Abstract
Electricity sector reforms have transformed the structure and organization of the sector worldwide. While outcomes of reforms in developed and developing countries have been extensively examined, there is limited analysis of the reforms in sub-Saharan Africa (SSA). This paper analyses the performance of electricity sector reforms in 37 SSA countries between 2000 and 2017. We use a stochastic frontier analysis approach to estimate a multi-input multi-output distance function to assess the impact of reform steps and institutional features on indicators of investment and technical efficiency. Results indicate a positive correlation between reforms and installed generation capacity per capita, plant load factor, and technical network losses. The presence of an electricity law, sector regulator, vertical unbundling, and private participation in the management of assets were positively correlated with reform performance. Perceptions of non-violent institutional features such as corruption, regulatory quality and governance effectiveness do not seem to have had a significant effect, but perceptions of political stability, violence, and terrorism influenced reform outcomes. We conclude that a workable reform in SSA involves vertical unbundling with an electricity law, a regulator, and private ownership and management of assets where feasible. However, positive outcomes go hand in hand with higher technical network energy losses which indicates higher investment in the generation segment than in the network segment. Hence, emphasis should be placed on decoupling the energy losses from power generation.
Highlights
During the 1980s, the electricity sectors of sub-Saharan African (SSA) countries were beset with capacity shortages, poor service quality, price-cost margins, high subsidies, high energy losses and low access rates [1–4]
Both the coefficients of outputs and inputs can be respectively interpreted as distance function partial elasticities with respect to outcomes and reform steps at the sample mean
We used a multi-input multi-output distance function to define a best performance frontier comprising three indicators, i.e., net installed generation capacity per capita, plant load factor, and technical network losses. This performance frontier was modelled as a function of some reform steps including the enactment of an electricity law, vertical unbundling of the industry, and the establishment of a sector regulator
Summary
During the 1980s, the electricity sectors of sub-Saharan African (SSA) countries were beset with capacity shortages, poor service quality, price-cost margins, high subsidies, high energy losses and low access rates [1–4]. The traditional sources of finance for infrastructure projects at the time (i.e., International Development Organizations) indicated that they would only be open to provide further support if countries would reform their sectors to address the systemic issues causing the persistent underperformance [6,7] These reforms aimed at introducing policies, regulations, and institutions that would unfetter the monopoly of state-owned utilities and provide avenues for private actors to participate in competitive markets [3,4,6]. Regulation of the networks (i.e., transmission and distribution), and sometimes ownership change would provide high-powered incentives and hard budget constraints This would internalize the problem of information asymmetry and eradicate the perverse incentives associated with natural monopolies while improving governance and fighting corruption [2,8,12–14]. These efficiency improvements are expected to be passed on to consumers directly through price and quality competition, or indirectly through re-investment in new assets [15]
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