Current practice in utility provision involves the following. Governments retain ownership and pay for capital investments, while privatising the operations and management of the companies. Does this modality guarantee equitable access to water and electricity services? (...)Equitable Access to Basic Services: Who will Guarantee it?

Degol Hailu

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Research Papers in Economics

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      June, 2008      Number  55
Equitable Access to Basic Services:
Who will Guarantee it?
by Degol Hailu,
International Poverty Centre 
Access to Essential Services
Source: World Development Indicators (April 2008).
Current practice in utility provision involves the following.
Governments retain ownership and pay for capital investments,
while privatising the operations and management of the companies.
Does this modality guarantee equitable access to water and
electricity services?
Ensuring equitable access requires financing the initial outlays in
infrastructure. Private companies seldom make these investments.
More to the point, immediate profits are not assured. For instance,
a British company walked out of a water-supply contract in
Zimbabwe, claiming its customers were too poor to pay for its
services. Water and electricity contracts are disputed, in some cases
terminated, in many countries including Gambia, Kenya, Guinea,
Mozambique, Nigeria and South Africa.
Public protests are common in response to exorbitant tariffs.
A private electricity provider in Zambia submitted more than 10
applications for tariff revision.  Consumers are expressing their
discontent at three public hearings held by the Energy Regulation
Board. Following the liberalisation of the sector in Nigeria, electricity
prices increased by over 800 per cent. Recently, the country
experienced widespread blackouts. In Guinea, water tariffs almost
doubled after liberalising the sector. In Latin America, the cost of
electricity connection reached 20 per cent of household income.
The expected efficiency gains are not always evident. Despite tariff
increases only about a quarter of the total water connections were
working in some countries. In other cases, wastage of water has
remained at 40 per cent. In Cameroon and Burkina Faso, the
electricity grid systems covered mainly the urban centres. Private
management of utilities are linked to maintenance failures, cuts
in water supply and electricity blackouts. The South African bill
of rights guarantees water supply to poor households, but not all
countries have such constitutional provision.
The deals offered to private contractors include purchase guarantees
and tax holidays up to 30 years. Others obtained 100 per cent
guarantee for the purchase of their output at fixed foreign
exchange price. Indeed, there may be low investor interest and some
enticement is necessary. However, the concessions result in heavy
fiscal burdens, often diverting resources away from social spending.
Access to basic services in Sub-Saharan Africa (SSA) is extremely
low. It is revealing to compare privatisation in the region with the
United Kingdom and United States, where it had a better success.
In the UK, water privatisation was proposed in 1984. The actual
asset transfers took place over the period 1989-1990. Electricity
privatisation started in 1989 with the split of the industry into many
companies. Water privatisation intensified in the US beginning 1988.
When these countries privatised water provision, they had attained
100 per cent access. Electricity consumption of 4,683 kWh per capita
in the UK and 9,862 kWh in the US was achieved. In contrast, by 2004,
only 56 per cent of the population accessed clean water in SSA.
About 83 per cent of the access was by urban dwellers. The 2004
electricity consumption in SSA was 6 per cent of the electricity
consumption in the US in 1980 (see Table).
Clearly, discussions on privatisation in SSA must take its low access
levels into account. Can the public sector do a better job? The
record is not very telling. Publicly managed utilities are sometimes
associated with poor maintenance, wastage, uncollected bills and
uniform tariffs (irrespective of household income levels). There are
success stories, however. Botswana’s Water Utilities Corporation
(WUC) increased the proportion of the population served by piped
water. The restructured Namibian Water Corporation Ltd (NamWater)
provides services adequately. Brazilian municipalities have been
successful in supplying sanitation and water services equitably.
The lesson is this: the higher the level of access at the start of
privatisation, the higher its success. Before embarking on full-scale
privatisation, minimum targets on access must be achieved through
restructured public provision. And when private provision is considered,
it must be supported by adequate regulatory environments. These
include the legal frameworks to enforce contracts and capacity to
negotiate them in the interest of poor consumers.
Further Reading:
Bayliss, K. and Fine, B. (2007). Privatization and Alternative Public Sector Reforms in Sub-Saharan Africa:
Delivering on Electricity and Water (eds.). London: Palgrave Macmillan.
Access to water (% of population) 56 100 100
Electric consumption (kWh per capita) 594 4,683 9,862
USA
 (1980)
Sub-Saharan
Africa (2004)
UK
(1980)

Equitable Access to Basic Services: Who will Guarantee it?

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Equitable Access to Basic Services: Who will Guarantee it?

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