3 - Privatization & Electricity Sector Reform

Summary

From the late 1960s until the late 1990s, power industries in Africa were most often national monopolies in charge of providing a public electricity service (Girod & Percebois 1998, p. 22). The three segments of electricity service delivery – production/generation, transport/transmission, and distribution – were vertically integrated, with supervision and regulation supported by public ministries or quasi-independent regulatory agencies. The rationale for this arrangement stemmed from the belief that public utilities had to support national development and the cohesion of society through the distribution of an important public good – electricity (1998, pp. 22–3). A fall in sales of electricity during the 1980s following economic decay in sub-Saharan Africa, however, left most utilities unable to expand or provide consistent service and unable to maintain equipment and infrastructure. The fallout from this era carried forward into the 2000s with large system losses in many countries due to technical problems and poor quality infrastructure. A great deal of blame for electricity sector problems can be attributed to dismal economic conditions and financial constraints, but problems were also frequently attributed to the quality of administrative oversight of the sectors.

Beginning in the 1980s, private sector proponents argued that public utilities in Africa lacked internal motivation, had little management autonomy, and were vulnerable to political interference (Girod & Percebois 1998; Yi-chong 2006). It was also argued that public utilities were not motivated to look for greater efficiency; were able to transfer costs resulting from poor management to the national pocketbook; and were able to finance investments using other government funds (Girod & Percebois 1998, p. 24). This situation prompted calls for restructuring, reorganization and the general reform of electricity sectors to improve and increase service delivery (Davidson & Sokona 2001; ESMAP 2000; Girod & Percebois 1998; Turkson & Wohlgemuth 2001; UNCHS 2001; Wereko-Brobby 1993); it also led to the promotion and creation of new organizations and institutional incentives that would promote substantial investment in, and expansion of, electricity infrastructure (UNCHS 2001, p. 143), while at the same time reducing political interference in the management of the sector.

The World Bank's promotion of electricity sector reform was central in the 1990s and early 2000s: it was ‘the main architect of energy sector reform and liberalization’ in developing countries (Vedavalli 2007, p. 78).