DUMSOR AND THE GHANAIAN ECONOMY

A cursory glance at the posts made by most Ghanaians on social media shows that Ghanaians are sitting at the edge of their seats wondering if DUMSOR (Power outage) is looming. This is not surprising since the current constant supply of electricity we are enjoying now is not due to permanent measures put in place by government but temporary (power barge) measures instead.

It is sad that the government is turning a blind eye on the importance of electricity in our daily lives. Electricity is one of the greatest technological innovations of mankind and has now become a part of our daily lives and it is almost impossible to think of a world without electricity. Almost all the devices at homes and our work places run on electricity. At home, electricity powers our electrical appliances like Lighting, TV, Refrigerator, AC, Fan, Electric Oven, Electric stoves, Laptops, etc. In the medical facility, electricity helps power Lights, X-ray machine, ECG and other essential devices that supports surgery. In the manufacturing sector electricity powers all the machinery used in the production process and in the banking and educational sectors electricity powers the lights, computers, projectors and ACs.

Sad as it may seem, the current and past governments have not realized, or have simply turned a blinded eye to the fact that electricity is one of the essential components that boosts the gross domestic product (GDP) of a country. The GDP of a country is the total value of everything produced by all the people and companies in the country.

If people in the country are to produce products or deliver services, there is the need for a stable electricity supply. Without a stable electricity supply, production is greatly affected. Also, the importance of the GDP of a country is seen in the area of foreign direct investment (FDI). Foreign direct investment refers to investments (which can be in the form of business) made by a foreign entity into another country. Since the GDP is the best way to measure a country’s economy, most investors look at the GDP before making any FDI. Sadly, the current uncertain state of electricity supply in the country is a disincentive to any foreign investor.

A Study conducted by the isearch Team on the impact of Electricity Supply Quality (ESQ) on firm productivity, using monthly panel observations (data) from the 2013 Enterprise Survey obtained from the World Bank Development Indicator Database (WDI) revealed that power outage has a negative relationship with productivity. Thus, results of the study showed that for a unit increase in power outage (all things being equal) productivity decreases by 11%. Again, an observation of Ghana’s GDP from 2011 to 2017 shows that the GDP significantly declined from year 2011 to 2016. It is worth noting that during all these periods (holding all other macro-economic factors constant), there was massive electricity supply outages (DUMSOR) in the country.

However, during the period when the electricity supply stabilized (with the introduction of the power barge) in 2016, there was an increase in GDP in 2017 (holding all other things constant) as shown in Figure 1

The occurrence of ‘DUMSOR’ has a ripple effect, which goes a long way in increasing unemployment in the country. When the electricity supply goes off, companies rely on generator sets to provide power supply. Most of these generator sets run on diesel and petrol which unfortunately are also very expensive. This consequently increases the operational cost of companies and thereby reducing profits. In order to maximise profits, companies in most cases undergo structural changes by reducing their staff strength, thus, laying off workers. Thus, is not surprising that in recent times most companies have laid off most of their staffs. Similarly, if companies cannot make enough profit how then can they expand to employ new University Students who are graduating year in, year out from our various universities.

It is time for the government to focus on finding a lasting solution to this looming problem. The government as a matter of urgency can invest into Wind Energy, Solar energy or even take advantage our many other water bodies and invest further into hydroelectric energy.