The Effects of Power Outages on the Performance of Manufacturing Firms in the MENA Region (original) (raw)
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Power outages and firm performance in Sub-Saharan Africa
Journal of Development Economics, 2018
In this paper we assess the extent to which power outages affect the sales of firms across different African economies. We address the potential endogeneity concerns endemic in much of the existing literature by constructing an instrument for power outages based on the varying share of electricity produced by hydro-power as a result of variation in the local climate conditions. Using firm-level data for 14 countries from the World Bank Enterprise Surveys, we find evidence of a negative relationship between an unreliable electricity supply and firms' sales, with a stronger effect for firms that do not own a generator. We find that reducing average outage levels to those of South Africa would increase overall sales of firms in Sub-Saharan Africa by 85.1%, rising to 117.4% for firms without a generator.
Power Outages and Production Efficiency of Firms in Africa
International Journal of Energy Economics and Policy, 2016
Literature shows that power generation capacity in sub-Sahara Africa is lower than that of any other region in the world and capacity growth has also stagnated. Africa currently faces major electricity shortages with a number of power outages which has the tendency of rendering many firms less efficient in their production. This study therefore seeks to find the impact of power outages on production efficiency of firms in Africa. The source of data is the World Business Environment Survey conducted by the World Bank. The analysis deployed stochastic production frontier and a two-tail Tobit models. The finding shows that the number of power outages experienced in a typical month has a negative impact on the production efficiency of firms in Africa. This call for immense investment projects in new generation capacity in order to ameliorate the negative effect of power crisis on production process of firms in Africa.
Past literatures on the correlational link between electric power outage dynamics and performance of manufacturing firms, in most economies, have portrayed a controversial conceptual debate amongst scholars with little focus on the moderating role played by firm characteristics. This paper focuses on determining the effect of firm characteristics (capital structure) on the relationship between electric power outage dynamics and financial performance of manufacturing firms in Kenya. Positivism philosophical point of view and descriptive survey research design was utilized. A population of 447 manufacturing firms in Kenya, which were also members of Kenya Manufacturers Association, was selected out of which a sample size of 138 firms was drawn using stratified random sampling methodology. Structured questionnaires were utilized to collect data which involved drop and pick approach. The research results indicate that the relationship between electric power outage dynamics and performance of manufacturing firms in Kenya is not significantly moderated by firm characteristics. This study outcome augments existing knowledge on electric power outage dynamics in relation to firm characteristics and financial performance. This is because it is evident that top management should not focus on capital structure as a conditional factor when making decisions aimed at enhancing firm financial performance under power outage conditions. The study has also made an input to the academic literature ascending from empirical reinforcement of tradeoff theory and pecking order theory in making determination on firms’ capital investments. Policy makers and power utilities benefit in understanding the negative effect of power outages on the performance of firms are therefore guided in overseeing the planning and implementation of proper electricity infrastructure. Kenya Association of Manufacturers (KAM) will find these research findings useful in guiding their member firms on strategies to adopt to ensure continuous productivity and safeguard damages to the firm as a result of electric power outages.
Do Power Cuts Affect Productivity? A Case Study Of Nigerian Manufacturing Firms
International Business & Economics Research Journal …, 2012
The primary objective of this study is to examine the impact of power disruptions on firm productivity in the manufacturing sector in Nigeria. Using OLS and the Tobit models, results show that power outage variables (measured using hours per day without power and percentage of output lost due to power disruptions) have a negative and significant effect on productivity, particularly on small firms. The significance of power outage variables suggests that there is need for the Nigerian government to come up with ways of improving energy generation and supply, as well as proper maintenance of electricity infrastructure in the country. Deliberate efforts by the government to improve power infrastructure will result in the country's being able to increase electricity production threefold and thus optimally utilize its installed generating capacity of 5900MW.
The productivity cost of power outages for manufacturing small and medium enterprises in Senegal
2019
This paper investigates on the productivity effects of power outages on manufacturing small and medium enterprises (SMEs) in Senegal, using a panel data on manufacturing firms. Productivity is estimated using stochastic frontier models, and power outages measured by their frequency or their duration. We controlled for firms owning a generator, relevant covariates as data availability permits as well. The main results are drawn from random effects linear panel model. Nonetheless, the results remain consistent to the robustness checks using different models: a double-sided truncated data model and a generalized linear model, and different productivity measures, using data envelopment analysis. We find that power outages have negative significant effects on the productivity of SMEs in Senegal. Further, firms with a generator were successful in countering the adverse effect of power outages on productivity, this make the negative effect bore only by SMEs, which in some cases cannot affo...
How constraining are electricity fluctuations to Ghanaian firms’ performance?
SN Business & Economics, 2021
In this study, we examine the impact of electricity power disruptions on the performance of Ghanaian enterprises. We make use of comprehensive firm-level data from the World Bank Enterprise Survey (WBES) in the years 2007 and 2013 to ascertain the extent to which sales generation and firm-level productivity are affected by power outages. The cross-sectional nature of the data limits our analysis and makes fixed-effects estimation unfeasible; consequently, we generate a firm cohort identification (cohort ID) to serve as a pseudo firm fixed-effects element to obtain a more robust result. The findings show that power outages negatively affect firm performance; specifically, the sales growth and productivity of Ghanaian firms. The magnitude of negative impact is higher among manufacturing firms compared to firms in the service sector. Furthermore, firms that do not resort to a backup electricity generation plan are highly affected than firms that adopt other forms of electricity generation. Firms that possess backup electricity generators are, however, not completely immune from the negative impact of erratic power supply. The findings suggest that backup electricity generation isn't a sustainable alternative, hence, the improvement of national electricity generation would be significant to firms' performance.
The International Journal of Business & Management, 2020
Electricity is a fundamental input factor for many production processes and is also the dominant source of energy for firms (Karen, Erin & Qiong, 2015). The major role of energy in most firm productivity endeavors renders any deficiencies negative to production efficiencies and further results into a reduction in output (Abotsi, 2015). Low stream of electricity is depicted by electricity reliability problems characterized by power outages and/or power quality fluctuations (Eto etal. 2001). Although adverse influence of electricity power outage is evident in most economies, the extent to which this damage occurs depends on other intermediating factors such as investment in back up generation (Wray & Tymoigne, 2008). Oseni and Pollitt, (2013) and Foster and Steinbuks, (2009) generally defined investment in backup generation as expending capital towards self-generation of electricity aimed at insulation against perverse effects of electric power
Cost of power outages for manufacturing firms in Ethiopia: A stated preference study
Energy Economics, 2020
Having a reliable supply of electricity is essential for the operation of any firm. In most developing countries, however, electricity supply is highly unreliable. In this study, we estimate the cost of power outages for micro, small, and medium-sized enterprises in Addis Ababa, Ethiopia, using a stated preference survey. We find that the willingness to pay, and thus the cost of power outages, is substantial. The estimated willingness to pay for a reduction of one power outage corresponds to a tariff increase of 16 percent. The willingness to pay for reducing the average length of a power outage by one hour corresponds to a 33 percent increase. The compensating variation for a zero-outage situation corresponds to about three times the current electricity cost. There is, however, considerable heterogeneity in costs across sectors, firm sizes, and levels of electricity consumption. Policy makers could consider this observed heterogeneity when it comes to aspects such as where to invest to improve reliability and different types of electricity contracts.
Power Outages in Ghana: Did They Have an Effect on the Financial Performance of Listed Firms?
International Journal of Management Excellence, 2018
The paper seeks to find out whether the recent power outages in Ghana had a negative effect on listed firms.. Out of 35 listed firms in Ghana, 25 were purposively chosen as the sample size for the study. The research design was explanatory and employed quantitative methods that enabled comparison of six years trend analysis of firms’ performance – ‘before’ and ‘during’ power outage periods. Key performance indicators measured were Revenue, Profitability and Growth Rate. Findings were that power outages did not have effect on revenue generation of listed firms and that contrary, they recorded higher maximum revenues for power outage periods. Again, an average growth rate of 122.26% for periods of power outages as against 79.0% mean growth rate for periods of consistent power established that power outages did not have an effect on the growth rate of listed firms. However, power outages had an effect on listed firms’ profitability and more so, accounted for increases in operational ex...