Adoption of benchmarking by Kenyan and South African electricity sectors and its impact on small, micro and medium enterprises (SMMEs)
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Date
2012
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Abstract
The current study aimed at establishing the impact of the adoption of benchmarking strategy in
the Kenyan and South African electricity sectors, first on KPLC and Eskom and second, on the
Small, Micro and Medium Enterprises (SMMEs) of the two countries. It focused on critically
analysing the positive and negative factors that may have influenced the adoption of this strategy
by KPLC and Eskom. The second objective was to gain a comparative understanding of the
nature of the overall relationship between the outputs of these electricity sectors and those of the
businesses which rely on electricity, represented by the manufacturing sectors of Kenya and
South Africa, respectively. In addition it aimed to establish if there were other adoptions of
benchmarking strategy used by global electricity sectors that could be adopted by KPLC and
Eskom to enhance positive impact.
The research was motivated by the various electricity consumers’ complaints against KPLC and
Eskom. Both sectors, like many others in developing economies, have faced consumer
complaints in relation to high and frequent increases in electricity tariffs and prolonged and
sometimes, unplanned power outages. This could have negatively affected the economies of
these countries in general and the economic well-being of the SMMEs in particular. The
recurrence of the blackouts which the researcher assumed to represent the level of efficiency of
power supply was used to indicate the sectors’ service quality. Majority of the SMMEs
interviewed indicated such problems as wastage of merchandises, loss of work-time, conflicts
with clients and therefore, loss of business opportunities and generally resulting in inefficient
business operation. The results from the manufacturing sector also indicated that losses were
experienced as a result of the outages. For example, the study established that a 1% rise in kWh
of electricity production resulted in a 48% rise in galvanised sheeting output, per month.
Therefore, a 1% drop in the supply of electricity would therefore lead to a 48% drop in
galvanized sheeting production per month. These losses were supported by earlier documented
evidence. For example, Eberhard et al., (2008: 4) argue that rampant power outages result in
extensive damage and losses with the informal sector experiencing as high as 16% loss in their
income.
However, it is worth pointing out that despite the consumer complaints, the presence of
electricity was noted to have enhanced the efficiency and effectiveness with which the SMMEs and the manufacturing sectors ran their businesses. In fact, a majority of SMMEs interviewed
indicated that it was difficult to start and or run a business without relying on electricity.
The study recommended that the electricity sectors need to benchmark other countries that
appear to have achieved higher rates of national electrification on global perspective. Such
countries as Tunisia, Algeria, Egypt and Libya have achieved almost 100% national
electrification level. However, as much as there were consumer complaints in Kenya and in
South Africa, the latter had attained higher levels of national electrification as compared to the
former. South Africa’s level of national electrification stands at 70% as of 2011 (Sub-Saharan
Africa Power Outlook, 2011: 4). Kenya is said to have always battled with national
electrification levels lower than those of sab-Saharan Africa which are the lowest in the world.
For example, Abdullaha and Markandya, (2010) reveal that in 2000, these rates were 42% for
Kenya and 51% for sub-Saharan Africa. This scenario points to the fact that in many ways,
KPLC needs to benchmark Eskom in several ways. For example, Kenya’s tariffs are much
higher than those of Eskom and this is occasioned by the fact that whereas as KPLC relies
heavily on hydro-electric generation, Eskom relies more on nuclear and renewable source of
electricity.
This research also advocated for special tariffs for SMMEs considering their contribution to their
countries’ economy. The SMMEs were noted to be efficient sources of employment and
producers of some of the inputs required by larger companies. Therefore, this study
recommended that the governments and their stakeholders like KPLC and Eskom needed to
support SMMEs. In addition, this study suggested several other ways through which the
sustainability of SMMEs can be guaranteed. Such initiatives as Public-Private-Partnership
(PPP), Inter-enterprise Self-Help Programmes and incorporation of the education sector in
support of growth and development of SMMEs were suggested. Similarly, this advocacy springs
from the fact that the SMMEs operate a highly competitive environment, while KPLC and
Eskom enjoy “natural” monopoly and also enjoy the benefits of economies of scale since they
are large companies as opposed to SMMEs, which are small enterprises.
Description
Thesis submitted in fulfilment of the requirements for the degree of Doctor of Commerce at the University of Zululand, South Africa, 2012.
Keywords
Electricity sectors, Small, Micro and Medium Enterprises, SMMEs, Small, Micro and Medium Enterprises -- South Africa, Small, Micro and Medium Enterprises -- Kenya