Energy consumption and manufacturing sector performance in Sub-Sahara Africa

Although energy consumption contributes immensely to productivity and economic growth, manufacturing sector in Sub-Sahara African (SSA) countries is among the least in terms of energy utilization. The objectives of this study are to investigate the effect of energy consumption on manufacturing performance in SSA within panel of nine SSA countries from 1995 to 2012, to examine the effect of energy consumption on manufacturing performance for SSA within the time series analysis for the period 1980-2012, to examine the effect of energy consumption on manufacturing performance across income group in SSA using panel analysis and to examine causal relationship between energy consumption and manufacturing performance in SSA. For time series analysis, the study employed Autoregressive Distributive Lag (ARDL) method and Granger-causality test. The result proves cointegration and positive effect of energy consumption on manufacturing performance, but no causality relationship between them. For panel analysis, the study utilized Pedroni panel cointegration, Fully Modified Ordinary Least Square (FMOLS) and Granger-causality test. The result of Pedroni panel cointegration proves the evidence of cointegration among the variables. In addition, the long run coefficients suggest that energy consumption, electricity, fossil energy, capital and labour determine the performance of manufacturing sector. Similarly, the results of Granger-causality test discover bidirectional causality for aggregate energy model, no causality for electricity model and unidirectional causality from manufacturing performance to fossil consumption in SSA. Also, evidence of bidirectional among the energy consumption and manufacturing performance is established for the low-income SSA as the unidirectional causality from manufacturing performance to energy consumption was maintained for the middle-income SSA. In the context of policy implication, the study recommends the implementation of subsidy policies that would enhance energy consumption as energy conservation policy may adversely affect manufacturing performance