Higher power tariffs are bad for industrie
The manufacturing industry is the underbuilding of social and economic development, without which a country’s economic stand can crumble like a pack of cards.
The sector is lauded for creating middle-class jobs, innovation and stimulating service through its multiplier effect. The economies of scale enjoyed by the sector make the end prices favourable and appealing to the consumer. The industry has also helped to ease over-dependence on agricultural income.
Its success can be affected by factors such as factory overheads, raw materials, product complexity and workforce. Another factor is the unfavourable increase in the price of utilities. That is why attempts by Kenya Power to raise electricity tariffs should be met by heavy censure.
The quality and quantity of production directly depends on the cost of power. Exposing the industry to energy shocks will sabotage the economy, convincing sub-sectors to pass the high energy cost to consumers. The sector already losses millions to power outages which translate to machinery breakdown and product damage. The utility would rather address power surges, protecting firms from unexpected downtimes.
The inefficiency and purported graft at Kenya Power denies the country its deserved competitive edge. As energy prices hike, local firms may consider off-shore production, further hurting the economy. That could be the bitter start for a speedy de-industrialisation in Kenya, a factor than can send the economy to its deathbed.
Raising power tariffs is not a strategic standpoint for solving the problem of depreciating shilling. The government should, instead, adopt a progressive vision of providing electricity access and fair pricing. It should shield the industry from high energy bills, implement strategic price controls and put in place targeted subsidies. Also, promote renewable energy by extending fiscal incentives to companies championing efficient solutions to manufacturers.
Mr Olage is a banking and finance specialist. [email protected]