Ideas to Action:

Independent research for global prosperity

Press Release

New Study: In Sub-Saharan African Countries with Unreliable Power, Outages Cost Companies As Much as 31% in Sales

August 21, 2018

More than 25% of businesses surveyed in some of Africa’s biggest economies cited losing double-digit sales due to power outages

Contact:
Holly Shulman
Center for Global Development

+1 (202) 416-4040
HShulman@cgdev.org

Washington – In Sub-Saharan African countries with unreliable power, outages cost some companies as much as 31 percent in sales, according to a new study released today by the Center for Global Development.

Researchers from the Center for Global Development (CGD) examined data from more than 3,000 firms in 37 African countries in an effort to examine how businesses across Sub-Saharan Africa respond to frequent power outages, and what it means for their businesses’ bottom lines and growth prospects.

“While there’s a lot of effort put into providing solar panels and generators to African households to power their daily lives, to actually change the economic development equation in Africa we must focus our efforts on the energy infrastructure that can power businesses,” said Vijaya Ramachandran, the study’s lead author and a senior fellow at CGD. “We found that unreliable power can have a major impact on businesses, dampening their growth prospects and undermining job creation opportunities.”

The study found:

  • In some of the continent’s largest economies like Nigeria, Angola, and Ghana, more than 25% of businesses lose double-digit sales due to power outages—with some firms averaging losses of 31%.

  • The largest grouping of firms are just surviving. Thanks to a heavy reliance on generators their sales are mostly unaffected by power outages, but they average just 3% growth.

  • Across the continent, some firms have grown rapidly despite frequent power outages—even in very poor countries.

  • In middle-income countries, especially in Southern Africa, many firms suffer relatively limited power outages and don’t see significant effects on sales.

  • The hardest-hit firms average more than 200 hours without power each month, while even the least-affected firms average more than 10 hours per month.

  • Some individual firms report losing over 70% of their sales.

“Of course, there’s no single story of how African businesses cope with unreliable power, but it’s clear that across the continent, a huge number of firms suffer high costs and lost sales,” said Ramachandran. “Better power infrastructure could enable business growth, create jobs, and produce better economic outcomes for the region.”

You can read the full study at https://www.cgdev.org/publication/how-do-african-firms-respond-unreliable-power-exploring-firm-heterogeneity-using-k-means.

##