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Services such as telecom, electricity and banking
play an important role in many economic activities.
The poor quality of many services in sub-Saharan
Africa has serious implications for the productivity
of firms. This in turn limits the potential of
economic growth for poverty reduction.
While physical goods can be imported from other
parts of the country or the rest of the world, firms
tend to rely on locally produced services inputs in
telecommunications, banking and electricity
distribution. Yet, access to reliable services
varies substantially within sub-Saharan Africa. The
resulting difficulties firms face might be expected
to affect their performance. A paper from the World
Bank investigates the relationship between the
productivity of African manufacturing firms and
their access to service inputs, focusing on
telecommunications, electricity and financial
services.
Unreliable telecommunication services make it
difficult for firms to communicate and coordinate
with clients and suppliers, and cause staff time to
be lost in the process. Difficulties in obtaining
credit or other shortcomings in banking services can
prevent a firm from making the most of investment
opportunities that enhance productivity. They can
also create unnecessary financial problems.
Inadequate power provision often disrupts production
process and cause productive assets to remain idle,
decreasing productivity. Such barriers undermine the
domestic and global competitiveness of firms.
The authors [of World Bank report] use information
on firm inputs and outputs to calculate their
productivities. As measures of service effectiveness
for telecommunications, energy, and banking, they
use: the time required to obtain a new (landline)
telephone connection; the number of days with power
cuts (electricity outages); and the time taken to
process domestic and international transactions,
along with the amount of credit offered to firms.
They use the variation stemming from regional
differences in services quality within countries to
control for unobservable country characteristics,
such as geography, the quality of institutions or
other policies.
Results from ten sub-Saharan African countries
reveal: Good telecommunications are associated with
higher performance. If Zambia had South Africa’s
telecommunications, firm productivity would improve
by 13.2pc.
Firms in regions with more frequent power outages
are less productive. Many use generators to avoid
disruption, which has higher costs.
More efficient banking systems are associated with
higher productivity. If Zambian banks were as
efficient as South African banks, firm productivity
would increase by 5.8pc.
Firms in regions where it is more difficult or
costly to get loans perform less well.
If all three service sectors are taken together,
there is a clear positive correlation between
efficiency in telecommunications and banking
sectors, and better firm performance. These results
are inconclusive for the electricity sector,
however.
The severity of physical conditions can only explain
part of the deficiencies in services provision in
African countries. Service sector policy plays a
major role.
Getting services policy right, through competitive
private sector involvement, must be an essential
element of any growth enhancement and poverty
reduction programme.
The role of political constraints, in particular
political elites that benefit by blocking policy
reforms to inefficient public service monopolies,
should not be underestimated. |
