The productivity cost of power outages for manufacturing small and medium enterprises in Senegal

This paper investigates on the productivity effects of power outages on manufacturing small and medium enterprises (SMEs) in Senegal, using a panel data on manufacturing firms. Productivity is estimated using stochastic frontier models, and power outages measured by their frequency or their duration. We controlled for firms owning a generator, relevant covariates as data availability permits as well. The main results are drawn from random effects linear panel model. Nonetheless, the results remain consistent to the robustness checks using different models: a double-sided truncated data model and a generalized linear model, and different productivity measures, using data envelopment analysis. We find that power outages have negative significant effects on the productivity of SMEs in Senegal. Further, firms with a generator were successful in countering the adverse effect of power outages on productivity, this make the negative effect bore only by SMEs, which in some cases cannot afford to own a generator. As a matter of fact, the manufacturing sector lost up to around 15% of the actual productivity due to power outages in 2012, and small and median firms have lost, respectively, around 4.7 and 4.2%. Besides, another important finding is the significant positive effect of access to credit on productivity. At last, it is confirmed that productivity increases with firms’ size.