BGCSE – COMMERCE REVISION NOTES

Book 1

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ACKNOWLEGMENT
This Senior Secondary School Commerce syllabus covers the needs of BGCSE
Commerce 0598. It’s a product of many people who worked hard to see it ready for
use by both BOU learners and our conventional schools. The booklet is produced
under a Creative Commons Attribution -ShareAlike 4.0 Licence (International):
http://creativecommons.org/licenses/by-sa/4.0

BOU wishes to acknowledge contributions from the following:

Programme Developer Business Subjects

Dr Tommie Hamaluba
Writer

Mr Lawrence Menyani

Content Editors
Mr Keabetswe Matongo

Proofreader
Ms Matshiditso Molefhe

BOU Editor
Eric Setabo

DON’T NOT COMMERCIALISE ANY PART OF THIS BOOK

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Introduction to BGCSE Commerce 0598

Welcome!

This revision booklet covers all your form 5 Commerce at greater depth, with
clear and focused explanations on the tricky topics.

The booklet gives students opportunities to self-test their understanding and apply
their knowledge as they study then check their answers with ours which are put at
the end of the booklet under each topic heading. Before you look at our model
answers, test yourself first.

Target!

We are targeting all those students who are taking Accounting syllabus 0615 and to
sit for papers 1, 2 and 3. You could be taking this subject for the first time, or
revising so as to rewrite, you are welcome!

How the book is arranged!

You will notice that the book starts with a topic and sub-topic, which is divided into
objectives, which you should achieve after studying each topic. After that, you will
be presented with topic main points. After main points, we present you with some
questions to test yourself based on the topic and answers for you to check yourself
with ours at end of the booklet. The questions under each topic gives you practice for
authentic exam preparation. Our answers are provided to help students check their
progress.

Other additional resources!

To support this revision booklet we have a cd that contains the syllabus, and variety
of mock examinations which you can obtain from the study Centre starting 1st
September 2020.

Where to get help!

Should you have any problem while studying this subject, kindly contact your
tutor or study centre supervisor. You can also reach the subject specialist at
BOU headquarters Dr Tommie Hamaluba on whatsapp 75341214 office line
3646181, email: thamaluba@staff.bou.ac.bw

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UNIT 1 TO UNIT 7 WITH MODEL EXAMINATIONS QUESTIONS AND
MODEL SCHEMES AND ANSWERS

TABLE OF CONTENTS

CONTENT PAGE
NUMBERS
UNIT 1: INTODUCTION TO COMMERCE
TOPICS: Production and the satisfaction of needs 5-10
and wants
Commerce 11-13
Section A: Multiple choice questions 14-16
Section B: Structured questions 17-23

UNIT 2: HOME TRADE PART 1

TOPICS: Types of retailers 24-35
Trends in retailing 36-42
Section A: Multiple choice questions 43-45
Section B: Structured questions 46-53
UNIT 3: HOME TRADE 2
TOPICS: Credit trading 54-58
Consumer protection and
Customer relations 59-61
Types of wholesalers 62-65
Customer Service 66-67
Marketing Boards in Botswana 68-69
Computers in trading 70-70
Section A: Multiple choice questions 71-73

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Section B: Structured questions 74-81

UNIT 4: PURCHASING AND SELLING

TOPICS: Simple contract of sale 82-83
Purchasing activity 84-88
Section A: Multiple choice questions 89-91
Section B: Structured questions 92-99
UNIT 5: INTERNATIONAL TRADE PART 1
TOPICS: The pattern of foreign trade 100-105
Procedures and documents in foreign 106-109
Trade 110-112
Section A: Multiple choice questions 113-115
Section B: Structured questions 116-121

UNIT 6: INTERNATIONAL TRADE PART 2

TOPICS: Government and foreign trade 122-123
Customs and Excise department in 124-126
Botswana
International Trade Agreements 127-130
Section A: Multiple choice questions 131-133
Section B: Structured questions 134-140

UNIT 7: BUSINESS ORGANISATIONS PART 1

TOPICS: Public sector 141-144
The private sector business in Botswana 144-147
Section A: Multiple choice questions 148-150

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Section B: Structured questions 151-156

ANSWERS TO MODEL QUESTIONS

UNIT 1 157-162
UINIT 2 163-170
UNIT 3 171-178
UNIT 4 179-185
UNIT 5 186-191
UNIT 6 192-197
UNIT 7 198-204

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UNIT 1 INTRODUCTION TO COMMERCE

TOPIC: PRODUCTION AND THE SATISFACTION OF NEEDS AND WANTS

Objectives:

§ explain needs and wants with examples

§ differentiate between needs and wants

§ explain the meaning of production

§ differentiate between direct and indirect production

§ explain how production helps to satisfy needs and wants

§ describe the chain of production with the help of a diagram

§ explain the stages of production

§ explain the meaning of specialization and division of labor

§ describe the relationship between specialization and trade

§ identify the levels of specialization with examples

§ discuss the advantages and disadvantages of specialization

Main points
• Day-by-day everyone has to do some kind of work in order to satisfy their
needs and wants.

• Needs are goods and services that are essential for survival or living. They
are few and usually do not change.

• Examples of needs: Food is a need because it is required for bodybuilding,

energy and the general health; this is why people cannot survive without it.
Shelter is essential for protection against bad weather, wild animals or even
bad people. Clothes are essential for protection against bad weather too and
in the modern have even become designs for special body coverage and
extended to styles and fashion for identification. Water is the most essential
to life as it is required by the human body for blood plasma, cell formation and

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 temperature regulation. Without water people cannot survive within few
weeks. In fact, all living things require water for their survival. We need water
to grow our crops for food, to prepare our food, to bath, to wash, etc.

• Wants are goods and services people require to make their living easy and
comfortable.

• They help people to do various activities without strain, stress or pain, making
them feel relaxed and health though peoples’ lives cannot be affected even if
these goods and services are not used.

• Wants are many, unlimited and are always changing.

• They are difficult to satisfy.

• Examples: Cars, airplanes, trains, televisions, furniture, electronic equipment

and tools.

• Cars and airplanes enable people to travel long distances in a short time
without sweat but owners and users of these cars and airplanes are not really
satisfied with what they have or use as new models are developed each year.
People can go to other countries within reasonable time relaxed watching
television. Machines can do difficult calculations without wasting time due to
technology. Meanwhile, the changes in models of these machines and cars
come with new developments that make peoples’ desires change.

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 • Some differences between needs and wants are outlined in the table
below:

Needs Wants

- Required for survival, hence, - Required for pleasure and

are must have. comfort, hence, can do without.
- Are few and can easily be - Are many, unlimited and
satisfied. difficult to satisfy.
- Rarely change. - Usually change with new
Developments/trends
Meaning of production

• Making goods and services available in for the purpose of satisfying human
needs and wants.

• Goods are made available using natural resources, i.e. land, lakes, rivers,
plants, minerals, rocks, etc. through the process of manufacturing and
construction.

• Services are made available by providing education and training of people or

personnel such as scientists, engineers, doctors, tourism guides, entertainers,
etc.

• For production to have taken place these goods and services must reach the
final user or consumer.

• Direct production is when an individual, family or organization makes goods

and services available for own or family use or consumption.

• Indirect production is when an individual, family or organization makes goods

and services available for sale to other people or organizations or makes
more than enough for own use with excess for sale.

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 How production helps to satisfy needs and wants

• All peoples’ working activities in the making of goods and services available to
satisfy human needs and wants can be divided into three levels or stages
which are interdependent. To make the goods, raw materials have to be
extracted from the natural resources (first stage). These are passed to the
second stage to be processed into finished and semi-finished goods. The
semi-finished components are further assembled or constructed to build up
finished products. The third stage is to move the finished goods from where
they are made to where they are required for use or consumption to satisfy
the needs or wants.

• This interlink forms what is referred to as “The Chain of production”, also

known as, the stages of production.

• The Chain of production can therefore be illustrated as follows:

Primary
Secondary Tertiary
Production
Production Production
(for example
(Cattle killed and (tinned beef sold
rearing of cattle)
processed to make to the final
tinned beef ) consumer)

• Primary production activities involve the collection or extraction of raw

materials from natural resources such as mining, ploughing fertile soil for
crops, fishing, lumbering, quarrying.

• Secondary production activities involve the changing of raw materials into

finished and semi-finished goods (Manufacturing) and Construction (building

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 airports, dams, roads, railway lines, bridges) and Assembling of vehicles,
bicycles, airplanes, ships, trains, etc.

• Tertiary production activities involve the provision of direct and indirect

services to help at all the stages and ensure that the goods reach the final
user or consumer.

• Direct services are those that can be provided or applied on the user in
his/her presence, e.g. tourism, defense, medical care, education,
entertainment.

• Indirect services, also called commercial services are those that support
production of goods and trade such as banking, transport, warehousing,
insurance, advertising and communication.

Specialisation

• Specialization is when individual workers, organizations, nations/countries or

regions concentrate on a task or a job or making a limited range of products
or providing a particular service.

• Division of labor is when the making of a product or provision of a service is

divided into tasks.

Relationship between specialisation and trade

When there is specialization nations/countries, regions and organizations will

concentrate on producing goods or providing services in the areas which can bring
them economies of scale or benefits of large-scale production at low cost and leave
the other areas to other countries, regions or industries. This will allow everybody to
save money and encourage the exchange of goods and services through buying and
selling of those good each one is unable to make and provide.

Levels of specialisation

Specialization can take place at various levels:

• Specialization by individual workers; this when an individual worker can

perform one task or provide one service, for example, a dentist in a hospital,

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 a business subjects teacher in a school, an accountant in a business
organization etc.
• Specialization by product; this is when one organization of the industry
produces a particular product. For example: the Kalahari Beverages can
provide brands of soft-drinks.
• Specialization by regions; this when a particular area of a country is able to
supply what other areas cannot. For example, the Maun and Chobe areas
are good for tourism due to their natural resources.
• Specialization by Nation/Country; this is when a country is able to supply
what other countries cannot due to its environment. For example, Botswana
supplies diamond and beef to the UK.
Advantages of specialisation

• Organizations and their workers can become faster and efficient.

• Time can be saved by making a particular product or providing a particular
service.
• Low cost of production can be incurred.
• Encourage interdependence between organizations and countries.
• Machinery and equipment to do simple tasks can easily be developed and
used by workers and enable them become more efficient.
• Training for jobs become shorter and easy to learn.
• If workers repeat the same operations, they become more skilled and fast
resulting into increased production.
Disadvantages of specialisation

• Workers may become bored by doing the same tasks each and every day.

• Use of machines can lead loss of craftsmanship skill in individual workers.

• Increased use of machines can lead to loss of jobs of workers.

• Production may stop if one worker is absent.

• Some workers may slow the process of production due to failure to cope with
others.

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 • If workers lose jobs they are specialized in, there will be need to go for new
training in other jobs.

TOPIC: COMMERCE

Objectives:

• explain the meaning of Commerce

• discuss the importance of the branches of Commerce

• relate Commerce to production

Main points

• Commerce is trade and aids to trade

• Trade is buying and selling of goods and services

• Buying and selling of goods and services can take within a country. This
called domestic or home trade.

• Buying and selling of goods and services between countries is called

international or foreign trade.

• Home trade involves retail trade and wholesale trade.

• Retail trade is buying goods in large quantities from wholesalers or

manufactures and selling them in smaller quantities to consumers.

• Wholesale trade is selling the goods to retailers and consumers in large

quantities.

• International trade involves export trade and import trade.

• Export trade means selling goods to other countries.

• Import trade means buying goods from other countries.

• Aids to trade are commercial services that make it possible for the goods and
services to be made available and sold and bought domestically or

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 internationally. These services include: Banking, Transport, Warehousing,
Insurance, Advertising and Communication.

The importance of the branches of commerce

• Trade: As individuals, families, organizations and countries, none is self-

sufficient in the production of goods and provision of services to satisfy all our
needs and wants. The location of natural resources too, determines what an
individual, family, organization or country can produce. Meanwhile, the
satisfaction of our needs and wants requires those goods and services we are
unable to produce or provide. Trade or exchange makes it possible for goods
and services required in the satisfaction of our needs and can be obtained
from where they are available at home or internationally.

• Banking: Banks make it possible for entrepreneurs, organizations and

countries to obtain financial help in the form of loans or development funds to
establish businesses in all sectors of production, (i.e. Primary sector,
Secondary sector and Tertiary sector). This makes it possible for the making
of goods and providing services to satisfy our needs and wants to take place.
Banks also safe keeps the profits made by entrepreneurs and the money
earns them interest.

• Insurance: Raw materials in the chain of production, finished goods stored

awaiting delivery and the factory building are at risk that they may be stolen,
damaged or destroyed by fire or natural disaster. Insurance provides
assurance to the manufactures, traders and the entire business community
that in the event of risk occurrences there would compensation.

• Warehousing: This is the safe storage of raw materials in the chain of

production and finished goods awaiting delivery or preservation for future use.

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 • Advertising: This makes it possible for consumers to know the availability,
place and prices of the goods and services that they require to satisfy their
needs and wants.

• Transport: This makes it possible for workers to travel to and from the
factories, move the raw material from where they are obtained to the factory
and distribute the finished goods to where they are required.

• Communication: Clear conveyance of messages among the business

community is very necessary as it avoids delays. Manufacturers,
wholesalers, retailers; exporters and importers need to get in contact regularly
to agree on terms of trade, delivery conditions etc. This service makes it
possible for traders to get easy understanding even where there are language
barriers.

The relationship between commerce and production

• Organizations make goods and services available for which they know that
there are consumers. In other words, for production to take place, there must
be demand. Commerce provides information to the producers about the
presence of customers for particular products. Consumers rely on producers
for the goods and services they require to satisfy their needs and wants, so
there is interdependence between commerce and production.

• Commerce provides capital with which organizations can start production at

any level of the production sector.

• Commerce helps to move raw materials from where they can be obtained to
where they are required for processing.

• Commerce makes it possible for the goods and services to reach the final
consumer.

• Producers and also commercial services rely on various direct services that
support the activities carried out in the primary and secondary sectors of
production, and also support the delivery of services and goods to the
consumer directly.

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Section a [10 marks]

Multiple choice questions

Choose the correct answer from those given and write A, B, C or D in the boxes
provided.

1. Which of the following provides basic human wants?

A. Commerce
B. Production
C. Specialisation
D. Trade

2. Which of the following are human wants?

A. Clothing, money and television.

B. Food, buildings and clothing
C. Food, house and medicines
D. Water, shelter and clothing

3. Which of the following defines commerce?

A. Buying and selling of goods and services

B. Distribution of goods and services
C. Provision of goods and services
D. Trade and services to trade

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4. Given the Chain of production shown below:

Primary stage ------- Manufacturer ------- Y ------ Retailer ------ Consumer

Which of the following does ‘Y’ represent?

A. Assembler
B. Constructor
C. Producer
D. Wholesaler

5. Which of the following activities are secondary production?

A. Assembling car components

B. Catching fish for cannery
C. Crushing stones for tar road construction
D. Mining coal for electricity power

6. Footballers, Hotel Catering, Musicians, Dentists and Soldiers are all

Examples of:

A. Commercial services
B. Direct services
C. Primary occupations
D. Secondary occupations

7. Which of the following is the importance of aids to trade?

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 A. They make it possible for best quality goods to be produced
B. They make it possible for consumers to have a wide choice
C. They make it possible for goods to reach the consumers
D. They make it possible for producers to compete

8. Which of the following defines “Specialisation”?

A. When business organisations and individuals provide similar goods

and services
B. When business organisations choose and divide industries according
to what to produce
C. When business organisations select and allocate workers according to
their experience and skills
D. When business organisations and individuals concentrate on
making a limited range of goods and services

9. Which of the following is an advantage of specialization?

A. An increase in the level of production

B. Lower cost on each product made
C. Work becoming boring for workers
D. Workers feeling lonely in their operations

10. Which of the following is a disadvantage of division of labour?

A. Jobs become easy and quick to learn

B. Employees need not have qualifications
C Electronic machines can do some of the work
D Employees’ skills may only be used in one industry

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SECTION B

Structured questions
Answer the questions in the spaces provided on the question paper or answer sheet
if provided

1 It is not only workers engaged in industries that make tangible products

are productive but anyone who contributes to the satisfaction of human
needs and wants. Goods and services help in satisfying needs and wants.
Hence, miners, manufacturers, drivers, health workers and educationists
are all productive workers.

(a) Explain needs and wants with one example in each case. [6]

(i) Needs:……………………………………………………………………….

…………………………………………………………………………………..

…………………………………………………………………………………..

…………………………………………………………………………… .[2]

Example: ……………………………………………………………………[1]

(ii) Wants:
………………………………………………………………………….

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 …………………………………………………………………………………..

…………………………………………………………………………………..

………………………………………………………………………………[2]

Example:…………………………………………………………………… [1]

(b) Identify and explain two ways in which human needs and wants can be
satisfied [6]

Way 1:
………………………………………………………………………………….

……………………………………………………………………………………….
[1]

Explanation:
…………………………………………………………………………...

…………………………………………………………………………………………..

……………………………………………………………………………………….[2]

Way 2: ……………………………………………………………………………………. [1]

Explanation:
………………………………………………………………………………….......................

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

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……………………………………………………………………………………………....
(2)

(c) Using the diagram below, name and describe the chain of production for
bread. [8]

1 2 3 4
Farmer grows Miller makes Baker makes Retailer
Wheat flour bread sells bread to the final
consumer

Stage 1: …………………………………………………………………………………. (1)

Description: ………………………………………………………………………………

……………………………………………………………………………………………..

…………………………………………………………………………………………….. (2)

Stage 2: ………………………………………………………………………………….. (1)

Description: ……………………………………………………………………………….

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………………………………………………………………………………………………

………………………………………………………………………………………………(2)

Stage 3: ………………………………………………………………………………….. (1)

Description: ……………………………………………………………………………………

…………………………………………………………………………………………….. (2)

Stage 4: ………………………………………………………………………………… (1)

Description: ……………………………………………………………………………..

…………………………………………………………………………………………….

…………………………………………………………………………………………….

……………………………………………………………………………………………. (2)

(d) Explain the stages and activities involved in the making of a motor vehicle before
use. [6]

Stage: …………………………………………………………………………………….. (1)

Activities: ………………………………………………………………………………….

……………………………………………………………………………………………… (1)

Stage: ………………………………………………………………………………………
(1)
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Activities: …………………………………………………………………………………..

……………………………………………………………………………………………….
(1)

Stage: ………………………………………………………………………………………
(1)

Activities: …………………………………………………………………………………..

……………………………………………………………………………………………… (1)

2. J. Motor (Pty) Ltd., has been in the Motor Assembling industry for over 15
years in Botswana, making specialist models for executive orders of cars and
specially designed models for specified purposes. They have been able to
meet their customers’ demand due to specialization and division of labour.

(a) Explain the meaning of the following: [2]

(i) Specialisation: …………………………………………………………………..

……………………………………………………………………………………. (1)

(ii) Division of labour: …………………………………………………………….

……………………………………………………………………………………. (1)

(b)Identify and explain any three levels of specialization with examples. [6]

(i) Level: ………………………………………………………………………….

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 …………………………………………………………………………………. (1)

Explanation: ………………………………………………………………………

……………………………………………………………………………………… (1)

(ii) Level: ………………………………………………………………………….

…………………………………………………………………………………. (1)

Explanation: ………………………………………………………………………

……………………………………………………………………………………… (1)

(iii) Level: …………………………………………………………………………..

……………………………………………………………………………………….(1)

Explanation: ………………………………………………………………………..

……………………………………………………………………………………….(1)

(c) Assess the use of specialization to J.Motor (Pty) Ltd.

…………………………………………………………………………………………

………………………………………………………………………………………..

………………………………………………………………………………………..

………………………………………………………………………………………..

………………………………………………………………………………………..
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 ………………………………………………………………………………………..

………………………………………………………………………………………..

………………………………………………………………………………………..

……………………………………………………………………………………….[9]

3. Commercial activities are associated with the last and final stage of
production of goods. Mpho a retailer designing clothing for both men and
women makes use of the branches of commerce.

(a) Explain the term ‘Commercial activities’. [2]

……………………………………………………………………………………….

……………………………………………………………………………………….

……………………………………………………………………………………. [2]

(b) Explain the importance of any four branches of commerce

……………………………………………………………………………………………….

……………………………………………………………………………………………….

……………………………………………………………………………………………….

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………………………………………………………………………………………………

………………………………………………………………………………………………

……………………………………………………………………………………………….

………………………………………………………………………………………………

………………………………………………………………………………………………

………………………………………………………………………………………………

……………………………………………………………………………………………… (8)
UNIT 2 HOME TRADE
TOPIC: TYPES OF RETAILERS

Objectives:
• discuss the functions of retailers
• identify the types of small and large-scale retailers (hawkers, mobile shops,
street traders, itinerant traders, market stall holders, independent retailers,
supermarkets, multiple shops, variety chains, department stores, mail order
businesses, co-operative retail society)
• discuss the factors leading to the decline of small retailers
• account for the survival of small retailers
• state the features of each type of large-scale retailers (supermarkets,
hypermarkets, multiple shops, variety chain stores, department stores, mail
order business, co-operatives).
• explain the advantages and disadvantages of each type of large-scale
retailers.
• differentiate between the different types of retailers.

Main points:

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 • Retail trade means buying goods in bulk from wholesalers and selling to
consumers in smaller quantities. The business may be owned by an individual
or a group of people

Functions of retailers
• Breaking bulk – buying goods in large quantities from suppliers like
manufacturers and wholesalers and sell to individual customers in smaller
quantities.
• Providing selling outlets for manufacturers’ goods
• Providing choice – obtaining and stocking a variety of goods from different
suppliers to give consumers choice.
• Providing goods when needed – stocking goods which are on demand and
usually opening early and closing business late to provide customers
convenient times.
• Providing advice and information – give customers advice on how to use the
products and inform them on the best items to satisfy their needs.
• Providing after-sales service – can offer to repair or provide spares for the
products after they have been sold.
• Providing credit facilities and finance – give customers credit facilities or loans
for expensive goods.
• Giving delivery services – offer delivery services for large and expensive
goods.

Types of retailers
Small-scale Retailers – businesses which have no fixed premises to operate from.

• Vending machines – sell variety of hot and cold food

_ sited in central busy sites
_ particularly prone to vandalism
• Hawkers – use some form of transport
• Pedlars – carry goods around without using any mode of transport
• Mobile shops – vehicles are used as form of transport for mobile grocery
shops.

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 • Market Stallholders – operate in open air or covered areas markets held on
certain days but rented by the holders to the Local Authority Councils.
• Itinerant traders – operate from place to place in areas where some kind of
entertainment is taking place.
• Street vendors (traders) – Traders who display their merchandise along the
road sides.
• Independent retailers (independent shops, sole traders, corner shops, unit
shops) – owned by sole traders or small partnerships.

Factors leading to the decline of small retailers

• Competition:

-Increasing number of large-scale retailers who have the power to enjoy

economies of scale from suppliers and afford to pass low prices to the
consumers are creating very stiff competition for the small retailer.

• Inadequacy of capital:

-Small retailers are finding it difficult to raise sufficient capital for expansion
and modernization.

• Poor location of small-scale retailers:

-Small retailers are restricted to locate in areas where there is little business
away from prime areas.

• Provision of limited range of goods and services:

28
 -Inability of small retailers to provide a wide range of goods and additional
services makes them lose business.
• Inefficient and accountable management:

-There is little or no efficiency and accountability in the running of small retails

• Large retailer attraction:

-Some large retailers attract consumers away from small retailers by offering
loyalty cards and other reward systems to encourage them to return.

• Exorbitant pricing:

-High prices and overcharging reduce the number of customers for small
retailers.

• Provision of outdated goods:

-Selling expired or outdated goods make customers go to large shops.

The survival of small retailers

• Owning premises located in prime areas and not being affected by the rising
current costs.

• Offering wide range of goods and services needed by their customers

• Locating near customers

• Offering personal service and attention to customers

• Offering credit, delivery and special orders to customers

• Opening long hours

• Dealing in specialized goods which require specialized services

Types and features of each large-scale retailer and their advantages and
disadvantages

1. Supermarkets:

29
 Features or characteristics:
- Has more than 200 square metres of shopping area
- Has three or more checkout points
- Sell pre-packed, priced products
- Offer self-service to customers
- Use ‘loss leaders’ to attract customers
- Are usually organized in multiples
- Encourage impulse buying
- Provide facilities like shopping baskets and trolleys
- Are located in busy shopping centres

• Advantages to the retailer:

- Enjoys economies of scale of multiple or chain stores

- Can employ specialist workers such as bakers, butchers, fishmongers.
- Good display leads to impulse buying
- It is labour cost saving due to self-service
- Lower running costs makes them able to offer customers lower prices
which attract many customers.

• Advantages to the customer:

- Variety of goods provided gives customers convenience of one-stop-

shopping
- Customers save their time through self-service
- Customers take their time to make a choice without being rushed
- Customers are relieved of embarrassment of persuasion and price
arguments
- Social facilities provided create a pleasant shopping atmosphere

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 - Goods displayed are easy to find
-
• Disadvantages to the retailer:

- Very high level of stealing of goods and trollies or pilferage

- Premises are expensive
- Suffer additional costs to provide equipment
• Disadvantages to the customer:

- Pre-packed goods cannot be inspected before purchasing

- Some customers miss personal attention when they encounter problems
- There are often delays at check-out points during peak shopping hours
and month ends
- Credit and delivery services are unusual
- Impulse buying makes some customers to overspend and have financial
problems
-

2. Multiple Shops or Chain stores:

Features or Characteristics.
- Large number of shops owned by the same company
- Control from a Head Office
- Have branches all over the country and outside the country
- Variety chain stores deal in a variety of goods like clothing and foods
- Specialist chain stores deal in a limited range of goods
- Each branch is headed by a branch manager
- All branches sell the same line of products
- Stock is bought by the Central Purchasing Department
- All branches use the same name and have similar shop fronts for easy
recognition
- All provide uniform quality products
- All advertise nationally in newspapers, TV etc.
• Advantages to the retailer:

31
 - Buying in bulk from the manufacturers enables the retailer to obtain
good discount
- Can afford employing highly qualified personnel whose efficiency would
assist reduce costs
- Stock shortages in branches can quickly be replaced by other
branches
- Loss in one branch can be absorbed by profits from other profit-making
branches of the company
- Saving in overheads leads to low cost per branch as advertising,
purchasing and accounting are done from the head office
- Can provide own brands cheaply than other brands
- Ability to attract customers with loss-leaders and giving free gifts

• Advantages to the consumers:

- Competitive prices offered

- Unsatisfactory goods bought from one branch are returnable in another
branch
- Quick rate of turnover means stock is sold while still fresh or still in
fashion
- Can easily recognize the identical shops whenever they go to a new
town or village
- Customers can receive some attention from sales assistants

• Disadvantages to the retailer:

- Large capital required to set up and run the business

- Centralized control leaves branch managers without power to make
decisions which suit their areas

32
 - Suffer double transport costs by moving the goods to the head office
first and then to the branches
- Managing large groups is difficult, hence, requires employing
inspectors for the branches

• Disadvantages to the consumers:

- Can only access to similar and limited range of products in all branches
- Rarely offer credit and deny consumers the chance to buy the goods.

3. Hypermarkets:

• Features or Characteristics.

- Very large shopping complex with area covering over 5000 square
meters.
- Offer widest range of goods
- Locates in outskirts of town on major road routes
- Has large car park area
- Have off-peak opening times

33
 - Usually charge lower prices due to relatively lower operation costs
- Offer self service
- Goods sold on cash and carry basis.

• Advantages to the retailer:

- Their sites are cheaper than in towns

- Enjoy economies of scale
- Self-service encourages impulse buying which leads to high turnover.
- Ability to sell large volumes of goods daily
• Advantages to the consumers:

- Offer a very wide choice and range of products

- Offer customers a ‘one-stop-shopping experience
- Very pleasant and easy to reach locations
- May offer late closing hours
- Offer good parking facilities
- Offer highly competitive prices
- Customers can shop at their own pace.

• Disadvantages to the retailer:

- Need huge land and are expensive to set up.

- Out of town location make transport necessary

• Disadvantages to the consumer:

- Little or no personal service is given

- Transport to the sites is required
- May be difficult to find some items in such big shops
- May be too large and impersonal.

4. Department Stores.

• Features or Characteristics.

34
 - Large store divided into a number of commodity departments.
- Each department operates under the control of a departmental manager or
buyer.
- Departments are responsible for own profitability.
- Owned by large companies and run by a General Manager.
- Located in large town centres and shopping precincts/enclosures.
- Offer a wide range of goods through departments.
• Advantages to retailer:

- Bulk buying from manufacturers enables them get good discounts

- Central town location attracts trade
- Losses in one department can be absorbed by other departments
- Each department advertises for others
- Supervision of departments is easier for the managers.
• Advantages to the consumers:
- Convenience of one-stop-shopping from a wide range of goods offered.
- Personal service offered.
- Central location allows easy transport access.
- Specialist services are provided through departmental specialization.

• Disadvantages to the retailer:

- Provision of facilities is expensive.
- Cannot compete in pricing
- Opening beyond normal trading hours is costly
- Large central sites are expensive
- Departments require more labour, hence, higher operation costs
- Comfortable surroundings can drain profits.
- Shop lifting may as well be experienced.
• Disadvantages to the consumers:
- Location in towns makes it hard for rural people to reach.
- Prices charged are usually higher
- Sometimes large and impersonal
- Difficult to reach if have no own transport.

35
5. Mail Order Businesses
• Features or Characteristics.
- Have no shops but warehouses and offices
- Products sold through advertising in catalogues, newspapers, magazines,
journals, radio, television, internet and part-time agents
- Rely on the post offices for delivery of goods to customers and receiving
orders.
• Advantages to the retailer:
- Does not need expensive premises
- Requires only a few specialized workers for packaging
- Operation costs are lower
• Advantages to the consumers:
- Often offered interest free credit
- Can choose goods at leisure
- Can buy in the comfort of own home
- Unsatisfactory goods can be returned.

• Disadvantages to the retailer:

- No personal contact between buyer and seller
- Holding large stocks of goods risky as demand and prices may fall.
- High costs on printing and commission paid.
• Disadvantages to the consumers:
- Prices often higher than many retailers
- Difficult to assess quality from illustrations and photos in catalogues and
other advertisements
- Inconvenient to return unsatisfactory goods.
- Type of retailer not available in all countries.

6. Co-operative Retail Societies.

• Features or Characteristics.
- Owned by members who buy shares

36
 - Members are also the main customers
- Shares not transferable but redeemed on demand
- Profits or surpluses divided between members at fixed rate of interest on
shares or dividend stamps issued with amounts of goods bought
exchanged for cash
- Stock mainly bought from co-operative wholesale societies
- Controlled by management committee elected by members
- Sell a wide range of goods
• Advantages to the retailer (Co-operative members):
- Reap economies of scale
- Dividends encourage custom
- Obtain shares of profits from wholesale co-operative societies.
• Advantages to the customers:
- Enjoy lower prices through the use of dividend stamps
- Proximity of stores to customers
- Sell products to everybody including non-members
- Customers and the community at large enjoy the benefits
- Democratically controlled
- Wide range of goods offered.
• Disadvantages of Co-operative Societies:
- Too much paperwork involved for staff.
- Inefficiency in the issuing of dividend stamps.
- Dominated by a few members who attend meetings.
- Progress retarded due to lack of qualified management teams.
- Restrictions on the number of shares an individual can buy restricts the
ability of the societies to raise capital for expansion.

37
TOPIC: TRENDS IN RETAILING

Objectives:

- identify main changes that have taken place in the retail trade (branding,
packaging, self-service, after-sales service, mail order, bar coding,
e-commerce, commerce on the internet, shopping malls, vending machines,
lay-bye, loss-leaders, Do It Your Self etc.)
- explain the characteristics of each of the new developments in retailing
- explain the causes of the changes in the retail trade
- explain the advantages and disadvantages of each of the new changes

Main points:

Main changes in the retail trade.

38
1. Branding – giving a unique name to a product (Brand Name)
• Characteristics:
- The name chosen must be unique
- Must be consistent and easily recognizable by its logo, shape, colour,
taste, etc.
- Make consumers aware of the product qualities
- Assure a standard of quality
- Create a brand image
• Advantages of branding:
- Easy for consumers to identify the product
- One producer’s goods can easily be distinguished from the others
- Advertising a product becomes easier
-
• Disadvantages of branding:
- Unpopular names may not attract attention
- Some strange names may drive customers away.

2. Packaging – The physical container or wrapping of a product, or the way that

products and services are presented to the consumer
• Characteristics:
- Material selected must be suitable for the product
- Must give protection to a product against temperature
- Must allow easy use of the product
- Colour and shape must be appealing to consumers
- Must be useful in promoting the product
- Must have labels carrying important information about the product.

• Advantages of packaging:
- Protects products from damage
- Saves customers time
- Carrying convenience/ allows for easy handling
- Provides attraction.

39
• Disadvantages of packaging:
- Products might become heavier than they actually weight
- Extra packaging material costs raise the selling prices
- Some packaging material require extra storage space.

3. Self-service – Customers serve themselves

• Characteristics:
- Expensive products displayed at eye level on shelves
- Cheaper products located on the bottom shelves
- Promotional goods placed at the end rows
• Advantages of self-service:
- Customers shop at their own pace
- Savings on lobour costs
- Customers benefit better prices
- Encourages impulse buying which leads to high turn-over

• Disadvantages of self-service:
- Some customers spend long times looking for some items
- Loss of income due to shoplifting
- Extra expenses incurred in providing and maintaining shopping
baskets, trolleys and installation of cameras to avoid shoplifting

4. After-sales service. – Services offered to consumers after goods have been

sold to ensure customer satisfaction.
• Characteristics:
- Offer/provide free or paid delivery services
- Offer/provide installation services
- Provide telephone help line or desk for customer service
- Provides repair, maintenance and servicing of products
- Provide advice and training

40
• Advantages of After-sales service:
- Relieves customers of transport costs
- Guarantee or warranty cover offered gives customers satisfaction
- Goods in transit are handled and delivered well by staff of the
organization
- Customers gain confidence and remain loyal to the organization.
• Disadvantage of After-sales service:
- Extra expenditure incurred by the retailer
- Employing a qualified person or organization for maintenance and
repairs is expensive.

5. Vending machine – Use of electronic machines to sell products.

• Characteristics:
- Machines placed at busy places
- Machines have slots for making payments
- Payment usually made in coinage
- Slots for the disposal of items bought provided

• Advantages of vending machines:

- No need for shop assistants, so retailer saves in expenses of salaries
and wages
- Little space required placing the machine
- Shopping open 24 hours.
• Disadvantages of vending machines:
- Machines are prone/open to vandalism
- Faulty machines may not respond favourably to customers’ requests
- Electricity load-shades or power cuts can fail operations.
6. Shopping Malls – Large enclosed business areas where a range of shops
are found.
• Characteristics:
- Developed by urban planners
- Aimed at reducing traffic

41
 - Aimed at reducing distance for urban residents
• Advantages of shopping mall
- Saves time for the shopping pace
- Facilities provided make shopping a pleasure
- Many items can be acquired under one roof
• Disadvantages of shopping mall:
- Possibility of shoppers missing their way in the area
- Shops are expensive to rent

Electronic point-of-sale till systems, bar coding and scanners.

7. Bar coding – A technology developed to check the goods using the computer
at the sales point (electronic data interchange, electronic funds transfer at the
point of sale).
• Characteristics:
- Strip of lines with a number below stuck on the package of the product.

• Advantages of bar coding:

- Helps check stock levels and re-orders.
- Retailers can easily identify the goods on demand
- Produce with short shelf life is not wasted
- Reduces stock control paperwork
• Disadvantages of bar coding:
- Electricity cuts (load shading) may cause problems
- Error fed into the computer would be reproduced at the checkout point.

8. Loss-leaders: Reduction of prices on some household items to attract

customers and slightly increasing the price on others for recovery.
• Advantages of loss-leaders:
- Increased sales.
- Increased profits.
42
 - Items bought cheaply.
• Disadvantages of loss-leaders:
- Losses may be made if other items are not bought.
- If items chosen are non-essentials, they may not attract customers.
-
9. Electronic Commerce (E-commerce):
• Characteristics:
- Buyer must have valid credit card
- Buyer must have access to internet
- Buyer must have access to seller’s internet and website.

• Advantages of e-commerce:
- Saves time.
- Transactions are safe.
- Shopping can be done anytime of the day.
- No travel expenses incurred.

• Disadvantages of e-commerce
- Limited to those who have own computers and internet
- Time wasted on searching.
- Delivery of goods may delay.
- There may be hacking of accounts while paying

10. Do-It-Yourself.
Features:
- Items or goods are of technical nature.
- Manufacturers give easy, clear instructions to follow
- Involve construction and repairing or decorating things by oneself.
• Advantages:
- Lower cost on items and cost saving.

43
 • Disadvantages:
- User may face problems if instructions are unclear.

11. Lay bye.

Characteristics.
- Buyer pays a deposit.
- Instalments paid over a period of time
- Items remain with the seller
- Items collected after final payment.

• Advantages:
- Items fully paid for when collected.
- Easier way to buy expensive items.
- Increases sales.
• Disadvantages:
- Too much paperwork
- Probability of customer losing money if the deal is cancelled
- Need for extra space for keeping goods on lay bye.

Causes of changes in retailing.

• Changes in the spending behavior as a result of raising standards of living.

• Rapid pace of modern life and the need for fast shopping services.
• Large shops owned by companies can easily raise capital for expansion.
• Competition among retailers.
• Technological developments.
• Government and community environmental concerns to restrict business
• Business environmental concerns to avoid pollution and climate change.
• Government laws on location of precincts (Green field and Brown field sites).

44
Section A [10 marks]
Multiple choice questions.
Choose the correct answer from those given and write A, B, C or D in the boxes
provided.

1. Which of the following is a function of a retailer to a manufacturer?

A. Giving customers credit facilities

B. Providing large variety of goods
C. Providing sales outlets
D. Selling goods in bulk

2. Which of the following is a characteristic of an independent retailer?

A. There is one branch only

45
 B. Owner has to do all the jobs
C. The business is situated near customers
D. Owner takes all the risks and profits

3. Which of the following is a feature for a departmental store?

A. Usually found in town centres

B. May be part of a voluntary chain
C. Selling different products under one roof
D. May have several branches in many parts of the world.

4. Which of the following is a disadvantage of mail order to the customer?

A. Ordering goods by telephone

B. Shops locating out of the town centre
C. There are no assistants to help customers
D. Goods received may not be as expected

5. Which of the following retailers is most dependent on advertising to inform

customers?
A. Hypermarkets
B. Independent traders
C. Mail order firms
D. Supermarkets

6. Which of the following is a reason for the new trends in retailing in Botswana?

A. Large retailers in Botswana can easily raise capital

B. New large retailers in Botswana are owned by companies
C. Rapid population in Botswana has created more markets
D. Setting up larger retail outlets in Botswana is cheaper

7. Which of the following explains the term ‘branding’?

46
 A. Giving a unique name to a product for easy identification
B. Labelling a product with the manufacturer’s name
C. Putting goods in packets by producers, for easy carriage
D. Production of only one unique product

8. What is meant by e-commerce?

A. Buying and selling of goods by internet

B. Buying and selling of goods on the phone
C. Buying and selling of goods on the television
D. Buying and selling of goods by visa card
9. Which of the following is a feature of e-commerce?

A. Delivery of goods is definite

B. Having a valid bank credit card
C. Limited use of computer.
D. Saving time on transacting

10. What does Do It Yourself mean?

A. Buyer being offered after-sales service

B. Manufacturer giving instructions on making items
C. Manufacturer making items of technical nature
D. Buyer assembling, repairing or decorating items by oneself

47
Section B

Structured questions
Answer the questions in the spaces provided on the question

1. Retailing is one of the branches of trade that actively performs various

functions domestically to ensure there is efficient distribution of goods to the
final consumer in a country. They can be classified into small scale and large-
scale retailers. PK agents is a small-scale retailer which sells electric
appliances such as microwaves, fridges, televisions etc.. A wholesale
business later opened next to PK agents retailers and sales started to decline.

48
 (a) Explain the following three functions that are carried out by PK agents
retailers [6]

(i) Breaking bulk: …………………………………………………………….

…………………………………………………………………………………..

…………………………………………………………………………………..

………………………………………………………………………………… (2)

(ii) Providing after-sales service: ………………………………………………

……………………………………………………………………………………..

……………………………………………………………………………………..

…………………………………………………………………………………. (2)

(iii) Providing choice to consumers: ……………………………………………

……………………………………………………………………………………..

……………………………………………………………………………………..

……………………………………………………………………………………

……………………………………………………………………………………

…………………………………………………………………………………… (2)

(b) List any two small-scale retailers

49
 (i) ………………………………………… (ii) ………………………………. [2]

(c) Explain any three factors that could have led to the decline of PK agents
retailers.

Factor 1

(i) ……………………………………………………………………………………….

…………………………………………………………………………………….........

…………………………………………………………………………………………..
Factor 2

(ii)
……………………………………………………………………………………….

…………………………………………………………………………………………..

…………………………………………………………………………………………

Factor 2

(ii)
……………………………………………………………………………………….

…………………………………………………………………………………………..

……………………………………………………………………………………[6]

50
 (d) Analyse two ways in which PK Agents retailers would be affected by the
opening of the wholesale trade
………………………………………………………………………………………………

………………………………………………………………………………………………

………………………………………………………………………………………………

………………………………………………………………………………………………

………………………………………………………………………………………………

………………………………………………………………………………………………

…………………………………………………………………………………………...[6]

3. Redevelopments in brown field sites of city centres and other special

developments in retail trade have taken place in recent years. These changes have
taken the form of building malls made up of a number of different outlets such as
clothing shops, grocery shops, restaurants, banks in one place.

Jonty is a commercial farmer who just opened a supermarket in the mall selling all
his branded produce such as beans, millet, maize, sunflower oil etc. She also makes
use of other trends in retailing such as self-service, e-commerce and bar coding.
Botswana Agricultural Marketing Board has also assisted Jonty in his commercial
farming.

(a) Explain the following new changes in retailing and state two features in each

(i) E-commerce: …………………………………………………………………………..

…………………………………………………………………………………………….. (1)

51
Feature 1 …………………………………………………………………………………

…………………………………………………………………………………………….. (1)

Feature 2 …………………………………………………………………………………

…………………………………………………………………………………………….. (1)

(ii) Vending machine: …..…………………………………………………………………..

…………………………………………………………………………………………….. (1)

Feature 1 …………………………………………………………………………………

…………………………………………………………………………………………….. (1)

Feature 2 …………………………………………………………………………………

…………………………………………………………………………………………….. [1]

(iii) Branding: …..…………………………………………………………………………...

…………………………………………………………………………………………….. [1]

Feature 1 …………………………………………………………………………………

…………………………………………………………………………………………….. [1]

Feature 2 …………………………………………………………………………………

…………………………………………………………………………………………….. [1]

52
(iv) Bar coding: …..………………………………………………………………………

…………………………………………………………………………………………….. [1]

Feature 1 …………………………………………………………………………………

…………………………………………………………………………………………….. [1]

Feature 2 …………………………………………………………………………………

…………………………………………………………………………………………….. [1]
(b) Discuss three ways in which Botswana Agricultural Marketing Board (BAMB)
might have assisted Jonty after harvesting his produce

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

……………………………………………………………………………………………….[9]

(c) Assess the use of self-service to Jonty’s business.

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

53
…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

……………………………………………………………………………………………….[9]

4.Dear Esteemed Customer

Great pleasure to send you our latest catalogue on newly developed leisure
and sportswear fashions, in which you will get details of our low-priced value
for your money offers merchandise. We have no doubt that you will
appreciate our prices and advise us if you find lower prices on similar items
elsewhere. You are also aware that if you not satisfied with any items, our term and
conditions apply.

(a) Which type of a retailer would write such a letter?

………………………………………………………………………………………….….. [1]

54
(b) Explain why the letter is written to this particular customer.

……………………………………………………………………………………………….....

…………………………………………………………………………………………………

……………………………………………………………………………………………... [2]

(c) How does this retailer persuade the customer to buy the goods?
…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………….. ………......

……………………………………………………………………………………………... [2]
(d) Which kind of merchandise is the retailer offering?

……………………………………………………………………………………………….
[1]

(e) What conditions do such retailers offer in case items do not satisfy
the customer?
…………………………………………………………………………………………………..

……………………………………………………………………………………………... [2]

(f) Discuss the effect of this kind of trend in retailing to the customer

…………………………………………………………………………………………………..

55
…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………….…………[9]

UNIT 3 HOME TRADE PART 2

TOPIC: CREDIT TRADING

Objectives:
- name the main types of credit trading (hire purchase, deferred payment,
simple credit, monthly account, budget account
- describe how each type of credit trading works
- compare hire purchase and deferred payment

56
 - state advantage and disadvantages of each type of credit trading
- explain the importance of banks and finance houses in hire purchase

Main points.
Main types of credit trading, how each type works and their advantages and
disadvantages:

• Hire purchase:
How it works:
- Agreement between buyer and seller signed
- Buyer pays an initial deposit (a small percentage of the price)
- Equal number of weekly or monthly instalments paid over a period of time
- Interest is charged
- Goods collected or delivered to the buyer
- Goods become property of the buyer on payment of the final instalment
- Buyer must not sell the item until the last payment has been made
- Seller or finance company are the rightful owners of the goods until the last
payment
- If buyer defaults payments, seller can repossess the item, (if customer has
paid one third of the value at default, a court order is needed to repossess the
item)
- (if two-thirds of the value has been paid, goods cannot be repossessed)

• Advantages of hire purchase:

- Spreads the cost of expensive goods over a long period of time,
thereby enabling small businesses and small income earners have
access to purchasing these goods
- Instalments agreed at the beginning remain constant
- The consumer is able to use the item while paying for it
- Retailers are able to increase turnover

57
 - If all payments are made, the buyer owns the item
- If the item becomes outdated or worthless than original price, buyer
may choose not to pay the final instalment and return the item.

• Disadvantages of hire purchase:

- Interest too high
- If the item is repossessed, all the earlier payments made will be lost
- Hire purchase encourages customers to live beyond their means by
buying on item after another and end up defaulting or fail to make
payments
- Hire purchase is more expensive than paying cash
- A large amount of capital is required for running the business since
most of the capital is tied up in debts.
- Items on hire purchase are usually very highly priced

• Importance of Banks and Finance Houses in Hire purchase:

- Help finance hire purchase transactions by paying cash plus
commission to companies
- Help hire purchase instalment debt collection from customers through
credit transfer or direct debit
- Serve as guarantees in hire purchase agreements
- Provide insurance services on hire purchase goods.

• Deferred payment (also known as Extended credit)

How it works:
- Agreement signed by buyer and seller
- Deposit and instalments agreements may or may not start immediately
after receiving the goods.
- Subject to interest or finance charges.
- Items become the property of the buyer straight away.

58
 - Used to buy goods or poor resale value.
- If buyer defaults, seller or finance company does not repossess goods
but can sue for repayments of debt.
• Advantages of deferred payment:
- If payments are missed or delayed, items will not be repossessed.
- Items belong to the buyer right away.
- Encourages impulse buying.
- The consumer can have the goods and use them at the time of
purchase even if he/she has no money.
• Disadvantages of deferred payment:
- The buyer may be sued for defaulting.
- Buyer cannot end the agreement and return the goods.
- Very high finance charges/interest and expensive to the buyer.

• Difference between hire purchase and deferred payment

HIRE PURCHASE DEFERRED PAYMENT

Buyer only assumes ownership after Buyer assumes ownership upon
last instalment has been paid payment or deposit
Seller can repossess the goods if Seller cannot repossess the goods
the buyer defaults payment buy may sue for the balance
Buyer cannot sell the goods before Buyer ca sell the goods anytime
fully paying for them
Suitable for goods with a high resale Suitable for goods with little resale
value such as cars, furniture etc. value such as clothing and carpets

• Monthly Account.
How it works:
- Customer and seller are familiar to each other.
- Customer negotiates to have goods for a certain amount for whose
value would ably be paid on the customer’s pay-day.
- Seller agrees and allows the negotiations and opens up a page or
account with details of the customer deemed suitable to note.

59
 - Customer may or may not be required to sign.
- Customer owns the goods there and then.

• Advantages of monthly account:

- Retailer gets regular customers
- The business builds goodwill.
- Customers are not subjected to interest charges.
- Customers can have their necessities even when they have no money.

• Disadvantages of monthly account:

- Failure to settle debts may break friendship
- May lead to legal action by the seller against the buyer

• Budget account.
How it works:
- Customer makes an initial cash payment.
- Seller allows customer access to the desired goods charging a small
amount above the cash price.
- Customer is expected to a certain amount each month until the full
balance is cleared.
- A credit limit is set.

• Advantages of the Budget account:

- Customers can afford to pay for the goods which they cannot manage
to buy cash and improve their standards of living.
- Retailers increase their turnover.
- Once an account is opened, it is not subject to further deposit.
- Account holders may benefit from special offers made periodically.
• Disadvantages of the Budget account:

60
 - Some customers may fail to pay their debts and make the retailer lose
revenue.
- The system of spreading payments for items over a long period of time
can lead to some customers purchasing items they cannot afford and
find themselves in debts.
- A lot of the retailer’s capital by be tied up in debts, hence, the need for
larger capital.

• Simple credit.
How it works:
- Supplier/seller agrees to provide goods or services to the
customer/buyer
- Verbal agreement made.
- Payment to be made at a later date.
- No documentation done.
• Advantages of the Simple credit:
- Buyer able to buy goods that he/she would not otherwise be able to
buy.
- Retailer able to dispose some slow-moving items with an assurance of
receiving payments within the near future.
• Disadvantages of the Simple credit:
- Buyer may run into bankruptcy and fail to pay the amount owing.
- Retailer may fail to recover the debt, thus losing income.

TOPIC: CONSUMER PROTECTION AND CUSTOMER RELATIONS.

Objectives:
- explain the need for consumer protection.
- state the right of the consumer in relation to the market.
- explain the various ways by which the consumer can be protected (including
help from Botswana Bureau of Standards and Ombudsman).

61
 - examine the purpose of forming consumer associations.

Main points.
• The need for consumer protection:
Business malpractices aimed at maximizing profits our of their products and
services.
- Misleading advertisements and other publicity material giving false
information.
- Producing dangerous drugs.
- Labelling incorrect descriptions on packaging.
- Giving incorrect weights and sizes of goods.
- Producing goods unsuitable for the purpose shown.
- Manipulating prices or charging extremely high prices.
- Offering credit terms which may not give a true picture of the extra cost.
- Producing sub-standard quality by using cheap raw materials.

• Consumer rights in relation to the market:

These are legal outlines issued by government to providers of goods and
services as consumer expectations. Consumers have rights to:
- Be given facts and data about products and services for them to make
informed choice each time they buy the goods
- Safety against products, production processes and services which are
dangerous to health and life.
- Choose from a variety or range of products and services offered at
competitive prices while being assured of satisfying quality.
- A healthy physical environment that will enhance the quality of life at the
present and in the future.
- Representation in the making and execution of government policy in the
development and production of goods and provision of services.
- Be heard when expressing their complaints and views on dissatisfying
goods and services.
- Receive fair settlement of just claims and compensation for
misrepresented, poorly made goods or unsatisfactory services.

62
 - Acquire knowledge and skills needed for taking action to influence factors
which affect consumer decisions.

• Ways by which the consumer can be protected.

- Legislation of Consumer Laws: various Consumer Protection Acts have
been passed in many countries and can still be passed.
- Codes of practice: Organizations and Industries set up specialist
associations to develop own voluntary codes of practice as a
responsibility for consumer protection e.g. Consumer Affairs Unit, the
Ombudsman (Public Protector) and the Botswana Bureau of Standards
(BOBS).
- Consumer protection organizations: People getting together and form
associations and pressure groups to benefit the community by
addressing issues affecting the interests of the consumer in respect of
health, safety or prosperity.

• Purpose of forming Consumer Associations:

Give powers to the groups to:
- Test products and report on the performance and standards of
manufacture as compared to other similar products. This information is
availed to the consumers.
- Communicate consumers’ views to governments, large organizations
and industries, especially where people are unable to deal with their
own consumer complaints.
- Promote and develop public consumer awareness while attempting to
prevent consumer exploitation.
- Enforce consumer protection legislation so that consumers receive
appropriate compensation and businesses operate more ethically all
times.

63
TOPIC: TYPES OF WHOLESALERS

Objectives:
- identify the main types of wholesalers (general wholesaler, specialist
wholesaler, cash and carry wholesaler)
- discuss the functions performed by the wholesaler
- describe the characteristics of each type of wholesaler
64
 - explain the factors leading to the elimination of wholesalers
- discuss the implications of the elimination of the wholesaler
- explain the ways by which the wholesaler is surviving in the chain of
distribution

Main points.
• Main types of wholesalers.
• General Wholesalers
Characteristics:
- Owned by large companies with huge capital.
- Operate from large warehouses on regional or national basis.
- Sited for convenient access from local towns.
- Offer retailers delivery services.
- Allow retailers credit.
- Offer a wider range of goods.

• Specialist Wholesalers.
Characteristics:
- Specialize in a limited range of goods.
- Offer a wide variety of goods within their range or line.
- May operate regionally and nationally.

• Cash and carry Wholesalers.

Characteristics:
- Do not allow credit.
- Do not offer delivery or transport services.
- Mainly offer groceries.
- Sell in relatively small quantities to retailers as well as consumers.
• Functions performed by wholesalers:
• For manufacturers:
- Providing convenient sales outlets for manufacturers’ goods.

65
 - Turning manufacturers’ goods into cash by paying promptly for the
goods they receive. This supplies manufacturers with sufficient
working capital.
- Bearing the risk that the goods bought from the manufacturers may not
be what retailers or consumers want.
- Relieve manufacturers from transport related costs by operating their
own fleets to collect goods bought from manufacturers and distributing
to the retailers.
- Preparing manufacturers’ goods for sale by blending, branding,
labelling, packaging or bottling.
- Marketing manufacturers’ goods using attractive displays and mail
shots. Mail shots are eye-catching leaflets sent directly to retailers by
post to inform them about existing and new lines of products and any
special offers that may be of interest to them.

• For retailers and consumers:

- Breaking bulk to allow the retailers to stock products according to the
needs and demands if their customers.
- Provide retailers ready supplies of goods whenever they want them by
warehousing large amounts of many different types and varieties of
products.
- Some wholesalers offer delivery and credit facilities to retailers
- Provide information on the latest products available to the retailers so
that they can plan ahead and stock the products which could be
demanded by customers in the near future.

• Factors leading to the elimination of wholesalers:

- The growth of large-scale retailers who have their own warehousing
and distribution facilities are able to buy goods directly from
manufacturers in bulk and negotiate reduced prices.

66
 - The growing in size and number of large-scale retailers opening in the
outskirts of towns and cities has led to many small-scale retailers who
happen to be the customers for the wholesalers, declining and
reducing the number of customers for the wholesalers who might go
out of business.
- Many large-scale retailers have linked computer systems with
manufacturers, orders can automatically be placed with the
manufacturers for replenishment of stock. The orders made can be
delivered within hours due to good road and railway networks. This
makes it difficult for wholesalers to compete with manufacturers who
decide to supply retailers directly.
- In an attempt to become more competitive, manufacturers are using
branding and advertising to create desire and awareness for their
products and can only promote their products more than their
competitors by establishing good relation with large-scale retailers. On
the other hand, retailers encourage manufacturers to use various
methods of sales promotion for their products to help them increase
sales of their products.
- Some manufacturers opting to sell their products to consumers directly
by establishing own factory shops.
- Some manufacturers choosing to use sales agents through whom their
goods can be sold.
- Some manufacturers choosing to set up mail order divisions so as to
be able to sell their products directly to the consumers.

• Implications of the elimination of the wholesaler:

• The manufacturer has to bear the consequences of performing all the
functions performed by the wholesaler to the benefit of the producer.

67
 • The retailers and consumers would greatly miss the wholesaler’s services to
the extent that they would not afford to have access to some goods and
services thereby lowering the standards of living for the communities at large.
There would be price increases for bulk buying, shortages of commodities,
lack of information on the availability of goods and services for example.
• Survival of the wholesaler in the chain of distribution:
• Many wholesalers have set up large-scale retail outlets operating regionally,
nationally and even internationally with some customer reward systems. E.g.
Sefalana
• Some wholesalers are now open to both small retailers and consumers
• Some wholesalers perform the branding and blending functions on behalf of
some producers for their survival.

TOPIC: CUSTOMER SERVICE.

Objectives:

68
 - identify customer needs which make them buy from a particular seller
(information, assistance, care, refund or replacement)
- discuss the features of good customer services that can be offered by the
retailer (staff, premises, products, after-sales care etc.)
- explain the importance of good customer services
- explain how retailers should handle customer’s complaints.

Main points.
• Customer needs that hold them to particular sellers:
- Provision of information on goods and services: point out benefits,
features and advantages that meet their needs.
- Provision of assistance in any form from the seller: good service,
listening to customers.
- Provision of care: deal with enquiries, queries, orders, promptly and
give discounts, delivery service and credit facilities where possible or
necessary.
- Provision of refunds or replacements for unsatisfactory items.

• Features of good customer service:

(i) Staff: well trained, knowledgeable on products, confident with authority
to resolve situations.
(ii) Premises: should be clean and appealing: clear access road, layout
and display should be neat and attractive
(iii) Product: should be of expected quality that meet the tastes and
standards of the customers
(iv) After-sales care: Any form of technical maintenance and repair
services, hotline queries, information follow-ups.

• Importance of good customer service:

- Builds business’s reputation and sustains good customer relations.
- Encourages customer loyalty.

69
 - Gives business an edge over competitors.
- Brings feedback that is used to improve products and services.

• How retailers should handle customers’ complaints:

- Listen and understand to the complaint without arguing.
- Take note of the main issues that need attention.
- Distinguish sense from nonsense without accusing the customer.
- Keep calm and do not loose temper.
- Seek clarity on unclear issues with sympathy
- Assess the complaint, and discuss the resolution with the customer;
accepting responsibility and apologizing for the inconvenience causes
on behalf of the organization where necessary.

TOPIC: MARKETING BOARDS IN BOTSWANA.

Objectives:
- Explain the reasons for establishing marketing boards

70
 - State the functions of marketing boards
- Explain the operations of the Botswana Agricultural Marketing Board and the
Botswana Meat Commission
- Appraise the activities of the marketing boards with reference to the BAMB
and BMC

Main points.
• Reasons for establishing marketing boards.
- To encourage producers increase production for food security
- To provide storage facilities for producers’ harvest
- To ensure steady supplies of produce for the market.
- To stabilize the buying and selling price of the produce.
- To maintain quality and standards of produce through inspection and
research.
- To provide transport for the collection of produce.
- To provide ready markets for producers.

• Functions of marketing boards:

- Buy produce from producers/farmers.
- Collect and store produce.
- Provide inputs to producers at reasonable prices.
- Provide loans and free or subsidized animal health services.
- Control production levels to prevent over or under production
- Conduct research and advise producers.
- Sell produce to processors or consumers at home or abroad.

• Operations of the Botswana Agricultural Marketing Board and the

Botswana Meat Commission.
• The Botswana Agricultural Marketing Board (BAMB)
- Provide training for agricultural crop producers or farmers

71
 - Determine the price at which the farmers will be paid.
- Supply high quality seeds to farmers at little or no cost.
- Provide farmers with financial help in form of loans and grants to
purchase inputs such as fertilizers and pesticides.
- Spray farms at regular intervals.
- Supply packaging material during harvesting periods
- Buy the commodities
- Provide transport to collect the commodities.

• The Botswana Meat Commission (BMC)

• Similar to the Agricultural Marketing Board in concern with the
stock/meat production.
• Appraisal for BAMB and BMC.
- Restrictive policies conflict with consumer interest.
- Consumer welfare ignored, more attention to producer protection.
- Government price control does not allow market forces to determine
the prices on agricultural produce.
- Standardized prices deprive consumers of price protection.

TOPIC: COMPUTERS IN TRADING

Objectives:
- Identify the different ways computers and accessories are used in trading
- Describe the importance of computers in trading

72
 - Discuss the importance of computers in electronic commerce.

Main points.
• Different ways computers and accessories are used in trading.
- Electronic points-of-sale till system, bar codes and scanners
- Electronic data interchange
- Electronic funds transfer at point of sale.
• Importance of computers in trading.
- Retailers have access to management information.
- Enables retailers to check levels of stock and re-order the right amount
in time.
- Promote high efficiency by helping retailers to ensure that they have
the right products in stock at the right price and at the right time.
- Enable retailers make orders automatically and receive their invoices
electronically.
- Customers are able to make payments for items using debit cards.

Section A [10 marks]

Multiple choice questions

73
Choose the correct answer from those given and write A, B, C or D in the boxes
provided.

1. Which type of credit trading transfers ownership of a product to the customer

after full payment?
A. Budget account
B. Deferred payment
C. Hire purchase
D. Simple credit

2. Which of the following is a common advantage of credit trading?

A. Customers never default
B. Customers use products while paying
C. Reduces the cost of the product
D. Spreads the cost over a period of time

3. Which of the following is a function of the Botswana Bureau of Standards

(BOB)?
A. Co-ordinating quality assurance.
B. Giving bad publicity for dishonest traders
C. Prosecuting traders who display misleading adverts
D. Receiving complaints from distressed customers.

4. Which of the following is NOT a reason for consumer protection?

A. Incorrectly described items on the package
B. Goods unsuitable for the purpose intended
C. Manipulated prices that give false bargain ideas
D. Accompanying instruction manuals describing how to use the goods

5. Which of the following is a feature of good customer service?

A. Builds good reputation for the business

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 B. Clean and appealing premises
C. Encourages customer loyalty
D. Gives an edge over competitors.

6. Whenever a retailer receives a complaint from a customer, he/she should

A. Ask the customer to come the next day
B. Defend the management
C. Listen and understand to the complaint
D. Refer the complaint to the manager

7. Wholesalers perform many functions for the manufacturers and retailers.

Which of the following describes their main function?
A. Promotes manufacturers’ products and materials
B. Provide linkage between manufacturers and retailers
C. Provide after-sales services to retailers and consumers
D. Provide purchase limit on what retailers demand

8. Which of the following explains the way by which the wholesaler is surviving in
the chain of distribution?
A. Opening factory shops
B. Setting up large retail shops
C. Rewarding retailers and consumers
D. Using agents to sell goods to consumers

9. Which of the following functions is provided by the Botswana Marketing Board

to help farmers?
A. Paying insurance premiums for farmers
B. Paying labour costs for harvesting crops
C. Providing farming implements for farmers
D. Recruiting farm employees for farmers

10. Which pair of computer accessories would a retailer use to detect stock levels
in a shop?
A. A bar code and printer
75
 B. Keyboard and printer
C. Scanner and bar code
D. Scanner and keyboard

Section B

Structured questions
76
Answer the questions in the spaces provided on the question paper

1. Mr. Boya has been in employment for five years and is considering of buying
a new car on credit trading terms, but he is not sure of the type of credit
trading suitable for such expensive transactions.

(a) What is meant by credit trading?

…………………………………………………………………………………………..

…………………………………………………………………………………….…[2]

(b) Differentiate between hire purchase and deferred payment. [4]

…………………………………………………………………………..

…………………………………………………………………………………………..

…………………………………………………………………………………………..

…………………………………………………………………………………………..

………………………………………………………………………………………….

………………………………………………………………………………………[4]

(b) Mr Boya has the option to buy the van on hire purchase. Assess the use of
this method to Mr Boya
………………………………………………………………………………………
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 ………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………………

…………………………………………………………………………………[9]

2. Many countries have a range of consumer protection institutions and laws

meant to ensure customers’ safety and protection by applying relevant ways.

(a) Explain any three business practices from which consumers need to be
protected. [6]

Practice 1: …………………………………………………………………………….

………………………………………………………………………………………….

Explanation: …………………………………………………………………………..

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

Practice 2:……………………………………………………………………………...
78
…………………………………………………………………………………………

Explanation:
…………………………………………………………………………………………..

…………………………………………………………………………………………..

…………………………………………………………………………………………

…………………………………………………………………………………………..

Practice 3:
…………………………………………………………………………………………..

…………………………………………………………………………………………

Explanation:
…………………………………………………………………………………………..

…………………………………………………………………………………………

…………………………………………………………………………………………

………………………………………………………………………………………[6]

(b)(i) Name the institution responsible for seeing to it that products

manufactured are meet a certain standard and quality

………………………………………………………………………………….[1]
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(ii) Explain two more functions of that institution

Function 1:
…………………………………………………………………………

………………………………………………………………………………………

…………………………………………………………………………………….
..

Function 2: ………………………………………………………………………..

………………………………………………………………………………………

…………………………………………………………………………………..[4]

(c)Industries can form and follow their own ‘code of practice’. Explain what is
meant by ‘code of practice’

Explanation: ……………………………………………………………………….

………………………………………………………………………………………

………………………………………………………………………………………

……………………………………………………………..……………….……[2]

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3. LAWPIN wholesalers specialises in selling jewellery. It has used a mail order
system for some years and feels that it could increase sales by using e-commerce.
(a) what is meant by a wholesale business
…………………………………………………………………………………………………

………………………………………………………………………………………………[2]
(b) Differentiate between a general wholesaler and a specialist wholeasler
…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

……………………………………………………………………………………………….[4]
(c) Explain three functions of LAWPIN wholesalers

Function 1: ……………………………………………………………………………
.

Explanation…………………………………………………………………………….
Function 2: ……………………………………………………………………………
.

Explanation…………………………………………………………………………….
Function 3: ……………………………………………………………………………
.

Explanation…………………………………………………………………………[6]

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(d) Explain any two factors that have contributed to the decline of the
wholesalers in the chain of distribution.

Factor 1 ………………………………………………………………………………..

Explanation:
…………………………………………………………………………………………..

…………………………………………………………………………………………..
Factor 2 ………………………………………………………………………………..

Explanation:
…………………………………………………………………………………………..

…………………………………………………………………………………………..

(e) Describe three ways in which wholesalers are still likely to exist in chain of
distribution.

Way 1: ………………………………………………………………………………..

…………………………………………………………………………………………

Way 2:
………………………………………………………………………………….

…………………………………………………………………………………………..

Way 3: …………………………………………………………………………………

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 ……………………………………………………………………………………….[6]

(f) Outline two limitations that small-scale retailers face to buy directly from
manufacturers.

Limitation 1: ……………………………………………………………………………

Limitation 2…………………………………………………………………………….[2]

(c)Assess the use of e-commerce to LAWPIN Ltd when selling their products
…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

……………………………………………………………………………………………….[9]

4.Lopang is a newly recruited employee in a company providing travelling agency

services.
She wants to know at least three ways that could help her handle customer
complaints.
(a) Explain to Lopang those three ways

Way1……………………………………………………………………………………….......

………………………………………………………………………………………………..
...
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Way 2…………………………………………………………………………………………..

………………………………………………………………………………………………..
...

Way 3…………………………………………………………………………………
………..

……………………………………………………………………………………………….
[6]
(b)Explain two benefits of a good customer service to the business
…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………….…[4]

………………………………………………………………………………………………….

……………………………………………………………………………………………….[6]

84
HOME TRADE PART THREE

UNIT 4. PURCHASING AND SELLING PROCEDURES.

TOPIC: SIMPLE CONTRACT OF SALE

Objectives:
- explain the meaning of a contract of sale
- define the terms offer and acceptance in sales contract
- explain the importance of conditions and warranties in a sales contract
- differentiate between actual sale and an agreement to sell
- determine the points on which agreement must be reached (price, quality,
delivery, condition of payment, quantity).

Main points.
• A contract of sale – a legally binding agreement of sale between a buyer and
a seller of a product or service.
• Offer in a sale contract – a statement made by a seller of a product or
service of willingness to part with the particular product or service.
- usually made to a specific person but also be made to a group of
people or general public.
- can not be withdrawn after acceptance.
- conditional offer must clarify the conditions attached to it.
- must be communicated to a prospective buyer.
- made for a specific period and not forever.
• Acceptance in a sales contract – to agree to buy a product or service at a
certain price.

85
 - must be accepted in the form made not conditional to any other.
- must be made within a reasonable period of time.
- must be communicated to the offeror promptly.
- cannot be withdrawn once has been made.
- can be written, verbal or by conduct (implied).

• Forms of contract:
(i) Verbal.
(ii) Written.
(iii) Deed or memorandum of agreement.
(iv) Implied by action or conduct of the parties concerned.
• Importance of conditions and warranties in a sales contract
- Terms of a contract of sale are obligations that both the seller and the
buyer have to meet without fail as per agreement for the contract to be
valid.
- Conditions are items in an agreement that the buyer and seller have to
adhere to if the contract has to remain valid.
- Warranties are legal documents that promise buyers that the products
bought will work, usually for a certain period of time. Warranties give
buyers of products assurance of having contract but aggrieved parties
can claim financial compensation.
• Agreement to sell and Actual sale.
Agreement to sell is where the buyer and seller agree on how the transaction
is going to proceed and conclude but no transfer of ownership takes place. In
Actual sale, the buyer pays the full buying price needed by the seller, goods
are delivered and the ownership is legally transferred to the buyer.
• Points on which agreement must be reached.
- These are points on which the buyer and the seller must agree upon
regarding the sale in order to reduce chances of dispute at a later
stage of the agreement and include: price of the product, quantity,
quality, delivery and conditions of payment.

86
 § Price: the agreement should specify what the quoted price includes
such as carriage paid, free on rail (f. o. r), carriage forward (c.f.), Ex-
works or Ex-warehouse, and Loco. Whatever the price agreed is, must
be clearly understood by the buyer and the seller.
§ Quantity: the buyer must clearly specify the quantity and unit of
measurement required in either imperial or metric system to the seller.
§ Quality: Buyer and seller must agree as to the exact quality they are
dealing with.
§ Delivery: Agreement should be made and reached in respect of place,
time and cost of delivery.
§ Condition of payment: Buyer and seller must agree on the dates and
mode of payment (Cheque, cash, bank draft, postal order, electronic
transfer, credit card, etc.).

TOPIC: PURCHASING ACTIVITIES.

Objectives:
- identify the sources of supply for a particular product.
- state the process of choosing a supplier for a particular product (define
the need, research the market, adapt the sources to the need,
enquiries, evaluate responses, place orders, etc.)
- show the follow-up procedures after receipt of order
- prepare the documents used in buying and selling (order, enquiry,
invoice, statement of account, etc.)
- state the rules for storing different types of stock
- complete stock record card

Main points
• Identifying sources of supply for a product:
- Suppliers of a business could be for goods and services needed in
order to perform its activities properly or supplies of raw materials,
machinery, equipment, spares and stock of goods for resale. In
addition, a business needs to purchase services which are necessary
for it to create the goods and services it sells. Therefore, a large
proportion of a business’s costs are represented by supplies of
87
 materials and services and need to be controlled by the purchasing
function. The responsibility of the purchasing function includes price,
quality and delivery.
- The sources of supplies could be manufacturers, wholesalers or
agents.
- Of the many suppliers available, it may be found that: Late or non-
delivery, poor and sub-standard material, incorrect specifications and
high prices are likely to have an effect on the profitability of the
business.
- The avoidance of delayed production, excessive material waste caused
by incorrect materials and the avoidance of excessive stocks among
the goals of an efficient buying or purchasing function of a business
- Choosing the right suppliers for the supplies required begins from the
original demand for production control, inventory control, efficient store
keeping and departmental management who forward their purchase
requisitions to the relevant purchasing authority in the business.

• The processes of choosing a supplier:

The main purchasing processes or procedures are:
(i) Supplier search for possible suppliers using own past records,
Telephone directories, Trade journals, Magazines, etc.
(ii) Sending enquiries or tenders to possible suppliers fully
specifying the requirements.
(iii) Receiving of quotations and tenders and vetting them by the
purchasing authority in liaison with originating sources
(iv) Supplier selection; considering the prices offered, quality,
delivery or lead-time, quantity and ability to supply the product or
material continuously.
(v) Dispatching of the purchase order is done with copies
distributed to the supplier, accounts, originating department,
stores, goods received, inspection and progress chasers.
(vi) Progress chasing and monitoring of deliveries.
(vii) Receiving of goods.

88
• Follow-up procedures after the receipt of orders.
- Goods should be received properly, inspected and raising a Goods
Received Note (GRN).
- The GRN is a document used in the supplier invoice approval
procedure.
• Store keeping:
- Store keeping for whatever stock involves issuing to the selling,
production or user departments and receipt of materials, storage space
organization, protection of stock from deterioration and stock-taking.
• Rules for storing different types of stock
- Frequently issued stock should be stored conveniently placed in the
store room.
- Items issued together should be kept together or next to each other
- Dangerous items should be separated and kept in lockable bins with
warning signs placed visibly.
- Flammable substance should be kept away from open flames and
warning signs posted to remind staff.
- Stock taking is carried out on a Periodic or Perpetual (Continuous)
basis.
• Stock Record Card:
The Stock Record Card is used to record/enter the receipts and issues of a
stock item to obtain a full picture of the position of the stock item. The design
of the cards varies from organization to organization, but the main parts
contained could be: the item details/name, the receipts column, the issues
column and the balances column.

89
ILLUSTRATION:
Receipts and Issues of item Z for the month of June are as follows:

Receipts Total Issues

Units value (BWP) units
1st June 2 000 @ P2.00 each 4 000
2nd June 3 000 @ P2.20 each 6 600
3rd June 2 000 @ P3.30 each 6 000
4th June 3 000
5th June 3 000 @ P2.00 each
th
6 June 6 000
There were no opening stock of item Z.

Required: Record the receipts and issues of item Z in the Stock Record Card
appropriately.

Stock record card

Item: Z Maximum level: 5 000

Stores Ref: Minimum level: 1500
Location: Re-order level: 500

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Date Receipts Issues Balance

Description Balance
Description Quantity Quantity
st
1 Jun.
Suppliers name 2 000 2000
2nd
Another supplier 3 000 5000
Jun.
Supplier 3 2 000 7000
3rd Jun.
Requisition No 06 3 000 4000
th
4 Jun.
Supplier 3 000 7000
th
5 Jun.
6 000 1 000
6th Jun.

• The Stock Record Card can be designed in various forms to include columns
relevant for stock control and stock valuation purposes.

• Documents used in buying and selling:

- Requisition: used for requesting goods from stock in store and a

purchase requisition is used when goods are not in stock and have to
be bought by the purchasing authority.
- Sales enquiries: Buyers can find out about the price and other details
of the goods they want to buy by sending letters of enquiry and in
return receive catalogues and price lists, quotations, offers, or
estimates. The details might also be obtained by telephone, telex,
facsimile (fax), television or internet or by visiting show rooms.
- Order: Used to request the seller to supply goods. Contains name and
address of supplier, date of order, quantity, descriptions, catalogue
number and price of each item clearly and accurately completed,
method of delivery and delivery address.
- Advice or Dispatch Note: Used to inform the buyer that the order has
been dispatched or is ready for dispatch.

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- Delivery Note: Serves as a receipt for goods delivered for the supplier
and as an advice of goods delivered for the customer or buyer.
- Goods Received Note: Used to notify internal departments concerned
of the arrival of a consignment and conditions of the goods.
- Invoice: Used to inform the customer of goods bought and the amount
charged in a credit transaction.
- Credit Note: Used to notify the customer of a reduction in the amount
charged on an invoice because of damaged or lost goods in transit
resulting to an overcharge.
- Debit Note: Used to notify the customer of an undercharge in the
invoice
- Statement of Account: Used to inform the customer of the total
amount owing to the seller and to request payment. Contains a record
of all transactions for a given period. It may begin with a balance
brought down followed by invoices for credit sales entered in debit (Dr.)
column and added to the balance; then credit notes sales returns and
cheques received and any form of payments made entered in the credit
(Cr) column and deducted from the cumulative balance. The balance
column is updated after every entry, the last amount in the balance
column is the amount owing at the end of the period covered by the
statement.

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Section A [10 marks]

Multiple choice questions.

Choose the correct answer from those given and write A, B, C or D in the boxes
provided.

1. Which of the following is a clear element of a contract of sale?

A. An agreement of sale between the seller and buyer

B. A promise made by the buyer to purchase the item seen
C. An offer made by the seller to sell the item wanted by the buyer
D. An acceptance made by the buyer to pay for the acquisition of the item

2. Which of the following defines the term ‘offer’ in a contract of sale?

A. Statement not usually made to a specific person

B. Statement that can be withdrawn after being made
C. Statement not to be communicated to the prospective buyer
D. Statement made by the seller of the terms and conditions to sell

3. What does the term ‘Actual sale’ in a contract of sale mean?

93
 A. An agreement has been signed and a deposit has been paid
B. A strong intention to purchase the item has been shown
C. The ownership of the item in the sale has been transferred
D. The buyer has paid a large deposit but does not collect the item

4. Which of the following is a point of agreement in a sales contract?

A. Conditions to withdraw the agreement

B. Price specification in the agreement
C. Warranties in the agreement
D. Written agreements

5. Which of the following is a condition of a contract of sale?

A. The buyer must inspect the goods

B. The goods must belong to the seller
C. The goods must be delivered before the buyer pays
D. The quality of the goods might be unsuitable for the purpose

6. In what form should an internal request for goods to be drawn from stock be?

A. A goods received note

B. A stock record card
C. An order form
D. A requisition

7. Which of the following purchasing procedure should be done before supplier

selection?

A. Consider the lowest prices quoted

B. Consider the credit worthiness of the supplier
C. Obtaining quotations from possible suppliers for vetting
D. Sending enquiries and order from the first responding supplier

94
8. Which of the following is not a document used in the purchasing of goods and
services

A. Advice note
B. Goods received note
C. price
D. Quotation

9. When is a credit note sent to a customer?

A. To correct delays in making payments

B. To correct an overcharge in an invoice
C. To correct an undercharge in an invoice
D. To correct omissions of discount

10. How often does a supplier send a statement of account to the buyer?

A. Every month
B. Every week
C. Every time it is requested for
D. Every time a transaction is made

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Section B
Structured questions.
Answer the questions in the spaces provided on the question paper.

1. Bontle is planning to buy a bicycle for her son.She boarded a bus from
Mochudi to Gaborone at a P15.00 fare. She saw a display of bicycles by the
window of a shop showing inviting prices for different bicycles on price tags.
Finally, she decided to buy one for P250.00 on a contract of sale basis.

(a) Explain the meaning of ‘contract of sale’

………………………………………………………………………………………

………………………………………………………………………………………

……………………………………………………………………………………..

………………………………………………………………………………….[2]

(b) The window display seen by Bontle was an offer and the signing of an
agreement in a sales contract is an acceptance. Define the terms ‘offer’
and ‘acceptance’ in a sales contract.

96
 (i) ‘Offer’ in a sales contract

………………………………………………………………………………………

………………………………………………………………………………………

…………………………………………………………………………………[2]

(ii)Acceptance in a sales contract:

………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………...…[2]
(c) Identify and explain the form of sales contract Bontle entered into when
she boarded the bus from Mochudi to Gaborone

Form of sales contract …………………………………………………………...

Explanation: ……………………………………………………………………….

………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………………

…………………………………………………………………………………..[3]

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 (d) Briefly explain the importance of ‘terms’, ‘conditions’ and ‘warranties, in
respect of sales contracts.

Terms………………………………………………………………………………

………………………………………………………………………………………

……………………………………………………………………………………

Conditions………………………………………………………………………….

………………………………………………………………………………………

………………………………………………………………………………………

Warranties
…………………………………………………………………………

………………………………………………………………………………………
.

………………………………………………………………………………….[6]

2. On signing the agreement, Bontle realized that she would not carry the bicycle
home with her since the sale was incomplete, but the agreement points were
pleasant to her.

(a) Differentiate between ‘Actual sale’ and ‘agreement to sell.’

98
…………………………………………………………………………………………..

…………………………………………………………………………………………..

…………………………………………………………………………………………..

…………………………………………………………………………………………..

…………………………………………………………………………………………..

…………………………………………………………………………………………..

………………………………………………………………………………………[4]

(b) Explain what you understand by points on which sales agreements must
be reached.

………………………………………………………………………………………….

…………………………………………………………………………………………

…………………………………………………………………………………………

………………………………………………………………………………………[2]

(c) Explain any four points of agreement in a sales contract.

Point 1: ……………………………………………………………………………….

………………………………………………………………………………………….

…………………………………………………………………………………………..

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 Point 2:
…………………………………………………………………………………

…………………………………………………………………………………………..

Point 3:
…………………………………………………………………………………

…………………………………………………………………………………………..

…………………………………………………………………………………………..

Point 4
…………………………………………………………………………………………..

…………………………………………………………………………………………..

3. Dan Boy is employed as a Purchasing Manager in a newly set up electric

cable and equipment manufacturing and distribution company. The company
is still small, so he is expected to establish purchasing and supply procedure
standards for materials and finished goods in the company. Production and
distribution activities have yet started as all activities are awaiting the arrival of
the materials and equipment.

(a) Explain two functions of Dan Boy as the purchasing manager

………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………………
100
 ………………………………………………………………………………………

…………………………………………………………………………………[4]

(b) State the four procedures for selecting supplier for materials and stock of
goods Dan Boy would use.

Procedure1: ……………………………………………………………………….

…………………………………………………………………………………..
….

Procedure 2: ……………………………………………………………………

……………………………………………………………………………………

Procedure 3: ………………………………………………………………………

…………………………………………………………………………………….
..

Procedure 4: ………………………………………………………………………

………………………………………………………………………………….[8]

On 1 September 2019 Dan Boy had the following records of purchases of

production materials in store and issues to the factory from the stores
during the first four months.

Date Material A Purchases Material A Issues

Quantities (Catons) Quantities (Catons)
13 Feb. 19 200
8 Mar. 19 400
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 10 Mar. 19 500
11 Apr. 19 600
12 May 19 400
20 May 19 600
15 June19 500
25 June19 400

There was no opening balance for February 2019.

(c) Record the information in the Stock Record Card below showing the
correct quantity balances only.
[10]

STOCK RECORD CARD

Item: Material A Maximum level:

Stores Ref: Minimum level:
Location: Warehouse Re-order level

Date Receipts Issues Balance

13 Feb. 19
200 ?

102
 8 Mar. 19 400 ?

10 Mar. 19 500 500 1 100

11 Apr. 19 600

12 May 19 200

20 May 19 600

15 Jun. 19 500

25 Jun. 19 400

[20]

4. Buyers and sellers use documents to record all their transactions because these
commercial transactions are agreements between traders. Maiba just bought electric
cables for his business supplying electricity suppliers.

(a) Identify the first three buying documents that could have been used by Maiba
‘s business
………………………………………………………………………………………………

………………………………………………………………………………………………

…………………………………………………………………………………………[3]

(b) State two rules for storing different types of stock.

…………………………………………………………………………………………..

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 …………………………………………………………………………………………

………………………………………………………………………………………[2]

UNIT 5 INTERNATIONAL TRADE PART 1

TOPIC: THE PATTERN OF FOREIGN TRADE

Objectives:

- Differentiate between Home trade and Foreign Trade

- Explain why Botswana takes part in international trade
- State the advantages and disadvantages of foreign trade to Botswana
- State the characteristics of Botswana’s foreign trade
- Define the terms “balance of trade” and “balance of payments”
- Classify the current account items into visible and invisible exports and
imports
- Differentiate between current and capital accounts in the balance of payments

104
 - Show how the balance of payments is calculated
- Explain the implications of a favourable balance or unfavourable balance of
payments to Botswana.
- Explain how a country can deal with an unfavourable balance of payments
- Explain the importance of the International Monetary Fund and the World
Bank
- Explain the problems faced by exporters and importers

Main points.

• Differences between Home trade and Foreign trade:

Home trade Foreign trade
Buying and selling of goods and Buying and selling of goods and
services within one country services between countries

Consists of wholesale and retail Consists of export and import trade

trade

No trade barriers Trade barriers exist.

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 Use same currency Different currencies used
Common units of measures and Different units of measures and
weights used weights used

• Why Botswana takes part in International Trade:

§ Interdependence – Some countries make more goods or provide
more resources than they can consume and so sell access to other
countries.
§ Scarcity of resources: Some goods, materials or services are not
available in Botswana because of lack of natural resources, human
expertise or right climate to grow certain types of produce, so has to
depend on other countries
§ Cost of production: Some goods and services are cheaper to
produce in other countries although they can be produced in Botswana
but at a higher production
§ Earning foreign exchange: Botswana participates in international
trade in order to earn foreign money with which to pay for imports.
§ Seasonal goods: To make seasonal produce available
§ Relations: To create good relations with other countries
§ Surplus: To get rid of surplus local products
§ Employment: To create employment opportunities
§ Technology: To acquire new technology.
• Advantages of international trade to Botswana.
- Botswana has access to a wider choice of goods and services available to
consumers.
- Botswana manufacturers enjoy economies of scale – decreases in the
cost of production or purchase price are made possible when goods are
produced in large quantities to have surplus for export.
- Botswana has improved relationships with other nations who trade with it,
- Botswana creates jobs for workers

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 - Botswana workers and consumers have an increased standard of living.
• Disadvantages of international trade to Botswana.
- Botswana may become a dumping place for inferior quality goods from
other countries.
- Local industries and commercial undertakings may be taken over by
foreigners.
- Botswana’s natural resources may be over extracted to the benefit of
other countries.
• Characteristics of Botswana’s Foreign Trade:
- Trade pattern of largely exporting raw materials and primary products
which cannot be processed into finished goods within the country such as
diamond, copper-nickel, gold, beef, soda ash, tourism, arts and crafts.
- Importing high value goods such as petroleum products, vehicles,
transport equipment, machinery, food beverages and tobacco, textile and
footwear, metal products, chemical and rubber products.
- Highly vulnerable to market fluctuation due to dependency of raw
materials and primary goods.
- Botswana Bureau of Standards helping with quality assurance.
- Export-led growth strategy created by government have helped
manufacturers to take an increased share of the domestic market.
• Balance of Trade and Balance of Payments:
Balance of trade is the difference between a country’s visible imports and
visible exports; a record of the overall flow of physical goods between
countries. Balance of payments is a record of a country for all the financial
transactions, visible and invisible, between the country and the world over a
given period of time.

• Classification of Current Account Items:

- Visible items refer to foreign trade in goods, when, in a given period,
the value of goods exported by a country is compared with the value of
goods imported, the result is called the visible balance or visible
balance of trade.

107
 - Invisible items refer to foreign trade in services. When, in a given
period the value of services sold to other countries brings money into
the country and is compared with the value of services received by the
country, taking money out of the country. The result is called invisible
balance or invisible balance of trade. It may be a deficit or surplus or
unfavourable or favourable respectively.
- When the visible balance and the invisible balance are compared, it is
called, the current balance or balance of payments on current account,
and, as well, could be favourable (surplus) or unfavourable (deficit).
- Capital items refer to the amount of money a country lends out to other
countries over a period of time and the money a country borrows from
other countries during the same period. When a country lends, a
capital sum of money is transferred out of the country and regarded as
an import in the same wan as payment for imported goods. When
money is borrowed, a capital sum of money from other countries is
received and regarded as an export in the same way as receiving
money for exported goods.

• Current and Capital Account in the Balance of payments.

- The Current account records the export and import of goods and
services. Thus, it shows the trade in visible imports and invisible
imports as well as visible exports and invisible exports. It is calculated
by subtracting the value of both visible and invisible exports. Thus,
total exports minus total imports equals Current balance of payments
or Balance of payments=Total exports - Total imports.
- The Capital account of the balance of payment records all foreign
purchases of assets a country makes resulting into capital outflow
and/or record all foreign sales of assets a country makes resulting into
capital inflow. The capital account also shows the amount of money a
country borrows from other countries and the amount of money it lends
out.
- The capital balance is calculated by subtracting the net capital
payments from the net capital receipts.
- Capital balance = Total capital receipts minus Total capital payments.
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• Implications of a favorable or unfavorable balance of payment to
Botswana:
- A favorable balance of payment means Botswana’s exports exceed
imports and the implication would be that the country can afford to
implement development projects, save money in the form of foreign
reserves that can help in paying for imports and also help in times of
difficulties.
- An unfavorable balance of payment means Botswana’s imports
exceed exports and the country might become a borrower from the
World Bank, International Monetary Fund (IMF) or other friendly
countries or its citizens. Development projects would either be
delayed, postponed or even abandoned/cancelled and the peoples’
standards of living would become poor.

• How a country can deal with an unfavourable balance of payment.

- Devalue its local currency to make her esports cheaper in foreign
markets and make her imports expensive to reduce importation.
- Impose quotas on the importation of some unnecessary goods and
services and even imposing quotas restricting exportation of some
goods.
- Impose tariffs or customs duty (import tax). Customs duties restrict
imports by making import of goods too expensive and discourage
people from importing goods.
- In extreme cases a country would ban the importation of some goods
that are not essential to the community or goods that are harmful.

109
 - In order to cause a fall in spending and a fall in imports, the country
can push up interest rates.
- A short-term way is by a country borrowing money either from other
countries or within the country just to postpone the problem though the
debt will still have to be paid.

• The Importance of the World Bank and the International Monetary Fund
(IMF).
- The World Bank, also known as the International Bank or International
Bank for Reconstruction and Development (IBRD) is an agency of the
United Nations established in 1945 with the primary function of making
funds available to help developing countries. Member countries agree
to subscribe quotas to the bank. It gives loans to finance specific
projects of investment in underdeveloped countries.
- The International Monetary Fund (IMF) was set up in 1944 with the
objective of working towards free trade at stable exchange rates.
Under the original agreement, members agree to make their
currencies convertible into other currencies and gold at fixed rates of
exchange and not to impose exchange or import controls without
permission from the fund. The function of the fund is to make foreign
exchange resources available to members who run into balance of
payments difficulties. Each member country has a deposit called a
quota, partly paid in gold and partly in its own currency with the fund.
The size of the deposit is fixed in relation to the country’s share in
world trade. In return a member country granted certain automatic
drawing rights from the fund and the fund has the power to make
larger loans and grant standby credits to be drawn on if required.

• Problems faced by Exporters and Importers.

§ Documentation: foreign trade needs more documents
§ Language: documents, information leaflets, advertising material, labels
etc. may need to be in foreign languages.
§ Foreign currencies: transactions need conversion of currencies.

110
 § Measures and weights differ (imperial and matric systems)
§ Debt collection difficulties.
§ Distance and transportation difficulties.
§ Legal and cultural differences.
§ Import duties and import and export restrictions.

TOPIC: PROCEDURES AND DOCUMENTS IN FOREIGN TRADE.

Objectives:
- list the middlemen engaged in foreign trade (merchants, brokers, factors,
forwarding agents)
- state the functions of each of the middlemen in foreign trade
- identify the documents used in foreign trade
- explain the functions of each document in relation to the export or import of
merchandise
- state the importance of each document

Main points.
• Merchants (traders):
- Export merchants buy and sell on their own behalf and receive profits.
They find their own customers to whom they export to.
- Import merchants find customers in the receiving country.
• Agents: work on behalf of other businesses and receive commission.
- Import and Export agents: export agents make arrangements for
transport, insurance cover for goods being exported and see that all
the export documents are complete and in order. Import agents make
arrangements to receive goods for importing firms.

111
 - Del credere agents: firms that accept responsibility for debts which
may arise from failure of their clients to pay for the goods provided.
The exporting business is protected but has to pay extra to the agent
for the service.
• Brokers: agents who assist traders carry out their transactions and receive
commission called brokerage. They never handle goods physically but bring
buyers and sellers face-to-face.
• Factors: agents who are usually in possession of their principal’s goods.
They collect the goods from the seller and physically go to sell them. They
sell in their own name.
• Forwarding agents or freight forwarders: make arrangements for the
transfer of exported goods by preparing documents, booking transport and
obtaining insurance cover.
• Shipping brokers: specialist in arranging shipping space for goods to be
exported by ship.
• Packaging agents: make sure exported goods have the best possible
packaging and correct protection for their journey.

Documents used in foreign trade and their functions.

1. Bill of lading: used in shipping of goods, gives full details of the goods, their
destination, ownership titlement and the terms under which the shipping firm
agrees to carry the goods. Three copies are raised, one retained by the
exporter, one copy is given to the captain of the ship and one goes to the
importer who has to make it available when collecting the goods when they
arrive.
Importance: It is a receipt to the exporter for the goods shipped

112
 - It is a contract signed by the ship’s captain to carry the goods to
the intended destination
- It is proof of having received goods on board ship.
- It is proof of titlement a person can use to claim possession of
the goods.
- It allows goods to be bought or sold while still at sea (quasi-
negotiable).
2. Manifest – A summary of all the cargo and Bills of Lading a ship is carrying.
3. Air Waybill – Used in air transport serving as a receipt for goods by the
captain of the air craft to the sender of goods. It shows details of goods,
departure and destination points and consignor and consignee.
4. Freight Note – The charge or bill for transporting goods by ship sent to the
exporter by the shipping company.
5. Import License – Used to enforce quotas. Issued by the importing
government allowing certain commodities into the country.
6. Certificate of Origin – A document certifying the origin country of the goods;
sometimes used by the importer if it has been agreed that the goods of one
country will be allowed to enter another country at a favourable tariff rate.
7. Export License – A document sometimes needed before certain types of
goods are allowed to leave a country.
8. Bill of exchange – A document issued by the seller of the goods requiring the
buyer to pay a sum of money on demand, or on an agreed future date.
9. Indent – A letter of instruction asking the agent of a principal to order goods
from abroad on behalf of the principal. The indent contains the description of
goods to be ordered; quantity of goods required, price at which goods are
offered; delivery instructions; and the terms of payment. The indent can be
open or closed. Open indent is where the importer does not specify the
supplier, so that it will be up to the agent to find a supplier with whom to place
an order. Closed indent is one in which the importer specifies the supplier
from whom the agent should place an order.
10. Consular invoice – A normal ordinary invoice signed by a consulate or trade
attaché of the exporting country to certify the correctness of the information
contained in the invoice to the customs authorities of the importing country for
the purpose of customs duties levy.
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 Importance of the consular invoice:
- The practice certifies the correctness of the price in the invoice for the
correct customs levy.
- The practice prevents the importation of prohibited goods.
11. Charter party – A contract made between an exporter and importer and a ship
owner for hiring a ship to transport goods. A charter part can be either as a
voyage or time charter. A voyage charter is issued for a journey only. A Time
charter is issued when hiring a ship a period of time. The hirer will have the
ship for the agreed duration during which many delivery trips can be made.
12. Shipping Note – A document prepared by the consignor and given to the port
authorities when goods are taken to the docks. It contains details of goods
including handling instructions, transporting ship’s name and destination.
When signed by the port authorities, it acts as a dock receipt, the consignor
can use it as proof that the port authorities have accepted to have the goods
loaded on the specific ship.

TOPIC: METHODS OF PAYMENT

Objectives:
- state the methods of payment by the importer
- explain each method of foreign payment
- state the advantages and disadvantages of each method
- show how commercial banks help to facilitate foreign trade

Main points.
• Methods of payment by the importer:
114
 Letter of credit or documentary credit: The importer banks the money for
the exporter at a local bank before the exporter sends the goods. The local or
home bank issues a letter of credit in favour of the exporter promising to send
the money to the exporter provided the exporter can prove that the goods
have been dispatched.
• Advantages:
- Encourages the exporter to send the goods on credit
- Guards against default by the importer
- Gives the importer assurance of ownership of the goods before
payment is made.

• Disadvantages:
- Can be risky if the letter of credit is revocable as it can be cancelled by
the importer.
- Any small complication in paper work may cause delays.

Direct payments: Used when the exporter and importer are established
traders and trust each other.
(a) Bank drafts – cheques drawn on the importers’ banks instead of own
account.
Advantages:
- Exporter has confidence in receiving payment against the draft
- Saves time in processing the transactions

(b) Electronic Cable Transfer – transfer of funds electronically between

banks.

115
 Advantages:
- The method is extremely quick
- Useful for urgent payments

Disadvantages:
- No money is physically transferred
- Require complete trust between banks
- May only be operated by same international banks
- Payments may be delayed and delay the transactions

Bills of exchange: Documents drawn and signed by the exporters when a

sale of goods has been agreed. The documents are then passed to the
importers for acceptance by signing across to signify the agreement to make
payment of the sum involved by the date shown on the bill. Common date is
three month’s period. The procedure is legally binding, provided the goods
are delivered and should arrive their destination before the bill matures.

• Advantages:
- Can be discounted to enable exporter get immediate cash before the
maturity of the bill.
- Enables the importers obtain short-term credit when importers are not
willing to give them.
-
• Disadvantages:
- The exporter looses the discounted amount from the actual charge the
importer was to pay.

Documentary bills: Like the bills of exchange, this means of payment is

handled between banks. It is a bill of exchange attached to other shipping
documents to show that the goods have been dispatched. It is drawn by the
exporter after shipping the goods and given to the bank with instructions to
hand the documents to the importer’s bank. The bank will not release the
documents till the importer has accepted the bill or has paid the money.

116
 Advantages:
- Used only by trustworthy traders.

Disadvantages:
- The bill can still be dishonored when it falls due.

1. Traveler’s cheques: Cheques for fixed amounts sold by a bank to customers

and can easily be cashed in a foreign country.

Advantages:
- Suitable for carrying money out of a country.
- Can be used to purchase goods and services from any business
- If lost and reported in time, a refund can be made.
Disadvantages:
- They are valueless until countersigned by the person to whom it was
issued.

• How banks help to facilitate foreign trade

- By financing importers and exporters through loans
- By processing payments for importers through documentary credits,
bank drafts, electronic cable transfers and travelers’ cheques.
- By transferring funds abroad helping importers to pay for their imports
- By giving exporters and importers business advice.
- By discounting bills of exchange to assist exporters with working capital
- By providing mortgage finance.

117
Section A [10 marks]
Multiple choice questions
Choose the correct answer from those given and write A, B, C or D in the boxes
provided.

1. Which of the following differentiates home trade from foreign trade?

A. Contains trade barriers
B. Contains may languages
C. Consists of wholesale and retail trade
D. Consists of legal, banking and tax systems

118
2. Which of the following is a reason for Botswana participating in foreign trade?
A. To be self-sufficient in production
B. To provide a wide choice of goods
C. To produce goods more cheaply than elsewhere
D. To reduce costs of production for local goods

3. Which of the following is a name given to an organization or individual

engaged in selling goods to other countries?
A. An exporter
B. An importer
C. A retailer
D. A wholesaler

4. Which of the following defines balance of trade?

A. The value of all visible exports and imports
B. The value of all invisible imports and exports
C. The difference between all visible exports and visible imports
D. The difference between all invisible exports and invisible imports

5. Which of the following situations would result into a favourable balance of

payment of a country?
A. Total exports being equal to total imports
B. Total exports being less than total imports
C. Total imports being less than total exports
D. Total imports being more that total exports

6. Which of the following is one of the ways a country can deal with an
unfavourable balance of payments?
A. Appreciating the value of its currency

119
 B. Cancelling trade barriers
C. Depreciating the value of its currency
D. Subsidizing local export manufacturers

7. Which of the following is a way commercial banks help exporters and

importers?
A. Forwarding goods to importers
B. Providing credit insurance cover
C. Providing loans to importers and exporters
D. Providing foreign currencies to pay import workers

8. Which of the following relates to a bill of lading?

A. A document of instruction to an agent to order goods
B. A document used for sending goods by air
C. A document used for sending goods by road
D. A document of title to goods

9. A documentary credit is a facility

A. Used to restrict credit buying in foreign trade
B. Used by exporters to obtain information in foreign trade
C. Used to settle disagreements between importers and exporters
D. Used to facilitate the payment for imports by commercial banks

10. Which of the following is not an advantage of exporting goods?

A. It generates foreign exchange
B. It is important to pay imports
C. It helps in dumping unwanted surplus
D. It results into self-sufficiency of a country

120
Section B
Structured questions
Answer the questions in the spaces provided on the question paper.

1. Mr Phutso is a furniture manufacturer who sells his products locally and abroad
(a) What is meant by foreign trade?
…………………………………………………………………………………………………

……………………………………………………………………………………………..[2]

121
(b)Differentiate between home trade and foreign trade.
…………………………………………………………………………………………………

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

………………………………………………………………………………………………[4]

(c)Explain any two reasons why Botswana takes part in foreign trade.

Reason1
…………………………………………………………………………………………………..

…………………………………………………………………………………………………

…………………………………………………………………………………………………..
Reason2
…………………………………………………………………………………………………..

…………………………………………………………………………………………………

…………………………………………………………………………………………………..

2. Country Y is importing and exporting large quantities of minerals and meat. It has
an unfavorable balance of payment.
(a) Define the following terms:

(i)Balance of trade

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..
122
(ii)Balance of payment

…………………………………………………………………………………………………..

………………………………………………………………………………………………[4]

(b) Evaluate three methods that a country can use to solve balance of payment
problems.
…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

………………………………………………………………………………………………[9]

3. (a) A P3 billion deficit for the month was recorded and the value of goods imported
Was P19 billion. Calculate the value of exported goods. Shows your workings.

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..
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………………………………………………………………………………………………[3]

(b) A textile manufacturer has decided to use an export merchant to sell their goods
abroad. Explain two advantages of using an export merchant in selling their
goods abroad.
.. .……………………………………………………………………………………………

..……………………………………………………………………………………………

……………………………………………………………………………………………….

……………………………………………………………………………………………….

……………………………………………………………………………………………….

……………………………………………………………………………………………[4]

(c) Explain the following trade documents:

Certificate of Origin: ……………………………………………………………………..

……………………………………………………………………………………………..

……………………………………………………………………………………………..

………………………………………………………………………………………………

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 Consular invoice: ……………………………………………………………………….

……………………………………………………………………………………………

…………………………………………………………………………………………[4]

4. (a) What are the differences between current account and capital account in the
balance of payments?

………………………………………………………………………………………………...

………………………………………………………………………………………………….

…………………………………………………………………………………………………..

…………………………………………………………………………………………………

…………………………………………………………………………………………………..

…………………………………………………………………………………………………

……………………………………………………………………………………………… [4]
(b) Explain any implications to Botswana of:

(i) An unfavorable balance of trade:

………………………………………………………………………………………………….

………………………………………………………………………………………………….

………………………………………………………………………………………………….

………………………………………………………………………………………………[4]
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 (ii) A favorable balance of trade:
…………………………………………………………………………………………………..

…………………………………………………………………………………………………

…………………………………………………………………………………………………..

………………………………………………………………………………………………[4]

(c) Explain the importance of the International Monetary Fund (IMF) and the World
Bank in foreign trade:
…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

...................................................................................................................................[6]

5. Lore is a of leather jackets manufacture. He sells his products locally and abroad

(a)State three problems that Mr Lore is likely to face as an exporter

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

……………………………………………………………………………………………...[3]

126
(b) Explain two ways in which Mr Lore could make use of a factor

…………………………………………………………………………………………………

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………

……………………………………………………………………………………………….[4]
(c)Explain why Mr Lore would choose to buy raw materials to make the leather
jackets from outside the country.
…………………………………………………………………………………………………

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………

……………………………………………………………………………………………….[4]

UNIT 6 INTERNATIONAL TRADE PART 2

TOPIC: GOVERNMENT AND FOREIGN TRADE

Objectives:
- Explain how the government can assist exporters and importers
- Explain the functions and importance of Botswana Export Credit Insurance,
Exporters Association of Botswana and Botswana Export Development and
Investment Authority (BEDIA).

127
Main points.
• How government can assist exporters and importers
• Direct ways government can help exporters and importers include:
- Subsidizing export production to enable exporters charge lower prices
and get more orders from abroad;
- Improve tariffs to improve imports;
- Impose quotas to restrict imports which would result to reduced foreign
competition;
- Devaluing the local currency to exports cheaper;
- Push up or down interest rates when necessary to reduce or increase
local spending;
- Abolish surcharges on importation of machinery;
- Exercising legal controls of business in issuing permits, passing
environmental protection legislation;
- Setting up statutory bodies;
- Providing physical and social infrastructure to enable businesses to
function normally;
- Providing financial assistance in the form of either loan guarantees or
grants;
- Setting up government special institutions in addition to its agencies to
assist exporters and importers either directly or indirectly.

The functions of Botswana Export Credit Insurance:

- A 100% wholly owned subsidiary of the Botswana Development
Corporation (BDC) Established to underwrite export credits in March,
1996.
- Its functions include: providing insurance cover for exporters who sell
goods on credit against the risk of not being paid by their foreign
customers;
- Promote export by taking many of the risks inherent in export trade away
from individual exporters;

128
 - Its importance is that it aims at developing non-traditional exports for the
country to support the long-term economic diversification objective of the
government.

• The functions of Exporters Association of Botswana

- An institution set up to increase the production of export products in
Botswana.
- Its importance is that it helps to identify foreign markets for export goods
and make representation to government on behalf of exporters.
• The functions of Botswana Export Development and Investment
Authority (BEDIA)
- An independent statutory body established in 1998 to replace the
Department of Trade and Investment Promotion (TIPA), mandated to
promote investment and export. BEDIA’s functions include:
- Providing advisory and consultancy services to local, national and
international investors;
- Liaising with potential investors and relevant government agencies and
business organizations;
- Organizing trade and investment missions to other countries;
- Operating trade and information services;
- Organizing annual trade fairs;
- Analyzing and identifying export markets as well as import substitution
chances.
- Dissemination trade and investment information to the business
community.

TOPIC: CUSTOMS AND EXCISE DEPARTMENT IN BOTSWANA

Objectives:
- differentiate between Customs and excise, ad valorem and specific duties
- state the advantages and disadvantages of customs duties

129
 - identify dutiable and non-dutiable goods in Botswana
- describe the functions of the department of customs and excise.

Main points.
• Differences between Customs and Excise; and ad valorem and specific
duties.
- Customs duties are taxes levied on imported goods and services (i.e.
goods entering the country from a different customs area), while Excise
duties are taxes levied on goods and services sold within a country.
- Ad valorem duty is customs duty calculated as a percentage of the
value of the import while specific duty is excise duty charged on each
unit of quantity bought, say: 5thebe per liter of petrol.

• Advantages of customs duties:

- Raise income or revenue for the country to finance development
projects
- Protect domestic industries by making imports more expensive to
discourage people from importing.
- Restricts imports to improve the balance of payments of a country
• Disadvantages of customs duties:
- Restricts trade for a country
- Break agreements with the World Trade Organization and neighboring
countries
- Other countries might retaliate by imposing similar duties causing what
is referred as a trade war.

• Dutiable and Non-dutiable goods in Botswana:

- Some goods are dutiable and non-dutiable or duty free.
- The decision to charge duties on goods is the Minister of Finance and
Development Planning’s responsibility. The list is announced during the
annual budgets speech but copies can be obtained from the Customs and
Excise Authorities on request. However, Botswana’s main imports on which

130
 duties are charged include: Petroleum products, vehicles and transport
equipment, machinery, medicines, tobacco, Food beverages, footwear, textile,
metal products, chemical and rubber products.
- There is no tax on exports and licensing is not required except for Game
skins, exotic leather, precious stones, hides and skins.

• Functions of the Department of Customs and Excise.

- Implementing customs legislation dealing with importation and
exportation of goods by:
1. Keeping statistical records which help the country to get details of
imports and exports for the calculation of balance of trade and balance
of payments and enable government to determine the needs of the
people; design and assess the effects of its trade policies and evaluate
the effectiveness of their tax collection.
2. Collecting customs duty, excise duty and sales tax or value added tax
(VAT) for government.
3. Controlling bonded warehouses in order to enforce the payment of
duty.
4. Enforcing quotas as a way to:
- Restrict the importation of some particular commodity in order to
correct a poor balance of payment position of the country
- Protect domestic industries against unfair foreign competition
- Reduce domestic consumption of imports
- Prevent dumping of low quality, cheap goods into the country by
foreign producers.
5. Guarding the movement of goods across the country’s border to
prevent the smuggling of prohibited goods that are either a threat to
national security or a danger to public health and also prevent duty
evasion by some traders.
6. Safeguarding public health by ensuring that goods that may pose a
danger to public health such as contaminated goods, unvaccinated
animals, goods not fit for consumption etc. are not allowed into the
country.
7. Facilitating trade and tourism.
131
 8. Providing technical and advisory services to investors
9. Carrying out agency work on behalf of other government departments.

TOPIC: INTERNATIONAL TRADE AGREEMENTS

Objectives:
- Identify the major international organizations designed to reduce trade
restrictions. World Trade Organization (General Agreement on Trade and
Tariffs, United Nations Conference on Trade and Development)
- Describe the functions and organization of the Southern Africa Development
Community and Southern Africa Customs Union as trading blocs.

Main points.
• Major International Organizations Designed to Reduce Trade
Restrictions:
- World Trade Organization (General Agreement on Trade and Tariffs)
(GATT) – Seeks to encourage reduction of trade barriers. Started in
1948 with encouraging formation of Customs Unions or Free Trade
Areas.
- United Nations Conference on Trade and Development (UNCTAD) –
Held its first session in 1964. Seventy-seven (77) poor nations came
together to act as a pressure group on trading matters. The
conference recommended to give developing countries free access to
world markets by eliminating quotas and tariffs, making commodity
agreements, stabilizing commodity prices inter-alia. Subsequent
sessions were followed and continue being held every four-year
interval.
- Association of South African and East Asian Nations (ASEAN)
- European Union (EU).
- Africa, Caribbean and Pacific (ACP).
- North American Free Trade Agreement (NAFTA).
- South African Customs Union (SACU).

132
• Organization and Functions of the Southern Africa Development
Community (SADC).
Established in 1980, SADC has since developed to become an international
organization with a legal personality that has power to enter into contract,
acquired, own or dispose of movable or immovable property and to sue and
be sued.
- It has programs of action covering several broad economic and social sectors
for energy, tourism, environment and land management, water, mining,
employment and labour, culture, finance and investment, human resource
development, food, agriculture, natural resources, legal affairs, health,
information, sport, transport and communication.
- Past experiences of failure and delays in program implementation and
completion by regional groupings meant that SADC had to undergo a series
of restructuring and decentralizing its institutional arrangement to ensure
member states are the main actors in the formulation and implementation of
policy decisions.
- The membership of SADC has grown to 16 countries; the Headquarters still
being in Gaborone, the Republic of Botswana. The membership comprises:
- The Republic of Angola The Republic of Mozambique
- The Republic of Botswana The Republic of Namibia
- The Democratic Republic of Congo The Republic of Seychelles
- The Republic of the Comoros The Republic of South Africa
- The Kingdom of Lesotho The Kingdom of Swaziland
(Eswatini)
- The Republic of Madagascar The United Republic of Tanzania
- The Republic of Malawi The Republic of Zambia
- The Republic of Mauritius The Republic of Zimbabwe

SADC Objectives:
§ Achieve economic development, peace and security;
§ Growth;
§ Alleviate poverty;
133
 § Enhance the standard and quality of life of the people of Southern Africa;
§ Support the socially disadvantaged through Regional Integration.
• To meet its goals SADC has the following main institutions:

(a) The Summit of Heads of State and Government:

- Most important organ composed of Heads of State and responsible for overall
policy direction and control of functions of the community
(b) The Troika: Consisting of the chair, incoming chair and outgoing chair.
Operate at the level of the summit, the organ on politics, defense, security,
council and standing committee of senior officials.
(c) The organ on politics, Defense and Security Co-operation.
- The summit selects a chairperson and deputy of the organ on rotation basis
among the members for a term of one year.
- The chairperson has to consult with the Troika of the summit and report to the
summit.
(d) The Council of Ministers:
- This is the number two organ of the community consisting of ministers of
finance and development planning and foreign affairs from member states.
- Its main role is to supervise or oversee the work of the community and ensure
the policies are properly implemented. It also prepares the agender for the
Heads of State Summit
(e) The Sectoral and Cluster Ministerial Committee:
- An institution aimed at ensuring proper policy guidance, co-ordination and
harmonization of sectorial activities.
- It consists of ministers from each member state and is responsible to oversee:
(i) trade, industry, finance and investment;
(ii) infrastructure and services;
(iii) food, agriculture, natural resources and environment;
(iv) social and human development and special programs, which include:
health and HIV and AIDS; education; labor; employment; and gender;
(v) politics, defense and security; and
(vi) legal affairs and judicial matters.
- Monitor and control the implementation of Regional Indicative Strategy
Development Plan in its area of competence;
134
- Provide policy advice to the council and create permanent or ad hoc
committees as may be necessary;
- With respect to these responsibilities, the organ has decision-making powers
to ensure rapid implementation of programs approved by the council.
(f) The Standing Committee of Officials:
- Consists of one permanent secretary or an office of equivalent rank from each
member state, preferably from the ministry responsible for economic planning
or finance.
- Advises the Council of Ministers
- Processes documentation from the Sectoral and Cluster Ministerial
Committee to the Council.
(g) The Secretariat:
- It is the principal executive institution of SADC responsible for;
1. Strategic planning and management of programs of SADC;
2. Implementation of decisions of all the other institutions;
3. Organization and management of SADC meetings;
4. Financial and general administration;
5. Representation and promotion of SADC;
6. Coordination and harmonization of the policies and strategies of member
states.
7. Gender mainstreaming in all SADC programs
8. Monitoring and evaluating the implementation of regional policies and
programs,
9. Development of capacity, infrastructure and maintenance of intra-regional
information communication technology and several other responsibilities.

• The Southern African Customs Union (SACU)

Created in 1910 as a free trade area or trading bloc., with the agreement being
amended in 1969 to make a greater allowance for the needs of member
countries.
135
 Current membership includes: Botswana, Lesotho, Swaziland (Eswatini), South
Africa, Namibia, Zambia, Zimbabwe.
• Functions of the Union:
- Collect customs duty from non-member countries importing goods to member
countries.
- Creating a wider market for member countries.
- Boost economies of member countries

Section A [10 marks]

Multiple choice questions

136
Choose the correct answer from those given and write A, B, C or D in the boxes
provided.

1. Which of the following is not a direct way the government can use to help
exporters?
A. Devaluing the currency
B. Exercising legal control
C. Imposing tariffs
D. Liaising with investors

2. Which of the following is a function of the Botswana Export Credit Insurance?

A. To increase export products
B. Develop non-traditional exports
C. Taking risks inherent in export trade
D. Subsidiary of the Botswana Development Corporation

3. Which of the following differentiates customs duty and excise duty?

A. Tax levied on exported goods and services
B. Tax levied on goods and services sold abroad
C. Tax levied on goods and services sold in the country
D. Tax levied on imported goods and services

4. One of the advantages of customs duty is that:

A. It restricts exports of a country
B. It protects industries of a country
C. It restricts trade of a country
D. It protects trade agreements of a country

5. Which of the following is not an advantage of the Botswana Export Credit

Insurance?
A. Covering non-payment risk of export credit
B. Ensuring the payment of customs duty is made

137
 C. Providing credit facilities to exporters
D. Sourcing for investments from abroad

6. An unfavorable balance of trade for Botswana is where,

A. Botswana brings in less goods and services than it exports
B. Botswana brings in more goods and services than it exports
C. Botswana does not keep records of its imports and exports
D. Botswana receives more revenue for invisible exports than it pays

7. Which of the following is a reason for an exporter using a freight forwarding

company?
A. To guarantee the importer makes payment
B. To research the market and find importers
C. To organize clearance of customs
D. To make and arrange contracts in its own name

8. A manufacturing business in Botswana might prefer to sell goods in the home

country rather than abroad because
A. Factors, brokers and merchants might be used
B. Insurance against risks of exporting is difficult
C. Setting up offices abroad require very little expense
D. Transport and storage expenses are usually lower

9. Which of the following defines trading bloc?

A. Group of countries which agree to eliminate trade restrictions
B. Group of countries which control distribution of natural resources to
influence world market prices
C. Group of companies which deal in similar products and share advertising
costs.
D. Large multinationals which try to monopolize global trade

138
 10. When there is an increase in trade between countries, which statement is
incorrect?
A. Countries become interdependent
B. Standards of living for people may rise
C. Surplus goods are traded between countries
D. Governments have balance of payments surpluses

Section B
Structured questions
139
Answer the questions in the spaces provided on the question paper.

1. Country X imports vegetables from neighboring countries. The Department of

Customs and Excise in that country implements Customs Legislation dealing
with imports and exports. In doing so, it performs a number of functions
including the collection of statistics of international trade at the border posts.
(a) Why does the Department of Customs and Excise collect statistics of
foreign trade:

………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………………

…………………………………………………………………………………...[4]

(b) Explain any other two functions of the Department of Customs and Excise
apart from the collection of statistics.

Function 1

………………………………………………………………………………………

…………………………………………………………………………………….
..

Function 2:
…………………………………………………………………………

…………………………………………………………………………………[4]
140
(c) The government is worried about the current figures of the balance of
trade for the country. Explain any four measures the government may
take to reduce the quantity of imports for the country.

Measure 1:
………………………………………………………………………...

………………………………………………………………………………………

Measure 2:
………………………………………………………………………...

………………………………………………………………………………………

Measure 3:
………………………………………………………………………...

………………………………………………………………………………………

Measure 4:
………………………………………………………………………...

………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………… [8]

(d) How might membership of a trading bloc such as SACU help a country’s
trade?
141
 ………………………………………………………………………………………

…………………………………………………………………………………[2]

2. (a) The Botswana Export Development and Investment Authority (BEDIA) is

an independent statutory body established to promote investment and export.
Explain four functions performed by BEDIA in a way to promote investment
and export.

Function 1: …………………………………………………………………………….

…………………………………………………………………………………………..

………………………………………………………………………………………….

Function 2: …………………………………………………………………………….

…………………………………………………………………………………………..

…………………………………………………………………………………………

Function 3: …………………………………………………………………………….

…………………………………………………………………………………………..

………………………………………………………………………………………….

Function 4: …………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………[8]
142
(b) Differentiate between ad valorem and specific duties.

…………………………………………………………………………………………………..

………………………………………………………………………………………………….

………………………………………………………………………………………………….

……………………………………………………………………………………………….
[4]

3.In relation to International Trade Agreements, answer the following questions:

(a) List four international continental or regional organizations that have benefited
Botswana.
…………………………………………………………………………………………………..

………………………………………………………………………………………………….

………………………………………………………………………………………………….

……………………………………………………………………………………………….
[4]

(b)State three advantages and three disadvantages of customs duty in international

trade:
Advantages
…………………………………………………………………………………………………..

………………………………………………………………………………………………….
143
………………………………………………………………………………………………….

…………………………………………………………………………………………………..

Disadvantages
…………………………………………………………………………………………………..

………………………………………………………………………………………………….

………………………………………………………………………………………………….

………………………………………………………………………………………………[6]

(c) Write the following international treaties in full.

ACP: ……………………………………………………………………………
(1)

SADC: ………………………………………………………………………….
(1)

WTO: ………………………………………………………………………… (1)

SACU: ………………………………………………………………………… (1)

4. (a) Explain any two functions performed by the Botswana Export Credit
Insurance.
Function 1: …………………………………………………………………………………….

…………………………………………………………………………………………………..

144
…………………………………………………………………………………………………

Function 2:……………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

………………………………………………………………………………………………[4]

UNIT 7: BUSINESS ORGANISATION PART ONE

TOPIC: THE PUBLIC SECTOR

Objectives:
• identify the main business organisations in the public sector
• explain why the government takes part in economic activities
• explain the terms,’nationalisation’, ‘privatisation’ and ‘commercialisation’.
• discuss the advantages and disadvantages of nationalisation and privatisation
• explain the main features of a public corporation

Main points:
• In a mixed economic system, business activities are divided into public sector
and private sector.
• The public sector comprises all business enterprises operated by the
government such as: Ministries and Departments in the Central Government;
District and Town Councils in the Local Government; Public Corporations like
the Water Utilities Corporation (WUT), Botswana Power Corporation (BPC),
Botswana Meat Commission (BMC), DeBeers, BCL, mines as well as
Botswana Railways (BR), Air Botswana, Botswana Telecoms, and Botswana
Posts.

Reasons for government participation in economic activities

145
 • To provide public and merit goods. Public goods are those that cannot be
divided up and only provided to people who are willing to pay for them, e.g.
street lighting. Merit goods are those thought to be consumed by people for
their own good and for the benefit of the society. E.g. medical care and
education.
• To control the exploitation of the country’s scarce natural resources.
• To provide goods and services that the private sector cannot manage to
provide at affordable rates.
• To create employment for the people.
• To assist in implementing government policies.
• To collect enough revenue for their recurrent expenditure.
• To raise profits for re-investments.

• Nationalisation is the process of transferring ownership of business

organisations in the private sector to the state.

Advantages of nationalization:
• Profits raised go to the government for development projects
• Provides secure jobs to the population
• Provides and promotes a model of better industrial relations
• Protects national interests
• Large public enterprises can enjoy economies of scale
• Makes the implementation of some government polices easy
• Government has the resources to rescue some failing industries

Disadvantages of nationalization:
• Eliminates competition and creates inefficiency due to monopoly of power
• Poor organization structuring leads to lack of communication
• Firms that make losses become a burden to the tax-payers’ coffers of the
government
• Usually nationalized industries become too large and difficult to manage
properly

146
 • Nationalized firms may be run and controlled by politicians who may not have
business expertise
• Centralized management makes too much red-tape or bureaucracy which
cause delays in decision-making
• Lack of interest in profit-making, nationalized firms’ operations tend to waste
resources

Privatisation is the process of transferring ownership of government owned business

organisations to private individuals.

Advantages of privatization:
• increase in quality of goods and services
• Improved efficiency due to competition and the aim for profit
• Dismisses political interference in the running of business
• Impowers citizens where the privatized businesses are strictly sold to citizens.

Disadvantages of privatization
• Privatization makes rich individuals richer while the poor get poorer
• Some of the government policies may become difficult to apply
• The process of privatization may be abused by some corrupt politicians who
would sell the firms to themselves at very low prices.
• Prices becomes higher and unaffordable

Commercialisation is the changing of a public organisation into a profit-making

business.
Advantages of commercialization:
• Improves efficiency in the business resulting to cost saving
• There will be better utilization of resources due to aims for high profit
• Depending on the profitability of the business, employees may become
committed and responsible as their livelihood depends on their jobs
• Due to competition, the company will aim at better quality products and
services.

147
Disadvantages of commercialisation
• Difficult for management to reconcile economic interests with political
interests
• Public and merit goods and services become too expensive for the poor
• Aiming at profit leads business to over exploit the country’s natural resources.
• There efficiency in service delivery

Features of a public corporation:

• A Public corporation is an organization owned and controlled by the Central or
Local government
• It is established by an Act of parliament
• It is set-up and funded by the central or local government
• It is managed by a Board of Directors or Governors appointed by a Minister
responsible
• It is a legal entity separate from the owner/s
• Profits made are used to improve peoples’ social well-being.

TOPIC: THE PRIVATE SECTOR BUSINESSES IN BOTSWANA

Objectives:
• differentiate between unincorporated and incorporated business units with
examples
• compare sole proprietorship and partnership of the basis of capital, control,
ownership, liability and setting up
• state the advantages and disadvantages of the sole proprietorship and
partnership
• differentiate between limited partnership and general partnership
• show the contribution of sole proprietorship and partnership to Botswana’s
economy.

Main points.

148
Differences between incorporated and unincorporated business units.

Incorporated businesses Unincorporated businesses

• registered with registrar of • Registered with local government

companies and issued with the councils and issued with business
certificate of incorporation e.g. licenses e.g. hawkers, general
public and private companies in dealers, small retail shops, all sole
the private sector of an economy. proprietorships and partnerships

• Have the word ‘Limited’ or Ltd, in • Have unlimited liability, hence, not
the names. allowed to bear the word, Limited
or Ltd., in the business titles.

• Have separate legal identity from • Owners are personally liable for
the owners. the debts of the business.

• Raise capital through the sale and • Raises finances through owner’s
issue of shares savings and borrowing from
friends, family, banks and other
financial institutions.

• Difficult to establish due to long • Easy to establish since there are

and expensive legal procedures. no complicated legal procedures.

• Owned and controlled by • Owned and controlled by

shareholders. individuals and partners.

• Profits after tax shared among • Profits belong to the owners or

shareholders as dividends. shared among partners according
to the partnership
deed/agreement.

Comparison between Sole proprietorship and Partnership

149
Sole proprietorship Partnership

• Set up by individual persons • Set up by two or more people but

not more than twenty persons
except in banking business where
the limit is ten persons.

• Owned by individuals • Owned by 2 to 20 partners

• Capital provided by individuals. • Capital provided by partners.

• Controlled by individuals. • Controlled by partners.

• Owner liable for any business • Partners, except for a limited

debts. partner, are liable for any business
debts.

Advantages of Sole proprietorship:

• Easy and cheap to set-up
• Owner controls the business
• Owner makes all decisions
• Any profits made belong to the owner
• Owner has close contact with customers
•
Disadvantages of sole proprietorship
• Owner is liable for the debts of the business
• Chances of the business to grow are limited
• Lack of business continuity in case of death or ill-health
• There is no specialization
• Workload and liability can cause pressure and stress
Advantages of Partnership
• Continuity is possible even when a partner leaves or sick

150
 • Responsibilities can be shared and make it possible for partners to specialize.
• Workload and liability can be shared resulting to reduced pressure and stress.
• The business can have access to more funds through partner’s contributions.
Disadvantages of partnership
• Partners are liable for all debts of the business
• Disagreement may arise leading to delays in decision-making
• Capital can be fairly limited in a partnership
• A new partnership deed is required if one partner dies or changes

Contribution of the Sole proprietorship and Partnership business to

Botswana’s economy.
• There are many Sole proprietorship and Partnership businesses operating as
hair-dressers, tailors, internet cafes, taxi and bus operators, some of which
are large enough to make profits over BWP 500 000 per year deemed for tax
category to BURS which these businesses contribute for project
developments in the country. Equally, Partnership businesses in Botswana
include professional firms such as practicing doctors, solicitors/lawyers. In
these businesses’ owners may work as self-employed and they employ other
people who all contribute to the country’s economy by:
• Creating jobs and providing income for livelihood to many people
• The tax they pay is a source of income for the government
• The country earns foreign exchange from the goods they make and export
• They are the foundation of rural economy and contribute to rural development
• They contribute to community development in the areas they are located
• Differences between a limited partnership and a general partnership
• A limited partnership is a business in which one partner at least has limited
liability whereas a general partnership has all partners with unlimited liability.

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Section A [10 marks]

Multiple choice questions

Chose the correct answer from those given and write A, B, C or D in the boxes
provided.

1. Which of the following describes a public corporation?

A. Set-up and controlled by the public

B. Set-up and controlled by shareholders
C. Set-up and controlled by the central or local government
D. Set-up and controlled by a Board of Directors elected by
shareholders

2. Which of the following business unit belongs to the public sector?

A. Holding company
B. Multiple store
C. Public company
D. Public corporation

3. Which of the following features is common to all public corporations?

A. Established by an Act of parliament

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 B. Established to increase efficiency
C. Established for profitability
D. Established to provide quality goods

4. Which of the following is a feature of an incorporated business unit?

A. Has twenty Board of Directors

B. Is registered with the Registrar of companies
C. Is organized and controlled by Local government
D. Has no separate legal entity from the owner

5. Which of the following is an example of an unincorporated business unit?

A. A partnership
B. A public corporation
C. A private limited company
D. A public limited company

6. Which of the following businesses is common in partnerships?

A. Dental practitioners
B. General dealers
C. Large supermarkets
D. Manufacturing factories

7. The profits of sole trader businesses belong to their:

A. Creditors
B. Debtors
C. Employees
D. Proprietors

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8. An advantage to a partnership business is that:

A. Any losses are a liability of one partner

B. Capital may be fairly limited
C. Delays in decision-making are possible
D. Responsibilities are shared

9. Which of the following explains the term, ‘privatization’?

A. Changing a private company into a public company

B. Changing a government owned business into a privately owned
C. Changing a private company into a government owned business
D. Changing a loss-making business into a profit-making business

10.Which of the following is a reason for government’s participation in

economic activities?

A. Increase efficiency in all business sectors

B. Prevent creation of employment by individuals
C. Prevent powerful individuals from becoming richer
D. Protecting national business interest.

154
Section B

Structured questions.

Answer the questions in the spaces provided on the question paper or answer if
provided and required.

1. Use the chart below to answer the questions that follow:

Botswana’s Economic System

-----------------------------------------------

Public sector Private sector

--------------------------- -----------------------------

Central Local Unincorporated Incorporated

Government Government ---------------------- ---------------------

Ministries District Councils Private Public

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 Departments City Councils companies
companies
Public corporations Town Councils
VDCs.
Sole Partner-
proprietorship ships

(a)Identify any two public sector business organizations that provide services and
any two that provide commodities in Botswana.

Service providers:
…………………………………………………………………………………………………..

………………………………………………………………………………………………[2]

Commodity providers:
…………………………………………………………………………………………………..

………………………………………………………………………………………………[2]

(b)The Botswana government has decided to privatise their medical health facilities
which has been nationalised all along.
(a) Explain the following terms:

(i) Nationalization: ……………………………………………………………

……………………………………………………………………………….

(ii) Privatization: ……………………………………………………………….

……………………………………………………………………………… [4]
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(b)In which sector of the economy are nationalized industries found
……………………………………………………………………………………………[1]
(c)State three features of a public corporation
…………………………………………………………………………………………………

…………………………………………………………………………………………………

…………………………………………………………………………………………..…[3]

(d) Evaluate the effects of privatization by the Botswana government on the

economy

…………………………………………………………………………………………………

………………………………………………………………………………………………….

………………………………………………………………………………………………….

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

………………………………………………………………………………………………[9]

2.(a)Differentiate between incorporated and unincorporated business units

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

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…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………

(b) State two advantages and two disadvantages of nationalization

Advantages

………………………………………………………………………………………………

………………………………………………………………………………………..….. [2]
Disdvantages

………………………………………………………………………………………………

………………………………………………………………………………………..….. [2]
3.Nchabe is a sole proprietor selling different colours of paints locally. She has since
decided to partner with another paint seller to increase their supply.
(a) Compare the Sole proprietorship and the Partnership in respect of the
Following:

Capital
…………………………………………………………………………………………………..

…………………………………………………………………………………………………..
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Liability
…………………………………………………………………………………………………..

…………………………………………………………………………………………………..
Control
…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

(b)State two disadvantages of a sole trader business

…………………………………………………………………………………………………

………………………………………………………………………………………………….

………………………………………………………………………………………………[2]

(c)Assess the effect partnership business unit to Nchabe and her other partner
…………………………………………………………………………………………………

………………………………………………………………………………………………….

………………………………………………………………………………………………….

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

………………………………………………………………………………………………[9]

(d)Describe any two ways the partnership businesses are contributing to

Botswana’s economy
…………………………………………………………………………………………………
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………………………………………………………………………………………………….

………………………………………………………………………………………………[4]

(e) Explain the difference between a general partnership and a limited partnership.
[4]

………………………………………………………………………………………………..

………………………………………………………………………………………………..

………………………………………………………………………………………………..

………………………………………………………………………………………………..

………………………………………………………………………………………………..

………………………………………………………………………………………………..

………………………………………………………………………………………………..

160
BGCSE COMMERCE REVISION MODEL EXAMINATIONS QUESTIONS AND
ANSWER SCHEMES FOR UNITS 1 TO 7

UNIT 1 ANSWERS TO MODEL EXAMINATION QUESTIONS.

QUESTION NUMBER ANSWER

1 B
2 A
3 D
4 D
5 A
6 B
7 C
8 D
9 A
10 D

161
Section B

Structured questions
Answer the questions in the spaces provided on the question paper or answer sheet
if provided

1 It is not only workers engaged in industries that make tangible products are
productive but anyone who contributes to the satisfaction of human needs and
wants. Goods and services help in satisfying needs and wants. Hence,
miners, manufacturers, drivers, health workers and educationists are all
productive workers.

(a) Explain needs and wants with one example in each case.[6]

(i) Needs: Goods and services that are essential for survival or living. (2 marks)
Examples: might include, food, clean water, shelter, clothing, medical
care. (1 mark)
(ii) Wants: Goods and services that are required for comfort and easy living

162
 (2 marks)

Examples: might include, cars, machinery, airplanes, television and many other
tangible products. (1 mark)

(b) Identify and explain two ways in which human needs and wants can be
satisfied.[6]
Way 1: Direct production (1 mark)
Explanation: When an individual, family or business organization is able to
make goods and services available for own use or consumption. (2 marks)

Way 2: Indirect production (1 mark)

Explanation: An individual, family or business organization makes goods and
services available for sale or other peoples’ use. (2 marks)

(c) Using the diagram below, name and describe the chain of production for
bread. [8]

1 2 3 4
Farmer grows Miller makes Baker makes Retailer
Wheat flour bread sells bread to consumers

Stage 1: Primary stage/production (1 mark)

Description: Farmer ploughs, grows and harvests the wheat. (1 mark)

Stage 2: Secondary stage/production (1 mark)

Description: Miller grinds the wheat into baking flour. (1mark)
OR
Stage 3: Secondary stage/production (1 mark)
Description: Baker makes bread from the flour (1 mark)

Stage 4: Tertiary stage/production (1 mark)

Description: Retailer sells the bread to the final consumer (1mark)

163
(d) Explain the stages and activities involved in the making of a motor vehicle
before use.[6]

Stage: Primary production (1mark)

Activities: Mining of metal ores and collection of rubber for tyre and other plastic
parts. (1mark)

Stage: Secondary production (1mark)

Activities: Processing/manufacturing metal ore and rubber to make metals and
rubber components. (1 mark)

Stage: Secondary production (1 mark)

Activities: Assembling/constructing the metal and rubber components to make a
complete motor vehicle ready for use. (1 mark)
2.J Motors (Pty) Ltd., has been in the Motor Assembling industry for over 15 years in
Botswana, making specialist models for executive orders and specially designed
models for specified purposes. They have been able to meet their customers’
demand due to specialization and division of labour.

(a) Explain the meaning of the following:

(i) Specialisation: Concentrating on making a limited number of products or

providing specified services. (2 marks)
(i) Division of labour: Breaking down a job or process of production into tasks.
(2marks)

(b) Identify and explain any three levels of specialization with examples. [6]
Levels: Relevant points might include:
- Individual worker’s specialization: (1 mark) where people become
professionals such as subject teachers in schools, doctors, or workers
concentrate on one task in a production line e.g. Assemblers of car
components in a car industry. (1 mark)
164
 - Product specialization: (1 mark) where an organisation or industry
concentrates on a particular product. For example, Senne Foods
concentrates on meat products. (1 mark)
- Regional specialization:(1 mark) where a particular area in a country is
able to supply raw materials, goods or services that other areas cannot
due to their climate or vegetation. For example, tourism in Maun and
Kasane in Botswana. (1 mark)
- National/Country specialization: (1 mark) where a country is able to supply
raw materials, goods or services that other countries cannot. For example,
Botswana supplies diamond and beef to the UK. (1 mark)

(c) Assess the use of specialization to J. Motors [9]

- Saves time (1 mark) workers changing wheels do not have to waste time
moving from doing one task to another. This will lead to workers being
more productive in their job areas. (1 mark) However, workers fixing tyres
everyday may become bored because of doing the same task each and
every day and will lead to them not meeting the set targets. (1 mark)
- If workers repeat same operations, they become more skilled and
knowledgeable in their job. (1 mark) workers fixing engines everyday will
be more knowledgeable in doing their job as they repeat it daily. This will
result in quality work being done while fixing engines. (1 mark). However,
production in the fixing of engines may stop if one worker who helps is
absent. This will lead to decreased productivity. (1mark)
- It enables more engines to be fixed. (1 mark) This is because repetition of
the same operation which is fixing engines is repeated, this increases the
worker’s speed. As a result, more engines will be fixed. (1 mark).
However, increased use of machines can lead to loss of some workers. If
J. Motors decides to use more machines in assembling car part. Some
people may become jobless which will affect their standard of living. (1
mark)
- 3 reasons, developed/applied with opinion 3x3 max 9marks
165
 - 2 reasons, developed/applied with opinion 2x3 max 6marks
- 2 reasons, developed/applied with no opinion 2x2 max 4 marks
- 2 reasons, developed not applied with opinion 2x1 max 2 marks
- 2reasons listed 2x1 max 2 marks

3. Commercial activities are associated with the last and final stage of
production of goods. Mpho a retailer designing clothing for both men and
women makes use of the branches of commerce.

(a) Explain the term ‘Commercial activities.[2]

The buying and selling of goods and services and the activities that help to
make the buying and selling possible. (2 marks)

(b) Discuss the importance of any four branches of commerce [8]

- Banking (1 mark) helps Mpho to obtain funds with which to start and
operate the production of clothes. (1 mark)
- Insurance (1 mark) helps Mpho’s business in the protection of sewing
machines and other equipments against risks such as damage, theft,
natural disasters, that may occur. (1 mark)
- Warehousing (1 mark) helps with the storage of clothes produced until
they are needed for use. (1 mark)
- Advertising (1mark) helps in spreading information about the availability of
clothes, their prices and where to find them. (1 mark)
- Communication (1mark) helps in breaking language barriers and enable
constant contact between traders to provide information on terms of trade,
delivery conditions of clothes and other aspects. (1mark)
- Transport (1 mark) helps in getting the right cloths for making dresses and
shirts at the right place and at the right time.

166
UNIT 2 ANSWERS TO MODEL EXAMINATIONS QUESTIONS.

QUESTION NUMBER ANSWER

1 C
2 D
3 C
4 D
5 C
6 A
7 A
8 A
9 B
10 D

167
Section B

Structured questions
Answer the questions in the spaces provided on the question

1.Retailing is one of the branches of trade that actively performs various functions
domestically to ensure there is efficient distribution of goods to the final consumer in
a country. They can be classified into small scale and large-scale retailers. PK
agents is a small-scale retailer which sells electric appliances such as microwaves,
fridges, televisions etc.. A wholesale business later opened next to PK agents
retailers and sales started to decline.

(a) Explain the following three functions of retailers that are carried out by PK
agents retailers [6]

(i) Breaking bulk: buying kettles, televisions in large quantities from suppliers like
manufacturers and wholesalers and sell to individual customers in smaller
quantities. (1 mark for explanation and 1 mark for application)

168
(ii) Providing after-sales service: can offer to repair of televisions or provide spares
for the products after they have been sold(1 mark for explanation and 1 mark for
application)

(iii) Providing choice to consumers: obtaining and stocking a variety of goods

from different suppliers to give consumers choice. (1 mark for explanation and 1
mark for application)

(b) List any two small-scale retailers [2]

Relevant points might include:
• Hawkers, padlers, mobile shops, street venders, itinerant traders,
Market stallholders

(c) Explain any three factors that could have led to the decline of PK Agents
retailers.

Competition:
-Increasing number of large-scale retailers who have the power to enjoy economies
of scale from suppliers and afford to pass low prices to the consumers are creating
very stiff competition to PK agents retailers which will reduce their sales of electric
stoves and fridges as they buy from the competitors.(1mark point and 1mark
explanation with application)
Inadequacy of capital:
-Small retailers are finding it difficult to raise sufficient capital for expansion and
modernization of the electric appliances such as microwaves, this will lead PK Agent
retailers not keeping up with new trends in the market.(1mark point and 1mark
explanation with application)

Poor location of small-scale retailers:

-Small retailers are restricted to locate in areas where there is little business away
from prime areas, this leads to less microwaves being bought. .(1mark point and
1mark explanation with application)
169
Inefficient and accountable management:
-There is little or no efficiency and accountability in the running of business by PK
Agents which will lead to misuse of funds of microwaves. .(1mark point and 1mark
explanation with application)

(d) Analyse two ways in which PK Agents would be affected by the opening of
the wholesale trade
Steady supply of goods (1mark)
This will lead to customer satisfaction in their products such as electric stoves. (1
mark) which will increase sales, hence possible profits for the business. (1mark)

Easy to re-stock (1mark)

This means that transport costs for delivering fridges and televisions will be reduced.
(1mark), this will allow for smooth running of the business as stock will always be
available. (1 mark)

3. Redevelopments in brown field sites of city centres and other special

developments in retail trade have taken place in recent years. These changes have
taken the form of building malls made up of a number of different outlets such as
clothing shops, grocery shops, restaurants, banks in one place.

Jonty is a commercial farmer who just opened a supermarket in the mall selling all
his branded produce such as beans, millet, maize, sunflower oil etc. She also makes
use of other trends in retailing such as self-service, e-commerce and bar coding.
Botswana Agricultural Marketing Board has also assisted Jonty in his commercial
farming.

(a) Explain the following new changes and state two features in each

170
(i) E-commerce:
-retail selling whereby customers use the internet to buy goods. (1mark)

-operational 24 hours and seven days a week

-use credit card to pay for items purchased by e-commerce

(2marks for 2 features)

(ii) Vending machine

- Use of electronic machines to sell products. (1 mark)

• Features.
- Machines placed at busy places
- Machines have slots for making payments
- Payment usually made in coinage
- Slots for the disposal of items bought provided
(2marks for 2 features)

(iii) Branding: giving a distinct name to a product (1mark)

• Features:
- The name chosen must be unique
- Must consistent and easily recognizable by its logo, shape, colour,
taste, etc.
- Make consumers aware of the product qualities
- Assure a standard of quality
- Create a brand image
(2marks for 2 features)

(iv) Bar coding: A technology developed to check the goods using the computer at
the sales point (electronic data interchange, electronic funds transfer at the point of
sale).(1 mark)

• features:
- Strip of lines with a number below stuck on the package of the product.
- Updates stock levels of products

171
 (2marks for 2 features)
(b) Discuss three ways in which Botswana Agricultural might have assisted
Jonty after harvesting his produce.[9]
- buy Jonty’s produce (beans, millet, maize) as soon as they are harvested (1 mark) by so
doing providing a guaranteed ready market (1mark) however they may pay lower prices
(1mark)

-collection of produce (beans, millet, maize) (1mark) which relives her problems of transport
(1) however transport might not be reliable (1 mark)

-provide farm inputs such as tractors (1mark) Jonty will buy them at reasonable prices
(1mark) However they may be too expensive to acquire (1 mark)

-Provide research (1mark) which will improve production of beans, millet (1mark) however
it needs expertise and time consuming (1mark)

-storage of produce (beans, millet, maize) (1mark) which relieves him of storage problems
(1mark) however produce may go bad while still in storage leading to lower prices(1mark)

- 3 reasons, developed/applied with opinion 3x3 max 9marks

- 2 reasons, developed/applied with opinion 2x3 max 6marks
- 2 reasons, developed/applied with no opinion 2x2 max 4 marks
- 2 reasons, developed not applied with opinion 2x1 max 2 marks
- 2reasons listed 2x1 max 2 marks

(c)Assess the use of self-service to Jonty’s business.[9]

-impulse buying (1mark) due to clever display of beans or peanuts, this will attract
customers which increases sales (1mark) however shoplifting may occur which will reduce
stock of beans leading to possible loss (1mark)

-it requires few sales assistants (1mark) which means low wage bills for Jonty (1mark)
however equipments such as trolleys, baskets, cash registers, surveillance cameras are
required which means more costs (1mark)

172
-It leads to increased sales (1mark) as customers take their time to move around the shop
on their own taking their time to buy maize or millet (1mark) however sometimes trolleys
and baskets can be stolen (1mark)

- 3 reasons, developed/applied with opinion 3x3 max 9marks

- 2 reasons, developed/applied with opinion 2x3 max 6marks
- 2 reasons, developed/applied with no opinion 2x2 max 4 marks
- 2 reasons, developed not applied with opinion 2x1 max 2 marks
- 2reasons listed 2x1 max 2 marks

4. Dear Esteemed Customer

Great pleasure to send you our latest catalogue on newly developed leisure
and sportswear fashions, in which you will get details of our low-priced value
for your money offers merchandise. We have no doubt that you will
appreciate our prices and advise us if you find lower prices on similar items
elsewhere. You are also aware that if you not satisfied with any items, our terms
and conditions apply.

(a) Which type of a retailer would write such a letter?

mail order retailer (1mark)
(b) Explain why the letter is written to this particular customer.
• The business wants to hold on the existing customers
• The customer is a loyal existing customer

173
 • A way of providing information on the available goods for the purpose of
customer care.
Creating personal contact that is lacking in mail order business
(2 marks for 2 reasons)

(c) How does this retailer persuade the customer to buy the goods?
• By pointing out the benefits of the sportwear, features and the advantages the
customer can derive from being their customer other the other competitors.
(2marks)
(d) Which kind of merchandise is the retailer offering?
• Clothing merchandise including fashion wear, sportswear, leisure wear etc.
(1 mark for naming one item
(e) What conditions do such retailers offer in case items do not satisfy the
customer?
Unsatisfactory goods can be returned
Customer can keep the goods and pay as interest free credit
(2marks for 2 points)

(f) Discuss the effect of this kind of trend in retailing to the customer
Advantages.
- Customer can be offered interest free credit
- Customer can choose goods at leisure
- Customer can buy in the comfort of own home
- Unsatisfactory goods can be returned.

Disadvantages
- Higher prices
- Difficult to assess quality from illustrations and photos
- Inconvenience to return unsatisfactory goods
- Not available in all countries
- 3 reasons, developed/applied with opinion 3x3 max 9marks

174
 - 2 reasons, developed/applied with opinion 2x3 max 6marks
- 2 reasons, developed/applied with no opinion 2x2 max 4 marks
- 2 reasons, developed not applied with opinion 2x1 max 2 marks
- 2reasons listed 2x1 max 2 marks

UNIT 3 ANSWERS TO MODEL EXAMINATIONS QUESTIONS

Section A [10
marks]
Answers to multiple choice questions.
QUESTION NUMBER ANSWER
1 C
2 D
3 A
4 D
5 B
6 C

175
7 B
8 B
9 C
10 C

Section B
Structured questions
Answer the questions in the spaces provided on the question paper

1. Mr. Boya has been in employment for five years and is considering of buying
a new car on credit trading terms to run his butchery well. He is not sure of
the type of credit trading suitable for such expensive transactions.

(a) What is meant by credit trading?

Buying for goods now and paying for them at a later date (2 marks)
Relevant points might include:

176
(b) Differentiate between hire purchase and deferred payment

HIRE PURCHASE DEFERRED PAYMENT

Buyer only assumes ownership after Buyer assumes ownership upon
last instalment has been paid payment or deposit
Seller can repossess the goods if Seller cannot repossess the goods
the buyer defaults payment buy may sue for the balance
Buyer cannot sell the goods before Buyer ca sell the goods anytime
fully paying for them
Suitable for goods with a high resale Suitable for goods with little resale
value such as cars, furniture etc. value such as clothing and carpets
(4 marks)

(c) Mr Boya has the option to buy the car on hire purchase. Assess the use of
this method of credit trading to Mr Boya

Advantages:
- Convenient way of buying expensive items such as cars
- Makes use of the car while paying for it
- By spreading payments over a period, Mr Boya can save money for
other things

Disadvantages:
- Interests charged are too high
- If the car is repossessed because of default in paying, all the earlier
payments made will be lost

177
 - It encourages customers to live beyond their means by buying one item
after another and end up defaulting or fail to make payments
- 3 reasons, developed/applied with opinion 3x3 max 9marks
- 2 reasons, developed/applied with opinion 2x3 max 6marks
- 2 reasons, developed/applied with no opinion 2x2 max 4 marks
- 2 reasons, developed not applied with opinion 2x1 max 2 marks
- 2reasons listed 2x1 max 2 marks

2. Many countries have a range of consumer protection institutions and laws

meant to ensure customers’ safety and protection by applying relevant ways.

(a) Explain any three business practices from which consumers need to be
protected.
- Misleading advertisements and other publicity material giving false
information.
- Producing dangerous drugs.
- Labelling incorrect descriptions on packaging.
- Giving incorrect weights and sizes of goods.
- Producing goods unsuitable for the purpose shown.
- Manipulating prices or charging extremely high prices.
- Offering credit terms which may not give a true picture of the extra cost.
Producing sub-standard quality by using cheap raw materials

178
 (3 practices explained = 6marks)
(b) (i)Name the institution responsible for seeing to it that products
manufactured are meet a certain standard and quality
Institution: Botswana Bureau of Standards (1 mark)
(ii)Explain two more functions of that institution
Functions might include:
- Product quality assurance
- Setting manufacturer codes of practice
- Setting minimum standards for the design and manufacturer of goods
- Guarantee quality, performance and safety in the manufacture of goods.
(4 marks for two functions explained
(2 marks for one function explained)
(c) Industries can form and follow their own ‘code of practice’. Explain
what is meant by ‘code of practice’
Voluntary guidelines on how to manufacture goods and provide services to
ensure the safety of consumers. (2 marks)

(a) Outline two limitations that small-scale retailers face to buy directly from
manufacturers.
[4]
Relevant points might include:
- Lack of capital to enjoy economies of scale
- Lack of storage facilities for bulk goods
- Lack of technological development
- Lack managerial skills

179
 4. LAWPIN wholesalers specializes in selling jewellery. It has used a mail order
system for some years and feels that it could increase sales by using e-commerce.
(a)what is meant by wholesale business
A business buying and selling goods in larger quantities and breaking bulk to
retailers and consumers (2 marks)
(b)Differentiate between general wholesalers and a specialist wholesaler
General wholesaler Specialized wholesaler
They sell household consumer They provide the customer with a
goods range of same products
They are large companies which They sell wide range of same
have huge capital and sells wide products
range of goods
They often send their salesperson They provide support services to
around to obtain orders from customers
retailers

2 points corresponding (2x2) = 4marks

points not corresponding (2x1) =2 marks

(c) Explain three functions of LAWPIN wholesalers

- Breaking bulk: to allow the retailers to stock jewellery according to the needs and
demands if their customers.
- Provide retailers ready supplies of goods: whenever they want them by
warehousing large amounts of many different types and varieties of jewelleries.
- Some wholesalers offer delivery and credit facilities to retailers
- Provide information on the latest products available to the retailers so that they can
plan ahead and stock jewellery which could be demanded by customers in the near
future
(3 functions explained and applied=6marks)

180
(d) Explain any two factors that have contributed to the decline of the
wholesaler in the chain of distribution.
-The growth of large-scale retailers who have their own warehousing and
distribution facilities are able to buy goods directly from manufacturers in bulk and
negotiate reduced prices.
-The growing in size and number of large-scale retailers opening in the outskirts of
towns and cities has led to many small-scale retailers who happen to be the
customers for the wholesalers, declining and reducing the number of customers for
the wholesalers who might go out of business.
-Many large-scale retailers have linked computer systems with manufacturers,
orders can automatically be placed with the manufacturers for replenishment of
stock. The orders made can be delivered within hours due to good road and railway
networks. This makes it difficult for wholesalers to compete with manufacturers who
decide to supply retailers directly.
(2 factors explained =4marks)

(e) Describe three ways in which wholesalers are still likely to exist in chain of
distribution.
• Many wholesalers have set up large-scale retail outlets operating regionally,
nationally and even internationally with some customer reward systems.
• Some wholesalers are now open to both small retailers and consumers
• Some wholesalers perform the branding and blending functions on behalf of
some producers for their survival.
(3 ways explained =6marks)

2. Assess the use of e-commerce to LAWPIN wholesalers when selling

their products. {9)

181
 -The business can make their payments on jewellery products relaxed at their
offices (1 mark) which saves their time as they do not have to travel (1 mark).
However, there can be fraud. (1 mark)
-Selling of jewellery can take place 24 hours and 7 days a week (1 mark) This
will allow for more people to buy jewellery which will increase sales. (1 mark)
however e-commerce is dependable on skilled labour. (1 mark)
-E commerce has global reach (1mark) a website can reach anyone in the
world who has internet access, and this will them to view the jewellery sold
and make decisions (1 mark) however, payment securities worry customers
(1 mark)
3 reasons, developed/applied with opinion 3x3 max 9marks
2 reasons, developed/applied with opinion 2x3 max 6marks
2 reasons, developed/applied with no opinion 2x2 max 4 marks
2 reasons, developed not applied with opinion 2x1 max 2 marks
2reasons listed 2x1 max 2 marks

4.Lopang is a newly recruited employee in a company providing travelling agency

services. She wants to know at least three ways that could help her handle
customer complaints
(a) Suggest to Lopang the three ways

- Listen and understand to the complaint without arguing.

- Take note of the main issues that need attention.
- Distinguish sense from nonsense without accusing the customer.
- Keep calm and do not loose temper.
- Seek clarity on unclear issues with sympathy

182
 - Assess the complaint and discuss the resolution with the customer;
accepting responsibility and apologizing for the inconvenience causes
on behalf of the organization where necessary.
(2 ways stated =3marks)

(b) Explain two benefits of a good customer service to the business

-increases customer loyalty
-increases sales
-leads to a good reputation of the business
(2 benefits explained= 4marks)

UNIT 4 ANSWERS TO MODEL EXAMINATIONS QUESTIONS

Section A [10 marks]

Multiple choice questions
Answers to the questions

QUESTION NUMBER ANSWER

183
1 A

2 D

3 C

4 B

5 B

6 D

7 C

8 B

9 B

10 A

Section B
Structured questions.
Answer the questions in the spaces provided on the question paper.

1. Bontle is planning to buy a bicycle for her son. She boarded a bus from
Mochudi to Gaborone at a P15.00 fare. She saw a display of bicycles by the

184
 window of a shop showing inviting prices for different bicycles on price tags.
Finally, she decided to buy one for P250.00 on a contract of sale basis.

(a) Explain the meaning of ‘contract of sale’

A legally binding agreement of sale between a buyer and a seller of a product or
service. [2marks]

(b) The window display seen by Bontle was an offer and the signing of an agreement
in a sales contract is an acceptance. Define the terms ‘offer’ and ‘acceptance’ in a
sales contract. [4
‘Offer’ in a sales contract: a statement made by a seller of a product or service of
willingness to part with the particular product or service (2 marks)
‘Acceptance’ in a sales contract: to agree to buy a product or service at a certain
price. (2 marks)

(c) Identify and explain the form of sales contract Bontle entered into when she
boarded the bus from Mochudi to Gaborone [6]
Identified form of sales contract: Implied by action or conduct of the parties
concerned (1 mark)
Explanation: Bontle saw the sign on the bus going to Goborone in Mochudi or head
the conductor offering passengers to Gaborone and accepted the offer by boarding
and getting a seat knowing how much fare she would be paying for the journey
(3 marks)

(d) Briefly explain the importance of ‘terms’, ‘conditions’ and ‘warranties, in

respect of sales contracts.

-Terms of a contract of sale are obligations that both the seller and the buyer
have to meet without fail as per agreement for the contract to be valid.
-Conditions are items in an agreement that the buyer and seller have to
adhere to if the contract has to remain valid.
185
 -Warranties are legal documents that promise buyers that the products bought
will work, usually for a certain period of time. Warranties give buyers of
products assurance of having contract but aggrieved parties can claim
financial compensation.

2. On signing the agreement, Bontle realized that she would not carry the bicycle
home with her since the sale was incomplete but the agreement points were
pleasant to her.

(a) Differentiate between ‘Actual sale’ and ‘agreement to sell.’

Relevant points might include:
Agreement to sell is where the buyer and seller agree on how the transaction
is going to proceed and conclude but no transfer of ownership takes place. In
Actual sale, the buyer pays the full buying price needed by the seller, goods
are delivered and the ownership is legally transferred to the buyer.
(4 marks)

(b) Explain what you understand by points on which sales agreements

must be reached.

-These are points on which the buyer and the seller must agree upon
regarding the sale in order to reduce chances of dispute at a later stage of the
agreement and include: price of the product, quantity, quality, delivery and
conditions of payment.

(c) Determine any four points of agreement in a sales contract. [8]

Relevant points might include:
-Price: the agreement should specify what the quoted price includes such as
carriage paid, free on rail (f. o. r), carriage forward (c.f.), Ex-works or Ex-
warehouse, and Loco. Whatever the price agreed is, must be clearly
understood by the buyer and the seller.
-Quantity: the buyer must clearly specify the quantity and unit of measurement
required in either imperial or metric system to the seller.

186
 -Quality: Buyer and seller must agree as to the exact quality they are dealing
with.
-Delivery: Agreement should be made and reached in respect of place, time
and cost of delivery.
-Condition of payment: Buyer and seller must agree on the dates and mode of
payment (Cheque, cash, bank draft, postal order, electronic transfer, credit
card, etc.).
(8 marks)

3. Dan Boy is employed as a Purchasing Manager in a newly set up electric

cable and equipment manufacturing and distribution company. The company
is still small, so he is expected to establish purchasing and supply procedure
standards for materials and finished goods in the company. Production and
distribution activities have yet started as all activities are awaiting the arrival of
the materials and equipment.

(a) Explain two functions done by Dan Boy as the purchasing officer
-Identifying sources of supply for a product:
- The sources of supplies of electric cables could be manufacturers,
wholesalers or agents.
- Of the many suppliers available, it may be found that: Late or non-
delivery, poor and sub-standard material, incorrect specifications and
high prices are likely to have an effect on the profitability of the
business.
- The avoidance of delayed production, excessive material waste caused
by incorrect materials and the avoidance of excessive stocks among
the goals of an efficient buying or purchasing function of a business
-Choosing the right suppliers for the supplies required begins from the original
demand for production control, inventory control, efficient store keeping and
departmental management who forward their purchase requisitions to the
relevant purchasing authority in the business. (2 points explained = 4
marks)

187
 (b) State the four procedures for selecting supplier for materials and stock
of goods Dan Boy would use.

Relevant points might include:

(i) Supplier search for possible suppliers using own past records, Telephone
directories, Trade journals, Magazines, etc.
(ii) Sending enquiries or tenders to possible suppliers fully specifying the
requirements.
(iii) Receiving of quotations and tenders and vetting them by the purchasing
in liaison with the originating authorities
(iv) Supplier selection; considering the prices offered, quality, delivery or
lead-time, quantity and ability to supply the product or material continuously
(4 marks)

On 1 September 2019 Dan Boy had the following records of purchases of production
materials in store and issues to the factory from the stores during the first four
months.
Date Material A Purchases Material A Issues
Quantities (Catons) Quantities (Catons)
13 Feb. 19 200
8 Mar. 19 400
10 Mar. 19 500
11 Apr. 19 600
12 May 19 400
20 May 19 600
15 June 19 500
25 June 19 400
There was no opening balance for February 2019.

188
 (c) Record the information in the Stock Record Card below showing the correct
quantity balances only.
[10]

STOCK RECORD CARD

Item: Material A Maximum level:
Stores Ref: Minimum level:
Location: Warehouse Re-order level
Date Receipts Issues Balance

13 Feb. 19
200 200

8 Mar. 19 400 600

10 Mar. 19 500 1 100

11 Apr. 19 600 1 700

12 May 19 200 1 900

20 May 19 600 1 300

15 Jun. 19 500 1 800

25 Jun. 19 400 1 400

189
4 Buyers and sellers use documents to record all their transactions because these
commercial transactions are agreements between traders. Maiba just bought electric
cables for his business supplying electricity suppliers.

(a)Identify the first three buying documents that could have been used by
Maiba
- Requisition: used for requesting goods from stock in store and a
purchase requisition is used when goods are not in stock and have to
be bought by the purchasing authority.
- Sales enquiries: Buyers can find out about the price and other details
of the goods they want to buy by sending letters of enquiry and in
return receive catalogues and price lists, quotations, offers, or
estimates. The details might also be obtained by telephone, telex,
facsimile (fax), television or internet or by visiting show rooms.
- Order: Used to request the seller to supply goods. Contains name and
address of supplier, date of order, quantity, descriptions, catalogue
number and price of each item clearly and accurately completed,
method of delivery and delivery address

(b) State two rules for storing different types of stock.

Rules for storing different types of stock

- Frequently issued stock should be stored conveniently placed in the
store room.
- Items issued together should be kept together or next to each other
- Dangerous items should be separated and kept in lockable bins with
warning signs placed visibly.
- Flammable substance should be kept away from open flames and
warning signs posted to remind staff.

190
UNIT 5 ANSWERS TO MODEL EXAMINATIONS QUESTIONS

Section A [10 marks]

Multiple choice questions

Answers to the questions:

QUESTION NUMBER ANSWER

1 C

2 B

3 A

4 C

5 C

6 C

7 C

8 D

9 D

10 A

191
Section B
Structured questions
Answer the questions in the spaces provided on the question paper.
1.Mr Phutso is a furniture manufacturer who sells his products locally and abroad
(a) What is meant by foreign trade
Selling of goods and services between countries (2 marks)
(b) Differentiate between home trade and foreign trade
Home trade Foreign trade
Buying and selling of goods and Buying and selling of goods and
services within one country services between countries

Consists of wholesale and retail Consists of export and import trade

trade

No trade barriers Trade barriers exist.

Use same currency Different currencies used

Common units of measures and Different units of measures and
weights used weights used

2 points corresponding (2x2) = 4marks

points not corresponding (2x1) =2 marks

(c) Explain any two reasons why Botswana takes part in foreign trade.

§ Interdependence – Some countries make more goods or provide

more resources than they can consume and so sell access to other
countries.
§ Scarcity of resources: Some goods, materials or services are not
available in Botswana because of lack of natural resources, human
expertise or right climate to grow certain types of produce, so has to
depend on other countries

192
 § Cost of production: Some goods and services are cheaper to
produce in other countries although they can be produced in Botswana
but at a higher production
§ Earning foreign exchange: Botswana participates in international
trade in order to earn foreign money with which to pay for imports.
§ Seasonal goods: To make seasonal produce available
§ Relations: To create good relations with other countries
§ Surplus: To get rid of surplus local products
§ Employment: To create employment opportunities
§ Technology: To acquire new technology.

2.Country Y is importing and exporting large quantities of minerals and meat. It has
an unfavorable balance of payment.
(a) Define the following terms
(i)Balance of trade: the difference between a country’s visible imports and visible
exports;
(ii) Balance of payments: a record of a country for all the financial transactions,
visible and invisible, between the country and the world over a given period of time.

(b) Evaluate three methods that a country can use to solve balance of payment
problems.
-impose import tariffs (1 mark). Country Y will restrict meat imports so that local
companies can also benefit which will improve the living standards of citizens.(1
mark) However, there may be shortage of meat from the local suppliers which
means the country will lack meat. (1 mark)
-Impose tariffs or customs duty. (1 mark) This will make meat imports expensive and
local businesses will benefit as citizens will buy from them. (1mark). However,
imposing tariffs means the prices of the imported goods will now have a higher price
in order to cover the tariffs, this means that citizens will now suffer as they cannot
afford to buy the products at high prices. (1 mark)
-Push up interest rate (1 mark) this is done in order to cause a fall in spending and
hence a fall in meat imports (1mark). However, it will be expensive for citizens to
borrow money in case of expanding their businesses. (1 mark)

193
 - 3 reasons, developed/applied with opinion 3x3 max 9marks
- 2 reasons, developed/applied with opinion 2x3 max 6marks
- 2 reasons, developed/applied with no opinion 2x2 max 4 marks
- 2 reasons, developed not applied with opinion 2x1 max 2 marks
- 2reasons listed 2x1 max 2 marks

3 (a) A P3 billion deficit for the month was recorded and the value of goods imported
Was P19 billion. Calculate the value of exported goods. Shows your workings.

Balance of payments = Total exports – Total imports

3 billion = ? - 19 billion

Total exports = 19 billion – 3 billion = 16 billion (3 marks)

(b) A textile manufacturer has decided to use an export merchant to sell their goods
abroad. Explain two advantages of using an export merchant in selling their
goods abroad

- For the manufacturer the transactions will be the same as selling to

the home market as it will be the export merchants who will be
responsible for promoting, advertising and selling the textile to buyers
abroad.
- Export merchants are specialists who have knowledge of exporting
activities. They help to overcome export difficulties such as language
and translation and successfully handle transactions for export.
(2 advantages explained =4 marks)

(c) Explain the following trade documents:

Certificate of Origin: A document certifying the origin country of the goods;

sometimes used by the importer if it has been agreed that the goods of one

194
 country will be allowed to enter another country at a favorable tariff rate. (2
marks)

Consular invoice: A normal ordinary invoice signed by a consulate or trade

attaché of the exporting country to certify the correctness of the information
contained in the invoice to the customs authorities of the importing country for the
purpose of customs duties levy. (2marks)
4. (a) What are the differences between current account and capital account in
the balance of payments?
The Current account records the export and import of goods and services. Thus,
it shows the trade in visible imports and invisible imports as well as visible exports
and invisible exports.
The Capital account of the balance of payment records all foreign purchases of
assets a country makes resulting into capital outflow and/or record all foreign
sales of assets a country makes resulting into capital inflow. The capital account
also shows the amount of money a country borrows from other countries and the
amount of money it lends out. (4 marks)

(b) Explain any implications to Botswana of:

An unfavourable balance of trade:

An adverse balance of payment means Botswana’s imports exceed exports and the
country might become a borrower from the World Bank, International Monetary Fund
(IMF) or other friendly countries or its citizens. Development projects would either be
delayed, postponed or even abandoned/cancelled and the peoples’ standards of
living would become poor. (one point explained =2 marks)

A favorable balance of trade:

A favorable balance of payment means Botswana’s exports exceed imports and the
implication would be that the country can afford to implement development projects,
save money in the form of foreign reserves that can help in paying for imports and
also help in times of difficulties. (one point explained =2 marks)

195
(c) Explain the importance of the International Monetary Fund (IMF) and the
World Bank in foreign trade:

Importance of IMF: to make foreign exchange resources available to members who

run into balance of payments difficulties. (one point explained= 2 marks)

Importance of the World Bank: the primary function of making funds available to
help developing countries. Member countries agree to subscribe quotas to the bank.
It gives loans to finance specific projects of investment in underdeveloped countries.
(one point explained =2 marks)

5. Lore is a leather jacket manufacturer. He sells his products in Botswana and

outside Botswana.
(a) State three problems that Mr Lore is likely to face as an exporter
-high transport costs
- difficulty in debt collection due to political factors and exchange control
regulations—-difference in measurements
-difference in languages
-import duties
-legal and cultural differences
-difference in measurements and weights
(3 problems stated 3 marks)
(b) Explain two ways in which Mr Lore could make use of a factor
-they can collect Mr lore’s leather jackets and go to physically sell them
-they sell the leather jackets in their own names and can even give credits
- they can also collect and forward payments to Mr Lore
(2 ways explained and applied= 4 marks)
(c) Explain why Mr Lore would choose to buy raw materials from outside the
country.
-because raw materials for making leather jackets are cheaper outside the country
- because raw materials for making leather jackets are of good quality
-because the tariffs charged at the borders after buying raw materials are low
(2 points explained= 4 marks)

196
UNIT: 6 ANSWERS TO MODEL EXAMINATIONS QUESTIONS

Section A [10 marks]

Multiple choice questions

Answer Keys to the questions:

QUESTION NUMBER ANSWER

1 D

2 C

3 D

4 A

5 A

6 A

7 D

8 D

9 A

10 D

197
Section B
Structured questions
Answer the questions in the spaces provided on the question paper.

1.Country X imports vegetables from neighboring countries. The Department of

Customs and Excise in that country implements Customs Legislation dealing with
imports and exports. In doing so, it performs a number of functions including the
collection of statistics of international trade at the border posts.
(a)Why does the Department of Customs and Excise collect statistics of
foreign trade
- help the country to get details of imports and exports.
- for the calculation of balance of trade and balance of payments.
- enable government to determine the needs of the people.
- enable government design and assess the effects of its trade policies.
- evaluate the effectiveness of their tax collection.
(2 points explained and applied= 4 marks)

Explain any other two functions of the Department of Customs and Excise
apart from the collection of statistics.

- Collecting customs duty, excise duty and sales tax or value added tax
(VAT) for government.
- Controlling bonded warehouses in order to enforce the payment of duty.
- Enforcing quotas;
Guarding the movement of goods across the country’s border to
prevent the smuggling of prohibited goods that are either a threat to
national security or a danger to public health and also prevent duty
evasion by some traders. (2 functions explained and applied= 4
marks)

198
 -

(c)The government is worried about the current figures of the balance of trade
for the country. Explain any four measures the government may take to
reduce the quantity of imports for the country.
Relevant points might include:
- Subsidizing export production to enable exporters charge lower prices
and get more orders from abroad;
- Improve tariffs to improve imports;
- Impose quotas to restrict imports which would result to reduced foreign
competition;
- Devaluing the local currency to exports cheaper;
- Push up or down interest rates when necessary to reduce or increase
local spending;
- Abolish surcharges on importation of machinery;
- Exercising legal controls of business in issuing permits, passing
environmental protection legislation;
- Setting up statutory bodies;
Providing physical and social infrastructure to enable businesses to
function normally. (4 measures explained and applied= 8 marks)

(d)How might membership of a trading bloc such as SACU help a

country’s trade?
[2]
Relevant points might include:
- Trading of goods and services between member countries becomes
easier and cheaper
- Specialization by member countries can be promoted
- Increase in income from exports can be experienced by member
countries
- Trading bloc consumers may experience an overall increase in
wealth and standard of living.

199
2 (a) The Botswana Export Development and Investment Authority (BEDIA) is an
independent statutory body established to promote investment and export. Explain
four functions performed by BEDIA

- Providing advisory and consultancy services to local, national and

international investors;
- Liaising with potential investors and relevant government agencies and
business organizations;
- Organizing trade and investment missions to other countries;
- Operating trade and information services;
- Organizing annual trade fairs;
- Analyzing and identifying export markets as well as import substitution
chances.
- Dissemination trade and investment information to the business
community.
(4 function explained = 8 marks)

(b) Differentiate between ‘ad valorem and specific duties’

Ad valorem and specific duties: Ad valorem duty is customs duty calculated as a

percentage of the value of the import while specific duty is excise duty charged on
each unit of quantity bought. (4 marks)

3.In relation to International Trade Agreements, answer the following questions:

(a)List four international continental or regional organizations that have
benefited Botswana.
The list might include:
- World Trade Organization (General Agreement on Trade and Tariffs)
(GATT) – Seeks to encourage reduction of trade barriers. Started in
1948 with encouraging formation of Customs Unions or Free Trade
Areas.
- United Nations Conference on Trade and Development (UNCTAD) –
Held its first session in 1964. Seventy-seven (77) poor nations came
200
 together to act as a pressure group on trading matters. The
conference recommended to give developing countries free access to
world markets by eliminating quotas and tariffs, making commodity
agreements, stabilizing commodity prices inter-alia. Subsequent
sessions were followed and continue being held every four-year
interval.
- Association of South African and East Asian Nations (ASEAN)
- European Union (EU).
- Africa, Caribbean and Pacific (ACP).
- North American Free Trade Agreement (NAFTA).
- South African Customs Union (SACU).

(a) State three advantages and three disadvantages of customs duty in

international trade: [
Advantages of customs duties might include:
- Raise income or revenue for the country to finance development
projects
- Protect domestic industries by making imports more expensive to
discourage people from importing. (3 marks for 3 advantages)
- Restricts imports to improve the balance of payments of a country
Disadvantages of customs duties might include:
- Restricts trade for a country
- Break agreements with the World Trade Organization and neighboring
countries
- Other countries might retaliate by imposing similar duties causing what
is referred as a trade war. (3 marks for 3 advantages)

(c)Write the following international treaties in full.

ACP: Africa, Caribbean and Pacific

SADC: Southern Africa Development Community

201
 WTO: World Trade Organization

SACU: South African Customs Union

4. (a) Explain any two functions performed by the Botswana Export Credit
Insurance.

- providing insurance cover for exporters who sell goods on credit against the
risk of not being paid by their foreign customers
- Promote export by taking many of the risks inherent in export trade away
from individual exporters
- Its importance is that it aims at developing non-traditional exports for the
country to support the long-term economic diversification objective of the
government. (2 functions explained = 4marks)

202
UNIT 7 ANSWERS TO MODEL EXAMINATIONS QUESTIONS

Section A [10 marks]

Multiple choice questions

QUESTION NUMBER ANSWER

1 C

2 D

3 A

4 D

5 A

6 A

7 D

8 D

9 B

10 D

203
Section B

Structured questions.

Answer the questions in the spaces provided on the question paper or answer
if provided and required.

3. Use the chart below to answer the questions that follow:

Botswana’s Economic System

-----------------------------------------------

Public sector Private sector

--------------------------- -----------------------------

Central Local Unincorporated Incorporated

Government Government ---------------------- ---------------------

Ministries District Councils Private Public

Departments City Councils companies
companies
Public corporations Town Councils
VDCs.
Sole Partner-
proprietorship ships

204
 (a) Identify any two public sector business organizations that provide
services and any two that provide commodities in Botswana.

Service providers:
BPC, WUC, Botswana Railways, Air Botswana (2 marks)

Commodity providers:
BCL mine, Orapa mine, BMC, DeBeers (2 marks)
(b)The Botswana government has decided to privatise their medical health facilities
which has been nationalized all along.
Explain the following terms:
(i) Nationalization: Transforming/changing/turning/buying a privately owned
organization into a public organization/government owned.
(ii)Privatization: Transforming/changing/turning/selling a government owned
organization into a privately owned organization.
(c)State three features of a public corporation
• It is established by an Act of parliament
• It is set-up and funded by the central or local government
• It is managed by a Board of Directors or Governors appointed by a Minister
responsible
• It is a legal entity separate from the owner/s
• Profits made are used to improve peoples’ social well-being.
(3 marks)

(d)Evaluate the effects of privatization by the government of Botswana on the

economy
Advantages of privatization:

- increase in quality of goods and services

-Improved efficiency due to competition and the aim for profit
-Dismisses political interference in the running of business
-Impowers citizens where the privatized businesses are strictly sold to
citizens.

205
Disadvantages of privatization
-Privatization makes rich individuals richer while the poor get poorer
-Some of the government policies may become difficult to apply
-The process of privatization may be abused by some corrupt politicians who
would sell the firms to themselves at very low prices.
-Prices becomes higher and unaffordable
- 3 reasons, developed/applied with opinion 3x3 max 9marks
- 2 reasons, developed/applied with opinion 2x3 max 6marks
- 2 reasons, developed/applied with no opinion 2x2 max 4 marks
- 2 reasons, developed not applied with opinion 2x1 max 2 marks
- 2reasons listed 2x1 max 2 marks

2,(a) Differentiate between incorporated and unincorporated business units

Incorporated businesses Unincorporated businesses

• registered with registrar of • Registered with local government

companies and issued with the councils and issued with business
certificate of incorporation e.g. licenses e.g. hawkers, general
public and private companies in dealers, small retail shops, all sole
the private sector of an economy. proprietorships and partnerships

• Have the word ‘Limited’ or Ltd, in • Have unlimited liability, hence, not
the names. allowed to bear the word, Limited
or Ltd., in the business titles.

• Have separate legal identity from • Owners are personally liable for
the owners. the debts of the business.

• Raise capital through the sale and • Raises finances through owner’s
issue of shares savings and borrowing from
friends, family, banks and other
financial institutions.

• Difficult to establish due to long • Easy to establish since there are

and expensive legal procedures. no complicated legal procedures.

206
 • Owned and controlled by • Owned and controlled by
shareholders. individuals and partners.

• Profits after tax shared among • Profits belong to the owners or

shareholders as dividends. shared among partners according
to the partnership
deed/agreement.

(b) State two advantages and two disadvantages of nationalization

Advantages of nationalization:

• Profits raised go to the government for development projects

• Provides secure jobs to the population
• Provides and promotes a model of better industrial relations
• Protects national interests
• Large public enterprises can enjoy economies of scale
• Makes the implementation of some government polices easy
• Government has the resources to rescue some failing industries
(2 marks)

Disadvantages of nationalization:

• Eliminates competition and creates inefficiency due to monopoly of power

• Poor organization structuring leads to lack of communication
• Firms that make losses become a burden to the tax-payers’ coffers of the
government
• Usually nationalized industries become too large and difficult to manage
properly
• Nationalized firms may be run and controlled by politicians who may not have
business expertise
• Centralized management makes too much red-tape or bureaucracy which
cause delays in decision-making
(4 marks)

207
3. Nchabe is a sole proprietor selling different colours of paints locally. After months
of operation she has decided to partner with another paint seller to increase their
supply.
(a) Compare the Sole proprietorship and the Partnership in respect of the
Following:
-Capital: Sole proprietor may raise capital for buying paint through inheritance,
retirement benefit, own savings or borrowing from family, friends, bank and other
financial institutions while a partnership raises capital through contributions from the
partners but can also borrow from banks and other financial institutions.
- Liability: In both the sole proprietorship and partnership businesses, the owners
are fully liable for the debts of the business, except in the case of limited
partners.
- Control: Management of a sole proprietorship lies in the hands of the owner
while in a partnership, the partners consult or may employ or appoint full-time
Managers.
(3 points explained and applied = 6marks)

(b) State any two advantages and disadvantages of being a Sole proprietorship
and a Partnership

Advantages of being Sole proprietorship:

-Easy and cheap to set-up
-Owner controls the business
-Owner makes all decisions
-Any profits made belong to the owner
-Owner has close contact with customers
(2marks)

Disadvantages of being a Sole proprietor:

-Owner is liable for the debts of the business
-Chances of the business to grow are limited
-Lack of business continuity in case of death or ill-health
-There is no specialization
-Workload and liability can cause pressure and stress
208
 (2marks)

(c) Assess the effect of partnership business unit to Nchabe and the other
partner
Advantages of partnership
-Responsibilities can be shared and make it possible for partners to
specialize.
-Workload and liability can be shared resulting to reduced pressure and
stress.
-The business can have access to more funds through partner’s contribution
Disadvantages of partnership
-Partners are liable for all debts of the business
-Disagreement may arise leading to delays in decision-making
-Capital can be fairly limited in a partnership
-A new partnership deed is required if one partner dies or changes

- 3 reasons, developed/applied with opinion 3x3 max 9marks

- 2 reasons, developed/applied with opinion 2x3 max 6marks
- 2 reasons, developed/applied with no opinion 2x2 max 4 marks
- 2 reasons, developed not applied with opinion 2x1 max 2 marks
- 2reasons listed 2x1 max 2 marks

(d) Describe any two ways the partnership businesses are contributing to
Botswana’s economy
• Creating jobs and providing income for livelihood to many people
• The tax they pay is a source of income for the government
• The country earns foreign exchange from the goods they make and export
• They are the foundation of rural economy and contribute to rural development
• They contribute to community development in the areas they are located

209
 (2 ways explained and applied=4marks)
(e) Explain the difference between a general partnership and a limited
partnership.

• A limited partnership is a business in which one partner at least has limited

liability whereas a general partnership has all partners with unlimited liability.
(2marks)

210