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Submitted by Anonymous on
While I agree that transportation should be a priority, this is a fairly limited analysis of the problem. The issue at stake is not the price of electricity but its reliability. Tanzania has been plagued by blackouts and brownouts, all of which effectively multiply the losses from sunk costs. With a parastatal such as TANESCO, the premise that the price of electricity per kilowatt-hour reflects the true cost of Tanzania's energy sector is flawed. Perhaps a better measure would include the down-time that plagues Tanzania's grid. For example, electricity may only account for 3% of costs to horticulture sector firms, but it is a key component of the production process that allows the packaging of products. When there is a blackout for a few hours, horticulture firms presumably still pay their workers. Next, fewer products are able to be shipped and many more expire because they weren't able to be packaged quickly. This reduces the profit from each trip to market. Ultimately, unreliable utilities cost a firm far more than 3% of its expenses. Of course, one could argue that labor, land, and transport are all integral parts of the production process without which a firm could never succeed. However, it appears that few involve as much uncertainty as electricity. Transportation has been a major issue for decades, and firms are ultimately able to predict and compensate for how much profit is lost during transport. To an extent, these losses are controllable. Major delays to an order because the entire factory is shut down can damage inputs as well as the credibility of a firm.