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Effect of Power Supply on the performance of Small and Medium Size Enterprises: A comparative analysis between SMEs in Tema and the Northern part of Ghana

Nyanzu, Frederick and Adarkwah, Josephine (2016): Effect of Power Supply on the performance of Small and Medium Size Enterprises: A comparative analysis between SMEs in Tema and the Northern part of Ghana.

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Abstract

Electricity provision in Ghana has been marred by low generation, poor supply, and frequent power outages. The situation compels firms to adopt strategies to cope with this poor public supply of power for their business. To this end, this study analyses the effect of power supply on the performance of SMEs: a comparative analysis between two regions in Ghana where Small and Medium firms are located. The study uses the current World Bank 2013 Enterprise Survey on Ghana with 403 sampled firms. The study employs chi-square and t-test to do pattern analysis. In addition, ordinary regression analysis (OLS) was employed to regress firm performance variable on electricity supply variable and other covariates. The results show that the power outages affected firm’s performance (profitability). In addition, it was further realized that power outages (power interruptions) severely affected SMEs located in the Northern part of Ghana than SMEs located elsewhere. The study, therefore, recommends government intervention in policies and programs such as power mix approach and renewable energy, as well as private sector participation to install competition and efficiency should be encouraged. In addition, SMEs should consider alternative sources of power such as solar power, inverter, biogas, generators, which could help curb the cost that is associated with power outage.

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