easily disrupted by bad weather.[1]
 It is relatively cheap for smaller loads and over short distance[1] so less money is spent[1]
however the direct vehicle operating costs are high such as licensing, fuel and maintenance[1]
 It can reach places which are isolated, not easy to reach
 Fewer documentation needed

DISADVANTAGES OF ROAD TRANSPORT

 It is slower than rail over long distances because of delays caused by traffic congestion
 The social costs of road transport is very high as costs arising from accidents, and air pollution from
exhaust pipes
 Road journeys may be slowed down due to poor weather conditions
 Restrictions of driving hours, tonnage of trucks, speed makes to unsuitable in certain cases
 The direct vehicles operating costs are high such as drivers’ wages, motor vehicle licensing etc

TYPES OF ROAD VEHICLES

 Refrigerated lorry- used to carry perishables that needs to be kept cool and fresh
 Delivery van-used for short distance delivery of small loads
 Container lorry- used for transporting goods that are fragile and need protection
 Heavy good vehicles- used for bulky and heavy goods over long distances.
 Earth moving like tippers used by building contractors to transport sand, crushed rocks etc.

NEW DEVELOPMENTS IN ROAD TRANSPORT

 The development of roads and motorways which bypass towns and villages[1] to reduce
traffic congestion.[1]
 Traffic lights[1] which help control movement of vehicles.[1]
 Better policing of the roads[1] to improve safety[1]
 Introduction of cleaner fuel like unleaded petrol[1] so as to reduce air pollution.[1]
 Introduction of better, faster and more reliable trucks with bigger size.[1] which allow carriage
of more/bulky goods[1]

OWN FLEET- having own trucks/vehicles for delivering goods and collecting raw materials

ADVANTAGES OF OPERATING OWN FLEET

 Goods may be taken care of/protected as they are under the control of the business driver[1] hence
reduced damage[1] however drivers have to be paid regularly which increases operational
costs[1]
 Business can respond quickly to customer’s orders[1] hence satisfied customers[1] however
delays may be caused by traffic congestion.[1]
 Sides of the vehicles can be used for advertising the business[1] hence reduced advertising
costs[1] however it is expensive to operate own fleet of vehicles because of maintenance, fuel

14
etc[1]

15
  Flexible deliveries as one delivery trip may be arranged to made several stopovers to deliver
goods to different customers[1] hence reduced transport costs[1] however long distance deliveries
to overseas customers may not be possible.[1]
 Less documentation[1]- only a delivery note is required[1]
 Can be cheaper if the business produces enough goods to keep the trucks busy[1]

DISADVANTAGES OF OPERATING OWN FLEET

 Costly to provide garages and maintenance
 May be expensive if output is small
 Long distance deliveries to overseas customers may be impossible
 Traffic congestion may delay deliveries

2. RAIL TRANSPORT

ADVANTAGES OF RAIL TRANSPORT

 It is faster and more effective than road over long distance[1] hence timely delivery of goods[1]
however it has limited coverage of the country as there are few railway lines across the country.
[1]
 It can carry a larger quantity of goods in one trip[1] hence reduced costs[1] however it cannot carry
/long and extra wide goods.[1]
 It is less likely to be disrupted by bad weather conditions[1] hence faster deliveries[1] however
it follows a fixed timetable.[1]
 Special containers are available for specialized items like oil and livestock[1] however costs tend to
be high for short distances.[1]

DISADVANTAGES OF RAIL TRANSPORT

 It cannot deliver goods door-to -door
 It is not flexible as it follows a fixed time table and a definite route
 It is not suitable for emergency situations that require urgent delivery of goods
 Transshipment is necessary at the beginning and end of the rail journey. It means increased costs
as well as higher risks of damage of goods
 Limited coverage of the country
 It is slower than road transport due to single way

tracks NEW DEVELOPMENTS IN RAIL TRANSPORT

 Freight liners[1]- these are container carrying trains which link up with special road and
sea terminals, and can be loaded and unloaded quickly by cranes.[1]
 Introduction of more comfortable passenger coaches[1] has increased passenger traffic.[1]
 Use of computers to monitor the operation of trains[1] has reduced costs and also
improved efficiency and volume of rail traffic.[1]

AIR TRANSPORT

ADVANTAGES OF AIR TRANSPORT

 air is the fastest form of transport for sending goods over long distances suitable for goods which are
urgently needed
 less documentation is required compared to goods sent by sea
16
 insurance costs are lower as transit time is short and there is lower risk of damage and theft of goods
 suitable for expensive and delicate equipment like computers
 saves a lot of time and money because both land and sea can be crossed in one journey with the
need to transfer goods from one mode of transport to another

Disadvantages of Air Transport

 a very expensive means of transport
 aircraft has got a limited carrying capacity both in weight, size and volume
 sensitive to bad weather
 causes pollution, especially noise

New Trends in Air Transport

 the building of larger and faster aircraft
 improved loading through large doors at the nose and tail
 improvement of storage and cargo handling facilities
 special light weight containers for air cargoes
 improved landing and navigation systems such as ‘autopilot’

17
 COMMUNICATION

This is the process of transmitting information from one place to another. It can take written, oral, visual or
physical forms. There are two branches of communication namely-postal services and telecommunication
services.

The benefit of fast and accurate transmission of commercial information to commerce

 It enables a manager to issue instructions to staff. This helps them to communicate politely so the business
will also operate smoothly and effectively.
 It enables the businessmen to instruct one another about the delivery of raw materials or goods etc to
prevent waste of time in production.
 It enables the businessman to gain knowledge about price and conditions in other markets in order that they
can compete favorably
 Communication provides a link between the businessman and other markets in the world and this helps the
businessman to enlarge his market
 The businessman can deal with enquiries as well as complaints from his customers
 Communication enables quick and rapid exchange of information which increases the efficiency of
business. Managers can issue instructions to their subordinates for the smooth and efficient running of the
business.

Postal services

1. Letter Post: - a businessman can send written information to his customers or suppliers through the post
office. He/she has to buy the correct amount of stamp and affix this on the envelope before posting. The
letter may be posted FIRST class which implies that the letter is delivered overnight. A SECOND class mail
is not so urgent so it is delivered within three days Letters weighing 750 grams or more will be treated by
the post office as second-class mail.

2. Business Reply service: - This is a special service provided by the post office to businessmen who want to
encourage replies to is questionnaires or advertisements. The businessman first obtains a license from the
postmaster to use the service. He then sends self-addressed envelopes showing his license number to his
customers to mail their replies. The businessman pays for the cost of postage on all replies received at the
post office. In addition he pays certain fixed charge for utilizing the service.

3. Freepost: - a businessman who wishes to encourage responses to his advert on his products applies to the
post office for a license to use the freepost service. Respondents are instructed to send their replies to a
special address with the word “freepost" written below the addressee's name. The post office charges a fee
for providing the service.

4. Registered letter: - a businessman who wants to send valuables to another businessman through the office
must first register the letter or parcel at the post office before mailing. The businessman or sender has to
mark the envelope or parcel with a cross on both the front and back before presenting it to the postal clerk.
The postal clerk then enters the name and address of the addressee in a special registration receipt book. A
copy of the receipt is given to the sender. The letter "R" and the receipt number are written on the letter to
be posted. The cost of posting the letter is higher than that of an ordinary letter. When the letter arrives at its
destination, the addressee is sent a registration slip or receipt informing him of the arrival of his registered
article. The addressee is expected to report at the post office with the slip and a personal identification

18
 before being given his letter or parcel. If a registered item is lost is the post, the post office pays
compensation to the sender.

5. Cash on delivery: This is a service provided to mail order companies. The post office undertakes to collect
payment on behalf of the businessman at the time goods are delivered to the buyer. This means that if the
buyer does not pay for goods, he cannot take delivery of them. The mail order company is protected from
incurring bad debt. The post office charges a fee for providing the service to the mail order companies.

6. Franking machines: These are special portable machines used for posting letters in place of stamps. The
machine makes some wavy lines on the envelope where stamps are normally affixed. Businesses that deal
with a large volume of correspondence apply to the post office for permission to lease or purchase a
franking machine. The machine has a meter which records the number of letters passed through it so that the
businessman pays the correct amount to the post office when the machine is taken there for reading of the
meter. A businessman may also prepay for the cost of postage and if the amount is used up he/she has to pay
more money to the post office to continue using the service.

7. Expedited Mail Service (Courier service): This is a cheap courier service provided by the post office for
businessmen to send their letters and parcels. The sender has to complete a special address slip at the post
office stating his particulars including his phone or fax number and the particulars of the addressee
including his/her phone number. A record of the time of delivery of the letter or parcel is made. A copy of
the slip is affixed on the EMS envelope supplied by the post office for dispatching the mail. When the letter
or parcel arrives at its destination, the addressee is contacted by the quickest means for fast delivery.

8. Poste restante: This service is provided to a person visiting a town but he/she does not know where he/she
will be staying. The person contacts the post office to apply for the use of the service. His/her letters have to
be addressed to the main post office in the town and the inscription poste restante has to be indicated on the
letter. The letters are kept at a special counter with poste written across. The addressee has to call personally
at the post office to collect his or her mail.

Example of poste restante: J.Tebogo

Poste Restante
Post Office
Gaborone
Botswana

9. Express mail: A businessman who wants his letter to be delivered urgently to a supplier or customer will
pay extra for the letter to be labeled 'EXPRESS' in order that it is sent by the fastest available means to its
destination.

10. Private box: a businessman may apply to the post office to rent a private box. If the request is granted, he is
given a box number and keys to the box so that he can collect his/her letter anytime.

11. Data post: The post office delivers packages overnight from door to door. The packages are transported by
road to their destination Packages can be collected and returned at pre-arranged times.

12. Airmail service: this service is provided to businessmen who want to send letters or parcels abroad. The
mail is transported using air transport. The postage charge is higher than that for surface mail.

13. Surface mail: These letters are sent by rail, ships, and boats or by trucks. The cost of postage is low.

19
14. Parcel post: This service is used for posting large or heavy items. Although the post office has a weight
restriction a special arrangement can be made for much larger and heavier items. A postage forward service
is also available where the receiver pays for the cost of postage. A license has to be obtained to use this
service.

15. Other services: Philatelic services: the post office sells decorative stamps commemorating some special
events. These stamps are not for posting letters but for stamp collection.

16. Financial services: the post office assists businessmen and individuals to send money by using postal orders
or money order. Agency services payment of old age pension, Botswana savings bank, Department of
Transport, Department of Customs, Botswana Telecommunications Corporation and The Red Cross.

PAYMENTS THROUGH THE POST OFFICE

a) National Giro Bank: This is a facility for making payments which allows monetary transfers between account
holders.

b) Postal orders: This is a facility offered by the post office for sending small amounts of money. The post
office provides postal forms to be filled in by the sender indicating the name of the payee, the post office of
payment e.g. Monarch Post Office. The orders are marked not negotiable as this protects the payee should the
postal order be stolen.

c) A crossed postal order can not be cashed over the counter but it has to be paid into the bank account. It is a
safe way of sending amount of money and a small commission is made for using this facility.

d) Money Orders: These are used for sending much more money and the commission charge by the postal office
is higher than postal order service. Money needed urgently can be sent through telegraphic money orders. The
sender pays telegram charges and supplementary fees.

The post office instructs the post office by telegram to pay a certain amount of money to the payee. The sender
may add extra message for an extra cost.

FACTORS AFFECTING THE CHOICE OF MEDIUM OF COMMUNICATION

a) Speed of transmission: If communication is urgently needed then express mail delivery should be faster than
ordinary mail. However, if faster and instant communication is required, a telephone, telex or fax can be used.

b) Cost of medium: where two methods are equal in efficiency, the cheapest can be used.
Mail services are the cheapest while telecommunication services are sophisticated and expensive.

c) Safety of medium: to ensure that information is received it is sometimes necessary to send by registered post
which is very useful for sending legal documents such as certificates, cheques e.t.c. where acknowledgement of
receipt of the document is important.

d) Record of information: A letter, telex, fax will serve as a best method as it keeps record of transmission and
such can be used in a court of law. A telephone does not keep a record of the message sent.

20
e) Accuracy of information: For accuracy sake, a telex, or letter can be used as they convey a full message
unlike a telephone or telegram which economizes on the usage of words. When detailed information is required
e.g. when exact copies of the original can be sent electronically by a telefax, is can be more accurate too.

f) Length of message: If the length of the message is long. Verbal communication would not be appropriate as
the receiver would not be able to remember all the details so written information would be necessary such as
telex, fax, and e.t.c.

g) Nature of the message: Some messages need confidentiality or secrecy while others can be displayed for
anyone. Letters especially registered mails are more confidential.

TELECOMMUNICATION

In Botswana, telecommunication services are provided by Botswana Telecommunication Corporation.

Telephone: This is an instrument that enables a businessman to contact his partners and other businesses both
locally and abroad to discuss business issues. The subscriber Trunk Dialing (STD) enables the businessman to
dial directly without passing his call through the operator. The telephone provides many services to the user.
This includes answering services, voicemail for receiving and recording messages while the line is busy with
another call, redirecting calls to another number and toll free service (Freefone)

Advantages:
1. It is a very fast means of communication
2. It is easy to use
3. It is cheap for local calls
4. It allows discussion or dialogue for efficient resolution of problems and misunderstanding

Disadvantages:
1. There is no written record of the transaction therefore further confirmation has to be made in writing.
2. They are expensive over long distances especially in the case of international calls.

Facsimile transmission (Fax): This is a special machine that is connected to the telephone system for sending
exact copies of documents. In order to send a message to his partner, the businessman will dial the fax number
of the partner after putting the document he wants to send into the fax machines. The businessman presses the
start button of his fax machine and if the partner's fax is not busy, the document is immediately reproduced in
the partner's office.

Advantages:
1. It is a fast means of communication
2. It is easy to use It provides a written or permanent record of the transaction
3. The businessman can send exact copies of drawings and plans to his partner
4. Multiple copies of a document can be sent at the same time
5. It is cheaper to use than the telephone
6. The message can be delivered even if the office is closed
7. The machine may be used as a photocopier

Disadvantages:
1. It does not allow for secrecy because anyone in the office can read the message unless codes have
been used.
2. It does not allow for dialogue
21
Telegram:

It is used to send urgent messages. The businessman who wants to send a message will go to the post office to
complete a telegram form IN addition to the message to be sent, the businessman has to write the name and
address of the addressee.
There is a flat charge for the first thirteen words. Any additional words are charged per word. The message is
transmitted from the sending post office to the addressee’s post office using telephone, a fax or telegraph. The
message is written on a new telegram form and delivered to the addressee.

Advantages
1. It is a fast means of communication
2. It provides a written record

Disadvantages
1. The message is usually brief because of the cost
2. The message may be misinterpreted
3. The message cannot be sent if the post office has closed.

Confravision or Videoconferencing:

Businessmen is different locations can arrange a joint meeting without physically coming together although
they can see and hear each other. The conference room of each group is a special studio with speakers and a
screen to enable the groups to hear and see each other.

Advantages:
1. Decisions can be made quickly due to dialogue
2. It provides both visual and audio impact
3. It reduces the need to travel and the payment of hotel bills for management staff
4. Top management staff do not have to leave their duty post during meetings
5. There is a reduction in the organization’s budget for travel and hotel

Inter-com system

This is communication within a particular building but not between different geographical areas.
The system is made up of loudspeakers located at strategic positions in the building and linked to a central
circuit. Messages are transmitted form the central circuit and these are echoed throughout the building by the
loudspeakers.

Advantages:

1. It is easy to operate
2. It is a fast means of communication

Disadvantages

1. It is a one way communication therefore no dialogue can take place.

2. The message is not limited to the receiver only therefore it may be disruptive.
3. There is no selectivity
22
Voice mail

This is a special service offered by the telecommunication authority. It allows both subscribers and non-
subscribers to receive and leave messages through a voicemail box.
To be connected to the service, the businessman must first register with Botswana telecoms and receive a
voicemail box number. In order to send a message to a subscriber, you dial his voicemail number and leave the
message. In order to receive the message, the owner of the mail box dials his secret code number to access the
messages that have been left.

Advantages:
1. It provides 24 hour service
2. Both subscribers to private telephones and non-subscribers can use the service.
3. The service is cheap
4. It allows for privacy
5. It can store up to twenty messages at a

time Radio paging

This is a service that allows a businessman to be contracted through a beeper which he carries.
If the businessman is needed, his number is dialed and his beeper automatically alerts him to make contract. In
some cases the beeper flashes a message to the businessman.
The radio pagers are connected to telephone lines and airwaves.

Advantages
1. It is a fast means of communication
2. It provides 24 hours service

Disadvantages
1. It does not allow for dialogue
2. The person carrying the beeper has to use a telephone to make contact with the sender of the
message

Internet service

This is a worldwide communication network by which individuals as well as businesses can communicate. The
businessman's computer is connected via telephone lines to a modem. This allows him to access others on the
internet and also to find information on web.

Advantages:
1.Information on a wide range of topics can be accessed information on the websites.
2.Business can advertise and sell their goods and services
3.It is used it to obtain suppliers
4.It is used it to obtain assistance
5. It helps to speed up communication
6. The businessman can order goods from the comfort of his home or office

Disadvantages
1. It contains a lot of uncensored information
2. If the correct address is not used, the search for relevant information may be futile.

23
Electronic mail (e-mail)

This is an electronic communication system similar to the internet except that the e-mail allows for personalized
communication.
To communicate using the e-mail, a businessman must have his own e-mail address. Messages are sent and
received by typing on the computer and posting the message electronically.

Advantages

1. It can be used to send files, graphics, audio and video files

2. It is a fast means of communication
3. It is easy to used provided one can type
4. A hardcopy of the message can be kept for future

reference Disadvantages

1. It is expensive to use.

Datel
Similar to the internet except that it is not global. It connects a company's computers to those of its branches.
Information can be transmitted from one branch of the company to another branch in foreign country. It is
suitable for multinationals and chain stores.

Advantages

1. Fast means of communication

Toll free service

This is a telephone service where the business man provides a telephone number for customers to dial when
they have complaints or want some information. The cost of the telephone call is paid by the business.

Telex
The sender types the message on the telex machine and it is printed by a teleprinter in the receiver's office.

Advantages

1. Fast method of communication

2. Provides written record

V-sat Network
This is a communication network connecting computers of a company's with those of branches through a
satellite.

Advantages

1. It is fast
2. It is very flexible suitable for both short and long messages.
3. Extends to remote areas
4. It can be easily relocated.

24
The benefit of fast and accurate transmission of commercial information

1. Mangers can issue instructions to their employees to promote efficiency in the organization.
2. Appropriate business decisions can be made quickly.
3. Orders can be received and sent quickly so production is not delayed.
4. Firms can contact suppliers for rapid delivery of inputs for production.
5. Complaints and queries from customers can be dealt with quickly
6. Businesses can expand their market to include overseas markets.
7. It has created an efficient banking and financial system.

Factors to consider in choosing and method of communication

1. Cost: A businessman will choose the cheaper method of communication to reduce his expenses

2. Speed of transmission: A business will choose the fastest method of communication for urgently needed
messages or information

3. Accuracy of information: If exact copies of documents or messages etc are required, the businessman will use
a fax, telex or letter post.

4. Record of information: if the businessman wants to keep a record of the transaction or message, the telex, fax
etc may be used as opposed to the telephone.

5. Safety: when sending important business documents etc, it is better to use a registered mail or EMS
especially if the businessman wants to be certain that the information will be received by the addressee.

25
 ADVERTISING

It is the spreading of information or awareness about a product or an event.

PURPOSE OF ADVERTISING
 To inform customers about the availability of products in order to generate awareness.
 To persuade consumers to buy a particular product/ brand so as to increase sales.
 To remind customers that a particular product still exist so as to come and buy.
 To inform job seekers on available vacancies.
 To create brand image

TYPES OF ADVERTISING
1. Informative advertising: type of advertising mainly designed to inform consumers in a clear and straight
forward manner without persuading them to buy the product.

2. Competitive advertising: a type of advertising used to increase sales by persuading consumers to believe
that the advertised product is the best, thereby influencing them to buy the business’s product.

3. Collective advertising: an advertising placed jointly by a group of producers in order to promote the use
of that product. It does not mention any brand or make by name. E.G A group of farmers can advertise
‘eat more fruits and keep the doctor away’

FACTORS TO CONSIDER WHEN DESIGNING THE ADVERTISEMENT

 Medium to use and its availability: one should choose a medium which reach out the largest possible
target group.
 Good timing: ensure that the advert is placed at the best time when the target audience is most likely to
by the product.
 Budget available: consider how much the advert and medium will cost and see whether the budgeted
money will be enough to cover the costs
 The message to be taken by the targeted market; the message should make the target market to want to
know more about the product and make them to but at the end.
 What the business wants to achieve
 Skills the company has

METHODS OF ADVERTISING APPEAL

 Sex appeal: designing an advert portraying a beautiful young woman/man using the product in order to
grab customers attention
 Famous personality: designing an advert showing a celebrity using the product e.g a football star
 Hero worshipping: using cartoons or film characters such as Spiderman and Dora the Explorer in
advertising
 Image appeal
 Gender appeal

26
ADVANTAGES OF ADVERTISING TO THE CONSUMER
 Better quality goods due to greater competition among producers hence improved standards of living
however it raises the prices of the product which makes it expensive for the consumer to buy.
 It informs consumers on what goods are available and provide them with information to make informed
choice by comparing prices and quality of different brands however this may lead to irrational choice of
goods.
 Lower prices: due to increased sales which results in lower production costs hence more consumers are
able to afford more goods and services however it may influence people to buy goods they do not need
hence waste money.
 Helps keep down costs of newspapers/ radio and TV licenses thereby increasing consumers access to
information and news however

DISADVANTAGES
 Makes goods expensive as advertising costs are added to the price of the product.
 May influence consumers to buy what they do not need/impulse buying
 Irrational choice of goods
 Mislead consumers through false claims.

ADVANTAGES OF ADVERTISING TO THE PRODUCER/BUSINESS

 Inform and persuade customers to buy hence increased sales/ market share and possibly profits however
it is costly to advertise.
 It help create a distinctive brand image which helps the business to stand out from competitors hence
attract more customers to buy however experts are need to design the advert which can increase business
costs.
 Help the business to find workers and fill job vacancies.
 Help maintain sales by keeping the business products before the consumer’s eyes.
 Help launch new products and help them penetrate the market quickly

ADVERTISING MEDIA

FACTORS TO CONSIDER WHEN CHOOSING THE ADVERTISING MEDIUM

 Target group: should choose a medium which reaches the targeted market most effectively to ensure
best coverage.
 Area to be covered: should determine whether the area to be covered is local or national so as to choose
the best medium. If coverage is local then posters are the best and if it is national, radio/TV should be
chosen for wider coverage.
 Nature of the product: medium chosen should suit the product, expensive products should be advertised
on expensive medium and cheaper ones on cheaper medium so as for the business to be able to cover the
costs.
 Cost of the medium: the cost should be considered in relation to the budget available, but the business
should weigh the relative benefits with the relative costs.
 Duration of advertising company:
 Availability of the medium

27
 DISCUSS THE ADVANTAGES AND DISADVANTAGES OF DIFFERENT ADVERTISING MEDIA.

ADVANTAGES DISADVANTAGES
TELEVISION

Combines visual with audio impact [1] so it is effective as it However the adverts are short lived [1] so many people
is appealing to different senses hence growing peoples desire may not see the advert/forget quickly [1]
to buy the products [1] leading to increased sales [1]

Wider coverage [1]so can be seen many viewers at peak However the adverts are not always well received by
hours hence leading to a larger market share [1] viewers as some take it as entertainment/interruption [1] so
may not get the message [1] hence not buy [1]

Adverts are attractive as they are shown in colour [1] so can However TV adverts are expensive so this may increase
create impulse buying [1] leading to increased sales and operational costs of the business [1] leading to reduced
possibly profits[1] profits [1]

RADIO
Wide coverage [1] leading to more customers buying [1] However most FM stations do not cover the whole country
hence increase in sales [1] [1] so this may limit the number of customers [1] leading to
reduced sales [1]

A popular song can be played along with the advert to grab However there is complete absence of visual impact [1] so
the attention of the listeners [1] so will get the message and it may not be effective
go and buy [1]

Provide opportunity to target particular segment of the However some listeners may not get the message as they
market through special interest programmes [1[ therefore may not pay attention to the advert [1] hence limiting the
customers will be able to receive the message [1] number of
customers [1]
Cheaper than TV advertising
short lived

NEWSPAPERS
Wide national coverage especially the daily news [1] so However the message can reach only the literate people [1[
many customers will see the advert hence come and buy in hence limiting the number of customers [1]
large numbers [1] leading to increased sales [1]

Relatively cheap [1] hence reduces advertising costs [1] However there is no audio visual impact [1] leading to less
leading to increased profits [1] people buying [1]

Information can be stored and referred to later/has long life However poor quality print may reduce the effectiveness of
span [1] hence help maintain awareness [1] the advert [1] hence less customers buying as the advert
may be unattractive [1]

Offer targeted marketing through certain pages [1] this help However newspapers are general and do not appeal to a
grab the attention of the viewers and may end up buying the particular group [1]
advertised product [1]

MAGAZINES/CATALOGUE
Adverts are shown in colour and in good quality paper [1] so However there is absence of audio visual impact [1]
can create inspiration and persuade customers to buy [1] leading to less people buying [1]

28
Have long life span [1] so it can help maintain awareness as it
can be kept and referred to later [1]
Offer targeted advertising [1] so the message get to the right
people who will end up buying [1]
BILLBOARDS
However they have limited readership/appeal to certain
class of people [1] so this reduces the number of customers
[1]
However it is suitable for literate people only/ it is
infrequent [1]

Low cost of production/cheap to advertise [1] therefore However they are open to vandalism/damaged by harsh
reduced expenses for the business [1] hence increased profits weather conditions [1]
[1]
However there is no audio kinetic impact [1]
Long life span/High repeat exposure [1] which helps
maintain awareness [1]

Can be shown in colour and in large size[1] so it may be However there is creative limitations as messages are
effective as it can attract consumers to buy [1] limited to simple short and clear statements [1] so
customers may not get the full message [1]
LEAFLETS [for local advertising only]

Cheaper and easier to design [1] hence low costs to the
business [1] leading to increased profits [1]
Advice and explanation can be given when necessary [1]
hence able to persuade the customers to buy [1]
However the leaflets have to be handed from person to
person [1] so this may lead to high distribution costs [1]
reducing profits [1]
However leaflets are quickly destroyed [1] so may not be
effective [1]

ADVERTISING AGENCIES

Theses are firms that specialize in the production, planning and placing of advertisements on behalf of their
clients.

FUNCTIONS OF ADVERTISING AGENCIES

 media planning and booking: they give advice and assistance on the choice of medium to be used that
would be most effective, they also reserve space and time on media
 Design and production of adverts: they have fully staffed and computerized creative studio where they
design creative adverts to promote client’s products.
 Client servicing: they have agency account executives who communicate clients’ requirements to studio
and media departments to ensure that the adverts that are produced and placed fit the clients’
requirements.
 Market research: they carry out research to clarify public opinion about a particular product and gain
understanding on competitive product penetration, quality wanted by target market for strategic
planning.

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WHY BUSINESSES MAY CHOOSE TO USE ADVERTISING AGENCIES

 To cut costs as it may not be economical for the business to have its full time advertising
staff/department
 To make use of highly equipped and specialized staff of advertising agencies so as to produce
effective adverts.
 They may not have the staff with the necessary expertise and experience in large scale advertising.

CODES OF ADVERTISING PRACTICE

Rules which businesses voluntarily agree to keep but which have no legal status in order to avoid abuse of
advertising by placing misleading, exploitative and harmful adverts.

HOW ADVERTISING CAN BE CONTROLLED

 Legislation: raising of law by government that makes it illegal to make false advertisement and setting
out to penalties to offenders.
 Media: can refuse to accept unsuitable adverts in their media
 Self regulation: advertisers can come up with set standards to be followed by members when
advertising.
 Consumer vigilance: consumers can protect themselves from unscrupulous advertisers by acting
rationally and voluntarily

RELATIONSHIP BETWEEN ADVERTISING.PACKAGING AND BRANDING

 Branding and packaging help consumers to identify products being advertised (brand name and
wrapping).
 Branding and packaging do the advertising as the packages have instructions on uses, sizes,
effects, qualities etc.
 Branded and packaged goods allow customers to serve for themselves.
Most attractive packages attract customers.

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 FINANCE AND BANKING

METHODS OF PAYMENT IN BOTSWANA

1. Cash:
Money means anything which is generally accepted as a medium of exchange and as a means of settling debts
and obligations.
-It is universally acceptable so no one can refuse to accept cash as a means of payment however it attracts the
attention of thieves
-It simplifies transactions since it reduces the time spent in exchanging of goods and services however it is not
suitable to be sent or posted to the payee
-It encourages people to give you discount which reduces expenses however Fake bank notes can be easily used
by dishonest people to pay your company.
- however in times of inflation people lose intrest in it and people would rather to prefer to prefer their wealth in
the form of assets such as gold and jewellery.
- however if lost, any person who finds it can freely use it unlike with a cheque which can be stopped once it is
lost.

2. Cheques:
-Cheques are safer and more convenient-because they can be written for any amount since they are not bulky-
this reduces the risk of carrying large sums of money.
-The clearing of cheques provides proof of payment so no receipts are required when paying by cheque
however -wastes time since they need to be taken and deposited into the bank account
-Cheques are numbered so they can be traced if lost or stolen however - -cheques can be safely sent by post
especially when crossed which is convenient however they may be valueless if the drawer does not have
enough money in his/her account
-cheque stabs that remain in the cheque book allows for easy banks reconciliation however they are not
practical when paying small amounts

3. Money orders:
this is a means of payment through the post office where a sender fills in a money order form stating the
amount they want to send. The money order is then faxed to the paying office. The payee is given a
notifying slip with the amount to be paid to him/her.
Adv: it is very quick because it can be faxed however network failure may delay payment
.
4. Postal orders: these are post office documents issued in lieu of cash issued in specific denominations.
The sender fills it in and posts it to the payee who then takes it to the named office to get cash. A fee
called poundage is paid by the sender.
Adv- they are safe since money is obtained from the post office however poundage is paid.

5. Credit transfers: -facility provided to current account holders for making regular payments directly into
the payee’s account. It can be used to make both single and multiple payments to large numbers of
people.
Advantages of credit transfer facility
-leads to improved administration, less reconciliation and less errors for the business
-There is no restriction on the number of payees hence efficiency
-It is quicker and safer since one does not have to carry money to make payment.

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-There is no chance of dishonoured cheques which reduces penalties

6. Debit cards: These are ATM cards that can also be used to buy goods and services from participating
businesses.-Debit cards do not entitle holders to obtain credits but to spend money they have in their
accounts.
Adv- they are safe since they can be cancelled when lost or stolen/due to use of PIN code however a small
commission is paid for the service.
- less bulky/convenient hence reduces risks and need to carry large amount of money around however
not practical for paying small amounts
- internationally/globally recognised hence make it convenient for making foreign payments however the card
can be hacked by thieves/ debit card fraud
- fast access to cash since can be used at any ATM/POS however there are bank charges

7. Credit card: This is a card that enables the holder to buy goods and services on credit from certain
businesses

Advantages of credit cards

-They provide easy credit to the card holder which enables them to get goods whenever they need them
however not all businesses accept credit cards
-Convenience- cards are quicker and cheaper to use than cheque books however they are prone to fraud.
-Cards are globally recognised which allows one to buy from cheaper international suppliers however a fee is
charged for the service.
-Provides fast access to cash which is convenient however some bad debts may occur

8. Bill of exchange: -These are usually drawn for a future date, either for 3 months or more.
-They are used where the buyer requires short term credit but the seller is not prepared to give it.
-The seller draws up the bill setting out the debt and demanding payment in the stated period and gives the
buyer for acceptance.
-By signing the bill the buyer acknowledges the debt and promises payment on maturity date.
-If the buyer has a good reputation and record, banks can accept and discount such a bill.

9. Standing orders: a facility used when making regular payments, of fixed amounts on fixed dates.
Importance: -the bank will not forget to make such regular payments on the client’s behalf which reduces the
penalty of interests from creditors hence reducing expenses.
10. Direct debits:-a facility used for making regular payments of varying amounts and varying
intervals. Importance
-it is the responsibility of payee to initiate payment, which reduces incidents of bad debts.
-it is convenient to the debtor who does not need to remember to make regular payments.
- It saves the business clerical work since the bank does this on its behalf thus saving time for other business
needs.

11. Cable transfers/ E-banking – a system whereby a customer’s computer is linked to the banks’s main
computer system which enable the customer to carry his/her banking transactions in the comfort of his/her home
Importance
- works 24 hours hence customers can assess services at any time however on-line fraud is prevalent
- convenient since can check balances/make payments in the comfort of your home however can be affected by
power cuts/computer virus
- easy to process data since can download account information to analyse on your computer however it
requires installation of special banking software on the computer
- it is cost effective since charges are often lower than for ordinary account however it needs internet
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12. Documentary credit: the facility guarantees payment to the exporter in advance of despatching goods and
the importer is made certain that the ownership of the goods is assured before payment can be made.
13. Letter of credit: it is commonly used in foreign trade. This is an order from a domestic bank to a foreign
bank, authorising payment of a certain amount to a named person.
Importance
-it helps guard against default by the importer since the credit worthiness of the importer is not known however
it can be revoked or cancelled by the importer
-it gives the exporter guarantee of payment before he/she hands over the documents to the importers’ bank.
-the importer knows for sure he/she would have ownership of the goods before payment is made.

14. Bankers ‘draft: this is a cheque drawn by a bank on itself and is made payable to someone you want to
pay.
Adv: the exporter has more confidence in receiving payment since the cheque is guaranteed by the bank.
More on banker’s draft- refer to notes under international trade.

THE CENTRAL BANK

The Central bank is run by the governor and the board of directors. The governor is appointed by the State
president. It is the nation’s banker and its main customers are commercial banks and the government.
Functions of the central bank
i. Issuing bank notes and coins:The BOB is responsible for arranging the printing, minting, storing
and circulation of notes and coins.
ii. Keeping the government’s account: The government has an account with the BOB from which payments
are made and to which revenues are deposited the central bank looks after the government’s money and
maintains the government’s account.
iii. Servicing the national debt: The central bank manages loans borrowed by Botswana from other countries
and international financial institutions such as World Bank and IMF.
iv. Lender of last Resort: The central bank can lend money to commercial banks as a last resort, if they
cannot get money from any other source.
v. The banker’s bank: All commercial banks have a deposit account at the central bank from which they
can replenish their cash stock and pay debts owed to other banks.

COMMERCIAL BANKS

Functions of commercial banks

1. Safe keeping of money-to protect it from theft, Fire, floods however bank charges service fee/bank charges
2. Making and receiving Payments: through cheques, Bank giro, standing orders, direct debit and
remittances which is convenient hence clients make receive payment on time however commission has to be
paid
3. Lending Money-In the form of loans and overdrafts to start or expand the business/increase
working capital/production however has to be paid back with interest
4. save money- may earn interest and grow/available for emergencies however to withdraw money needs notice
5. Provides financial advice- e.g investment opportunities/business risks however they charge consultation

fee Types of accounts offered by commercial banks

1. DEPOSIT ACCOUNT: it is an account suitable for keeping temporary liquid capital or money which one
does not want to use immediately.
-A high interest is paid by the bank depending on the amount deposited and duration
-No ledger fees and cheque books
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-To withdraw money, seven days notice is given to the bank

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2. FIXED DEPOSIT ACCOUNT: This is an account with a fixed investment period, ranging from one to
twelve months. The money cannot be withdrawn before the expiry date. The minimum deposit varies from bank
to bank
Features of a fixed deposit account
-Money is deposited for a fixed period of time
-Interest rates are fixed for the duration of the deposit
-Interest is paid by the bank at the end of the period
-Customers can choose to reinvest their money with or without interest

3.SAVINGS ACCOUNT
-Provides a safe place for people to keep their money until they need it.
-It is intended for small savers with regular incomes but do not qualify for current accounts.
-Has a low opening and low minimum balance
-No cheque books issued

4. CURRENT ACCOUNT: This is a non- interest bearing account which provides cheque books and cash
cards. Features of a current account
-It is available to persons over the age of 21 with a regular monthly income, companies, clubs, societies,
trustees, partnerships and religious bodies
-Cheque books are issued to customers
-Account holders pay a ledger fee
-It offers free bank statements at regular intervals
-Current account holders are eligible for other banking services such as credit transfer, standing orders direct
debiting and overdraft facilities

5. CALL ACCOUNT: This is an immediate access deposit account with a high minimum balance of over
P10 000 in the case of Barclays Bank. It is available to all businesses and personal customers. High interest is
earned from the account
Features
-Balances are transferred to and from a current account on request.
-Interest is paid on balances even though the money is deposited for a short term
-funds are available on demand
-Tiered interest rates is paid according to the size of the deposit held.

6.PREMIUM DEPOSIT ACCOUNT: This is a deposit account which pays a special rate of interest. It is
available to all high value personal customers clubs, societies, and associations. It is not available to business
customers.
Features
-It has a high minimum balance. E.g Barclays is P2500.
-Interest on daily balance is paid quarterly
-Provides instant access to cash
- No restriction on the amount or number of withdrawals as long as the minimum balance is maintained.
-No ledger fees charged
-Customers are served from current account tills.

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IMPORTANCE OF SAVING TO THE INDIVIDUAL AND THE COUNTRY

-it is a process by which capital is accumulated, thus people save and create wealth.
-Provide cash for emergencies such as draught, floods etc.

METHODS OF MAKING PAYMENTS ON BEHALF OF CUSTOMERS

1. Cheques:
2. Bank giro
3. Standing/ stop order
4. Direct debit
5. REMITTANCES- Travellers’ cheques, credit cards, debit card, Telegraphic transfers, Bankers ‘draft, Bank
guaranteed cheque:

THE USE OF COMPUTERS IN BANKING

-Store data-eg customer account details, sales records, stock control, bills
-Process data- eg prepare wages, prepare accounts on softwares such as EXCEL, ACCPAC to provide
meaningful reports
-Carry out business correspondence with branches which saves time
-Advertise and market their services and products on the internet which increase their sales

DIFFERENCES BETWEEN A BANK LOAN AND OVERDRAFT

Loan Overdraft
-is usually used for the purchase of capital -used for short-term financial needs such as
items eg buying motor vehicles buying stock
-collateral or security is needed - security is not needed
-interest is charged on the full amount -interest is only charged on the exact amount
overdrawn
-expensive way of borrowing -cheaper way of borrowing
-when a loan is granted a separate loan -no separate account is opened
account is opened
-money put in a current account does not -money put in a current account reduces the
reduce the loan balance overdraft balance

FACTORS CONSIDERED BY THE BANK BEFORE GRANTING A LOAN

-The applicant’s ability to repay the loan based on their income
-The security pledged by the customer
-In case of a business loan, the viability of the project, cash flow projections and the purpose

OTHER FINANCIAL INSTITUTIONS

These are non-bank financial institutions which also provide a wide range of services.
1. BOTSWANA SAVINGS BANK:-It is an independent national financial institution, wholly owned by the
government which operates through the post office.
-It provides ways of saving for the small saver and provides financial services to all people of Botswana under
the supervision of the bank of Botswana.
-provides savings accounts and basic banking services

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2. BOTSWANA BUILDING SOCIETY:-It is owned by shareholders, It Provides long term loans for the
purchase or building of houses.

ROLES
-Provides Batswana with access to finance to acquire affordable home ownership
-encourage savers to own shares in the society
-contribute and participate in, the growth, prosperity and future of the society and nation

3. NATIONAL DEVELOPMENT BANK-NDB: it was established by the government to offer finance for risky
ventures where banks are reluctant to provide fund eg in agriculture and industrial sectors.it gets funds from the
government and does not accept deposits from the public
-The loans have fixed interest and for longer periods than commercial banks.

4. BOTSWANA DEVELOPMENT CORPORATION:-Provides venture or start-up capital to businesses in the

form of shares to help businesses begin operating or expand.
-It also gives advice on how to set up and run businesses.

5. MERCHANT BANKS:-African Banking Corporation is the merchant bank in

Botswana Functions
-arranges loans to companies
-dealing in international finance
-buying and selling shares
-Launching new companies on the stock exchange

6. MICRO LENDERS:-sometimes called loan sharks; people or organisations that offer illegal or unsecured
loans at high interest rates to people who cannot get loans from mainstream lending institutions like banks.

THE CHEQUE SYSTEM

A cheque is an unconditional order to the bank to pay a certain amount to the named person or company or
his/her order.
Parties to acheque
Drawer: a person who has a current account with the bank and writes the cheque to withdraw his/her deposits.
Drawee: the bank which the cheque is drawn from.
Payee: the person named on the cheque to whom it is made payable.

TYPES OF CHEQUES
These are bearer cheque and order cheque.
Bearer cheque
- This is a cheque made payable to the bearer
i.e anyone who presents it to the bank.
-The order reads: Pay............or bearer.
-It is not a safe means of payment since
anyone who presents it to the bank would be
paid
-cannot be transferred by endorsement
Order cheque
This is cheque made payable to the named
person or organisation or to their order.
The order reads: Pay................or order
-It is a safe means of making payments but
good for someone with a bank account
-can be transferred by endorsement

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CHEQUE CROSSINGS
-Refers to drawing two parallel lines on the face of the cheque to ensure that the cheque is deposited into a bank
account not cashed over the counter. This is a secure way of paying someone by cheque.

TYPES OF CHEQUE CROSSINGS

1. General Crossing
-This is when two lines are drawn across the face of the cheque. The phrases ‘Account payee only’ or ‘And
company’ or ‘not negotiable’ may be added between the parallel lines.
-This means that the cheque can only be deposited into a bank account

ii) Special crossing

-This is when the parallel lines are drawn down the face of the cheque with the name of the payees’ bank and
branch written in between the lines.
-This means that the cheque can only be paid into the named branch

Endorsement of cheques: means to sign it at the back in order to transfer the right of payment to a third party.
Dishonoured cheques: This is when the bank refuses to make payment to the named person, organisation or
their order. Instead the bank teller would write RD meaning refer to drawer on the face of the cheque and return
it to the payee. Such a cheque is known as a dishonoured cheque.

Reasons for dishonouring cheques

-The signature on the cheque differs from the specimen provided to the bank
-The drawer has stopped payment
-The drawer has already closed the account
-The bank has been notified of death, insanity or bankruptcy of the drawer
-the cheque has some error eg date is not written
-The drawer does not have enough money in his or her account
-The amount in words differs from that in figures.
-It is stale
-It is post dated
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THE CLEARING OF CHEQUES
This is when banks come together and settle the amounts they owe each other as a result of their customer’s
business transactions. This takes place in a clearing house at the central bank

WAYS BY WHICH BANKS CLEAR CHEQUES

1.Branch or local clearing
Takes place where both the payee and drawer keep their money at the same bank and same branch. The bank
simply transfers the amount from the drawer’s account to the payee’s account.
-the cheque does not need to go to the clearing house

ii) Internal or in-house clearing

-This occurs when the payee and the drawer have accounts in the same bank but different branches.
-The cheque is sent to the bank’s central clearing department at is headquarters
-The cheque does not need to go to the clearing house

iii) Town clearing

-This occurs when two or more banks are involved but all of them are in one town or city
-The cheques passes through the clearing house but are cleared on the same day rather than taking many days.

iv) General or national clearing

-This takes place when two or more banks are involved and they are not all in one town.

STEP Cheque sorted and sent to Cheques exchanged 3

clearing house between banks

Step 2 Cheque sent to bank’s Cheque returned to its

Headquarters headquarters

Step1 Customers pay by cheque Cheque sent back to its

and cheque is deposited at branch and debited from
the bank customer’s account

Process through which the cheque would pass before payee is paid “between banks”
1. Drawer pay and cheque is deposited at the bank
2. Cheque is sent to headquarters (drawer’s bank)
3. Cheque is sent to clearing house
4. Cheque is exchanged between banks ( payee’s and drawer’s bank)
5. Cheque is returned to drawer’s bank headquarters
6. Cheque is sent to drawer’s branch and debited from his/her account
7. Money is paid into payee’s account

39