Abstract:
Manufacturing sector development in Ghana has undergone a lot of transformation from preindependence
to date, yet the sector is yet to reach its full potential of making Ghana an
industrialized country. Ghana’s manufacturing sector has faced many impediments mainly in
terms of infrastructural development especially in the provision of electricity as a cheap source of
industrial energy. This study accounts for the status of the power industry in Ghana and how it
affects the growth and development of the manufacturing sector in the country. The study therefore
investigates the relationship between electricity supply and manufacturing sector performance in
Ghana, given performance indicators to be value-added output, labour productivity, and
employment.
Six models were estimated in this study. The first three models dealt with the relationship between
electricity consumption with manufacturing sector performance at the aggregate level employing
the Autoregressive Distributive Lag (ARDL) method developed by Pesaran et al (2001) using time
series data from 1990 to 2015. The other three models investigated the relationship between
expenditure on electricity consumption and manufacturing performance at the firm level using a
panel fixed-effects estimation model using panel data from 1992 to 2003.
Results indicated that in the manufacturing sector, electricity had a long run relationship with all
the manufacturing performance indicators and positively related to manufacturing value-added
output growth and labour productivity in the long run. However, electricity was negatively related
to employment growth in the long run. Results found for firm level manufacturing indicates that,
expenditure on electricity consumption had a negative relationship with firm value-added output,
productivity and employment.
