CHAPTER 11
ROLE OF GOVERNMENT IN COMMERCE
Government involvement in business activities is one of the commercial duties it owes its citizens. It is
the one that provides the necessary environment for investments to be undertaken by itself, or by the local
and foreign investors. This, the government may do in various ways, these include;
1. Producing goods and services
2. Distributing goods and services
3. Advising producers and traders
4. Promoting trade and economic development.
5. Protecting consumers against exploitation by producers and traders.
6. As a consumer of goods and services.
Role of Kenya's Government in Business
a. Maintenance of stable political and economic climate in which business can thrive.
b. Laws are used by government to promote competition.
c. Government protects consumers from unsafe products, false adverts, etc.
d. Government protects the environment by setting standards, anti-pollution practices and using fines.
e. Provides infrastructure that supports business activities.
f. Consumer protection.
g. Export compensation shares.
h. Security.
i. Import restriction.
j. Import quotas.
Reasons for Government involvement in business
The following are the major reasons for the government’s involvement and participation in business
activities;
a. To prevent exploitation of the public by private business persons especially in the provision of
essential goods and services such as sugar, transport, communication etc. the Kenya Bureau of
standards (KEBS) regulates the quality of goods consumed in Kenya.
b. To provide essential goods and services in areas where private individuals and organizations are
unwilling to venture because of low profits/ high risks involved.
c. To provide essential goods and services which private organizations and individuals are unable to
provide due to the large amount of initial capital required b e.g. generation of electricity,
establishment of airlines etc.
d. To attract foreign investment by initiating major business projects.
e. To stimulate economic development in the country e.g. by providing social services.
f. To provide goods and services which are too sensitive to be left in the hands of the private sector e.g.
provision of firearms.
g. To create employment opportunities by initiating projects such as generation of electricity.
h. To prevent foreign dominance of the economy by investing in areas where the locals are not able to.
i. To redistribute wealth where returns are very high.
j. To prevent establishment of monopolies.
Methods of Government Involvement in Business
The government gets involved in business activities through the following methods:
Regulation
Legislation
Training
Trade promotion
COMMERCE COURSE NOTES CHAPTER 11 – ROLE OF GOVERNMENT IN COMMERCE PREPARED BY MR. ANTONY AMBIA Page 1
, Provision of public utilities
Enabling Environment
a). Regulation
This refers to Rules and restrictions the government requires business units to follow in their business
activities. Through this method, the government ensures high quality goods and services and puts in
control measures to protect consumers from exploitation. The government regulation measures include;
i). Licensing
A license is a document that shows that a business has been permitted by the government to operate. It is
usually issued upon payment of a small fee.
Licensing is the process of issuing licenses to businesses.
Some of the reasons why the government issues licenses include;
o Regulating the number of businesses in a given place at any given time to avoid unhealthy
competition.
o To control the type of goods entering and leaving the country.
o To ensure there are no illegal businesses.
o To ensure that traders engage only in trade activities that they have been licensed for.
o To ensure that those who engage in professional activities meet the requirements of the profession.
o To raise revenue for the government.
ii). Ensuring standards/ enforcing standards; the government regulates business activities by setting
standards that businesses should and ensuring that the standards are adhered to. To achieve this purpose,
the government has established bodies such as;
o Kenya bureau of standards (KEBS) whose main responsibility is to set standards especially for the
manufactured goods and see to it that the set standards are adhered to/ met. Goods that meet such
standards are given a diamond mark of quality, to show that they are of good quality.
o The ministry of public health to ensure that businesses meet certain standards as concerning facilities
before such businesses can be allowed to operate. Such standards may include clean toilets, clean
water and well aerated buildings.
b) Legislation;
The Government may come up with rules and regulations (laws) that regulate business activities e.g.
banning hawking in certain areas, matatus required to carry certain number of passengers etc.
c) Training
The government takes keen interest in training and advising people in business about business
management strategies and better ways of producing goods and services. The government offers these
services through seminars and courses. This is mainly done by the Kenya Business Training Institute
(K.B.T.I).
d) Trade promotion
This is a government initiated and supported policy to encourage local business people to enter into
business. This is aimed at increasing the volume and variety of goods and services traded in.
Trade promotion is classified as either external trade promotion or internal trade promotion.
a) External trade promotion
The purpose of external trade promotion is to encourage local business people to enter into the
export market.
It also intended to attract foreign investors into the country.
In Kenya, external trade promotion is done through the department of external trade in the
ministry of trade and industry.
External trade promotion may also be done by Commercial attaches.
COMMERCE COURSE NOTES CHAPTER 11 – ROLE OF GOVERNMENT IN COMMERCE PREPARED BY MR. ANTONY AMBIA Page 2
ROLE OF GOVERNMENT IN COMMERCE
Government involvement in business activities is one of the commercial duties it owes its citizens. It is
the one that provides the necessary environment for investments to be undertaken by itself, or by the local
and foreign investors. This, the government may do in various ways, these include;
1. Producing goods and services
2. Distributing goods and services
3. Advising producers and traders
4. Promoting trade and economic development.
5. Protecting consumers against exploitation by producers and traders.
6. As a consumer of goods and services.
Role of Kenya's Government in Business
a. Maintenance of stable political and economic climate in which business can thrive.
b. Laws are used by government to promote competition.
c. Government protects consumers from unsafe products, false adverts, etc.
d. Government protects the environment by setting standards, anti-pollution practices and using fines.
e. Provides infrastructure that supports business activities.
f. Consumer protection.
g. Export compensation shares.
h. Security.
i. Import restriction.
j. Import quotas.
Reasons for Government involvement in business
The following are the major reasons for the government’s involvement and participation in business
activities;
a. To prevent exploitation of the public by private business persons especially in the provision of
essential goods and services such as sugar, transport, communication etc. the Kenya Bureau of
standards (KEBS) regulates the quality of goods consumed in Kenya.
b. To provide essential goods and services in areas where private individuals and organizations are
unwilling to venture because of low profits/ high risks involved.
c. To provide essential goods and services which private organizations and individuals are unable to
provide due to the large amount of initial capital required b e.g. generation of electricity,
establishment of airlines etc.
d. To attract foreign investment by initiating major business projects.
e. To stimulate economic development in the country e.g. by providing social services.
f. To provide goods and services which are too sensitive to be left in the hands of the private sector e.g.
provision of firearms.
g. To create employment opportunities by initiating projects such as generation of electricity.
h. To prevent foreign dominance of the economy by investing in areas where the locals are not able to.
i. To redistribute wealth where returns are very high.
j. To prevent establishment of monopolies.
Methods of Government Involvement in Business
The government gets involved in business activities through the following methods:
Regulation
Legislation
Training
Trade promotion
COMMERCE COURSE NOTES CHAPTER 11 – ROLE OF GOVERNMENT IN COMMERCE PREPARED BY MR. ANTONY AMBIA Page 1
, Provision of public utilities
Enabling Environment
a). Regulation
This refers to Rules and restrictions the government requires business units to follow in their business
activities. Through this method, the government ensures high quality goods and services and puts in
control measures to protect consumers from exploitation. The government regulation measures include;
i). Licensing
A license is a document that shows that a business has been permitted by the government to operate. It is
usually issued upon payment of a small fee.
Licensing is the process of issuing licenses to businesses.
Some of the reasons why the government issues licenses include;
o Regulating the number of businesses in a given place at any given time to avoid unhealthy
competition.
o To control the type of goods entering and leaving the country.
o To ensure there are no illegal businesses.
o To ensure that traders engage only in trade activities that they have been licensed for.
o To ensure that those who engage in professional activities meet the requirements of the profession.
o To raise revenue for the government.
ii). Ensuring standards/ enforcing standards; the government regulates business activities by setting
standards that businesses should and ensuring that the standards are adhered to. To achieve this purpose,
the government has established bodies such as;
o Kenya bureau of standards (KEBS) whose main responsibility is to set standards especially for the
manufactured goods and see to it that the set standards are adhered to/ met. Goods that meet such
standards are given a diamond mark of quality, to show that they are of good quality.
o The ministry of public health to ensure that businesses meet certain standards as concerning facilities
before such businesses can be allowed to operate. Such standards may include clean toilets, clean
water and well aerated buildings.
b) Legislation;
The Government may come up with rules and regulations (laws) that regulate business activities e.g.
banning hawking in certain areas, matatus required to carry certain number of passengers etc.
c) Training
The government takes keen interest in training and advising people in business about business
management strategies and better ways of producing goods and services. The government offers these
services through seminars and courses. This is mainly done by the Kenya Business Training Institute
(K.B.T.I).
d) Trade promotion
This is a government initiated and supported policy to encourage local business people to enter into
business. This is aimed at increasing the volume and variety of goods and services traded in.
Trade promotion is classified as either external trade promotion or internal trade promotion.
a) External trade promotion
The purpose of external trade promotion is to encourage local business people to enter into the
export market.
It also intended to attract foreign investors into the country.
In Kenya, external trade promotion is done through the department of external trade in the
ministry of trade and industry.
External trade promotion may also be done by Commercial attaches.
COMMERCE COURSE NOTES CHAPTER 11 – ROLE OF GOVERNMENT IN COMMERCE PREPARED BY MR. ANTONY AMBIA Page 2
