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

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...

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Main Authors:	Trimble, Chris, Kojima, Masami, Perez Arroyo, Ines, Mohammadzadeh, Farah
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2016
Subjects:	electricity electric utilities quasi-fiscal deficit subsidies reform
Online Access:	http://hdl.handle.net/10986/24869

id	okr-10986-24869
recordtype	oai_dc
spelling	okr-10986-248692017-12-14T06:13:25Z Financial Viability of Electricity Sectors in Sub-Saharan Africa : Quasi-Fiscal Deficits and Hidden Costs Trimble, Chris Kojima, Masami Perez Arroyo, Ines Mohammadzadeh, Farah electricity electric utilities quasi-fiscal deficit subsidies reform 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. 2016-08-10T16:16:14Z 2016-08-10T16:16:14Z 2016-08 Working Paper http://hdl.handle.net/10986/24869 English en_US Policy Research Working Paper;No. 7788 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Africa Sub-Saharan Africa
repository_type	Digital Repository
institution_category	Foreign Institution
institution	World Bank
building	World Bank Open Knowledge Repository
collection	Online Access
language	English en_US
topic	electricity electric utilities quasi-fiscal deficit subsidies reform
spellingShingle	electricity electric utilities quasi-fiscal deficit subsidies reform Trimble, Chris Kojima, Masami Perez Arroyo, Ines Mohammadzadeh, Farah Financial Viability of Electricity Sectors in Sub-Saharan Africa : Quasi-Fiscal Deficits and Hidden Costs
geographic_facet	Africa Sub-Saharan Africa
relation	Policy Research Working Paper;No. 7788
description	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.
format	Working Paper
author	Trimble, Chris Kojima, Masami Perez Arroyo, Ines Mohammadzadeh, Farah
author_facet	Trimble, Chris Kojima, Masami Perez Arroyo, Ines Mohammadzadeh, Farah
author_sort	Trimble, Chris
title	Financial Viability of Electricity Sectors in Sub-Saharan Africa : Quasi-Fiscal Deficits and Hidden Costs
title_short	Financial Viability of Electricity Sectors in Sub-Saharan Africa : Quasi-Fiscal Deficits and Hidden Costs
title_full	Financial Viability of Electricity Sectors in Sub-Saharan Africa : Quasi-Fiscal Deficits and Hidden Costs
title_fullStr	Financial Viability of Electricity Sectors in Sub-Saharan Africa : Quasi-Fiscal Deficits and Hidden Costs
title_full_unstemmed	Financial Viability of Electricity Sectors in Sub-Saharan Africa : Quasi-Fiscal Deficits and Hidden Costs
title_sort	financial viability of electricity sectors in sub-saharan africa : quasi-fiscal deficits and hidden costs
publisher	World Bank, Washington, DC
publishDate	2016
url	http://hdl.handle.net/10986/24869
_version_	1610781931633377280

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

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