Ethiopia power outages cause manufacturing firms to declare loss

Since the introduction of electric power shedding in March this year, the impacts of power outage are strongly affecting major business entities and smallholdings across the nation. In the past three months the country has been facing electric power outage due to the dwindling water level in dams, which are the dominant source of hydroelectric power.

A number of manufacturing companies are expected to declare loss for the current fiscal year due to the power outages and power cuts that have entailed scaling down and stoppage of production, according to industry observers.

Scores of large, medium and small-scale manufacturing enterprises and other businesses affected by the power interruption have already declared loss for the month of May, during which time the Ethiopian Electric and Power Corporation (EEPCo) disconnected a number of manufacturing plants from the nation grid, according to sources from the Ethiopian Revenues and Customs Authority.

The power shedding has also affected the overall economy. Just this week, Prime Minister Meles Zenawi told The Financial Times that the power outages have trimmed the country’s GDP growth forecast for the current fiscal year by close to one percentage point to 10.1 percent. Despite the IMF’s 6.5 percent GDP growth projection for the country, the government had earlier on projected an 11.2 percent growth.

Aside losses in revenues, profits and taxes, the power interruption was expected to result in substantial job cuts as manufacturing enterprises stop production. Fortunately, the power cut has not induced significant layoffs, at least so far. “One of the biggest fear was there will be more and more job cuts,” Kassahun Follo, president of the Confederation of Ethiopian Trade Unions (CETU) told The Reporter. “But there is not much layoff observed in connection to the power shedding.”

“There are 562 companies and enterprises who are members of CETU, including state-owned enterprises,” Kassahun says. “Of these, only two are reported to have cut jobs while a few construction companies have sacked temporary workers due to shortage of cement emanating from the power cut. All the same, if the power crisis is not resolved in time, things may get worse.”

Although EEPCo officials are entreating the public to wait patiently until the dams get sufficient water this rainy season, they are also insisting that the problem will be solved when Gibe II starts

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