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Sub-Saharan Africa AFRICA REGION THE WORLD BANK ESMI 2 Symposium on Power Sector Reform and Efficiency Improvement in Sub-SaharanAfrica Johannesburg, December 5-8, 1995 Report No. 182/96 June 1996 Jointly Organized by The Africa Region of the World Bank and The Joint UNDP/World Bank Energy Sector Management Assistance Programme (ESMAP) EnergySedor Management sistance Programme JOINT UNDP / WORLD BANK ENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAMME (ESMAP) PURPOSE The Joint UNDP/World Bank Energy Sector Management Assistance Programme (ESMAP) is a special global technical assistance program run by the World Bank's Industry and Energy Department. ESMAP provides advice to governments on sustainable energy development. Established with the support of UNDP and 15 bilateral official donors in 1983, it focuses on policy and institutional reforms designed to promote increased private investment in energy and supply and end-use energy efficiency; natural gas development; and renewable, rural, and household energy. GOVERNANCE AND OPERATIONS ESMAP is govemed by a Consultative Group (ESMAP CG), composed of representatives of the UNDP and World Bank, the governments and other institutions providing financial support, and the recipients of ESMAP's assistance. The ESMAP CG is chaired by the World Bank's Vice President, Finance and Private Sector Development, and advised by a Technical Advisory Group (TAG) of independent energy experts that reviews the Programme's strategic agenda, its work program, and other issues. ESMAP is staffed by a cadre of engineers, energy planners, and economists from the Industry and Energy Department of the World Bank. The Director of this Department is also the Manager of ESMAP, responsible for administering the Programme. FUNDING ESMAP is a cooperative effort supported by the World Bank, UNDP and other United Nations agencies, the European Community, Organization of American States (OAS), Latin American Energy Organization (OLADE), and public and private donors from countries including Australia, Belgium, Canada, Denmark, Germany, Finland, France, Iceland, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Sweden, Switzerland, the United Kingdom, and the United States. FURTHER INFORMATION An up-to-date listing of completed ESMAP projects is appended to this report. For further information or copies of completed ESMAP reports, contact: ESMAP c/o Industry and Energy Department The World Bank 1818 H Street N.W. Washington, D.C. 20433 U.S.A. ClX 12ESMAP Joint UNDP / World Bank Energy Sector ManagementAssistance Programme c/o The World Bank * 1818 H Street, N.W. * Washington, D.C. 20433 * U.S.A. Symposium on Power Sector Reform and Efficiency Improvement in Sub-Saharan Africa Johannesburg, December 5-8, 1995 Power Development, Efficiency and Household Fuels Division Industry and Energy Department The World Bank 1818 H Street, N.W. Washington, D.C. 20433 This document has restricted distributionand may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without UNDP or World Bank authorization. Table of Contents Foreword . .............................................................. v Preface ..................................................... vii Abbreviations and acronyms ........................................ ix Executive summary .......................................... 1 Energy Sector: Status and Challenges ........................................ 1 Economic and Demographic Features ........................................ 1 Energy Balance ........................................ 2 Key Electricity Sector Issues ........................................ 2 SSA countries need to expand access to energy beyond the currently low levels. 3 Utilities need cost-recovery tariffs. 3 Most SSA power sectors need to reform. 4 Utilities need to concentrate on the commercial aspects of power supply. 5 Regional integration and bulk power trading can substantially reduce power system costs ... 5 Social protection can be maintained while reforming. 5 Private investors are attracted by macroeconomic stability and institutional, legal, and regulatory transparency. 6 Welcome address ........... 9 Keynote address ........... 11 Inaugural Address on the challenges of reform in the power sectors of Sub-Saharan Africa ...... 15 Keynote address on social aspects of power development in Sub-Saharan Africa ...................... 19 I. How do Sub-Saharan African utilities compare? ........................................... 23 1.1 Introduction ............................. ................................. 23 1.1.1 The Conventional Wisdom ...................................................... 24 1.1.2 Sector Indicators and Methodology .............. ................................ 25 1.2 Study Highlights............................................................. 25 1.3 Characteristics of the Sample Countries ................................................. 28 1.3.1 Economic and Demographic . ................................................... 28 1.3.2 Sector Policies and Institutional Structure of the ESIs ................................ 30 1.3.3 Alternative Reform Options . ................................................... 33 1.4 Supply Performance ............................................................ 42 1.4.1 Installed Capacity ........................................................... 42 1.4.2 Access to Electricity ......................................................... 43 1.4.3 Generation ............................................................. 44 1.4.4 Transmission and Distribution. ................................................. 44 1.4.5 System Losses ............................................................ 45 1.4.6 Peak Demand and Reserve Margins ............. ............................... 46 1.4.7 Reliability of Supply ......................................................... 49 1.4.8 Environmental Performance . ................................................... 49 1.4.9 Project Performance ......................................................... 49 1.5 Demand Indicators ............................................................ 50 1.5.1 Consumption by Customer Class ................ ............................... 50 1.5.2 Tariffs, Subsidies and Costs . ................................................... 51 1.6 Productivity lndicators ............................................................ 53 1.6.1 Labor Productivity .......................................................... 53 1.6.2 Power Plant Performance...................................................... 54 1.6.3 Cost Performance ............................................................ 54 1.7 Financial Challenges ............................................................ 55 1.7.1 Financial and Commercial Performance ............ .............................. 55 ii ZU4Az0' C01wi.wRs 1.7.2 Investment Challenge ......................................................... 57 Attachment 1: Data Sources and References . ............................................... 60 Attachment 2: Macroeconomic and Sector Data .............. ............................... 61 11. The electric power sector in SSA: Current institutional reforms ........ ..................... ... 75 2.1 Current Institutional Conditions ....................................................... 75 2.2 Analyzing the Trends ............................ .............................. 80 2.2.1 Sources of Institutional Change . ................................................ 81 2.3 Available Reform Strategies ......................................................... 84 2.3.1 A Wide Range of Institutional Arrangements ...................................... 84 2.3.2 Preparing to Finance Future Interconnections ..... ................................ 86 Attachment I: A Topology of Institutional Arrangements ...................................... 88 Attachment II: C6te d'lvoire: Lessons of an Experiment ...................................... 98 III Global Reform Trends and Institutional Options for Sub-Saharan Africa ........... ... ......... 101 3.1 Introduction .......................... .. .............................. 101 3.2 Why Reform? . ..................................... 102 3.3 Types of Reforms ........................................................... 103 3.4 Role of the Public and Private Sectors .................... .................. ......... 103 3.4.1 Public Enterprise Reform . .................................................... 104 3.4.2 Public Ownership and Private Operation ........... .............................. 105 3.4.3 Private Ownership and Operation ............... ............................... 106 3.5 Industry Structure and Competition ..................... .............................. 109 3.6 Regulation . ............................................................... 110 3.7 Reform Strategy .......................... .. .............................. 112 IV. Social Impact of Sector Reform in Sub-Saharan Africa .......... ........................ .... 115 4.1 Introduction .......................................................... 115 4.2 Background to Price Reform ....................................................... 116 4.2.1 Need for Economic Prices ... ....................... 116 4.2.2 Methodological Framework.................................................... 116 4.2.3 Sample of Countries ......................................................... 117 4.2.4 Electricity
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