Effects of Monthly Fuel Price Adjustments on Performance of Selected Small and Medium Enterprises (SMEs) In Lusaka Zambia

Abstract

This study explored the impact of monthly fuel price adjustments on the performance of Small and Medium Enterprises (SMEs) in Lusaka, Zambia, where SMEs play a vital role in employment and GDP. The research aimed to: (1) analyze how fuel price fluctuations affect operational costs and profitability, (2) assess the overall impact on SME performance, and (3) identify strategies SMEs use to cope with fuel price changes. A quantitative research design was employed, using structured questionnaires to gather data from 110 SME owners and managers across various sectors, including retail (54%), wholesale (24.1%), and both (21.8%). Data analysis involved descriptive statistics and regression analysis using SPSS to examine the relationship between fuel price changes, operational costs, and profitability. The findings revealed that fuel price adjustments significantly increased operational costs, with 82% of respondents reporting a negative effect on their businesses. Regression analysis showed a significant negative relationship between fuel price fluctuations and profitability (coefficient = -0.161, p = 0.015), meaning that increased fuel prices reduced profitability. Other factors such as firm size, sales volume, and operational costs also significantly influenced profitability. SMEs adopted several coping strategies, including raising prices (39.5%), reducing working hours (28.7%), and improving fuel management (19.2%). However, these measures were only moderately effective, with nearly half (47.1%) of respondents acknowledging that fuel price fluctuations severely hindered profitability. The study confirmed the reliability of the data through Cronbach’s alpha, which ranged from 0.809 to 0.826, indicating high internal consistency. The regression model explained 77.1% of the variance in profitability, highlighting the significance of fuel price changes and other operational factors. The study concluded that fuel price fluctuations negatively impact SMEs, recommending that businesses invest in energy-efficient technologies and fuel management strategies while urging the government to stabilize fuel prices and provide financial support to SMEs during price surges. Keywords: Fuel price fluctuations, SMEs, operational costs, profitability, coping strategies, regression analysis, business performance, energy-efficient technologies, government policy.