African power sector reforms: some emerging lessons

Abstract

Implementation of power sector reforms in Africa picked up speed in the 1990s. These reforms are driven largely by governments' need for development loans available from international financing institutions only upon commitment to reform. The main model advocated has been commercialisation followed by privatisation on the basis that the private sector is more efficient than the government. Reform promises better services, jobs, competition and lower tariffs. However, emerging lessons indicate cause for concern. Competition has hardly come into place. Instead there are shifts from government-owned monopoly utilities to foreign-controlled companies, some of which are in reality foreign-government monopolies. This has energy security implications. Financial instability suffered by many of these companies is placing these already economically unstable and vulnerable countries on a riskier path than before reform. The old utilities have not been particularly attractive to the private sector. This is mainly due to the small market sizes available since electrification rates are rather low. This has led to transfers of the utilities at unfavourable prices and conditions for the host governments. The socio-economic status related to the power sector has worsened as many employees are retrenched, tariffs rise and the majority of the population remains unconnected. A review of the reform process to integrate social and developmental needs is vital.