A team of researchers from EfD has concluded a cross-country study exploring the relationship between innovation, energy efficiency, and productivity of female-led manufacturing enterprises. The study, spanning selected countries in East and West Africa, provides valuable insights into common trends and context-specific factors that foster or hinder the growth of female-led businesses.
The countries are Ethiopia, Kenya, Ghana, and Nigeria, offering inclusive coverage that makes the study a significant contributor not only to the advancement of enterprises but also broader national and regional development objectives.
Focus on three aspects of efficiency
“Collaborating with colleagues on this study has enriched our research and fostered capacity building and stronger linkages between our centers. It is gratifying to come out with insights and recommendations that support evidence-based policymaking at both national and regional levels,” says Kebede Selamawit G/egziabher, lead researcher from EfD Ethiopia.
Using secondary data from the World Bank Enterprise Survey, the researchers aimed to address three main objectives: first, to examine the effect of innovation on energy efficiency; second, to explore the impact of energy efficiency on productivity, measured by both capital and labor, and third, to analyze gender patterns of innovation, energy efficiency, and productivity.
Experience and size matter
The findings highlight the crucial role of introducing new products and services to enhance energy efficiency. Additionally, less experience of top managers and smaller firm size have a negative effect on energy efficiency, suggesting potential challenges stemming from weak corporate governance and diseconomies of scale. Notably, Ghana emerged as more energy efficient relative to Ethiopia.
Furthermore, the research revealed a positive linkage between energy efficiency and productivity across multiple metrics, including Total Factor Productivity (TFP), capital productivity, and labor productivity. Interestingly, a one percentage point increase in energy efficiency corresponded to nearly a 10 percent boost in TFP, capital productivity, and labor productivity, underscoring the importance of energy efficiency enhancement initiatives.
Interventions needed for energy efficiency
Further analysis showed significant differences in productivity levels across the four nations, with Ethiopia lagging and Nigeria emerging as the most productive, both in terms of capital and labor.
An important observation relates to the impact of gender dynamics on energy efficiency and productivity. Firms with female majority ownership demonstrated lower energy efficiency levels, with innovation having a negligible influence within this demographic. However, the study underscored the critical role of energy efficiency in augmenting productivity among such firms, advocating for tailored policy interventions to bridge this gap.
Reliable electricity is important
In light of these findings, the research urges policymakers to support innovation within the manufacturing sector, particularly in Ghana, where innovation has been proven to positively impact energy efficiency. Proposed measures include incentivizing through subsidies, tax breaks, or grants for firms spearheading innovative endeavors.
Finally, there is a need for increased investments in improving the reliability and quality of electricity supply, especially in Nigeria, where energy intensity is the lowest. This could be done by expanding the grid capacity, diversifying the energy sources, upgrading the transmission and distribution infrastructure, and reducing the losses and thefts.
The project team also includes Frank Adusah-Poku and Mawunyo Agradi of EfD Ghana, and Laura Barasa of EfD Kenya.
By: Vicentia Quartey