Adoption of Benchmarking by Kenyan and South African Electricity Sectors and Its Impact on Small, Micro and Medium Enterprises (Smmes)

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 galvanized 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 sub-Saharan Africa which are the lowest in the world. For example, Abdullaha and Markandya, (2010) reveal that in 200 0, 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.