THE IMPACT OF POWER OUTAGES ON FIRM OUTPUT AND LABOUR PRODUCTIVITY: EMPIRICAL EVIDENCE FROM MALAWI’S MANUFACTURING SECTOR

Abstract

The primary objective of the study was twofold: Firstly, to establish the extent to which power outages affect firm’s labour productivity and secondly to establish the extent to which power outages affect firm output in the manufacturing sector in Malawi. Using OLS, the statistical analysis undertaken for this study supports empirical findings that power outages tend to negatively affect output and labour productivity of manufacturing firms. The significance of the power outage variable suggests that the government should put in place deliberate strategies of improving electricity generation and supply as well as mitigating the negative impact of power outages. In the short term, since the study has established that generator ownership ameliorate the impact of power outages, the government should find ways of ensuring that firms can easily or cheaply access these machines. This can be done by encouraging firms to participate in generator production locally or through tax waivers on imported ones so as to ultimately push prices down. At the same time, it is important for ESCOM to ensure that outages follow a reasonably regular pattern (through provision of consistent load shedding schedules). This will enable firms to change production schedules to correspond to power supply. Obviously, proper maintenance of existing electricity infrastructure by ESCOM could also in the short term ensure steady supply of electricity to firms. In the long term, the government should consider such strategies as tax incentives so as to attract investors into power generation using such other resources as coal and solar.