The Relationship Between Electricity Tariff Structure, Labor Costs and Production Patterns.
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Date
2025-10-25
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Makerere University Business School
Abstract
This study investigates the relationship between electricity tariff structure, labor costs, and production patterns among steel manufacturing firms in Uganda. Recognizing the steel sector’s critical role in Uganda’s industrial economy and its energy-intensive nature, the research seeks to understand how variations in electricity pricing and labor expenses influence operational efficiency and output. The study is motivated by the challenges posed by fluctuating electricity tariffs especially time-of-use tariffs and relatively high labor costs that impact competitiveness and production costs in Ugandan steel rolling firms. A quantitative cross-sectional research design was employed, collecting data via structured questionnaires from 31 steel rolling firms across central and eastern Uganda. The analytical approach integrated factor analysis, correlation, and multiple linear regression to examine the individual and combined effects of electricity tariff structure and labor costs on production patterns. The regression results revealed a statistically significant positive relationship between electricity tariff improvements and production output, with the electricity factor coefficient at 0.412 (p = 0.007). This shows that a one-unit improvement in electricity tariff structure (e.g., lower or more flexible tariffs) is associated with a 0.412-unit increase in production performance. Conversely, the labor cost factor showed no statistically significant effect on production (coefficient = 0.083, p = 0.578), suggesting labor cost variations have a limited direct influence on output. The combined model was statistically significant (F = 4.32, p = 0.0232) and explained approximately 21% of the variation in production levels (R² = 0.21), indicating that electricity and labor factors jointly influence production but that other unmeasured variables also play a substantial role. The study concludes that electricity tariff reform focused on affordability and time-of-use optimization is crucial for enhancing production output, while labor cost management should emphasize workforce skills and productivity improvements. The findings offer evidence-based recommendations for policymakers, industry stakeholders, and researchers aiming to foster sustainable growth and competitiveness in Uganda’s steel manufacturing sector.
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This is a master's thesis.
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Kibekityo, G. (2025) The Relationship Between Electricity Tariff Structure, Labor Costs and Production Patterns: A Case Study of Steel Manufacturing Firms in Uganda. (Unpublished master's dissertation). Makerere University Business School, Kampala, Uganda.