Perhaps it’s time that we have an earnest conversation as a country about the economic factors that slow us down and will keep us at a 5.6% growth rate for decades. And maybe we need to reorganize our priorities so that our approach to important issues is not deemed as casual.
This past weekend, we witnessed a 5 hour black out that affected the whole country and consequently resulted in huge losses for local businesses. This comes at a time when some of our notable trading partners are unveiling cutting edge inventions designed to cater to the challenges that harbor trade and economic growth; for example China’s new elevated bus that straddles traffic – roughly 72 feet long, 25 feet wide and 16 feet tall powered by electricity.
For many countries in the world, electricity is a fundamental component of all development plans and they go to great lengths to ensure that it is available and constant. It would appear that as much as we have the right idea on how to develop our infrastructure, some necessities have fallen through the cracks. For a long time, local manufacturers have continued to bear the brunt of frequent power interruptions due to unreliable supply.
These interruptions range from outages, over voltage, under voltage and surges which lead to immense losses in-production time, production throughput, operation cost of generators and loss of equipment. Subsequently, our equipment, which is a costly investment, is damaged and compensation takes a long time to be effected.
For many countries in the world, electricity is a fundamental component of all development plans and they go to great lengths to ensure that it is available and constant.
There has indeed been some marginal improvement by Kenya Power in certain aspects such as provision of alternative feeder lines to consumers to increase redundancy on supply lines, initiation of active WhatsApp groups in different regions, upgrade of substations across the country, frequent forums with stakeholders and assignment of account managers dedicated to consumers for timely intervention. However, this has not solved the problem of power quality and reliability.
Manufacturers have reported that interruptions increased by over 70% in the first quarter of this year compared to the total average of 2015. This is a major pain to industries and we feel that this may not be sustainable in coming days. A survey carried out both last year and this year amongst our members reveals that on average, manufacturers lost an equivalent of 5 per cent of the monthly electricity bill in certain sectors and as high as 18% in others.
Areas hard hit with frequent interruptions include; Nairobi, Mombasa, some parts of Western Kenya and the North rift. And whilst the reliability issue takes longer to be fixed, businesses (who can afford to) have resulted to fuel as an alternative, which is an added cost especially with the introduction of the Road Maintenance Levy. These combined costs will definitely impact the cost of production and exports.
Due to power unreliability, production costs are significantly escalated such that the resulting products are highly priced, this lowers competitiveness of Kenyan products, limiting expansion and discouraging investors.
The current context is that industry has been operating at low capacity and might not be capable of absorbing any pricing shocks. In fact the drop in fuel prices had provided breathing room for many embattled producers who have been trying to mitigate losses resulting from poor quality and reliability of power. A manufacturer in the food sector has reported a loss of 172.9 hours of production time between January and June 2016 that is equivalent of 88 Million Kenya shillings worth of revenue.
Due to power unreliability, production costs are significantly escalated such that the resulting products are highly priced, this lowers competitiveness of Kenyan products, limiting expansion and discouraging investors. On average, manufacturing companies are experiencing power outages estimated 5 days per year resulting to an increase in electricity cost by an average of 15%.
TICAD IV, which will be held in Nairobi in two weeks comes on the back of the launch of the Africa Agenda 2063 whose theme is – The Africa we want. These issues however, portray a mismatch between the city that we want to be, given the magnitude of hosting such events in our capital, and our slow-footed approach to important aspects of our development such as electricity.
A 2013 AFDB study on infrastructure in EAC, estimates that power demand in the East African Power Pool area will increase by 69% over the next decade. Are we ready to meet this demand? Many investors have shown great interest in the EAC and especially Kenya, but how do we sustain these interests in the face of challenges such as these that compromise our competitiveness in comparison with other countries?
Following investment in generation, the issue is no longer adequacy of generation, the focus now needs to be on facilities for evacuation of power (transmission and distribution networks) in order to avail the generation to the load centers and improve reliability. We need to act with haste to remedy this situation and get back on track to achieving our Vision 2030 goal.
The writer is the CEO of Kenya Association of Manufacturers and the UN Global Compact Network Representative for Kenya. She can be reached at email@example.com.