Impact of Power Outages On the Selected
Manufacturing Firms in Nairobi, Kenya
Kiogora Dennis,
Soo-Jin Park*, Shammah Kiptanui**
1
Contents
•
•
•
•
•
•
Introduction
Objectives
Methodology
Results
Conclusion
References
2
2
Introduction
Nairobi is the capital city of Kenya, is regarded as the business hub of Eas
t Africa, and host the largest number of manufacturing firm in
country
Sustainable power has been the worst nightmare to all sectors due to
frequent power outages
The major cause of the blackouts includes centralized, monopolized, and inc
onsistent power generation, transmission, distribution and maintenance.
The Energy & Petroleum report 2019 indicates that Kenya’s
installed
capacity stands at 2,712 MW. The energy mix comprises of 826MW (30%) h
ydro, 807MW (29.8%) thermal, 663MW (24%) geothermal, 336MW (12%) w
ind, and 180MW (5.2%) being solar cogenerations [1]
3
Introduction Cont’…
• On 2nd May this year, Kenya experienced close to 12 hours of po
wer blackout due to a ‘a fault on the high voltage power line’ (B.
Elias et al, 2020) [2]
• In 2016, there was a four (4) hour outage when a small wild anima
l was trapped on a transformer and tripped a 180 megawatt (MW)
of electricity (B. Guarino,[3]
• In 2014, the north eastern province of Kenya experienced days o
f power blackout when fire broke in a substation [4]
4
Objectives
• This is a preliminary study intended to determine the impact of
power outages to the manufacturing sector in Nairobi, Kenya usin
g the World Bank Enterprise Surveys
• The paper also looks into the existing research to predict the
expected results for the future studies
5
Methodology
Using Panel Analysis model to further examine the Enterprise Survey data, a Production
Function is used as follows:
(𝜋|𝑧) = P.Y (𝑋|𝑧) – C(𝑋|𝑧) ……. (1)
where 𝜋 is the profit, 𝑧 is the number of outages, P is the sales price, Y is the quantity of out
put, X includes inputs such as labour, capital and electricity.
If Y is used to represent sales, the equation is written as:
𝑌𝑖 = 𝑓(𝑋𝑖 , 𝑍𝑖) ……. (2)
This means that the firm (i) sales (Y) is a function of inputs (X) and outages (z)
The equation therefore becomes:
𝑌i = A.Ki𝛽1.Li𝛽2.Ei𝛽3.Agi𝛽4.Oi𝛽5 ……. (3)
Yi is the sales from firm i, A is the profit, Ki is the firm’s value of assets
from the balance sh
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Methodology Cont.…
Variables:
Sales (Y); the firm’s sales represent the revenue generated from the sale of outputs
Profit (K); represents the reminder after deduction of quantity of outputs from
sales
Assets (A); represents the value of assets from the firm’s balance sheet
Labour (L); represents the number of employees
Age (Ag); represents the age of the firm
Outages (O); represents the number of power outages in a month
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Expected Results & Discussions
Economy Year
2007
2007
2007
2007
2007
2007
2013
2013
2013
2013
Kenya
Subgroup
Sector
Sector
Sector
Sector
Location
Sector
Sector
Sector
2013
2013
2013
2018
2018
2018
2018
Sector
Sector
Location
2018
2018
2018
Sector
Sector
Location
Sector
Sector
Sector
If there
were
outages,
Number average
Percent of
duration
of firms electrical of a
experienc outages typical
ing
in a
electrical
Top Subgroup
Average/ electrical typical
outage
Level
Subgroup Level
SE/N
outages month
(hours)
Average 84.2
5.8
4.4
Manufacturing All
Average 91.5
5.4
5.2
Manufacturing Food
Average 91.6
5.7
4.7
Manufacturing Garments
Average 95.1
4.5
4.4
Manufacturing Other Manufacturing Average 90.9
5.5
5.6
Nairobi
Average 89.1
5.2
4.5
Average 89.4
6.3
5.6
Manufacturing All
Average 87.9
5.9
5.8
Manufacturing Food
Average 81.8
5.1
6.3
Manufacturing Textiles & Garments Average 95.7
6.2
5.3
Chemicals, Plastics &
Manufacturing Rubber
Average 95
7.6
5.8
Manufacturing Other Manufacturing Average 94.7
6.7
4.9
Nairobi
Average 91.3
6.4
5.3
Average 82.8
3.8
5.8
Manufacturing All
Average 89.5
4.9
6.4
Manufacturing Food
Average 95.5
5.4
7.6
Manufacturing Textiles & Garments Average 89.8
4.4
3.8
Chemicals, Plastics &
Manufacturing Rubber
Average 95.9
4.7
4.1
Manufacturing Other Manufacturing Average 82.9
4.8
6.9
Nairobi
Average 77.4
3.2
5.9
If there
were
outages,
average
losses
due to
electrical
outages
(% of
annual
sales)
6.4
5.4
5.8
4
5.6
6.9
7
7.8
7.8
7
If a
generato
r is used,
Percent average
of firms proportio
owning n of
or
electricity
sharing a from a
generato generato
r
r (%)
65.7
14.7
65.7
14.7
63.5
16.3
44.4
15.1
70.6
14.1
64.9
15.2
57.4
14
57.2
12.6
53.9
14.3
59
13.7
Days to
obtain an
electrical
connectio
n (upon
applicatio
n)
40.5
56
50.4
36
64.6
35.6
43
58.8
83.9
n.a.
Percent
of firms
identifyin
g
electricity
as a
major
constrain
t
27.6
52.6
54.9
50.9
52
26.1
22.2
36.6
38.8
33.1
8.6
7.8
6.4
5.4
7.2
6.8
8.7
74.5
58.2
57.8
65.6
69.6
70
74.2
9.9
10.6
14.2
17.8
25.4
17.5
18.3
n.a.
22
29.7
78.9
52.7
67.2
n.a.
23.5
36.6
23.1
21
32.3
36.9
25.2
5.6
7.8
4.2
52.6
74.6
63
25.1
32
21.4
30.3
55.8
125.9
22.9
33.7
18.8
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Expected Results & Discussions
As per the World Bank Enterprise Survey (2018), out of 305 firms surveyed
in Nairobi, Kenya, 83% experienced power blackouts at 3.8% outages in a
month. Each outage was reported to last 5.8hours. The survey also indicates 5.
4% losses in annual sales and that 65.6% of the manufacturing firms use
generators as the alternative source of power [5].
Osongo S. et al 2020 found that power outages have a negative effect on the
profitability of businesses {negative coefficient of -0.40540 using Two-stage
least Square (2SLS)} [8]
Additionally, C. Lassana’s 2019 [9] analysis concluded that power outages
have a negative impact on the manufacturing sector in Senegal
From this preliminary study, we expect that the results will be similar to the
results of references [5], [8], and [9]
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Conclusion
The major cause of power outages is Kenya include the centralized,
monopolized, and inconsistent power generation, transmission,
distribution and maintenance.
To ensure sustainable power supply among the possible energy
policies include, public private partnerships (PPP) project finance
mechanism (funding and financing) of new power generation projects
Investment in sustainable power sources including nuclear power, use
of distributed micro grids and power off-takers (large-scale purchase
industries), large scale power storage, and energy as a service (EAAS).
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References
[1] Energy & Petroleum Report (2019).
[2] B. Elias and G. Obulutsa, 2020. Kenya and Uganda hit by power
blackout, electricity back in most of Kenya.
[3] Guarino Ben (2016 June, 08). 4-hour blackout across Kenya.
[4] pacworld (2014 June). Blackout watch.
[5] Enterprise Surveys, The World Bank.
[6] D. Herbling. Business Daily journal, 2015.
[7] Africa Energy Outlook (2014). International Energy Agency
[8] Stephene Osongo and Milton Utwongo (2020). The Cost of Power
Outages on Enterprise Performance in Kenya.
[9] Lassana Cissokho (2019). The Productivity Cost of Power Outages for
Manufacturing Enterprises in Senegal.
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THANK YOU
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