The effects of “dumsor” on small and medium scale enterprises The case of Kwame Nkrumah Circle enclave
The small and Medium Scale Enterprises (SME) sub-sector is the fastest growing sub-sector in developing countries, employing majority of the urban labour force and providing incomes to households and local & central governments (ILO cited in UNESCO, 1995). It is through SMEs that Ghana can hope to reduce unemployment rate and poverty significantly among its populace. These SMEs need reliable and sustainable supply of energy to continue to play their poverty reducing roles of employment creation and income generation.
Energy is the key which unlocks all other resources, and will continue to be the answer to human’s physical prosperity by fuelling the modern world (NDPC, 2008). Thus, energy serves as the backbone to all industrial productions in the world including micro and small scale industries that dominate in Ghana.
Despite the significant role SMEs play in job creation and poverty reduction, their operations have been engulfed by inadequate and unreliable power (electricity) supply rendering them unproductive and inefficient. Due to the unreliable electricity supply, industries in Ghana ranked interrupted power supply highest among 13 other problems. This current energy crisis in Ghana is threatening continued existence of SME sub-sector in Ghana.
Ghana’s energy crisis has deteriorated in recent times, hitting businesses hard, with authorities blaming the situation on low water levels in the Akosombo Dam and lack of gas to power the country’s thermal plants. The situation has compelled the country’s chief power distributor, Electricity Company of Ghana (ECG) to introduce a load shedding timetable in February, 2015 to regulate supply.
After few weeks of operating the load shedding timetable, the power crisis situation has worsened due to a shortfall of between 400 and 600 megawatts (MW) in power generation. As a result, the initial load-shedding timetable designed to shed between 300MW and 400MW of power and which allowed consumers to enjoy 24 hours of power and 12 hours of power outage can no longer be followed. (Electricity Company of Ghana – ECG, 2015).
Since ECG can no longer follow the initial load-shedding timetable, what have been the effects of unannounced power cut on the operations of small and medium scale businesses whose operations solely depend on electricity since February, 2015? What alternative power source have they been utilizing to ensure survival of their businesses?
A cross-sectional survey was conducted between February 2015 and August, 2015 on 75 SMEs which had access to grid power from Electricity Company of Ghana (ECG) within the Kwame Nkrumah Circle business enclave.
The aim of the survey was to assess the impact of the current loadshedding exercise on the operations of SMEs dealing with photocopying and printing, stationery, hair dressing, barbering shop, grinding mills, food vending, retail shop, cold store, sawmill , dressmaking, straightening and welding, IT services, phone repairs and servicing, sachet water production and spraying.
The analysis of data involved the use of qualitative techniques in terms of interpretive and reflexive approaches while quantitative techniques made use of descriptive statistics in terms of frequencies, cross tabulation, pie charts and correlation techniques.
The study revealed that the effects of planned and unplanned power outages for significant portion of operational hours of SMEs resulted in loss of money, low productivity and profit, damage to plant equipment, increased cost of production, increased expenditure, reduction in labour force, overnight work and low quality service/product with photocopying and printing, hair dressing, barberingshop, cold store and dressmaking enterprises being the worst affected since their operations heavily depended of electricity.
The main areas affected by the power fluctuations were production, storage and service delivery. The costs incurred include increased expenditure on alternate sources of power, cost of acquiring voltage stabilizers, increased costs in outsourced repair services and cancelled orders due to delays.
It was also discovered that unplanned/ unannounced as well as planned/announced power fluctuations had adverse effects on the profitability of the SMEs surveyed.
The findings further revealed that there was a positive correlation between duration of power outage and decline in SMEs’ production.
The findings are in support of Sing’andu, (2009) who argued that, repeated power rationing eventually leads to a decline in production and, consequently, SMEs fail to reach their projected sales volume. Reduced sales volume translates into reduced business income because the SMEs are unable to meet customer demand.
The research concludes that there is a symbiotic relationship between electricity and business. If the SME sub-sector has been identified as the engine of economic growth through employment creation and poverty reduction, then their continued existence is crucial.
Investment in alternative energy sources such as solar and wind, assisting SMEs through subsidies to acquire alternative power source at relatively cheaper cost and the need to open the energy market for greater competition in the supply and distribution of power are highly recommended.
By Emmanuel Anyidoho