Zimbabwe’s political instability and the impact on business

Zimbabwe's political instability and the impact on business - NewsDay Zimbabwe

The criticism is that Zimbabwe has become a “command economy” with government’s hand visible in almost every sector of the economy including the latest urban mass transport service. The viability of this plan has been broadly questioned.

Lack of political stability also leads to social instability which significantly affects business operations.

This has been driven by citizens’ disapproval of government policies such as the recent protests against the fuel price increase. Eventually, it led to looting, riots and general disorder.

Soon after the recent protests characterised by looting as well as burning and destruction of business properties, industry counted losses totalling in excess of $500 million.

Consequently, some businesses, especially the small and medium enterprises said a rebound is almost impossible unless government intervenes through capital injections.

Tax and economic policiesAn increasing or decreasing rate of taxes is a good example of political component, and this directly impacts business.

Among the major highlights since coming into power of the new administration is the increase in tax money. Following the introduction of the monetary and fiscal policies in October and November last year, government introduced a new 2% tax per every dollar transaction on all electronic transactions from the 5% tax. Increasing tax rates without complementing it with an increase in wages impacts on the cost of living for the citizens.

This, in turn, impacts on aggregate demand for the supply of goods into the market, therefore affecting business operations.

The main goal for business is to make profit and government’s goal is to ensure economic stability and growth. Both of them are different, but interdependent.

For this, government and businesses should respect the channels through which they try to influence and persuade each other on various matters. These include lobbying by business organisations and trade unions calling for industrial actions to influence government actions.

Meanwhile, government’s role is to influence business by-laws and regulations as well as trade policies.

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