Page 26 - Vol 33 Issue 34 2021

Power utilities in Africa - a woeful tale of losses and poor governance
energy Opinion

Power utilities in

Africa - a woeful tale

of losses and poor

governance

By James Anyanzwa

frican households and industries have been pushed into a life of unreliable and
Aexpensive power as a result of inefficient, loss-making state-owned power utility
firms with questionable governance structures.

A study by Clarion Energy and the Gordon Institute of phasing out operational inefficiencies, implementing

Business Science (University of Pretoria) shows that short-term mea sures to reduce the duration (if not the
governance irregularities have become a major cause frequency) of outages, and addressing customer service
for concern for government-owned utility firms as they quality in general.”
adversely impact the firms’ procurement processes. According to the report, serious shortcomings in
The report dubbed The Future of Power Utilities in operational efficiency, high costs of small-scale operations,
Africa (2018) notes that the future trajectory of African and overreliance on expensive oil-based electricity
utility firms largely depends on the improvement of the generation have increased costs of power supply in Africa,
quality of their governance structures and their precarious while under-pricing and the inability of many customers to
cash positions. pay for electricity services have reduced utility revenues.
The World Bank through a survey on power cost In addition, a utility that does not cover its costs will
and reliability in Africa also revealed that electricity struggle to deliver reliable electricity in sufficient quantity
transmission and distributing firms on the continent are while inefficient utilities suffer from losses associated with
cash strapped and have allowed their assets to fall into transmission, distribution and bill collection.
disrepair, exacerbating power shortages. The report notes that financial sustainability of electric
The survey, which sampled 39 countries on the utilities in many African countries is pre carious.
continent in 2016, found out that only power utilities According to the American Power Africa Ini tia tive, most
in Seychelles and Uganda were fully recovering their utilities in sub-Saharan Africa - whether state-owned or
operational and capital costs but utility firms in only 19 privatised - struggle to make ends meet.

countries were able to cover their operational costs from Ethiopia’s state-owned power distribution com pany
the cash they collected. Ethiopian Electric Utility estimates that pre-Covid-19
“Such large funding gaps prevent power sectors from deficits amounted to nearly $100 mil lion annually.
delivering reliable electricity to exis ting customers, let In Nigeria, some privatised utilities lose as much as half
alone expanding supply to new consumers at an optimal of their allocated electricity supply due to technical faults,
pace,” according to the survey report, Making power theft or customer non-payment.
affordable and viable for its utilities. “With more efficient operations and improved finances,
utilities are better positioned to help weather and recover
Cure for deficits from the effects of Covid-19. Healthier utilities help
create stronger energy sectors and point the way toward
“If utilities could reduce combined transmission, dis tri bu- a brighter future for sub-Saharan Africa,” according to
tion, and bill collection losses to 10 per cent of dispatched Power Africa’s annual report (2020).
electricity and tackle over staffing, an additional 11
countries could see their utility deficits disappear.” Curse of unreliable systems
According to the report, utilities need to focus on
achieving an acceptable level of service quality for a According to the International Finance Cor po ra tion (IFC),
chance at cost recovery in tariff revenues. unreliable utility distribution systems are a major drag
“Raising tariffs while outages continue una ba ted is on regional growth in Africa, with the cost of inefficiency
bound to invite a backlash. They could reduce costs by in Africa’s power and water sectors valued at $4.5 billion

26 | AFRICAN POWER Mining & Oil Review Vol33 Issue 34 2021