Power tariffs : caught between cost recovery and affordability

This is the first paper to build a comprehensive empirical picture of power pricing practices across Sub-Saharan Africa, based on a new database of tariff structures in 27 countries for the years 2004-2008. Using a variety of quantitative indicators, the paper evaluates the performance of electricity tariffs against four key policy objectives: recovery of historic power production costs, efficient signaling of future power production costs, affordability to low income households, and distributional equity. As regards cost recovery, 80 percent of the countries in the sample fully recover operating costs, while only around 30 percent of the countries are practicing full recovery of capital costs. However, due to the fact that future power development may be based on a shift toward more economic technologies than those available in the past, existing tariffs look as though they would be consistent with Long Run Marginal Costs in nearly 40 percent of countries and hence provide efficient pricing signals. As regards affordability, today's average effective tariffs are affordable for 90 percent of today's customers. However, they would only be affordable for 25 percent of households that remain unconnected to the grid. Tariffs consistent with full recovery of economic costs would be affordable for 70 percent of the population. As regards equity, the highly regressive patterns of access to power services, ensure that subsidies delivered through electricity tariffs are without exception also highly regressive in distributional incidence. The conclusion is that achieving all four of these policy objectives simultaneously is almost impossible in the context of the high-cost low-income environment that characterizes much of SSA today. Hence most countries find themselves caught between cost recovery and affordability.International Trade and Trade Rules,Energy Production and Transportation,Infrastructure Economics,Debt Markets,Trade Policy

Burkina Faso's infrastructure : a continental perspective

Infrastructure contributed 1.3 percentage points to Burkina Faso's annual per capita gross domestic product (GDP) growth over the past decade, much of it due to improvements in information and communication technology (ICT). Raising the country's infrastructure endowment to that of the region's middle-income countries (MICs) could boost annual growth by more than 3 percentage points per capita. Burkina Faso has made significant progress developing its infrastructure in recent years, especially in the ICT sector. The country has also moved forward in the areas of road maintenance and water and sanitation, but still faces challenges in these sectors, as well as in the electricity sector. As of 2007, Burkina Faso faced an annual infrastructure funding gap of $165 million per year, or 4 percent of GDP. That gap could be cut in half by the adoption of more appropriate technologies to meet infrastructure targets in the transport and the water and sanitation sectors. Even if Burkina Faso were unable to increase infrastructure spending or otherwise close the infrastructure funding gap, simply by moving from a 10- to 18-year horizon the country could address its efficiency gap and meet the posited infrastructure targets.Transport Economics Policy&Planning,Infrastructure Economics,Town Water Supply and Sanitation,E-Business,Energy Production and Transportation

Mozambique's infrastructure : a continental perspective

In the last 10 years, Mozambique's economy has grown steadily at an impressive rate of 7.7 percent per year, driven by the service sector, light industry, and agriculture. This pace is expected to continue or even increase with the massive influx of already-planned investment on the order of $15-20 billion. Mozambique's infrastructure is well developed in some sectors, including its east-west transport infrastructure, power grid, and water and sanitation networks. But the nation still faces critical challenges in these and other areas, including developing north-south transport connections, properly managing the water system, and expanding hydroelectric generation to meet potential. Mozambique spent about$664 million per year on infrastructure during the late 2000s, with as much as $204 million lost annually to inefficiencies. Comparing spending needs with existing spending and potential efficiency gains leaves an annual funding gap of$822 million per year. Mozambique could reduce inefficiency losses by positioning itself as a key power exporter. The country could reach infrastructure targets in 20 years through a combination of increased finance, improved efficiency, and cost-reducing innovations.Transport Economics Policy&Planning,Infrastructure Economics,Town Water Supply and Sanitation,Energy Production and Transportation,Water Supply and Systems

Sudan's infrastructure : a continental perspective

Improvements in infrastructure across Sudan in recent years have contributed 1.7 percentage points to the country's per capita growth. Consistent with trends in other countries, the ICT revolution that swept Africa contributed more than any other sector to growth in Sudan. Raising the infrastructure endowment of all parts of Sudan to that of the region's best performer -- Mauritius -- could boost annual growth by about 3.5 percentage points. Sudan has heavily invested in infrastructure in recent years. Notable achievements include tripling power-generation capacity, liberalizing the ICT sector, and connecting to an undersea fiber-optic cable. Looking ahead, Sudan's most pressing infrastructure challenges lie in the water and transport sectors. In the water sector, the country needs to dramatically improve access to safe sources of water and sanitation while improving utility efficiency. In the transport sector the country needs to vastly expand rural and international connectivity and improve quality across the network. Sudan presently spends about $1.5 billion per year on infrastructure, with$580 million a year lost to inefficiencies. Even if the inefficiencies were eliminated, however, Sudan would face an infrastructure funding gap of $2.9 billion per year. This gap could be reduced by half by choosing lower-cost water, sanitation, and road-surfacing technologies, and could be bridged by continuing to capture financing from the private sector and abroad.Transport Economics Policy&Planning,Infrastructure Economics,Energy Production and Transportation,E-Business,Banks&Banking Reform