PRODUCTION

Definitions of terms

 Production is the process of combining land, labor and capital to come up with goods and services
so as to meet consumer needs and wants.
 Production is the provision of goods and services to satisfy human needs and wants.
 Production is any economic activity that is carried out by firms, government and individuals in
order to satisfy human needs and wants.
 products refer to both goods and services.
 Goods are tangible items. Examples of goods are books, oranges, pencils and cups.
 Capital goods are assets used by firms and individuals to produce goods and services. Example of
assets are machinery, equipment and buildings.
 Consumer goods are products that consumers use to satisfy their needs and wants. Examples are
clothes, refrigerator, food and drinks.
 Durable goods are items that have a long life span. Examples are refrigerators, television and
mobile phones.
 Non-durable goods are items that have a short life span. Examples are food and drinks.
 Services are intangible products which we cannot touch. Examples are banking and insurance.
 Consumers are firms and individuals who buy goods and services for their own use.
 Needs are products that are basic in our lives and we cannot do without them. Examples are shelter
and clothes.
 Wants are products we can live without. Examples are televisions, chocolates and ice creams.
 Firms are business organizations which produce goods and services, then sell them at a profit.
Examples are delta beverages and National foods.


Factors of production and their rewards

factor reward
land Rent
labour Wages and salaries
Capital Interest
Enterprise Profit

 Land, labor and capital are scarce resources for the production process.
 Those who combine scarce resources (land, labor and capital) to come up with products are called
entrepreneurs.
 Entrepreneurs can either work in firms or as individuals.
 The production process ends when goods and services produced reach the consumers.
 land, labour, capital and enterprise are inputs used in production process by firms to produce output
which is used by households.
 Factors of production are also known as factor inputs or resources

Factors of production
Land
 Land refers to all natural resources used in the production process.

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 These include water, forests, soil, trees and fisheries.
 Land is a limited resource which is supposed to be carefully allocated. Land comprises of the
actual place and other natural resources.
 It includes all natural resources both renewable and non-renewable. Examples are water, soil,
diamonds, gold and animals.
 Land is a limited resource and it cannot be expanded geographically.
 So, firms and individuals should produce goods and services on the limited portion of land that is
allocated to them.
 Land owners earn rent from the land they lease to firms and individuals.

Labour
 Labour is the human mental and physical effort that is used in the production process.
 Production is a process of converting inputs into outputs.
 Outputs are goods or services that are produced by firms and individuals. Examples of labour
include teachers, lawyers, engineers and economists.
 Labour is the human mental and physical effort used in the production of goods and services.
 When workers carry out tasks within a given period of time, their payments are in form of wages
and salaries.
 Labour is paid either hourly, daily, weekly or monthly depending on the payment system suggested
by the firm.
 Labour is a scarce resource because there is need for funds to pay for services provided.

Capital
 These are man-made resources used to produce goods and services.
 They include machines, buildings, tools and factories.Capital
 Capital refers to man-made resources that are used for the production of goods and services.
 These resources include machinery, equipment and tools.
 Capital resources are subject to lose value overtime.
 The reward of capital is interest.
•

Entrepreneurship/enterprise
 Entrepreneurs combine all the other factors of production (land, labour and capital) to produce
goods and services.
 Enterprising skills and knowledge are required to facilitate efficient and effective production.
 Entrepreneurs create business plans, acquire resources and manage their business
 Entrepreneurs are individuals who combine land, labour and capital to produce goods and services
at a profit.
 Business planning and acquiring of financial and material resources is done by an entrepreneur.
 An entrepreneur decides on what to produce, how to produce and for whom to produce.

Rewards to factors of production

Rent
 Rent is the price for hiring land.
 No one can operate a business without a piece of land, it could be a mere office or a factory.
 In business some people use land that belongs to others. For example, farmers may use other
people’s land to grow their crops.
 Rent does not involve the payment for use of premises and buildings on the piece of land.
 Rent is payment for the use of the ground where production facilities can be constructed.

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 The value of rent depends on natural differences of the land involved.
 Some pieces of land are fertile while others are infertile.
 If the land is required for farming, fields that are fertile should be more expensive than infertile
ones.
 The land that is close to urban centres may be more expensive than the land which is far away from
towns and cities.
 Probably the land that attracts highest rent is that found in the urban centres.
 The reason for the high cost of land in urban centres is that it is limited.
 Such land cannot be increased in size, so it is expensive.

Wages and salaries

 Reward for labour is wages and salaries.
 Wage is the payment for a service that is provided by people during the production process.
 People who provide mental or physical services are rewarded through wages/salaries.
 Therefore all types of workers, unskilled, semi-skilled and skilled are given wages/salaries.
 When economists use the term wages, they also refer to salaries.
 The term wage mean anything that is paid for the provision of human effort, such as salaries or
bonuses.
 Wages can be paid in cash or kind.
 An employee is paid in kind if he/she is given goods or services as a payment.
 For example, an employee can be given grocery items as part of his/her payment.
 If the employee is given cash, that is referred to as nominal wage. This includes the money that is
deposited in the employee’s bank account.
 Apart from nominal or money wage, there is real wage.
 Real wages refer to the quantities of goods and services that a worker is able to acquire using the
money he earns.
 Employees can be paid daily, weekly or monthly.
 The amount of money an employee is paid per unit of time or activity is called a wage
 rate.
 A piece rate is the amount of money that is paid to a worker after completing a given task at work.
 A time rate is the amount of money that is paid to an employee basing on the unit of time spend at
work.
 Employees can also be given bonuses at work, basing on agreed criteria.

Interest
 Interest is the reward for capital.
 Capital are all the man-made resources that are used to produce goods and services.
 Most often, businesses borrow money to finance various investment projects.
 In other words, money is required to secure capital assets such as machinery, vehicles, factories
and other equipment needed for production purposes.
 Businesses that borrow funds will return the money with interest.
 For borrowers, interest is the cost of borrowing money.
 Interest is normally charged as a percentage of money borrowed.
 The rate of interest fluctuates, going up or down depending on the demand for loans in the
economy.
 Why there should be interest for borrowing money?
 Interest is levied on borrowed money (loan) for a number of reasons:
 Businesses use capital in producing goods and services, as a result the borrowers pay interest from
part of the money they earn from the sale of their products.
 Interest is paid as a payment to compensate the lender for the risk involved in lending out money.

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 By lending money, the lender is open to a possibility of failure to recover such funds.
 Interest is paid to cover for the inconvenience of the lender in parting with his/her money.
 When the money has been lent to other people, the owner can no longer use it.
 Therefore, interest is paid to compensate for the inconvenience that arises to the owner when s/he
parts with his/her money.
 Interest is used to compensate for any possible fall in the value of money (inflation).
 Part of the interest is used to cover for administrative charges.
 In order to issue out a loan, a firm needs to do a lot of paperwork.
 The lender may need to carry out reference checks which uses resources.

Profit
 The reward for entrepreneurship is profit.
 Profit is the reward for entrepreneurship or enterprise.
 The entrepreneur offers services to the business in various ways such as managing the business.
 The entrepreneur is also paid for risk taking.
 A risk is a possibility of incurring a loss so when the entrepreneur invests in the business, he/she
risks the possibility of incurring a loss.
 However, a profit is only a payment for taking non-insurable risks.
 Non-insurable risks are the risks that are least anticipated, for which there is no insurance.
 Some risks such as loss that arises from accidents and fire, for example, can be insured against.
 Profit is the difference between the cost of production and the revenue generated from production.
 Profit = value of output – value of inputs.
 If we subtract the value of total output from the value of total input, we get gross profit.
 Gross profit is defined as the total income that the entrepreneur gets from the business.
 The gross profit is composed of the following components:
1. Rent for the land owned by the entrepreneur
2. Interest on the capital that has been provided by the entrepreneur
3. Payment for the services offered by the entrepreneur to his/her business
4. Payment for bearing the business risks and uncertainties
5. Payment for introduction of new innovations

 Therefore, pure profit for the entrepreneur can be obtained by subtracting the above components,
which could have been paid to any other hired worker, if it was not provided by the entrepreneur.
 To arrive at pure profit, the following must therefore be subtracted from the gross profit:
a) Rent for land owned by the owner
b) Interest on capital provided by the owner
c) Payment for service provided by the owner

 Pure profit can also be called net profit.

 To arrive at net profit, taxes must be subtracted from it.
 However, profit can be used by the entrepreneur in several ways, such as:
i. Reinvestment in the business
ii. Introducing new technology and innovation
iii. Part of the profit that is reinvested into the business is called retained earnings.

 At times the business also makes a loss.

 This is when the value of inputs is greater than the value of outputs or when total cost is greater
than total revenue.

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Stages of production
 Production of goods goes through 3 stages until they reach the final consumer.
 They include
1. Primary
2. Secondary
3. Tertiary

Primary stage
 This is the first stage in the production process.
 This involves the extraction of raw materials from the land.
 Most of the products that are extracted need to be processed before they are used.
 Some production activities that are found in this sector include farming, mining, fishing, oil
extraction and forestry, among others.
 Once the products are obtained from the earth’s surface, they are passed on to the second stage
which is called secondary production.

Secondary stage

 The secondary sector consists of all industries that change the raw materials from their original
state into finished or semi-finished goods.
 The secondary sector has got two main activities which are construction and manufacturing.
 The manufacturing industry is involved in processing the raw materials that are produced in the
primary stage into semi-finished or finished state.
 The manufacturing sector includes firms that produce furniture, clothing and chemicals.
 The construction sector involves making different goods from the semi-finished products. Some
examples of construction firms include car assembly and building industry.

Tertiary stage

 This stage involves the movement of goods from the producers to the end users.
 The tertiary sectors also deal with provision of commercial and personal services to the primary
and secondary sectors.
 Commercial services are all the activities that assist in the movement of products from the
producers to the consumers.
 The production function ends when the consumers access the goods and services.
 Some of the commercial services are insurance, finance and transport.

Division of labour
 Division of labour refers to a situation whereby the production process is divided into various tasks,
where each individual or team does a single task on a continuous basis.
 Each worker or team is expected to do the allocated activity every time.

Advantages of division of labour

 increases output . As each worker does the same activities day after day, he/she becomes very
experienced therefore does the job accurately and in a fast way.
 Saves time because each employee does the tasks very fast.
 Low cost of production .Experienced workers are more likely to reduce wastage of raw materials
and other resources.

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 Encourages use of machines. It becomes easier to set aside other activities that can be done by
machines. Each employee or team becomes reliable in the use of some tools and equipment as they
use these for long periods of time.
 Improved quality of goods. Since employees are specializing in certain activities, they become very
accurate in their tasks leading to high quality products and services.
 cheaper products are produced since each department becomes efficient.
 easy to train employees since they focus on their special tasks. They do not need to learn other
skills that are not related to their activities.
 Facilitates inventions . it promotes the development of new ideas and better techniques

Disadvantages of division of labour

 Lack of craftmenship. Workers are trained to be producers of only parts of products rather than
producers of whole products
 Boredom and monotony. The job becomes boring if an employee does a similar task now and again
and for a long period of time.
 Over-dependence among workers. Due to the high level of interdependence in the production
activities, a breakdown on production on one section leads to work stoppage in other areas.
 Redundancy of workers. Unemployment may increase in the country. If an employee who has been
specializing in a certain activity leaves the current job, he/she may not find similar work where
he/she can use such skills and expertise.

Specialization
 Specialization has resulted from division of labour.
 Specialization means that individuals, firms, countries and even regions use their natural and man-
made resources on producing the goods and services for which they are best at.
 Specialization has been in existence for a long time.
 In the traditional society, girls concentrated on specific tasks such as washing and
 cooking, whereas boys had their own tasks at home such as herding and hunting.
 In the feudal system, tradesmen specialized. There were locksmiths, hunters, pastoralists and
gathers.
 For specialization to be effective, the people need to trade their goods and services.
 People who produce certain goods and services need to exchange with others so that they have
enough products to live on.
 Farmers must exchange their produce so that they can have medicine, education or entertainment.
 Nowadays, people no longer use barter trade but they use money as medium of exchange.

Individuals
 Many individuals specialize in producing certain goods and services.

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 Individuals specialize in doing various trades and professions.
 Some people are doctors, nurses, farmers, lawyers, carpenters and welders,
whereas others are teachers, mechanics, lecturers, electricians and builders,
among others.
 Nowadays, many young people depend on sporting activities such as soccer,
tennis and rugby for survival.
 Farmers produce crops and sell. This gives them money to buy clothes and to
pay for services such as the education for their children.
 People specialize in doing jobs for which they have skills and experience.
 People whose skills are in high demand are paid well. Soccer players and some
musicians earn a lot of money because they have specialist skills.
 Individuals whose skills are not in demand are paid less and at times may fail to
find the job.
 With increased mechanization and automation, many people are finding their
skills to be redundant.
 Redundancy means that their skills and expertise are no longer needed in the
modern world and they need to acquire new skills through training.

Firms
 Many firms have noted that they can produce more if they choose to concentrate
on producing a single product.
 Producing a single product ensures that all the workers in the firm use their
skills and knowledge towards the production of the good or service.
 Such firms also use all its man-made and natural resources towards the
production of the product they are best at. This results in increased productivity.
 In Zimbabwe, many companies specialize in mining, farming, food processing,
manufacturing and insurance.
 However, some firms choose to produce a variety of related products as a means
to reduce risk that arises from producing a single product.
 The greatest risk of producing a single product arises from the fact that if the
demand of the product falls, the company faces viability problems.

Advantages of specialization
The following are some of the gains of specialization:
 There is high output of goods and services in the country, region and the world
at large.
 As a result, consumers have access to a variety of products to meet their needs
and wants.
 Producers of goods and services enjoy economies of scale.
 Since goods and services are produced in many countries but accessible to all,
the prices of products tend to remain low.

Disadvantages of specialization
 Specialization leads to loss of flexibility to workers.
 Work becomes boring to the workers if they continue to do the same work every
time.
 Workers cannot learn other skills because they concentrate on their own jobs
only.
 It creates shortages if one worker is absent.

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 Increased risk of unemployment due to lack of various skills on the part of the
employees.
 Specialization also leads to overdependence of countries on others.
 Some countries will face trade restrictions thereby losing markets for their
products.

Interrelationship of the three stages of production

 forestry is the first stage of production where raw materials are produced.
 Trees from the primary industry will be processed into timber in the secondary
production stage.
 The processed timber is transported to the construction site by a vehicle.
Transport falls under the tertiary stage of production.
 After delivery, the timber is used for the construction of a building.
 The tertiary stage is found in all the production stages of the economy.

Value addition
 Value addition is a process of transforming inputs from their original state to a
more valuable state during the production process.
 Value addition is shown by the difference between the price of inputs and the
price of finished goods.
 The value of products can be increased by excellent delivery services, offering
convenience, improving product features and benefits.

Sources of value addition

i. Refining
ii. Purification
iii. Cutting
iv. Manufacturing
v. Branding
vi. Advertising
vii. Offering convience
viii. Providing customised products
ix. Packaging
x. Providing additional features

Importance /advantages of Value Addition

To the firm
a) It increases the price of the product thereby maximising profits.
b) It improves the quality of the product which result in increased living standards.
c) It improves the reputation of firms that manufacture the products.
d) It creates employment opportunities

To the country/economy
a) It increases the country’s GDP
b) Brings in foreign currency
c) Reduces the country’s import bill
d) Reduces socio-economic inequality

Drawbacks/disadvantages of value addition

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a. Huge amounts are required to implement
b. Requires infrastructure that may not be available in the country
c. Huge training costs incurred in training staff
d. Requires foreign currency to purchase some equipment that may not be
available
e. Disrupts tried and tested existing sytems

Methods of Production
 There are two methods of production namely direct and indirect production.

Direct production
 In direct production, goods are produced by individuals specifically for their
own consumption.
 Goods and services are produced to satisfy individual needs and wants.
 For example, production of crops and animals are for own consumption.
 Direct production is done to attain self-sufficiency.
 With direct production, there is little or no surplus goods produced for sale.
 An example of people involved in direct production are communal farmers.

Indirect production
 Indirect production involves the production of goods and services in large
amounts for sale.
 The goods and services produced during indirect production also satisfy the
needs and wants of individuals who were not directly engaged in the production
process.
 Indirect production requires more capital because of the need to produce large
volumes of goods and services.
 The firms and individuals engaged in indirect production gain revenue after
selling their goods and services.

Land Reform Programme in Zimbabwe

 Land reform is a program that is undertaken by the government to redistribute
agricultural land to people who want to do farming.
 Land reform involves the changing of laws and regulations pertaining to land
governance and ownership.
 The land reform and redistribution programme is carried out by the government.
 After Zimbabwe gained independence in 1980, the government aimed at
distributing land among the citizens.
 The land reform programme in Zimbabwe began around 1990.

The aims of the Land Reform programme

in Zimbabwe
a) To resettle deserving and landless
people.
b) To extend and improve agricultural base in the economy.
c) To alleviate population pressure in communal areas.
d) To improve the standards of living of the poorest sector of the population.
e) To increase food security.
f) To stimulate economic growth.
g) To create employment in the country.

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h) To achieve national stability and progress in Zimbabwe.
i) To increase land utilisation in the country.

Economic effects of the land reform programme in

Zimbabwe.

Positive effects of land reform programme

The land reform programme:
a. Creates employmemt opportunities
b. enabled the citizens to have land thereby producing their own food.
c. enabled the citizens to access education on farming. The education they
received by the farmers enables them to increase production while conserving
land.
d. reduced over population in communal areas.
e. resulted in increased infrastructure in the economy such as dams leading and
irrigation schemes.
f. enabled the country to export more agricultural products thereby increasing
foreign currency earnings.
g. led to stability in the economy through increased food production.

Negative effects of land reform programme

a) Increased government as it developed new infrastructure such as roads, schools
and hospitals.
b) under-utilization of land in some areas due to lack of resources such as tractors,
combine harvesters and chemicals.
c) increased the debt of the government as it financed the land reform programme
using borrowed funds.

Productivity
 Productivity is a measure of the efficiency of resources in the production
function.
 It is a measure of the relationship between the inputs and the outputs in a
production function.
 The inputs are the factors of production namely labour, capital and land.
 The output is the amount of products that the firm gets as a result of production
process.
 The output is in terms of goods or services or a combination of both.
 Productivity can either increase or decrease.
 Productivity increases when there is an increase in the amount of goods or
services that are produced using similar amounts of factors of production as
before.
 There is a decrease in productivity when there is a fall in the amount of goods
and services that are produced using similar amounts of factors of production as
before.

 Productivity increases in either of the two situations:

a.There is an increase in output using similar combination of factors of
production
b. When the quantity of output remains the same after there has been a
reduction in the factor input.

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 Generally, an increase in productivity results in an increase in profit or a
reduction in loss, all other things remaining constant.
 A firm with lower productivity will have difficulty in competing with firms that
have higher productivity.

Measuring productivity

 In theory, we can measure the productivity of all the factors of production.

However, most firms measure the productivity of capital and labour.
 At times, firms can calculate combined productivity of all the factors of
production using multiple factor method.
 Productivity is obtained by dividing the total amount of output by the value of
factor input.
 Productivity= outputs/inputs

Measuring the productivity of labour

 Firms use this ratio to get each employee’s contribution to

production. It measures the efficiency of labour.
 Labour productivity is obtained by dividing total output by the average
number of employees within a specific period of time such as hour, week
or month.

 Labour productivity = total revenue/Average number of employees

If a firm employees 500 workers and it produces 1000 shirts per day, then the
average output per employee is obtained by dividing 1000 by 500.

 Labour productivity = 1000/500

 This means that on average each employee produces 2 shirts per day.
 If the number of shirts produced per day increases to 1 500, then the average
output per employee becomes 3 shirts.
 Assuming that all other factors of production remain unchanged, there has been
an increase in productivity.
 If on the other hand, output decreases to 750 shirts per day, the average output
per employee is 1.5 shirts per day.
 In this case productivity has declined.
 In the above example, the calculation of labour productivity is straightforward.
However, complication arises if there is production of a service.
 It is difficult to measure output of service in terms of complete units.
 The best way is to calculate average productivity using the revenue generated,
for example within a day.
 In this case, the following formula of productivity is used: Labour productivity
= total revenue/Average number of employees

Labour productivity

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 If a restaurant employs 15 people and generates $1 200 per day, then the
productivity of employees is obtained by dividing $1 200 by 15.

 Labour productivity = $1 200/15

 The productivity of each employee is $80.00 per day.

Productivity of capital

 Capital refers to all the machinery, equipment and infrastructure that is used to
produce goods and services.
 Capital productivity = outputcapital employed
 If a company that produces candles use 30 candle making machines to produce
180 000 candles per day, the productivity of the machines will be calculated as
follows:

 Capital productivity = 180 000/30

 Each machine therefore produces 6 000 candles per day.

 However, the improvement of the machine performance does not solely depend
on the efficiency of capital.
 At times, it is difficult to separate the efficiency of capital from the efficiency of
labour.

Multifactor productivity

 Labour productivity and capital productivity are examples of partial factor

productivity.

 However, at times firms calculate the productivity of more than one factor of
production, all at once.
 This is referred to as multifactor productivity.
 Multifactor productivity simply refers to the relationship between output and the
combination of resource input.
 Multifactor productivity = output labour+capital+material etc.
 Total output is divided by the weighted average factor input.
 Weighted average simply means that all the combined factors have been given
different weights.
 With multifactor productivity, the value of factors can be presented in monetary
form.

Multifactor productivity

 50 000 units are produced at $0.50 per unit, labour cost $250.00, raw materials
cost $350.00 and overhead costs $10 000.

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 Capital productivity = $25 000/10 600
 The Multifactor productivity is 2.36
 This productivity ratio is used to establish whether productivity is increasing or
decreasing.
 The ratio can also be used to find the best combination of factor inputs in order
to cut production costs.

Measuring factor productivity in the short run

 The short run period is a period in which there is at least one factor of
production that is fixed.
 Therefore, in the short run firms study how output changes as a result of a
change in the quantity of one factor input.
 Normally in the short run, capital and land are fixed factors while labour is
variable.
 In the short run, we assume that only labour is the variable factor.
 When only one factor of production varies, the law of diminishing returns
applies.
 The law of diminishing returns states that when one factor in the production
process continually increases, the output will at first rise then later declines.
 To better understand the law of diminishing returns and productivity,
economists study the relationship between three related concepts:

a) Average product

b) Total product

c) Marginal product

Number of Total product Average product Marginal product

workers

1 8 8 8

2 24 12 16

3 54 18 30

4 82 20.5 28

5 95 19 13

6 100 16.7 5

7 100 14.3 0

8 96 12 -4

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Total product

 Total product refers to the total output produced by a firm, using available
resources within a period of time.
 To get total product, we multiply units of output by the unit price.
 Total product is used to analyze the relationship between a change in variable
factor of production and the quantity of units produced.
 After obtaining the total product, a firm may derive related concepts of marginal
product and average product.
 It is unlikely that total product would increase in proportion to the increase in
the variable factor of production.

Average product

 The average product of a firm is obtained by dividing the total product by the
number of units produced within a period of time.
 Average product therefore indicates the amount of inputs that are used in
producing each unit of a product.
 The average product is an essential figure that is used in setting the selling price
of a product.
 The average product when used with marginal product can indicate efficiency in
production.
 Average product = Total Product/Units of input

Marginal product

 Marginal product refers to the number of units of output that arise due to an
increase of input by one unit.
 In other words, it is a change in output as a result of an increase in input by one
unit.
 Marginal product = Change in total product/Change in quantity of input

Labour productivity

 As the number of workers continued to increase from worker 1 to 6, total

product continued to increase as well.
 However, average product and marginal product did not continue to increase.
 After employing the fourth worker, the average product reached its peak.
 From the fifth employee, the average product has been falling.
 When the average product and marginal product start to fall, it means that the
combination of the factor inputs is no longer efficient.
 There is a decline in productivity.
 When the number of employees increased up to a certain point, the marginal
product started to decline.
 This is in line with the law of diminishing returns. Law of diminishing
returns also known law of variable proportions states that as successive units
of one factor are added to other fixed factors the increments in total output
will at first rise and then decline

 This information can be presented graphically.

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  The total product curve is generally positive in nature, meaning an
increase in variable factor leads to an increase in total product.

Ways to improve productivity

Productivity in firms can be improved in various ways.

Training workers.
 If a firm trains its workers, it increases their skills levels which help them to perform
better and faster at work.
 Better trained employees are more productive than untrained ones.
 For example, workers are trained to reduce wastages that may occur in the production
process.

motivate employees to work harder.

 The use of production bonus for example, is an incentive for workers to meet their
targets.
 Another strategy used to motivate workers to perform better is to use the share
schemes.
 If workers have shares in the company, they will work harder as they will get higher
dividends in return.

introducing modern technology, new machines and equipment.

 Newer machines and equipment are faster and more efficient than older ones.
 Old machines and equipment can also easily breakdown thereby affecting
productivity.

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 Machines may be used to replace labour in performing some tasks.
 Machinery can be more reliable and faster than human beings in performing some
critical work tasks.
 Firms can also introduce new production techniques and methods which may be faster
and efficient.
 Some techniques may be essential in reducing wastages and increasing the quality of
products.

Improving working conditions.

 Employees need good resting time, safety at work, good accommodation and
healthcare among others.
specialisation and division of labour at the workplace.
 When there is specialisation and division of labour, employees do the tasks that they
are very good at.
 Due to repetition in doing the tasks, employees become faster and accurate in doing
the activities.

Firms may source cheaper and better quality raw materials.

 Better quality of raw materials reduces wastages

Location of industries
Introduction
 There are various industries in Zimbabwe.
 An industry is a group of firms that are related in that they produce similar
goods and services.
 The main categories of the industries are primary, secondary and tertiary sectors.
 These industries must be located at convenient places in order to be productive
and viable.
 The following factors influence the location of industries depending on the
nature of goods and services they produce.
Factors that influence the location of industries

Markets
 Market refers to the people who are willing to buy the goods or services that a
firm produces.
 When a firm produces its products, consumers must buy them.
 As a result, industries must be located closer to the people who are willing to
buy the goods or services.
 Many consumers create a high demand for goods and services.
 The largest markets of goods and services are found in cities and towns.
 That is why most industries are located in Bulawayo, Harare, Gweru and Mutare
among others.
 Closeness to the market is particularly important to producers of perishable
goods.
 The service sector must be located closer to the market.
 That is why hair salons, restaurants and banks are located in areas where there
are many people.

Raw materials

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 Raw materials are the inputs that industries use to produce their goods and
services.
 All manufacturing and construction industries need these inputs in order to
produce goods and services.
 Industries that use perishable raw materials are usually located closer to these
resources.
 The primary industries are located where the raw materials are found.
 Mining companies are located at a place where there are
minerals.
 Timber processing companies are located near the source of
wood.
 In cases where the raw materials easily lose weight, the processing firms must
be located close by.
 An example of raw materials that can easily lose weight is sugar cane.

Source of energy
 Most industries need a lot of energy to make their goods and services.
 Therefore, they must be located close to power supply.
 Electricity is the main source of energy in Zimbabwe.
 Factories must be located where there is reliable supply of electricity.

Availability of reliable water sources

 Most industries need water for a number of reasons.
 Water is needed for cooling, cleaning machinery and tools.
 Water may also be used as part of the input in the production process.
 For example, water is needed in the building industries to make mortar.
 Steel processing firms need to be located close to reliable sources of water.

Transport system
 Firms need to move their goods from one place to the other.
 Finished goods must be transported to the market.
 Raw materials need to be transported from the source to the factory or
production centre.
 The main forms of transport used by industries are road and rail.
 Most industries are located closer to the main tarred roads for easy
transportation of goods and raw materials.

Labour supply
 Production depends on the availability of the four factors of production that
include labour.
 Therefore, firms must be located where there is good supply of the type of
labour they want.
 Some firms require the availability of skilled, unskilled and semi-skilled labour.
 Agricultural firms need to be located where there is enough supply of unskilled
and semiskilled workers.
 The need for reliable supply of skilled and unskilled labour makes many firms
to locate in growth points, towns and cities.

Land and site

 The gradient of a place may influence the location of industry.

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 Some firms require places where there are large flat pieces of land so that right
sizes of structures are erected.
 The type and nature of the soil may influence the presence of some industries.
 For instance, agricultural firms may need fertile soil with good drainage.

Capital
 Capital is important for the operations and viability of the business.
 There are two forms of capital namely fixed and working capital.
 Fixed capital includes machinery, land, infrastructure that cannot be transferred
to another place.
 These can include some social capital such as hospitals and schools.
 Fixed capital also includes road infrastructure and railway line.
 Working capital includes the short term materials which are needed to finance
the day to day running of the firm.
 Working capital includes unfinished goods and finished goods that have not yet
been sold and raw materials in stock.
 Most sources of capital are found in cities and towns. Therefore, some firms
locate in these areas so that they can easily access such resources.

Industrial inertia
 This is a factor that affects firms which are already established in certain places.
 Inertia refers to the reluctance of a firm to relocate to another place.
 The existence of fixed assets such as factories forces these firms to avoid
relocation.

Government Policy
 The central government plays an important role in the economy through
planning processes.
 It is responsible for setting aside areas for development.
 For instance, in Zimbabwe, the government has established many growth point
centres where businesses can make investments.
 It also influences the location of public firms such as Grain Marketing depots,
Agribank and Zimbabwe Electricity Supply Authority (ZESA) among others.
 The government also establishes labour laws in the country as well as taxation
policies.

Special circumstances
 There are other factors that influence location of industries such as the climate
of the area.
 Most agricultural firms do their businesses in areas where there is reliable
rainfall.
 Alternatively, these agricultural firms may locate near large dams to enable
them to practice farming under irrigation.

Methods of government intervention in influencing

location of industries Most governments
influence the location of industries.
 Different governments use various methods depending on the economic outlook
in the economy.

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 The government can introduce direct measures or can use regional agencies and
local authorities- urban councils.
 The government may develop various infrastructures as a way of luring firms to
invest in certain places.
 Normally, firms locate to places where there are good infrastructures such as
roads, railways, airports, schools, health centres, security and
telecommunication among others.
 Therefore, the government develops such infrastructures in some places as a
way to attract investments.
 At times, the government sets offices in these areas as well as ensuring that
there are banking and other tertiary services which industries require.
 The government may ensure that there are necessary utilities such as electricity
and water in such areas.
 For example, if the areas do not have water, the government may build reliable
dams in the designated places.
 In areas where there are tourist attractions, the government can construct
modern airports.

The government may set aside large tracts of land for industrial purpose.
 Land is one of the four factors of production and is limited in supply.
 The government may choose to unveil large pieces of land so that various
industries have space to do business.
 The government may set low prices on land so as to reduce the cost of starting
businesses.
 In its planning, the government usually sets aside industrial sites in cities, towns
and growth points.
 With mixed economies such as Zimbabwe, the government may set up its
enterprises in designated areas.

The government may introduce business terms to attract investment in certain areas.
 For example, the government may reduce or eliminate import duties for certain
industries that are located in particular zones.
 It can provide subsidies to industries located in some places such as growth
points and new industrial towns.
 The government can make it easy for firms to get licenses.
 It may reduce or scrap off corporate tax for some industries for a certain period
of time such as one year.
 Sales taxes on certain raw materials or certain finished products may also be
scrapped. The government may introduce industrial zones in urban centres.
 Industrial zones are areas designated by urban councils for industries and
factories. The local government may put in place various measures to influence
the location of industries and factories in their areas.
 They can offer incentives such as grants to firms that want to establish
industries in their areas.
 They can also provide cheap land for industrial purposes.
 Local authorities may advertise the business opportunities that are in their areas
through newspapers, websites and business meetings.
 It can build and rent out cheap offices and other supporting structures.

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 The government may establish training facilities close to the targeted site so that
there is availability of skilled workforce.
 For example, Zimbabwe has established forestry colleges in Manicaland where
there are many forestry and timber industries.
 In some countries, governments have introduced regional development agencies
which are responsible for attracting investment in the areas that they represent.
 Such agencies advertise the existing business opportunities and facilities.

Legal provisions
 The laws that are enacted by the government can influence the location of
industry.
 In some areas, laws are established to prohibit the production of material that
may pollute the environment.
 For example, some industries that produce heavy smoke may not be allowed to
locate in areas where wind blows from into residential places.
 In some developed countries, nuclear industries are prohibited in certain areas.
Reasons for the government to influence location of industries
 The government may influence the location of industries for a number of
reasons. The government influences the location of industry as a way to reduce
the level of unemployment in a certain area or region.
 One of the main objectives of the government is to have low levels of
unemployment.
 By putting conditions that allow for the establishment of industries in a certain
district, province or region, the government allows for creation of employment
opportunities.

The government also puts measures to attract investment in certain geographical

areas so as to increase the level of business activities in such areas.
 High business activities result in the provision of goods and services.
 The government may also aim to attract foreign direct investment in some of
these areas. The government may attract industries in certain places to enhance
development of backward areas.
 The coming of new industries and firms leads to economic development in some
areas.
 Services such as banking, insurance, healthcare, security and education may be
created in areas where there are firms operating there.
 Creating opportunities for firms and industries to be established across the entire
country helps to create balanced economic development.
 To disperse economic activities around the country.
• The dispersion of industries and firms helps to reduce congestion in
some urban centres.
• This may also help to solve some social problems that affect the country
such as shortage of accommodation.
 The government may create investment zones in rural areas so as to reduce
rural to urban migration.
 If the government helps in establishment of industries and factories in
growth points, many people will find employment there.
• As a result, there will be no need for such people to go to urban centres.
• The improvement in service provision as a result of investment in
growth points will attract people to stay there.

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 The government will influence setting of industries in some areas as a drive to
ensure that there is efficient utilization of economic resources.
 The government may help setting of industries in areas that have vast untapped
resources such as minerals, wildlife or fishery.
 To help in reducing income and wealth inequalities in the country.
 If industrial activities are spread across the country, it means that there is fairer
distribution of income.

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