Impact of powers outages on the technical efficiency of manufacturing firms in Cameroon: the role of a firm's status, formal or informal

Abstract

The objective of this paper is to measure the impact of powers outages on the technical efficiency of manufacturing firms in Cameroon, focusing on the role of informality status. Indeed, informal firms are mostly very small and generally use less energy than formal firms and do not need sophisticated and costly electrical equipment for their operation. We mobilize data from the Enterprises Survey conducted in Cameroon in 2009 and 2016 by the World Bank. We first apply the data envelopment method (DEA) to determine the technical efficiency scores of firms. We estimate average efficiency scores of 25% and 42% for 2009 and 2016 respectively, which represents an improvement over the period. We then assess the impact of powers outages and other exogenous factors on the efficiency scores using the Tobit model as the efficiency scores are between 0 and 1. The results show that the occurrence of powers outages, the number of powers outages events, the duration of a powers outages event, the total cost of electricity and the losses due to powers outages negatively and significantly affect the efficiency scores of manufacturing firms in Cameroon in 2009 and 2016. However, informal firms are more resilient to powers outages than formal firms. Furthermore, sensitivity analyses using quantile regression confirm the robustness of our estimates. These results call, first, for improving the quality of private and public electricity infrastructure in order to reduce the occurrence of powers outages. Secondly, these results suggest the development of substitutes to electric energy to cope with long periods of powers outages.