Electricity Reliability and Intra-Sectoral Structural Change in Sub-Saharan Africa: Evidence from Medium-Sized Manufacturing Firms

Kabinet Kaba and Fulbert Tchana Tchana

No 10770, Policy Research Working Paper Series from The World Bank

Abstract: Although access to reliable electricity enables manufacturing companies to increase their output, there have been few studies of the distribution of output growth between export and domestic markets. Although some papers have examined the impact of electricity reliability on exports (in volume terms or dummy terms), little is known about the way electricity reliability can push existing manufacturing firms more into the export market. Using the World Bank Enterprise Surveys, this paper examines a sample of 13,025 manufacturing firms surveyed in 39 Sub-Saharan African countries between 2006 and 2022. The paper employs the entropy balancing approach to examine how access to reliable electricity affects the distribution of manufacturing firms' sales between export and domestic markets. The results show that for medium-sized manufa cturing firms, electricity access increases the share of exports in total sales at the expense of the share of domestic sales. However, the results for small and large manufacturing companies are not statistically significant. Among medium-sized manufacturing enterprises, domestic companies improve their exports relative to domestic sales when they have access to electricity, with mixed results for foreign companies. Even in resource-intensive countries, electricity access enhances the share of exports relative to domestic sales. The intra-sectoral structural change induced by power access is not limited to medium-sized companies in the manufacturing sector; the same pattern is observed in the service sector with mixed findings.

Date: 2024-05-15
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