Financial Viability of Electricity Sectors in Sub-Saharan Africa: Quasi-Fiscal Deficits and Hidden Costs

105 Pages Posted: 9 Sep 2016

Date Written: August 9, 2016

Abstract

This paper studies the financial viability of electricity sectors in 39 countries in Sub-Saharan Africa using an approach similar to that in an earlier study, the Africa Infrastructure Country Diagnostic. The quasi-fiscal deficit in each country is calculated under two scenarios: existing utility performance and benchmark utility performance. In the first scenario, only two countries have a financially viable electricity sector (the Seychelles and Uganda). Only 19 countries cover operating expenditures, while several countries lose in excess of US$0.25 per kilowatt-hour sold. Quasi-fiscal deficits average 1.5 percent of gross domestic product, and exceed 5 percent of gross domestic product in several countries. In this context, it will be difficult for utilities to maintain existing assets let alone facilitate the expansion needed to reach universal access goals. The number of countries with a quasi-fiscal deficit below zero increases to 13 under the second scenario, and to 21 when oil price impacts are considered, indicating tariff increases may not be needed at benchmark performance in these cases. Combined network and collection losses on average represent a larger hidden cost and are less politically sensitive to address than underpricing, so could be a smart area for policy focus to reduce quasi-fiscal deficits. Underpricing remains an issue to address over the medium term, as service quality improves. With no changes in power mix, tariffs would need to increase by a median value of US$0.04 per kilowatt-hour sold at benchmark performance, representing a 24 percent increase on existing tariffs. Most countries have improved or maintained performance, and relatively few countries have had declining financial viability.

Keywords: Access of Poor to Social Services, Services & Transfers to Poor, Disability, Energy Policies & Economics, Economic Assistance

Suggested Citation

Trimble, Christopher Philip and Kojima, Masami and Perez Arroyo, Ines and Mohammadzadeh, Farah, Financial Viability of Electricity Sectors in Sub-Saharan Africa: Quasi-Fiscal Deficits and Hidden Costs (August 9, 2016). World Bank Policy Research Working Paper No. 7788. Available at SSRN: https://ssrn.com/abstract=2836535

Christopher Philip Trimble (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Masami Kojima

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Ines Perez Arroyo

Independent

No Address Available

Farah Mohammadzadeh

Independent

No Address Available

Register to save articles to
your library

Register

Paper statistics

Downloads
55
Abstract Views
201
rank
369,757
PlumX Metrics