"Which services most affect the productivity of firms in Sub-Saharan Africa?" This was the major research question put forth by Godfrey Madigu in his most recent lecture at the Navarra Center for International Development. Services have the potential to impact productivity by either increasing marginal costs or by hampering productivity through not being accessible. It was up to Madigu to explain of the two which most affected the productivity of Sub-Saharan Africa firms.
Building off from the studies of Eschenbach and Hoekman he examined how regional services in telecommunications, power services and financial services affects productivity. By using data from the World Bank Sub-Saharan survey of more than 10,000 businesses, he controlled for other factors like firm size, foreign ownership and export status.
The study revealed some very interesting results. For electrical power and telecommunications services the cost of the services affected firm productivity. Apparently, inhibited access to these services had no influence on firm productivity. Related to this finding was that there was a significant increase in a firmâ€™s production when they used email and/or had a website.
However for financial services, access to financial services was much more important than the cost of these services. There were two areas that Madigu acknowledged needed further investigation. The first was the counter-intuitive result that as you increase the average number of power outages, firm productivity increased. The second was that firm productivity did not seem to be affected by interest rates.