An Empirical Assessment Of Technical Efficiency In The Kenya Sugar Industry: Data Envelopment Analysis (Dea) Approach
Abstract
The sugar industry in Kenya has been struggling and falls behind competitively produced sugar
from COMESA and non-COMESA countries like Brazil. The key challenges facing the industry
include high cost of production, low farm productivity, firm inefficiency, sub-optimal firm
production, mismanagement, and corruption among others. Using data envelopment analysis
(DEA), this study estimated the technical efficiency levels of sugar firms in Kenya. Moreover, this
study used panel regression to estimate the factors affecting technical inefficiency in the sugar
firms. Data on sugarcane production by all firms from 2009 to 2018 was used. Using variable
return to scale (VRS) assumption and output orientation, this study decomposed technical
efficiency into pure technical efficiency (PTE) and scale efficiency (SE). This study found an
average overall technical efficiency of 84.21%, average pure technical efficiency (PTE) of
89.95%, and scale efficiency of 94.74% in the sugar industry. Private firms had higher efficiency
levels than state owned firms but the difference was not significant. Moreover, this study found
state ownership, cane quality, labour, and product diversification to have significant effects on
inefficiency levels. However, age, skill level, and capital-labour ratio were all insignificant in
affecting firm inefficiency levels.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Economics [237]
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