Ghana’s Power Industry and Manufacturing Sector Performance

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.