Micro-businesses lose US$686.4m to power crisis

The poor quality of electricity supplies to micro-businesses as a result of the energy crisis costs their annual sales US$686.4million, the Institute of Statistical, Social and Economic Research (ISSER) has said.

This is based on crude estimates from the research think-tank which indicated that the over-four million micro and small businesses in the country, which provide over two-thirds of all jobs in the country, are US$2.2million shy of their daily sales target due to the chronically erratic power situation.

The figure represents between 30-50 percent of total sales of these businesses, costing the economy around two percent of national output.

The study analysed the amount of losses associated with electricity outages and its implications for economic output, using data collected from a sample of 1,250 micro and small businesses.

“Based on the estimated population of such firms in the country -- hovering around 4 million -- crude estimates suggest that the nation could be losing production worth about US$2.2million per day -- an equivalent of US$57.2million per month and US$686.4million per year -- owing to the electricity crisis.

“The daily outages -- which usually last a full 24 hour hours with varying degrees of predictability -- lead to halts in production, spoils goods-in-process and damages equipment of these micro-businesses, resulting in this obvious, serious chain-effect,” the report indicated.

Senior Research Fellow and Head of Economics Division at ISSER, Dr. Charles Ackah, attributed the findings to market failure due to inconsistencies in the supply side of the power sector.

This, he said, is worsened by the lack of a long-term plan for the energy sector to serve as a guide to investments and policy decisions to forestall future occurrences.

“The crisis can be attributed to market failure; because if people can afford to buy generators and fill them with fuel, then it means the demand side is intact. Maybe government should sell the product at a reasonable price.

“We also need a long-term sector plan, which we don’t have; some countries have 20-40 year plan to inform decisions concerning the power sector,” he said.

A micro-business, also commonly known as a micro-enterprise, is a business with less than five employees and includes self-employed individuals. In Ghana, such businesses include barber shops, hair-dressing salons, retail shops and other small-sized informal or non-white-collar jobs.

Ishmael Ackah, Head of Policy Unit at the Africa Centre for Energy Policy (ACEP), says the condition of economic depression as the result of ‘dumsor’ calls for vigorous investment into the sector, and for government to pay up the debts it owes power producers and distributors.

He said the country needs a 25 percent production margin in order to have reliable and secure energy, and this can be achieved through adequate funding.

“Aside from the calls for alternative sources of power, there is also need for vigorous investments into the sector.

“Government, for instance, must pay its debts to ECG and VRA even if it has to come from the oil revenue to enable them operate efficiently,” he told the B&FT.