Underpricing ‘Killing’ Utility Providers in Sub-Saharan Africa – World Bank

The World Bank has identified under pricing as the biggest threat to the survival of utility companies providing electricity, in sub-Saharan Africa.

As a result, the Bank is predicting of a possible drop in private sector participation to improve operations of such companies if the situation remain unresolved.

The World Bank attributes the worrying impact of underpricing to what it describes as institutional and political weaknesses within the power supply chain.

Despite the existence of laws on the independence of regulators, the Bank argues that such institutions are compelled by political players to bypass transparent processes and objective economic principles in setting tariffs.

Also, the report highlights the inability to subject most concession and power purchase agreements to scrutiny.

This it says have always been justified by government officials as due to commercial necessity or competition.

Second to the under pricing is the issue of transmission and distribution losses which account for thirty percent of challenges facing the utility providers.

In addition, collection losses as well as over staffing account for 20 and 10 percent of all losses, respectively.

Zeroing in on Ghana’s performance, the percentage of businesses reporting electricity outages and its impact on their businesses, has dropped from the region of almost a hundred percent to ninety percent since 2013.

This means that the country may be improving it its power situation but still needs to do more to provide reliable power to such industries.

The report comes at a time where the Millennium Development Authority (MiDA) operating under the US’ Millennium Challenge Corporation, has selected Philippine company, Meralco, as its preferred concessionaire in the private sector participation of the ECG.

As a result, Ghana could draw critical lessons and apply them in her strategy for the state power producer.

CEO of MiDA, Martin Esson Benjamin is hopeful of the plan in turning around the fortunes of the ECG.

Source: Citibusinessnews