RELATIONSHIP BETWEEN POWER SUPPLY INTERRUPTIONS AND FINANCIAL PERFORMANCE OF MANUFACTURING COMPANIES IN MACHAKOS COUNTY

Abstract

The importance of power supply to economic development of any nation cannot be overemphasized. Availability and access to reliable electricity supply has a rippling effect on productivity of manufacturing firms. Power supply in Kenya is generally known for its unreliability and high disruption costs that affect production efficiency and competitiveness. Unreliable power leads to disruptions in production, loss of perishable goods, damage to sensitive equipment and loss of orders. According to Economic Survey 2017, the number of power interruptions in Machakos County sector rose from an average of 7 cases a month in 2015 to an average of 13 cases a month in 2016. The study examined the relationship between power supply interruptions and manufacturing companies‟ financial performance in Machakos County. The research objectives were to determine the effect of scheduled maintenance, effect of equipment vandalism, the effect of response time and effect of interruption repair cost on financial performance of the manufacturing companies. The study was guided by Control Theory, Transaction Cost Theory, Resource Dependence Theory and Modern Theory of Cost. The study adopted a descriptive research design. The target population constituted the 69 manufacturing firms in Machakos County. The study used census approach to sample production manager from each manufacturing firm. Data collected was analyzed using SPSS version 21.0 to generate both descriptive statistics and inferential statistics. A multiple regression model was employed to depict the relationship between independent variables and dependent variable. The statistics generated included both descriptive statistics and inferential statistics. Descriptive statistics included frequency tables, mean and standard deviation. Inferential statistics included correlation analysis and multiple regressions. The results were presented in form of tables. The study found that scheduled maintenance and financial performance are positively and significantly related (r=0.243, p=0.001). The results indicated that equipment vandalism and financial performance are negatively and significantly related (r=0.211, p=0.021). It was also established that response time and financial performance are positively and significantly related (r=-0.155, p=0.012). From inferential statistics it was also clear that repair costs and financial performance are negatively and significantly related (r-0.128, p=.022). In conclusion, electricity is necessary for the operation of any manufacturing company and any interference with electricity supply makes manufacturing companies run into serious losses. From the results of this study, it is clear that companies suffer a great deal anytime there is power outage. As reported in this study, the financial performance of manufacturing companies in Machakos County are always affected by; scheduled maintenance by power utility, vandalism of electrical equipment, the response time by power utility staff to restore power and the cost the companies incur in terms of paying losses as a result of damage caused by power outage. Due to the important nature of electricity in the manufacturing industry, there is need to create clear policy framework protecting manufacturing companies from regular power outage which has an adverse effect on the operations of the manufacturing companies in the country. Scheduled maintenance by should be done in such a way that it does not interfere with the normal operations of manufacturing companies. The government and the utility company should ensure that there are vigilant groups formed to safe guard power equipment and power lines against vandalism which has become a major setback to the utility company in its attempt to maintain constant power supply