Major Constraints on Small Business in Zimbabwe

Topics: Inflation, Robert Mugabe, Hyperinflation Pages: 6 (1832 words) Published: May 9, 2013

It is an undeniable fact that small business has become a crucial part of the business environment of any country. What is the small business? A small business is owned and operated privately, and it has a few employees and a small volume of sales. Depending on the countries and industry, the legal definition of "small" is usually different. In Australia, “a small business is defined by the Fair Work Act 2009 as one with fewer than 15 employees”( Fair Work Act 2009). Even thought individual small business only creates a small number of position for unemployed people, the quantity of various small businesses is enormous. They together can provide a lot of positions and play a significant role in the economy. The small business can be fast and flexible, and close to their customers. They can also perform an essential substitution role. Additionally, the small business promotes the economic growth and also makes important contributions to our society. However, the developments of small business are constrained by many issues such as lack of management skills, lack of credit, corruption, inflation and the poor infrastructure. Not only is the small business limited by these internal factors, but also is limited by the external environment.

This report will discuss how the developments of small business is impacted by the social, political, and economical environment in Zimbabwe. Firstly, the corruption in Zimbabwe brings a great influence on the small business, which introduces nonscientific allocation of resources. Secondly, the hyper inflation in Zimbabwe also severely affects small businesses, which makes long-term budgeting and planning futile. Thirdly, the limited access to finance in Zimbabwe also prevents the small businesses from growth. Finally, the informal sector induces unfair competitions among small businesses. We will introduce how to improve small business environment in Zimbabwe.

Sub-section 1. Constraint from corruption

The corruption is one of the the biggest obstacles in hampering the development of economy in almost all countries, especially in underdeveloped Zimbabwe. “Transparency International's Global Corruption Report 2009 places Zimbabwe, jointly, as being the 11th most corrupt of nations in its survey of 180 countries for 2008” (Field 2009).

This is attributable to the current political and economical system in Zimbabwe. Based upon the constitutional law of Zimbabwean, the Reserve Bank is the only legal place for depositing foreign fund. Since it is controlled by the president Robert Mugabe, the fund is often used for other personal purposes before releasing. For example, in 2008, Tuberculosis and Malaria released a aid for the health system of Zimbabwe, worthy of $300 million. $7.3 million of the donation was spent by government of Zimbabwe for other purposes. A representative of the government rejected to tell how the money was spent, but apparently it was not for the intended purpose. The government also denied the requests for returning the money. “A senior official with one donor organization in Harare said that some funds had actually gone missing after arriving at the Reserve Bank”(Berger and Thornycroft 2008). In addition, president Robert Mugabe implements controversial land redistribution policy that deprives enormous land properties from the white farmers, which significantly changes its economical structure.

These corrupted management has induced nonscientific allocation. This directly affects the development of those small businesses in Zimbabwe from various aspects. Firstly, the political and economical corruption undermines the confidence of the investors and arouses negative prospective in their mind. Secondly, some government officials used their power to accept many bribes and protect the inefficient business that will cause unfair competition among small businesses. Those who provide bribes to the government officials will have significant...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Essay on Small Business in Zimbabwe
  • Major Constraints to Inclusive Growth Essay
  • Short Paper Small Business
  • Small Business in Sub-Saharan Africa: Major Constraints in [Nigeria] Essay
  • Small Business Essay
  • Small Business Essay
  • Entrepreneurship & Small Business Essay
  • The Role of Small Business in Economic Essay

Become a StudyMode Member

Sign Up - It's Free