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Business News of Tuesday, 7 June 2016

Source: B&FT

Electricity gobbles up SMEs’ profit

Small and Medium Scale Enterprises (SMEs) are reeling under the weight of high electricity cost, which has led to a significant dwindling of their profit marginsand resulting in some operators considering the option of temporarily shutting down.

In an interview with the B&FT, Baba Yabdow, CEO of Yabco Focus Company Ltd. a fruit-juice manufacturing firm in Navrongo, said his company now hardly makes any profit because of the astronomical increase in electricity tariffs.

“The electricity price has affected us adversely. Because if I look at the bills I am now paying, it has gone up by about 160 percent. Even though I don’t use all my machines now, I spend GHC500 on each meter any other day I buy electricity. Last year we were spending an average of GHC3,500 monthly on electricity, but this year, we are spending about GHC8,000 -- more than twice the amount I used to buy. How can I remain in business with such a situation?” he asked.

He further stated that using a generator for his business has become relatively cheaper than using electricity from the grid.

“If I compare it [the electricity] with buying fuel for our generator, I think using the generator is better. Because when we buy GHC300 worth of fuel into our generator, we are able to use it for the whole day—from 6 am to 6pm. But for the wear and tear and maintenance cost attached to it, using a generator is better than mains electricity,” he said.

He added that but for the welfare of his workers he would have shut down operations for some time till the power situation becomes better, which would make it possible for his business to return to making profit.

“I am considering the option of shutting down, but what sometimes holds me back is the people who work for me. Some of them have families to take care of, and if they are asked to go and stay home how will they take care of their families?

‘Some schoolchildren who come from poor families work here during vacations so they can take care of some expenses when they go back to school. If I send them away how can they take care of themselves? But if the situation continues to be unbearable it will leave me with no option than to shut down,” he said.

Yaganoma Baatuolkuu, owner of Wanjo Foods located in Accra, said she has increased prices of her products in order to recover some of the cost she incurs on electricity, but has lost some customers as a result.

“I don’t really use too much energy consuming machines in my business. So last year, GHC50 worth of electricity could last me for a month. But this year, if I buy a GHC100 worth of electricity, it lasts me two weeks, making it GHC200 a month. So what I did was increase the prices of my products, but I have lost some of my customers because they think my juice is too expensive,” she said.

“There are other costs that have also risen, and all these have made it very difficult for me to make profit,” she added.

Many have blamed the high cost of power on faulty meters from ECG, and have been anticipating possible reductions when the meters are fixed.

Parliament has however put a damper on such hopes, claiming that the high prices are just what have been approved and not the result of faulty meters.

After a meeting with the ECG, MPs accepted explanations by the power distributor that it has achieved 99.9% accuracy in billing, with only 7,000 out of 8 million bills generated in recent months being faulty.

“We have been convinced by ECG’s explanations. It was vilified as if it was a bad company; but with what we have witnessed operationally, I think they are good,” Joseph Cudjoe, a minority member of parliament, told B&FT after the meeting.