885 SMEs lost GHS250m to ‘dumsor’

24th August 2017

A study on the impact of the four-year power crisis that hit Ghana has established that 885 small- and medium-sized manufacturing firms in Accra, Tema, Kumasi and Sekondi-Takoradi lost GH¢250 million within the period.

Additionally, the power outages, to a large extent, led to a 10 per cent fall in monthly productivity of those firms, with as many as 55 of such businesses folding up in the four locations of the country.

Findings

Presenting the results of the study at a workshop at the University of Ghana, Legon, on Wednesday, 23rd August 2017, a Senior Research Fellow of the Institute of Statistical, Social and Economic Research (ISSER) of the university, Dr Charles Ackah, said one extra day of outages each month resulted in about one per cent reduction in labour productivity.

The theme of the workshop was, “Counting the Cost: the Impact of Power Crisis on Manufacturing Sector Productivity.”

The survey, commissioned by the International Growth Centre (IGC), was conducted by ISSER.

Dr Ackah stated that the energy crisis had significant negative effects on labour and total factor productivity in the manufacturing sector.

He indicated that though output fell following the outages, there was no significant impact of the crisis on the number of workers in those firms, but added that the crisis led to a reduction in raw materials and some level of reduction in the firms’ stock of machinery.

“The findings suggest that while firms may flexibly alter inputs such as machinery and raw materials in response to electricity outages, some inputs such as labour tend to be less flexible, potentially owing to rigidities in the labour market,” he explained.

Firms surveyed

Dr Ackah pointed out in particular that the reduction in labour productivity might have stemmed from the reduction in the amount of capital available to workers.

According to the researcher, out of the 1,244 eligible firms, 885 were surveyed, with 73 declining to participate in the survey where 55 had collapsed at the time the survey was conducted between August and September 2016.

Touching on the method of research, he remarked that the survey collected information on the characteristics of the firms, their level of production, employment, capital, investment, raw materials, electricity consumption, and generation as well as financing.

Coping strategies

A lecturer at the Finance Department of the University of Ghana Business School, Dr Patrick Asuming, a co-researcher, said the objective of the study was to understand how the affected firms managed to cope and the strategies they adopted to stay in business.

He submitted that while the most common strategy adopted by majority of the firms was to operate fewer hours, many others depended on generators, with some also changing their working hours to operate when power was available.

Dr Asuming posited that overall, firms appeared to cope with the electricity outages by producing their own electricity through generators, reducing the amount of time they operated and reducing their reliance on electricity by changing their production processes and dropping products.

“We find that none of the coping strategies were effective in reducing the negative impact of outages on output. Indeed, we find that total factor productivity fell for firms that used generators as a coping strategy,” he posited.

Recommendations

The researchers recommended that additional investment be made in power generation and distribution of power to guarantee reliability.

The Director of Technical Regulations and Renewable Energy at the Energy Commission, Dr Nii Darko Asante, said the coping strategies adopted by the firms were not effective in preserving their productivity.

He, however, observed that many firms were currently using generators by choice due to high electricity tariffs.

 

Source: Classfmonline | http://m.classfmonline.com/1.11253375 

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