Advances in Phytochemistry, Textile and Renewable Energy Research for
Industrial Growth – Nzila et al. (Eds)
© 2022 Copyright the Author(s), ISBN: 978-1-032-11871-0
Open Access: www.taylorfrancis.com, CC BY-NC-ND 4.0 license
Industrial output in Uganda: Does electricity consumption matter?
B. Akankunda & S.K. Nkundabanyanga
Department of Accounting, Faculty of Commerce, Makerere University Business School, Kampala, Uganda
M.S. Adaramola
Faculty of Environmental Sciences and Natural Resource Management, Norwegian University of Life Sciences, Ås,
Norway
A. Angelsen
School of Economies and Business, Norwegian University of Life Sciences, Ås, Norway
ABSTRACT: Existing studies indicate that access to electricity is associated with gainful economic benefits.
The main goal of the study was to examine the effect of electricity consumption on industrial output while
holding other factors constant using data sets from the Uganda Investment Authority, Uganda Bureau of Statistics,
Electricity Regulatory Authority, and World Bank enterprise report on workers’ education, labour employed, and
electricity consumed by the industries (agro based). Using the vector error correction model, results of the
study indicated that that education, electricity consumption, and labour have a long-term causality on industrial
output. Based on the research questions, the effect of electricity consumption on industrial output, the effect of
educated workers on industrial output, and the labour employed influence industrial output. Furthermore, we find
evidence that workers’ education and the labour employed differentials correspond directly with industrial output
differentials. Regulators must make efforts to increase an affordable and reliable supply of industrial electricity
as a facilitating condition through subsidised electricity tariffs. Moreover, results suggest that industrial-led
electricity consumption policies that can enhance industrial growth should be implemented. Likewise, the results
also suggest efforts to encourage agro-based industries to employ more well-educated workers to increase the
industrial output.
Keywords: Electricity consumption, Industrial output, capital, education, and labour employed.
1 INTRODUCTION
1.1 Background of the study
Industrial development has been an engine of any
economy that desires to move from a non-industrial
state to an industrial state (Daubaraitë 2015; Li et al.
2016; Mountjoy 2017). To achieve this, certain factors
must be put in place to trigger and achieve this target
(Izadmehr 2018; Shepherd 2015).Among these factors
are availability and reliability of energy resources to
meet the demand of the industry, which must be efficiently utilized by the industrial sector (Alley 2016;
Ugwoke et al. 2016). The study objective is to examine
the effect of electricity access on sustainable industrial
output. Uganda is regarded as an agriculture-based
economy and a food basket in the Eastern African
region, given its ability to produce a variety of foods
and in large quantities (Ssozi 2018). The agricultural output comprises food and cash crops, livestock,
forestry, and fishing sub-sectors. In addition to being
a good source of national income, agro-processing
industries provide skilled and unskilled employment
opportunities for many Ugandans to support their
livelihood.
According to an Electricity Regulatory Authority
tariff review report (2019), the Industrial Customer
category includes Medium, Large, and Extra-Large
Industrial Customers. Energy Sales to Industrial Customers reduced by 7% in 2019 compared to 11% in
2018. The decreasing rate in the Energy Consumption
of Industrial Customers in 2019 was majorly attributed
to the low industrial growth. The average consumption per Industrial Customer recorded a low growth
rate in average consumption in 2019 as compared to
2018 among Industrial Customers (ERA 2019). In
addition, according to Mawejje (2016), 80% of these
industries rely heavily on electricity for their operations. Agricultural energy demand can be divided into
direct and indirect energy needs. The direct energy
needs include the energy required for land preparation, cultivation, irrigation, harvesting, post-harvest
processing, food production, storage, and the transport of agricultural inputs and outputs (Dogan 2016),
while indirect energy demand include the energy
embedded in farm buildings and processing factories,
84
DOI 10.1201/9781003221968-11
Industrial Growth – Nzila et al. (Eds)
© 2022 Copyright the Author(s), ISBN: 978-1-032-11871-0
Open Access: www.taylorfrancis.com, CC BY-NC-ND 4.0 license
Industrial output in Uganda: Does electricity consumption matter?
B. Akankunda & S.K. Nkundabanyanga
Department of Accounting, Faculty of Commerce, Makerere University Business School, Kampala, Uganda
M.S. Adaramola
Faculty of Environmental Sciences and Natural Resource Management, Norwegian University of Life Sciences, Ås,
Norway
A. Angelsen
School of Economies and Business, Norwegian University of Life Sciences, Ås, Norway
ABSTRACT: Existing studies indicate that access to electricity is associated with gainful economic benefits.
The main goal of the study was to examine the effect of electricity consumption on industrial output while
holding other factors constant using data sets from the Uganda Investment Authority, Uganda Bureau of Statistics,
Electricity Regulatory Authority, and World Bank enterprise report on workers’ education, labour employed, and
electricity consumed by the industries (agro based). Using the vector error correction model, results of the
study indicated that that education, electricity consumption, and labour have a long-term causality on industrial
output. Based on the research questions, the effect of electricity consumption on industrial output, the effect of
educated workers on industrial output, and the labour employed influence industrial output. Furthermore, we find
evidence that workers’ education and the labour employed differentials correspond directly with industrial output
differentials. Regulators must make efforts to increase an affordable and reliable supply of industrial electricity
as a facilitating condition through subsidised electricity tariffs. Moreover, results suggest that industrial-led
electricity consumption policies that can enhance industrial growth should be implemented. Likewise, the results
also suggest efforts to encourage agro-based industries to employ more well-educated workers to increase the
industrial output.
Keywords: Electricity consumption, Industrial output, capital, education, and labour employed.
1 INTRODUCTION
1.1 Background of the study
Industrial development has been an engine of any
economy that desires to move from a non-industrial
state to an industrial state (Daubaraitë 2015; Li et al.
2016; Mountjoy 2017). To achieve this, certain factors
must be put in place to trigger and achieve this target
(Izadmehr 2018; Shepherd 2015).Among these factors
are availability and reliability of energy resources to
meet the demand of the industry, which must be efficiently utilized by the industrial sector (Alley 2016;
Ugwoke et al. 2016). The study objective is to examine
the effect of electricity access on sustainable industrial
output. Uganda is regarded as an agriculture-based
economy and a food basket in the Eastern African
region, given its ability to produce a variety of foods
and in large quantities (Ssozi 2018). The agricultural output comprises food and cash crops, livestock,
forestry, and fishing sub-sectors. In addition to being
a good source of national income, agro-processing
industries provide skilled and unskilled employment
opportunities for many Ugandans to support their
livelihood.
According to an Electricity Regulatory Authority
tariff review report (2019), the Industrial Customer
category includes Medium, Large, and Extra-Large
Industrial Customers. Energy Sales to Industrial Customers reduced by 7% in 2019 compared to 11% in
2018. The decreasing rate in the Energy Consumption
of Industrial Customers in 2019 was majorly attributed
to the low industrial growth. The average consumption per Industrial Customer recorded a low growth
rate in average consumption in 2019 as compared to
2018 among Industrial Customers (ERA 2019). In
addition, according to Mawejje (2016), 80% of these
industries rely heavily on electricity for their operations. Agricultural energy demand can be divided into
direct and indirect energy needs. The direct energy
needs include the energy required for land preparation, cultivation, irrigation, harvesting, post-harvest
processing, food production, storage, and the transport of agricultural inputs and outputs (Dogan 2016),
while indirect energy demand include the energy
embedded in farm buildings and processing factories,
84
DOI 10.1201/9781003221968-11