Abstract

The Kenyan economy in the recent past has witnessed a considerable exit of multinational companies due to high-energy costs. Similarly, a comparative analysis among the East African community partners places the country among the list of those nations with high-energy charges levied on consumers. This phenomenon disadvantages the competitiveness of local industries while discouraging potential players. This is detrimental to the government efforts of ensuring economic growth and development. Such exits reduce investor confidence, and drives away potential investors. In addition, it adds more pressure on the government’s efforts to create more jobs, creation of more goods and services, increased household and national income. The objective of the study was to assess the effect of energy costs on attaining competitive advantage among manufacturing firms in Kenya. A quantitative research approach using survey research design was adopted by the study. Purposive sampling of 14 firms was done representing a total of 14 company representatives who filled the self-administered questionnaire. Data analysis was done using both descriptive statistics and inferential statistics. The hypothesis test showed that energy costs on electricity and petroleum had a significant effect on manufacturing firm’s efforts in attaining competitive advantage and was a significant predictor of competitive advantage in Kenya at 37.2% explanatory power. The results also showed that manufacturing companies in Kenya spend an average of 10.5% of their total income on electricity and petroleum products, thus reducing their competitiveness both nationally and internationally. The study posits that, since energy management practices yields significant benefits not just to the firms, but the society, environment and the government, there is a need to foster a cooperative approach in efficient energy use investment.

Key words: Energy cost, cooperative strategy, energy efficiency, competitive advantage, Kenya.

Abbreviation

UNIDO, United Nations Industrial Development Organization; ERC, Energy Regulatory Commission of Kenya; KAM, Kenya Association of Manufacturers; KNBS, Kenya National Bureau of Statistics; GOK, Government of Kenya; KES, Kenya Shillings; IEA, Institute of Economic Affairs; KIPPRA, Kenya Institute for Public Policy Research and Analysis; CCPs, Centre for Cooperation with the Private Sector; EBITDA, Earnings Before Interest, Taxes, Depreciation and Amortization; UNEP, United Nations Environmental Programme; CEOs, Chief Executive Officer’s; USA, United States of America.