- Mo.9 Ii5+80 AS% Lending for Electric Power in Sub-Saharan Africa E it,f--j~~~~~~~ -- AWorlBAnk eatio ns Eovauaio Ss .r cm^ A World Bank Operations Evaluation Study Lending for Electric Power in Sub-Saharan Africa Other Titles in the Series PREPARED BY THE WORLD BANK OPERATIONS EVALUATION DEPARTMENT Industrial Restructuring: World Bank Experience, Future Challenges (1996; contains summaries in French and Spanish) Social Dimensions of Adjustment: World Bank Experience, 1980-93 (1996; contains summaries in French and Spanish) 1994 Evaluation Results (1996; contains summaries in French and Spanish) Ghana Country Assistance Review: A Study in Development Effectiveness (1996; contains summaries in French and Spanish) Evaluation and Development: Proceedings of the 1994 World Bank Conference (1995) Developing Industrial Technology: Lessons for Policy and Practice (1995; contains sumnaries in French and Spanish) The World Bank and Irrigation (1995; contains summaries in French and Spanish) 1993 Evaluation Results (1995; contains summaries in French and Spanish) Structural and Sectoral Adjustment. World Bank Experience, 1980-92 (1995; contains summaries in French and Spanish) Gender Issues in World Bank Lending (1995; contains sununaries in French and Spanish) The World Bank's Role in Human Resource Development in Sub-Saharan Africa: Education, Training, and Technical Assistance (1994; contains summaries in French and Spanish) 1992 Evaluation Results (1994; contains sunmnaries in French and Spanish) New Lessons from Old Projects: The Workings of Rural Development in Northeast Brazil (1993; contains summaries in French, Portuguese, and Spanish) World Bank Approaches to the Environment in Brazil (1993; contains sunmmaries in French, Portuguese, and Spanish) Evaluation Results for 1991 (1993; contains summaries in French and Spanish) Trade Policy Reforms under Adjustment Programs (1992; contains summaries in French and Spanish) World Bank Support for Industrialization in Korea, India, and Indonesia (1992; contains summaries in French and Spanish) Population and the World Bank: Implications from Eight Case Studies (1992; contains summnaries in French and Spanish) Forestry: The World Bank Experience (1992; contains summaries in French and Spanish) The Aga Khan Rural Support Program in Pakistan: Second Interim Evaluation (1990; contains summaries in French and Spanish) Lending for Electric Power in Sub-Saharan Africa Alvaro J. Covarrubias THE WORLD BANK WASHINGTON, D.C. Copyright i) 1996 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing May 1996 The opinions expressed in this report do not necessarily represent the views of the World Bank or its member governments. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries. Some sources cited in this paper may be infor- mal documents that are not readily available. The material in this publication is copyrighted. 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Cover: Workmen at the Volta River Dam in Akosombo (Ghana). Credit World Bank/Pamela Johnson ISSN: 1011-0984 Library of Congress Cataloging-in-Publication Data Covarrubias, Alvaro J., 1934-. Lending for electric power in Sub-Saharan Africa / Alvaro J. Covarrubias. p. cm.-(World Bank operations evaluation study, ISSN 1011-0984) Includes bibliographical references. ISBN 0-8213-3644-4 1. Electric utilities-Africa, Sub-Saharan-Finance. 2. Economic development projects-Africa, Sub-Saharan-Finance. 3. Economic assistance-Africa, Sub-Saharan. 4. World Bank. I. World Bank. IL Title. III. Series. HD9685.A4472C68 1996 333.79'323'0967-dc2O 96-19589 CIP Contents Foreword xi Prefacio xii Preface xiv Acknowledgments xv Abbreviations and acronyms xvi Executive summary I Resumen 8 Resume analytique 17 1. Introduction 27 Study objective 27 Study scope and methodology 27 Report outline 28 Public utilities paradigm of the 1970s and 1980s 28 Response to the energy crises 28 1992 policy revision 29 Core challenge for Sub-Saharan African countries 29 2. Review of completed projects 32 Objectives and components 32 Performance 33 Institutional development and technical assistance 35 Compliance with covenants 38 Environment and resettlement 38 3. Program impact 41 Least-cost development 4i Efficiency and strengthening institutions 42 vii Access by the poor 48 Resource mobilization 49 4. Performance factors 51 External and country factors 51 Choosing project objectives 52 Eliciting borrowers' ownership 53 Optimizing Bank involvement 56 Effectiveness of technical assistance 58 Cofinancing and donor coordination 62 5. Implementing the new policy 64 The new policy 64 Trends in recent projects 65 Transparent regulatory process 65 Commercialization and corporatization 67 Importing services 68 Commitment lending 69 Private investment 72 6. Conclusions and recommendations 74 The road ahead: immediate agenda 74 The new frontier: restructuring and assets privatization 75 Role of the Bank 78 Recommendations 80 Annex 83 Supplement 87 Introductory note 88 Management response 89 Committee on Development Effectiveness response 93 Boxes 3.1 Management vs. lease contracts 46 3.2 Nigeria: recovering cash costs and depreciation 47 3.3 Tanzania: changing revenue covenants 48 4.1 Ghana: a case of mixed ownership of power projects 55 4.2 Bank involvement in project preparation 58 4.3 Twinning with expatriates: good practice 60 viii 5.1 Burundi: separation of responsibilities on paper 67 5.2 Financial reporting: good and bad practices 68 5.3 Management contracts and staff streamlining: good practice 69 5.4 Lease contracts ("affermage"): good practice 70 5.5 Commercialization with a management contract: good practice 72 Figures 1.1 Installed capacity of power systems in Africa vs. other countries 30 1.2 GDP per capita vs. electricity consumption per capita 30 2.1 Power projects 32 2.2 Project objectives 33 2.3 Distribution of physical components in the cohort 34 2.4 Distribution of non-physical components in the cohort 36 2.5 Distribution of project economic rate of return 37 3.1 Average revenue from electricity sales 44 3.2 Electricity coverage in Africa vs. other countries 49 3.3 Completed projects: contributions by major cofinanciers 50 Tables 2.1 Lending for completed infrastructure projects in Sub-Saharan Africa, 1978-93 33 2.2 OED ratings of completed power projects, 1978-93 35 2.3 Compliance with financial covenants 39 3.1 Operating indicators in the early 1990s 43 3.2 Financial indicators in the early 1990s 45 3.3 Financing of power projects in Sub-Saharan countries 49 ix Foreword This study investigates whether Sub-Saharan cial reform, is well adapted to Africa's circum- Africa (SSA) posed-and will continue to stances, and there is a growing realization in pose-a special challenge in the World Bank's SSA that reform is needed. In a few cases, lending for power sector development. It evalu- progress has been made through management ates the performance of 41 power projects com- and lease contracts based on a blend of domes- pleted from 1978 to 1993. The Bank lent $1.2 tic and foreign know-how. billion of the projects' total $3.3 bilion in costs, and mobilized $1.4 billion in cofinancing. The The study recommends that the Bank nurture Sub-Saharan countries contributed $0.7 bilion. borrower ownership for such changes-partic- While SSA's record in the execution of physical ularly for a regulatory framework that ensures components was on average as good as in other autonomy and adequate power prices for oper- regions, this was not the case for institutional ators, public and private. It also recommends development and policy reforms. Low opera- that country assistance strategies examine the tional efficiency and failure to recover costs justification of power lending and ensure its plagued the sector despite the repeated injec- coherence with other assistance priorities. In tion of Bank funds. particular, the Bank should avoid making large power loans unless the sector is substantially External factors and public sector weakness are on its way to reform. Finally, strategic partner- part of the explanation. Borrower ownership of ships with other development agencies policy and institutional improvements was concerned with SSA power development often missing. Lapses in the coordination should be considered. among international donors also hurt. Project design and implementation variables under the Bank's control played an important role as well. Robert Picciotto The Bank's new power sector policy, focusing Director General on effective institutional, regulatory, and finan- Operations Evaluation xi Prefacio En este estudio se intenta determinar si los entre los donantes intemacionales tambi6n paises de Africa al sur del Sahara han tuvieron un efecto perjudicial. Asimismo, las representado -y seguiran representando- variables controladas por el Banco relativas a un desafKo especial en lo que respecta al la formulaci6n y ejecuci6n de los proyectos financiamiento del Banco Mundial para el revistieron mucha importancia. desarollo del sector de energia electrica. En e1 se evaliuan los resultados de 41 proyectos La nueva politica del Banco para el sector de de ese sector terminados entre 1978 y 1993. energia el6ctrica, orientada a lograr reformas De los $3.300 millones correspondientes al institucionales, reglamentarias y financieras costo total de los proyectos, el Banco dio en eficaces, se adapta bien a las condiciones pr6stamo $1.200 millones y moviliz6 $1.400 imperantes en Africa, y en los paises de millones en cofinanciamiento. Los paises de Africa al sur del Sahara hay una conciencia Africa al sur del Sahara aportaron $700 cada vez mayor sobre la necesidad de aplicar millones. En promedio, los resultados de reformas. En unos pocos casos se han hecho estos paises en la ejecuci6n de los compo- avances mediante la celebraci6n de contratos nentes fisicos de los proyectos fueron tan de administraci6n y de arrendamiento basa- satisfactorios como los logrados en otras dos en una combinaci6n de conocimientos regiones. Sin embargo, no ocurri6 asi en lo prTcticos tanto internos como externos. que respecta al desarrollo institucional y a la reforma de politicas. En estas esferas la En el estudio se recomienda que el Banco eficiencia operativa fue escasa y no se recu- fomente la identificaci6n de los prestatarios peraron los costos, a pesar de los continuos con estas reformas, sobre todo con un marco aportes de recursos financieros por parte del normativo que garantice a las empresas puibli- Banco. cas y privadas su autonomia, ademas de tari- fas adecuadas para la electricidad. Tambien se Estos resultados se deben, en parte, a recomienda que en las estrategias de asistencia factores externos y a las deficiencias a los paises se tengan en cuenta las razones existentes en el sector piublico. En muchos que justifiquen el financiamiento de proyectos casos, los prestatarios no se identificaron con de energia electrica y se garantice que estas los programas de reforma institucional y de sean coherentes con otras prioridades en mate- politicas. Los problemas de coordinaci6n ria de asistencia. En particular, el Banco debe xii evitar el otorgamiento de prestamos de gran desarrollo del sector de energia electrica en los cuantia para ese tipo de proyectos, a menos paises de Africa al sur del Sahara. que el sector se encuentre en una etapa avan- zada de reforma. Finalmente, debe estudiarse Robert Picciotto la creaci6n de asociaciones estrategicas con Director General otros organismos de desarrollo vinculados al Evaluaci6n de Operaciones xiii Preface La presente etude cherche a 6tablir si l'Afrique La nouvelle politique de la Banque pour le subsaharienne a pose - et continuera de secteur de l'electricit6, qui privilegie la mise en poser-un probleme particulier a la Banque oeuvre de reformes institutionnelles, r6glemen- mondiale en matiere de pret au developpe- taires et financieres, est bien adaptee a la situa- ment du secteur de l1'lectricit&. Elle dresse le tion de l'Afrique, et les pays de l'Afrique bilan de 41 projets d'electricite acheves entre subsaharienne sont de plus en plus conscients 1978 et 1993. Pour ces projets, qui ont couIte au de la necessite de la reforme. Dans quelques total 3,3 milliards de dollars, la Banque a prete cas, la conclusion de contrats de regie et de 1,2 milliard de dollars et elle a mobilise 1,4 contrats d'affermage alliant competences milliard de dollars de cofinancement. La con- etrangeres et nationales a permis des progres. tribution des pays d'Afrique subsaharienne s'est elevee A 0,7 milliard de dollars. S'agissant L'etude recommande que la Banque favorise de l'ex6cution des composantes physiques, la l'appropriation par l'emprunteur de ces performance de la region a e en moyenne reformes ae notamment l'adoption d'un cadre aussi satisfaisante que celle d'autres regions, reglementaire qui garantisse l'autonomie des mais il n'en a pas ete de meme pour le ren- exploitants, publics et prives, et leur permette forcement institutionnel et les reformes. Le d'appliquer des tarifs electriques adequats. peu d'efficacite de 1exploitation et le non- Elle recommande 6galement que les strat&- recouvrement des colats ont gravement nui au gies d'aide-pays examinent la justification secteur, malgre l'injection repetee de fonds de d'operations de pret au secteur de l'electricite la Banque. et veillent a leur coherence avec les autres priorit6s de l'aide. En particulier, la Banque Cette situation tient en partie a des facteurs doit se garder d'accorder des prets impor- externes et a la faiblesse du secteur public. tants pour l'electricit6, a moins que le secteur Souvent, 1'emprunteur n'avait pas fait sienne ne soit fortement engag6 sur la voie de la l'amelioration des politiques et des institu- reforme. Enfin, il lui faut envisager l'etablis- tions. Les projets ont egalement souffert de sement de partenariats strategiques avec defauts de coordination entre les bailleurs de d'autres organismes de developpement actifs fonds 6trangers. Des variables relevant de la dans le secteur de l'electricit6. Banque, aux stades de la conception et de I'execution des projets, ont egalement joue un Robert Picciotto role important. Directeur g6neral Evaluation des operations xiv Acknowledgments This report was prepared by Alvaro Covarru- the report. Angie Gentile-Blackwell was the bias (Task Manager). Guy Prenoveau, Rend copy and production editor. Charles Strout Ribi, and Gary Wu (Consultants) made valu- and Lorna Sibblies provided administrative able contributions to it. Yves Albouy reviewed support. xv Abbreviations and acronyms AFDB African Development Bank ARPP Annual Report on Portfolio Performance CDC Commonwealth Development Corporation CFD Caisse Francaise de Developpement CIDA Canadian International Development Agency CIE Compagnie Ivoirienne d'Elktricit6 CIPREL Compagnie Ivoirienne de Production d'Elkctricite DCGTX Direction et Contr6le des Grands Travaux ECG Electricity Corporation of Ghana EECI Energie Electrique de Cote d'Ivoire EIB European Investment Bank ENELGUI Entreprise Nationale d'Electricite de Guin6e ERR Economic rate of return ESAL Energy Sector Adjustment Program ESMAP Energy Sector Management Assistance Program ESW Economic and sector work GDP Gross domestic product GWh Gigawatthour GTZ Deutsche Gesellschaft fur Technische Zusammenarbeit IMF International Monetary Fund IPP Independent power producer KFAED Kuwait Fund for Arab Economic Development KfW Kreditanstalt fur Wiederaufbau kWh Kilowatthour LDC Less developed country LRMC Long-run marginal cost MW Megawatt NEPA National Electric Power Authority NORAD Norwegian Agency for International Development ODA Overseas Development Administration OECD Organization for Economic Cooperation and Development OED Operations Evaluation Department OMS Operational manual statement xvi PAR Performance audit report PCR Project completion report PMTF Portfolio Management Task Force REGIDESO Regie de Distribution d'Eau et d'Electricite ROR Rate of return SAL Structural adjustment loan SAR Staff appraisal report SAUR Societe Africaine Urbaine SECAL Sectoral adjustment loan SIDA Swedish International Development Agency SODECI Societe de Distribution d'Eau de C6te d'Ivoire SSA Sub-Saharan Africa TA Technical assistance TANESCO Tanzania Electric Services Company TWh Terawatthour UNDP United Nations Development Program VALCO Volta Aluminum Company VRA Volta River Authority WDR World Development Report xvii Executive summary Why are Bank power projects less successful in growth. Many less-developed countries have Sub-Saharan Africa than in other regions? To tried to race ahead by setting unduly low find answers, this study establishes the out- power prices-hoping to spur their economic comes of the completed projects and assesses growth. But this has proven unaffordable and the Bank's and borrowers' performance. It ineffective because electrification programs do identifies country, project, and process factors not significantly affect economic growth in the that have enhanced or inhibited progress. It absence of other development prerequisites. In also assesses the prospects for implementing SSA as elsewhere, the challenge is for the the principles of the Bank's new power sector power sector to meet effective demand at least policy and suggests approaches to improve cost without (a) adding to public deficits, the impact of Bank intervention. and/or (b) competing for scarce public funds for such social priorities as education and For the 26 Sub-Saharan African (SSA) coun- health. tries receiving Bank credits or loans for electric power, the average GDP per capita was $304 Public utilities paradigm of the 1970s and 1980s. in 1994. Their economies grew at 5.5 percent a Most power utilities benefiting from Bank year during 1970-80, and stagnated until 1985 loans have been state-owned enterprises, and before plummeting to their recent lows. Their all projects completed by 1993 were designed combined energy resource endowment is sub- under the Bank Operational Manual Statement stantial with numerous hydro sites, coal and 3.72 for public utilities projects, issued in 1978. uranium deposits, and large crude oil and gas OMS 3.72 set out broad policy objectives in reserves. But they use little of this potential, as accord with the public utilities paradigm pre- witnessed by the low rates of electricity con- vailing at that time. The Bank sought to help sumption in 1971 (31 TWh) and in 1991 (81 (a) provide power service on the basis of least- TWh). On a per capita basis, electricity con- cost development programs, (b) strengthen the sumption has risen and fallen with GDP: from sector's institutions and improve their 134 kWh in 1971 to 200 kWh in 1991 after efficiency, (c) increase local resource mobiliza- peaking at 247 kWh in 1980. Compare those tion and catalyze cofinancing, and (d) improve figures with 580 kWh for China and 350 kWh access to electricity by disadvantaged groups. for India. Policy revision. By the late 1980s, it became clear Core challenge. Power supply should not, as a that Bank projects had delivered too little on rule, lag behind or race ahead of economic key OMS 3.72 objectives, especially with respect to financial and environmental sustainability. projects since 1978. For 22 projects completed So, in January 1993, the Bank introduced a new in 1989-93, the achievement of institutional policy that stressed the desirability of operating development objectives was rated as substan- the sector on a commercial basis, the import- tial in only 27 percent of the cases (38 percent ance of energy conservation, and the requisites Bankwide), and the sustainability of benefits of environmental sustainability. This new pol- as likely in only 36 percent of the cases (68 per- icy, no longer emphasizing access to basic elec- cent Bankwide). tricity service by the poor, represented a notable shift. It identified five guiding principles for Bank Economic rate of return (ERR). At completion, support: transparent regulation, commercializa- ERRs were recalculated for only 22 of the 41 tion and corporatization, imports of services, a completed projects. Ten of the 22 projects had commitment to reform, and greater private ERRs below 10 percent, compared with the investment. average of 12-15 percent for all Bank power projects completed since 1978. Only three had higher ERRs at completion than at appraisal. Review of completed projects With few exceptions, ERRs were calculated using input market prices, net of taxes and Since the issue of OMS 3.72 in 1978, the Bank import duties, and tariffs as a proxy for the has participated in 69 power lending opera- economic value of power. fions in 26 SSA countries. The cohort reviewed here consists of 44 credits or loans for 41 com- Institutional development and technical assistance pleted power projects in 22 countries-a dozen (TA). Assistance from engineering consultants of them with two operations, and only Kenya for project design and construction supervision and Zaire having more than two. Of total Bank was the most frequent and most successful type financing for infrastructure in SSA since 1978 of TA. Management assistance was most effec- ($5.6 billion), the share for electric power was tive where expatriates were given executive 21 percent. authority. Training occurred in various forms, but the outcomes were poorly documented. Objectives and components. The projects emphasized physical capacity and insti- Compliance with covenants. Overall compliance tutional strengthening, and cofinancing was with covenants was more often partial than an important feature of most. Improving substantial. The degree of compliance with access to electric service by disadvantaged important financial covenants was especially groups was attempted in only five countries. weak-for the collection of accounts receiv- New generation-particularly hydroelectric able, the approval of tariff increases, and the plants-and transmission had priority over financial return on fixed assets. expansion of distribution. In more recent years, rehabilitation had the highest priority, Environment and resettlement. Power projects particularly the rehabilitation of distribution. in SSA seldom raised critical environmental On average, about 12 percent of project cost and resettlement issues. The encroachment of was allocated to non-physical components- power lines and substations on natural mostly for studies. resources was relatively minor. Thermal gen- eration in several countries is based on small Performance. The outcome was rated as satis- diesel-fueled sets, a relatively clean technol- factory for 64 percent of the cohort projects, ogy, and coal-fired power plants, developed compared with 79 percent for all Bank power only in Botswana and Zimbabwe, use appro- 2 priate technology to abate pollution. In nine of tions of SSA power utilities was worse and, the 15 hydroelectric projects, the environmen- with a few exceptions, marginal. The outcome tal impact was considered insignificant at the of most projects was mixed, and the sustain- onset, and Bank documents do not report on ability of the physical improvements uncer- the impact after completion in the others. This tain-due to a lack of effective maintenance said, three out of five cases where resettlement arrangements. By the early 1990s, the rate of raised issues-hydro power projects account power losses was higher than the Bankwide for about 18 percent of the 190,000 people dis- median for two-thirds of SSA countries. Pro- placed by Bank-financed projects in SSA- ductivity, measured by the number of these were not handled according to present customers or the production per employee, Bank guidelines even though these projects was also low. were approved after publication of the guide- lines in the early 1980s. This confirms that the Cost recovery. With few exceptions, cost recov- lessons learned early on in Ghana (Akosombo ery in SSA countries has been inadequate and approved in the 1960s)-to restore resettlers' generally below that of other regions. In the productive systems and social environment- early 1990s, collection of electricity bills was were not subsequently applied systematically worse than the Bankwide median for two- elsewhere in the region. thirds of SSA countries. More than 75 percent of outstanding accounts receivable was more than 90 days old, with arrears tending to Program impact increase with the billed price of electricity. In the harsh economic environment of the 1980s, Least-cost development. In line with Bank policy, enterprises and households were hard put to Bank involvement in the SSA power sector pay their bills-but the bulk of the arrears aimed to encourage least-cost development- were from the public sector. and it was largely successful. In the aftermath of the two oil shocks of 1973 and 1979, relatively The financial performance of the electric large hydroelectric plants were perceived as the power utilities of SSA countries has generally best alternatives, but the drop in oil prices been inadequate. In about 60 percent of SSA since 1986 has reduced the economic benefits countries, rates of return (RORs) on revalued of hydroelectric plants. Those financed by the net fixed assets in operation-and debt service Bank in the 1980s would still be good invest- coverage-were worse than the Bankwide ments today, but gas-based alternatives now median. On self-financing, three out of four look more attractive in C6te d'Ivoire, Nigeria, SSA countries were worse than the Bankwide and Tanzania. Economic and sector work average, the disappointing results attributable (ESW) and energy assessments did not always to slow asset growth in the 1980s. High to influence project identification: the Bank acceptable RORs (as in Malawi and refused to finance several projects that were Zimbabwe) reflect operating efficiency as uneconomical, but with the exception of much as the adequacy of tariffs. Nigeria, few options other than hydro were considered. Access by the poor. With few exceptions- Burundi, C6te d'Ivoire, Ghana, Guinea, and Efficiency. Project cost and time overruns, Nigeria among them-the provision of elec- while substantial, were no worse in SSA than tricity service to low-income households in in other regions. But the improvement in the SSA was pursued weakly or not at all. Where efficiency of technical and commercial opera- it was pursued, through distribution or rural 3 electrification components, it did not prove In some cases, sector objectives were subordi- sustainable. Generously subsidized tariffs, nated to the resource transfer and other broad often directed to low-voltage customers, goals of adjustment operations. Conversely, favored existing customers more than new adjustment loans sometimes included energy ones. But the overriding factor, depressing sector conditions: in the 1980s, a total of 23 incomes and demand for new connections, structural adjustment loans (SALs) were was the poor macroeconomic environment. implemented in SSA countries, of which eight, in eight countries, had such conditions. But, Resource mobilization. For power projects more often than not, adjustment operations completed since 1978, the Bank lent $1.2 missed opportunities to address the fiscal bur- billion (36 percent of total project financing den of power utilities. OED evaluations' show requirements), and cofinanciers contributed that SALs in the 1980s were most effective in $1.4 billion (44 percent). The utilities and the reforming the energy sector when: (a) reforms governments contributed the remaining $0.7 were urgent because energy consumption per billion (20 percent). unit of GNP was high and prices were very distorted, (b) reforms were easier because energy intensity and the share of industrial Performance factors consumption were high, and (c) technically sound action plans had been prepared (often External and country factors. In SSA as in other under previous investment loans). The last regions, international interest rates, currency two conditions were seldom present in the movements, and terms of trade shifts hurt the power sectors of SSA countries. power sector's performance. High inter- national fuel prices also hurt the finances of Eliciting borrower ownership. Borrowers' owner- utilities with predominantly thermoelectric ship of objectives was high for capacity expan- systems until 1986, when prices began to drop. sion, but not for TA and institutional and In Sahelian countries, a long period of drought policy reforms. Least owned were: utilities between 1978 and 1985 depleted reservoirs autonomy, large tariff adjustments, and staff and eroded the utilities' financial reserves. reductions or adjustments in remuneration. By Beyond these outside factors, a weak human and large, the Bank had little success in elicit- resource base and an ineffective institutional ing stakeholder initiation and ownership of framework contributed to technical inefficien- reform. In some cases, the Bank helped perpet- cies. Despite all this, process factors under uate traditional approaches-although signs Bank control were highly influential in final existed that bolder ones would have been project outcomes, as explained below. acceptable. In many instances, the Bank avoided sanctioning countries, even in the face Choosing project objectives. During the 1980s, of repeated breaches of covenants, rushed to broad energy considerations affected project lend in a handful of cases, and approved large designs, increasing project complexity and loans that failed to elicit even modest policy making priorities more diffuse. And although adjustments. Policy seminars organized by traditional energies such as fuelwood are very ESMAP (Energy Sector Management important for SSA countries-and several Assistance Program) tended to dwell on prin- forestry projects addressed them-their pro- ciples rather than concrete actions. cessing and rational use deserved more sys- tematic attention than the piloting of a few As a result, the intellectual conviction of components in power projects. policymakers was not tested. Political commit- 4 ment, when it emerged, was less the result of ment services where they were used. In addi- Bank persuasion than of fiscal crises that tion, more countries are showing concrete afflicted, for example, Burundi, C6te d'Ivoire, signs of upfront commitment to reform in Ghana, and Guinea. There is no evidence of recent Bank projects. Bank efforts to enlist the support of potential "winners" of reform and change the incentives Transparent regulatory process. On the basis of of potential losers. available evidence, separating responsibilities between the regulating authorities and the Effectiveness of technical assistance. Again, own- operating companies is deficient in the power ership-or rather its absence-was the key sectors of all SSA countries. To enhance trans- factor. Ghana's twinning program for manage- parency, the Bank has promoted performance ment assistance was successful because of the contracts ("contrats de plans") between gov- good interaction between a few expatriates ernments as owners of the power utilities and and a new management team of young, ambi- the management teams that operate them. tious people who were strongly motivated and These contracts have clarified objectives, stim- eager to learn. This experience is exceptional, ulated dialogue between government and however. Bank staff are often too remote or enterprise management, and introduced better lack the skills to supervise TA. Other donors management, accounts, and audit systems. But have greater field presence and effectiveness, because contract targets are not legally but their expertise is mostly in technology. The enforceable, they have not enhanced the challenge is to build through innovative autonomy of state enterprises or resolved their approaches government's role as regulator major difficulties. and policymaker. Commercialization and corporatization. Many Cofinancing and donor coordination. The Bank utilities in the region have corporate (or simi- has been very successful in catalyzing co- lar) status-and in many respects behave like financing-less so in coordinating the role commercial enterprises. But they are not exclu- and actions of other lenders and donors. Its sively or even strongly profit-oriented, and influence has been undermined when other they continue to drain public resources. donors financed projects it rejected as un- Nonetheless, the prospect for meaningful economical. And sometimes the design of progress appears to be substantial, in view of TA was not closely coordinated among the growing consensus on the benefits of com- donors-so that it became diffuse, included mercializing public utilities, and the fact that conflicting elements, and left gaps and in- the region may be coming out of the depres- consistencies. sion of the 1980s. Private sector involvement. Political and Implementing the new policy economic constraints notwithstanding, priva- guidelines tizing some segments of power operations appears possible-as a few SSA countries Success was generally modest in establishing a show. Private operators can be expected to transparent regulatory process, introducing a invest if they succeed in covering their business orientation, and attracting the private perceived risk-and forthright implementa- sector. But positive trends have recently tion of the Bank's policy would go a long way emerged. Substantial progress has been made toward reducing the perceived risk to poten- due to the effectiveness of imported manage- tial investors. 5 Importing services. The procurement of services Distribution should be the prime focus of atten- from sources outside countries or even the tion: it is where service delivery and cost recov- region is not new-including expertise for ery happens, and unbundling distribution from long-term planning, project design, construc- transmnission and generation can open the field tion, construction supervision, tariff studies, for operators who do not have the technical and a variety of technical advice and training. and financial wherewithal to invest large sums. But among imported services, management and Distribution should be decentralized into ser- lease contracts have the greatest potential to vice areas designed to make the bidding for the make a lasting impact on a utility. Are imported franchise attractive. And if the good record of services not bound to be resented by the local decentralized community services for water staff? Not necessarily, if experience in C6te supply and other services is an example, this d'Ivoire and Ghana is a guide. type of organization is worth experimenting with for low-voltage power supply in areas Recent projects. Of 25 ongoing power projects in where informal governance systems work bet- SSA, 11 were approved after the new sector pol- ter than formal ones. icy orientation was introduced, the majority induding elements of the new policy, particu- Sector information. The execution of this study larly for regulatory reformn and for management revealed that the Bank has valuable knowledge contracts by private operators. In many cases, (though insufficient in some areas) of the SSA those elements have been incorporated upfront power sector. This knowledge has been the and in disbursement conditionalities. The FY94 basis for policy choices and donors' involve- Annual Review of Portfolio Performance indi- ment. But the principles of the new policy ori- cated that 87 percent of these projects were entations require better information to monitor likely to meet their stated development objec- and evaluate power sector performance and to tives. But even though borrower commitment provide a basis for decisions on private sector to these objectives is strong, this prognosis involvement. appears optimistic in comparison with the Bankwide 72 percent estimate for all power projects exiting the portfolio. Recommendations Sector restructuring. Changes in the sector's The new policy orientations for power lending structure are also part of the agenda promoted by the Bank make sense for SSA-its poverty by the Bank. With few exceptions, power utili- and dependence on foreign assistance do not ties in SSA countries are government-owned justify relaxing quality standards. Indeed, SSA integrated monopolies responsible for the utilities are peculiarly vulnerable to bad man- transmission and distribution of all the elec- agement, and their poor performance is one tricity that they produce. At this stage, the reason underlying the weak fiscal situations in small size of the power systems and the weak- many SSA economies. ness of the regulatory framework make it diffi- cult to recommend their break up as was done The Bank and other cofinanciers could exercise in some countries like the United Kingdom much more leadership in promoting the sector and Chile. But, independent power producers reforms that form the thrust of the new agenda. might be able to compete with utilities for gen- Until such reforms take hold, the guarantees eration in special circumstances, so there is a they can give to induce large private sector need to review the barriers to their entry in the investments in the power sector are likely to be market and the rules for pricing their output. very costly. 6 Based on the foregoing findings, this review operators, and providing guarantees for has six main recommendations. independent power producers. Recommendation 1. The country assistance Recommendation 4. The Bank should nurture strategies for SSA countries should examine SSA borrower ownership of its new sector the justification for power lending and estab- policy principles, of institutional devel- lish the strategies' coherence with Bank assis- opment programs to support the reforms, tance for broad economic adjustment and for and of the delivery of technical assistance by the development and rational use of other locals and expatriates. Effective dissemina- (especially renewable) energy resources. tion of good practice and build-up of stake- holders' support of reform should be an Recommendation 2. Except for small integral part of project preparation. operations aimed at institution building or rehabilitating facilities, power lending in Recommendation 5. The Bank should forge SSA should be avoided in countries where strategic alliances with other lenders and sector performance is below acceptable donors to obtain a consensus on the policy benchmarks in key technical and financial objectives and criteria for their involvement in areas2 and where little of the following SSA countries. It should also establish partner- reform platform is under implementation at ships in the deployment of human resources the time of appraisal: and share responsibilities in performing those tasks that would benefit from the diversity of * The establishment of a transparent and field assets and competencies of donors. arms-length regulatory framework with legal guarantees that utilities can operate Recommendation 6. In collaboration with other with autonomy-for example, through interested lenders and donors, the Bank management or concession contracts. should help coordinate and institutionalize a systematic effort to gather and analyze the a The enforcement of regulatory principles data that will be needed to implement the to ensure financial discipline, adequate principles of the new policy. tariffs, and incentive-based, competitive contracting of services. Notes Recommendation 3. When promoting power sector restructuring and privatization in SSA, *. C. Jayarajah and W. Branson, Structural and Sectoral Adjustment: World Bank Expenence, 1980-92, A World Bank the Bank should explore setting up purchase Operations Evaluation Study, Washington, DC: World Bank, tariffs, decentralizing distribution and June 1995. unbundling it from generation and transmis- 2. Areas to monitor are technical losses, accounts receivable, sion, using concession contracts for private and rates of return on investments. 7 Resumen Por que en Africa al sur del Sahara los proyec- de electricidad de 1971 (31 TWh) y de 1991 (81 tos de energia electrica del Banco no dan tan TWh). El consumo de electricidad per capita buenos resultados como en otras regiones? A subi6 y baj6 de acuerdo con el PIB de 134 fin de encontrar una explicaci6n, en este estu- kWh en 1971 a 200 kWh en 1991, despues de dio se establecen cuales fueron los resultados haber alcanzado el maximo de 247 kWh en de los proyectos terminados y se evaluia el 1980. Comparense estas cifras con las de 580 desempefio del Banco y de los prestatarios. Se kWh y 350 kWh correspondientes a China e identifican los factores relativos al pais, al India, respectivamente. proyecto y a los procedimientos vinculados a este que han promovido o restringido el avance Principal desaffo. Como regla general, el sumi- de los proyectos. Tambien se evahlian las pers- nistro de electricidad debe guardar propor- pectivas de que se apliquen los principios de la ci6n con el crecimiento econ6mico. Muchos nueva politica del Banco con respecto al sector paises menos desarrollados han dado un paso de energia el6ctrica y se recomiendan metodos mas alla del que les permitia dicho creci- para mejorar los efectos de las actividades de miento fijando tarifas demasiado bajas para la esta instituci6n. energia electrica con la esperanza de estimu- lar el desarrollo econ6mico. Sin embargo, ello El PIB medio per capita de los 26 paises de result6 ser inasequible e ineficaz porque los Africa al sur del Sahara que recibieron credi- programas de electrificaci6n no influyen tos o prestamos del Banco para proyectos de significativamente en el desarrollo econ6mico energia electrica era de $304 en 1994. Su creci- cuando faltan otros requisitos previos. Al miento econ6mico, que habia sido de 5,5 por igual que en otras regiones, en Africa al sur ciento anual en el periodo 1970-80, experi- del Sahara el desafio que encara el sector elec- ment6 un estancamiento hasta 1985 y a partir trico es satisfacer la demanda efectiva al costo de entonces disminuy6 a los niveles minimos minimo sin (a) agravar los deficit publicos ni observados en los ultimos tiempos. Su dota- (b) competir para absorber fondos publicos ci6n total de recursos energeticos es conside- escasos que deben destinarse a prioridades de rable; hay numerosos emplazamientos para el orden social, como la educaci6n y la salud. aprovechamiento de la energia hidroelectrica, dep6sitos de carb6n y uranio y cuantiosas Paradigma de los servicios puiblicos de las decadas reservas de petr6leo crudo y gas. Sin em- de 1970 y de 1980. La mayoria de las empresas bargo, aprovechan poco de este potencial, de servicios publicos de electricidad que reci- como lo revelan sus tasas bajas de consumo bieron prestamos del Banco eran empresas del 8 estado y todos los proyectos terminados para ciones de financiamiento para el sector elec- 1993 se habian formulado con arreglo a lo trico de 26 paises de Africa al sur del Sahara. establecido en el documento del Manual El conjunto examinado aqui esta integrado por Administrativo OMS 3.72 relativo a los proyec- 44 creditos o prestamos para 41 proyectos ter- tos de servicios puiblicos, emitido en 1978. En minados de energia electrica correspondientes a dicha norma se establecen objetivos amplios de 22 paises; 12 de estos proyectos comprendian politica ajustados al paradigma de empresas de dos operaciones y s6lo los correspondientes a servicios piiblicos que prevalecia en ese Kenya y Zaire abarcaban mas de dos. Del entonces. El Banco procuraba ayudar a lograr financiamiento total (por valor de $5.600 lo siguiente: (a) prestar servicios de suministro millones) proporcionado por el Banco desde de electricidad basados en programas de 1978 para fines de infraestructura en Africa al desarrollo de costo minimo; (b) fortalecer las sur del Sahara, el 21 por ciento se destin6 al instituciones del sector y aumentar su eficien- sector electrico. cia; (c) aumentar la movilizaci6n de recursos locales y cumplir una funci6n catalizadora del Objetivos y componentes. En los proyectos se cofinanciamiento; y (d) mejorar el acceso de los hacia hincapie en el desarrollo de la capacidad grupos desfavorecidos a la electricidad. ffsica y el fortalecimiento institucional; el cofinanciamiento era una caracteristica impor- Revision de las poifticas. A fines de la decada de tante de la mayoria de ellos. S6lo en cinco 1980 se hizo evidente que los proyectos del paises se trat6 de mejorar el acceso de los Banco estaban muy lejos de alcanzar los princi- grupos desfavorecidos a los servicios de pales objetivos establecidos en OMS 3.72, sobre suministro de electricidad. La expansi6n de la todo en materia de sostenibilidad financiera y generaci6n, sobre todo en centrales hidro- ambiental. En consecuencia, en enero de 1993 el electricas, y la transmisi6n de electricidad Banco introdujo una nueva politica que hacia revestian prioridad respecto de la ampliaci6n hincapie en la conveniencia de que el sector de la distribuci6n. En los iltimos afios, la funcionara en condiciones comerciales, la rehabilitaci6n de las instalaciones revisti6 importancia de la conservaci6n de la energia y maxima prioridad, especialmente la rehabi- los requisitos de sostenibilidad ambiental. Esta litaci6n de la distribuci6n. En general, un 12 nueva politica, en la que ya no se puso enfasis por ciento del costo de los proyectos se asign6 en el acceso de los pobres a los servicios basicos a componentes no fisicos, fundamentalmente de electricidad, constituye un apartamiento a la realizaci6n de estudios. notable de la seguida hasta ese momento. En ella se establecieron cinco principios en los que Resultados. Se clasific6 como satisfactorios a los debfa basarse el apoyo del Banco, a saber: regla- resultados del 64 por ciento de los proyectos mentaciones transparentes, comercializaci6n y comprendidos en el conjunto examinado, conversi6n de las empresas estatales en frente al 79 por ciento del total de proyectos de sociedades comerciales, importaci6n de servi- energia electrica del Banco desde 1978. En el dos, empefno en la reforma y un mayor volu- caso de 22 proyectos terminados en 1989-93, el men de inversi6n privada. logro de objetivos de desarrollo institucional se clasific6 como sustancial en s6lo el 27 por ciento de los casos (frente al 38 por ciento a Examen de los proyectos terminados nivel de todo el Banco), y la sostenibilidad de los beneficios se clasific6 como probable en Desde que se emiti6 el documento OMS 3.72 s6lo el 36 por ciento de los casos (frente al 68 en 1978, el Banco ha participado en 69 opera- por ciento a nivel de todo el Banco). 9 Tasa de rentabilidad econ6mica. Al momento de raci6n de energia termoelectrica se utilizan la terminaci6n, se volvi6 a calcular la tasa de pequefios equipos diesel, tecnologias relativa- rentabilidad econ6mica de s6lo 22 de los 41 mente poco contaminantes y centrales electri- proyectos terminados. En diez de los 22 cas que funcionan con carb6n, existentes s6lo proyectos, dichas tasas fueron inferiores al en Botswana y Zimbabwe, y se usan tecnicas diez por ciento, frente al promedio de entre de reducci6n de la contaminaci6n. En nueve 12 por ciento y 15 por ciento del total de de los 15 proyectos hidroelectricos, el impacto proyectos de energia eletrica del Banco ter- ambiental se consider6 insignificante al comi- minados desde 1978. S61o tres tuvieron a su enzo, y en los documentos del Banco no se da terminaci6n tasas de rentabilidad mas altas cuenta del impacto al momento de la termi- que las previstas en la evaluaci6n inicial. naci6n de los demas. Aclarado esto, en tres de Salvo algunas excepciones, las tasas de los cinco casos en los que se plantearon proble- rentabilidad econ6mica se calcularon segCn mas relativos a los reasentamientos -de las los precios de mercado de los insumos - 190.000 personas desplazadas en raz6n de deducidos los impuestos y los derechos de todos los proyectos financiados por el Banco importaci6n- y las tarifas como sustituto en. Africa al sur del Sahara, un 18 por ciento lo del valor econ6mico de la energia electrica. fue por proyectos de energia hidroel6ctrica- dichos problemas no se abordaron en conso- Fortalecimiento institucional y asistencia tecnica. nancia con las directrices del Banco, pese a que La asistencia tecnica observada con mas fre- los proyectos se habian aprobado despues de cuencia y que tuvo mas eficacia fue la de inge- la publicaci6n de 6stas a principios de la nieros consultores para el disefio del proyecto decada de 1980. Este hecho confirma que las y la supervisi6n de las obras de construcci6n. ensefianzas derivadas del caso de Ghana -de La asistencia para la gesti6n fue mas eficaz restablecer los sistemas productivos y las cuando las facultades ejecutivas se delegaron a condiciones sociales de la poblaci6n reasen- extranjeros. Si bien se utiliz6 varias formas de tada (Akosombo, aprobado en los afios capacitaci6n, los resultados no se documen- sesenta)- no se aplicaron en forma siste- taron bien. matica en los demas paises de la regi6n. Cumplimiento de los compromisos. En general, el cumplimiento de los compromisos contrac- Efectos del programa tuales fue parcial mas que sustancial. Se observ6 un bajo grado de cumplimiento de Desarrollo de costo mmnimo. De acuerdo con la los compromisos financieros importantes, politica del Banco, la participaci6n de este en el relativas al cobro de cuentas por cobrar, la sector electrico de Africa al sur del Sahara tenia aprobaci6n de aumentos de tarifas y el por objeto promover el crecimiento a costo rendimiento financiero de los activos fijos. minimo -y tuvo mucho 6xito despues de las dos crisis del petr6leo de 1973 y 1979. Las cen- Medio ambiente y reasentamientos. En los proyec- trales hidroelectricas relativamente grandes se tos de energia electrica para Africa al sur del consideraron la mejor alternativa, pero la baja Sahara pocas veces se plantearon problemas del precio del petr6leo desde 1986 ha reducido criticos relativos al medio ambiente y los los beneficios econ6micos que se esperaban de reasentamientos. La invasi6n de los recursos las centrales hidroelectricas. Los proyectos naturales por las lineas de transporte de financiados por el Banco en los afios ochenta energfa electrica y las subestaciones fue relati- aun serian buenas inversiones en la actualidad, vamente escasa. En varios paises, para la gene- pero las alternativas de aprovechamiento del 10 gas parecen ahora mas interesantes en C6te la mayor parte de los atrasos correspondia al d'Ivoire, Nigeria y Tanzania. Los estudios sector puiblico. econ6micos y sectoriales y las evaluaciones de recursos energeticos no siempre contribuyeron Por lo general, los resultados financieros de las a la identificaci6n de buenos proyectos: el empresas de servicios publicos de electricidad Banco se neg6 a financiar varios proyectos que de los paises de Africa al sur del Sahara no eran antiecon6micos pero, con la excepci6n del fueron buenos. En un 60 por ciento de estas caso de Nigeria, se consideraron pocas naciones, la tasa de rendimiento de los activos opciones distintas de las hidroelectricas. fijos netos revalorizados en operaci6n y la cobertura del servicio de la deuda fueron infe- Eficiencia. Si bien fueron sustanciales, los riores a la mediana a nivel de todo el Banco. sobrecostos y atrasos de los proyectos en la En materia de autofinanciamiento, la situaci6n regi6n de Africa al sur del Sahara no fueron de tres de cada cuatro paises de dicha regi6n mayores que en otras regiones. Sin embargo, era peor que el promedio a nivel de todo el en la primera el aumento de la eficiencia de las Banco; cabe atribuir los resultados desalenta- operaciones tecnicas y comerciales de las dores al lento crecimiento de los activos en los empresas de servicios puiblicos de electricidad afios ochenta. Las tasas de rendimiento entre fue menor y, salvo algunas excepciones, mar- elevadas y aceptables (como en el caso de ginal. Los resultados de la mayoria de los Malawi y Zimbabwe) se deben tanto a la efi- proyectos fueron desparejos y la sostenibilidad ciencia operativa como al nivel adecuado de de las mejoras ffsicas fue incierta, debido a la las tarifas. falta de sistemas eficaces de mantenimiento. Para principios de los afios noventa, el Acceso de los pobres. Salvo algunas excepciones porcentaje de perdida de energia electrica era -como en los casos de Burundi, C6te d'Ivoire, mayor que la mediana a nivel de todo el Banco Ghana, Guinea y Nigeria- poco o nada se en las dos terceras partes de los paises de trat6 de prestar servicios de suministro de Africa al sur del Sahara. Tambien fue baja la electricidad a las unidades familiares de ingre- productividad, medida por la producci6n y sos bajos de Africa al sur del Sahara. En los por el numero de usuarios por empleado. casos en que se procur6 hacerlo, mediante componentes de distribuci6n o electrificaci6n Recuperaci6n de costos. Salvo algunas excep- rural, ello no result6 sostenible. Las tarifas ciones, la recuperaci6n de costos en los paises sumamente subvencionadas, normalmente de Africa al sur del Sahara fue insuficiente y en para los usuarios de bajo voltaje, beneficiaban general mas baja que la correspondiente a otras a los usuarios existentes mas que a los nuevos. regiones. A principios del decenio de 1990, la Con todo, el factor predominante era la mala tasa de cobro de las facturas por el servicio de situaci6n macroecon6mica, a la que se debia la suministro de electricidad fue mas baja que la baja de los ingresos y de la demanda de mediana a nivel de todo el Banco en el caso de nuevas conexiones. las dos terceras partes de los paises de Africa al sur del Sahara. Mas del 75 por ciento de las Movilizaci6n de los recursos. Con respecto a los cuentas por cobrar registraban una mora de proyectos de energia el6ctrica terminados mas de 90 dias, y los atrasos por lo general desde 1978, el Banco prest6 $1.200 millones (el aumentaban a medida que lo hacia el precio de 36 por ciento de la necesidad total de financia- la electricidad. En la dificil situaci6n econ6mica miento para los proyectos) y los cofinancia- de los anios ochenta, las empresas y unidades dores aportaron $1.400 millones (o sea, el 44 familiares mal podian pagar sus facturas, pero por ciento). Las empresas de servicios publicos 11 y los gobiernos suministraron los $700 millones de las operaciones de ajuste. En otros, los restantes (es decir, el 20 por ciento). prestamos para fines de ajuste a veces inclu- yeron condiciones relativas al sector de ener- gia electrica: en el decenio de 1980, en los Factores determinantes del desempefio paises de Africa al sur del Sahara se registr6 un total de 23 pr6stamos de ajuste estructural, Factores externos y nacionales. Al igual que en de los cuales ocho -correspondientes a ocho otras regiones, en Africa al sur del Sahara los paises- contenian condiciones de esa natu- movimientos de las tasas internacionales de raleza. Sin embargo, con mucha frecuencia las interes, los movimientos de dinero y la operaciones de ajuste no se aprovecharon relaci6n de intercambio menoscabaron el para abordar la carga fiscal de las empresas desempefio del sector electrico. El precio inter- de servicios puiblicos de electricidad. Las nacional de los combustibles tambi6n afect6 evaluaciones ex post del Departamento de negativamente la situaci6n financiera de las Evaluaci6n de Operaciones' revelan que los empresas de servicios piiblicos de sistemas prestamos para fines de ajuste estructural de predominantemente termoelectricos hasta los afios ochenta a nivel de todas las regiones 1986, afio en que comenz6 a beneficiarla. En eran mas eficaces para reformar el sector de la los paises del Sahel, la sequia que se prolong6 energia cuando: (a) la necesidad de las refor- desde 1978 hasta 1985 agot6 los embalses y mas era urgente debido a que el consumo de socav6 las reservas financieras de las empresas energia por unidad de PNB era elevado y los de servicios puiblicos. Ademas de estos precios estaban muy distorsionados; (b) la factores externos, las deficiencias de la base de aplicaci6n de las reformas era ficil porque la recursos humanos y la ineficacia del marco intensidad de uso de la energia y la propor- institucional contribuyeron a producir inefi- ci6n de consumo industrial de ella era ciencias tecnicas. Pese a ello, los factores que elevado, y (c) se habian preparado planes estaban bajo el control del Banco influyeron acertados de acci6n (con frecuencia en el mucho en los resultados finales de los proyec- marco de prestamos anteriores para proyectos tos, como se explica mas adelante. de inversi6n). Las dos uiltimas condiciones pocas veces estaban presentes en el sector Selecci6n de los objetivos de los proyectos. Durante electrico de los paises de Africa al sur del la decada de 1980, consideraciones generales Sahara. relativas a la energia influyeron en el disefio de los proyectos, acrecentaron su complejidad Promover la identificaci6n de los prestatarios con e hicieron que las prioridades fueran mas los objetivos. Los prestatarios se identificaban difusas. Si bien las formas tradicionales de mucho con los objetivos relativos a la amplia- energia, como la lefia, son muy importantes ci6n de la capacidad de las instalaciones, para los paises de Africa al sur del Sahara -y aunque no con los relativos a la asistencia se abordaron en varios proyectos forestales- tecnica y las reformas de instituciones y poll- su procesamiento y uso racional merecian una ticas. Con lo que menos se identificaban los atenci6n mis sistematica que su introducci6n prestatarios era con el logro de la autonomia experimental como componentes de algunos de las empresas de servicios publicos, los proyectos de energia electrica. grandes ajustes de las tarifas, las reducciones de personal o los ajustes de las remunera- En algunos casos, los objetivos del sector ele- ciones. En general, el Banco no logr6 eficaz- trico se subordinaron a la transferencia de mente que los interesados asumieran la recursos financieros y otros objetivos amplios responsabilidad de la introducci6n de la 12 reforma y su identificaci6n con esta. En trica aplicado en Ghana se debi6 a la buena algunos casos, el Banco contribuy6 a perpe- interacci6n entre unos pocos expertos extran- tuar los enfoques tradicionales, aunque habia jeros y un nuevo equipo de administraci6n sefiales de que los mas audaces habrian sido integrado por personas j6venes y con ideas de aceptables. En muchos casos, el Banco evit6 gran alcance que tenian una gran motivaci6n y imponer sanciones a los paises ain en caso de un gran interes en aprender. Sin embargo, esta violaciones reiteradas de las estipulaciones experiencia es excepcional. contractuales, se apresur6 a conceder pres- tamos en algunos casos y aprob6 prestamos Coordinacion del cofinanciamiento y los donantes. grandes que no lograron promover ni siquiera El Banco ha logrado cumplir cabalmente una pequefios ajustes de las politicas. Los semina- funci6n catalizadora del cofinanciamiento, rios sobre politicas organizados en el marco aunque en menor medida la de coordinar la del Programa de asistencia para la gesti6n del funci6n y actividades de otros organismos de sector de energia (ESMAP), por lo general, se financiamiento y donantes. Su influencia sufri6 referian a principios en lugar de medidas menoscabo cuando otros donantes financiaron concretas para aplicarlos. proyectos rechazados por el Banco como anti- econ6micos. Ademas, algunas veces el disefio En consecuencia, no se puso a prueba la con- de la asistencia tecnica no se coordin6 estrecha- vicci6n intelectual de los responsables de las mente entre los donantes, por lo que ella se politicas. Cuando hubo compromiso politico, diluy6, abarc6 elementos incompatibles y oste se debi6 menos a la persuasi6n ejercida registr6 lagunas e incoherencias. por el Banco que a las crisis politicas que se registraron, por ejemplo, en Burundi, C6te d'Ivoire, Ghana y Guinea. No hay evidencias Aplicaci6n de las nuevas directrices de que el Banco se haya esforzado por ganar de politicas el apoyo de los que podrian beneficiarse con la reforma ni de cambiar los incentivos para Por lo general, se logr6 en medida moderada conseguir el de quienes podrian perjudicarse establecer procedimientos reglamentarios con ella. transparentes, introducir una orientaci6n empresarial y despertar el interes del sector Eficacia de la asistencia te'cnica. Cabe reiterar que privado. Sin embargo, hace poco surgieron la identificaci6n de los prestatarios con los tendencias positivas. Se lograron progresos objetivos, o mas bien la falta de ella, fue el considerables en materia de eficacia de servi- principal factor coadyuvante de los resultados cios de administraci6n extranjeros. Asimismo, obtenidos. El personal del Banco suele estar son mas los paises que muestran signos con- demasiado alejado o carecer de las aptitudes cretos de compromiso inicial en los recientes necesarias para supervisar la prestaci6n de proyectos del Banco. asistencia tecnica. Otros donantes tienen mayor presencia en el terreno y son mas efi- Procedimiento reglamentario transparente. Sobre caces, pero su especializaci6n se refiere funda- la base de las evidencias disponibles, la mentalmente a la tecnologia. El desaffo que se divisi6n de funciones entre las autoridades plantea es que el gobierno cumpla la funci6n reglamentarias y las empresas es deficiente en de regulador y responsable de la formulaci6n el sector de energia el6ctrica de todos los de las politicas, y aplique enfoques novedosos paises de Africa al sur del Sahara. A fin de al efecto. Por ejemplo, el exito del programa de lograr mayor transparencia, el Banco ha pro- asistencia para la gesti6n de la empresa elec- movido los contratos de desempefio entre los 13 gobiernos como propietarios de las empresas planificaci6n a largo plazo, el disefio de los de servicios puiblicos de electricidad y los proyectos, la construcci6n, la supervisi6n de la equipos de administraci6n que las dirigen. construcci6n, el estudio de tarifas y servicios Estos contratos han servido para aclarar obje- diversos de asesoramiento y capacitaci6n tec- tivos, fomentar el dialogo entre el gobierno y nicos. Con todo, entre los servicios importa- la administraci6n de las empresas e introducir dos, los contratos de administraci6n o de mejores sistemas de administraci6n, contabili- arrendamiento son los que tienen mas posibili- dad y auditoria. Sin embargo, como las metas dades de producir efectos duraderos en las contractuales no son exigibles legalmente, con empresas de servicios publicos. Cabe pregun- ellos no se ha aumentado la autonomia de las tarse si la importaci6n de servicios ha de ser empresas del estado ni se han eliminado sus forzosamente resentida por el personal local. principales dificultades. A juzgar por la experiencia de C6te d'Ivoire y Ghana, no siempre ha de ser asi. Comercializaci6n y conversi6n de las empresas estatales en sociedades comerciales. Muchas de las Proyectos recientes. De los 25 proyectos de empresas de servicios puiblicos de la regi6n se energia electrica en marcha en Africa al sur del clasifican como sociedades comerciales o de Sahara, 11 se aprobaron despues de introdu- tipo similar, y en muchos sentidos se compor- cirse la nueva orientaci6n de politica sectorial; tan como empresas comerciales. Sin embargo, la mayorfa de ellos comprendi6 elementos de no tienen exclusiva ni notablemente finalida- la nueva politica, sobre todo en materia de des de lucro y siguen dependiendo de recur- reforma de las reglamentaciones y los con- sos publicos. A pesar de ello, al parecer hay tratos de administraci6n y de arrendamiento buenas perspectivas de que se produzcan por parte de agentes del sector privado. En considerables avances habida cuenta del cre- muchos casos, el cumplimiento de dichos ele- ciente consenso que existe acerca de los bene- mentos condicionaron la aprobaci6n de los ficios de convertir a las empresas de servicios prestamos o sus desembolsos. En el Examen publicos en sociedades comerciales y al hecho anual del desempefio de la cartera del ejercicio de que la regi6n tal vez este saliendo de la de 1994 del Banco se senal6 que el 87 por crisis de los afios ochenta. ciento de dichos proyectos en Africa al sur del Sahara tenia posibilidades de alcanzar sus Participaci6n del sector privado. A pesar de las objetivos de desarrollo establecidos. Sin em- restricciones politicas y econ6micas, al parecer bargo, pese a existir una gran identificaci6n de es posible privatizar algunos segmentos de las los prestatarios con estos objetivos, este pro- operaciones de energia electrica, como lo n6stico parece optimista frente a la estimaci6n demuestran algunos paises de Africa al sur del del 72 por ciento a nivel de todo el Banco rela- Sahara. Cabe prever que los agentes del sector tiva a los proyectos de energia electrica exis- privado invertiran si logran cubrir los riesgos tentes en la cartera. que enfrentan. La aplicaci6n inmediata de la politica del Banco contribuiria mucho a Reestructuraci6n del sector. La modificaci6n de reducir el riesgo percibido por los posibles la estructura del sector electrico tambien inversores. forma parte del programa promovido por el Banco. Salvo algunas excepciones, las empre- Importaci6n de servicios. La contrataci6n de ser- sas de servicios publicos de electricidad de los vicios de fuentes externas a los paises o paises de Africa al sur del Sahara son mono- incluso la regi6n no es una novedad. Ella com- polios integrados de propiedad del estado prende conocimientos especializados para la responsables de la transmisi6n y distribuci6n 14 de toda la electricidad que producen. Pero el Recomendaciones tamafho reducido de las redes de energia elec- trica y las deficiencias del marco reglamentario Las nuevas orientaciones de politica relativas tornan dificil recomendar su desmantelamien- al financiamiento del sector electrico por el to como se hizo, por ejemplo, en el Reino Banco son valederas para Africa al sur del Unido y Chile. Sin embargo, los productores Sahara. La pobreza de esta regi6n y su depen- independientes de energia electrica podrian dencia de la asistencia externa no justifica que competir con las empresas de servicios piibli- se disminuyan las normas de calidad. Es mas, cos en la generaci6n de electricidad en situa- las empresas de servicios publicos de Africa al ciones especiales, de modo que es preciso sur del Sahara son especialmente vulnerables examinar los obstaculos a su entrada en el a la mala administracion, y su mal desempefio mercado y las normas para fijar el precio de es una de las razones basicas de la mala su producto. situaci6n fiscal de muchos paises de Africa al sur del Sahara. La distribuci6n de electricidad debe ser el principal centro de atenci6n. Como es alli El Banco y otros cofinanciadores podrian donde se da la prestaci6n de los servicios y la ejercer un grado mucho mayor de liderazgo en recuperaci6n de costos, separar la distribu- lo que se refiere a la promoci6n de aquellas ci6n de la transmisi6n y la generaci6n puede reformas del sector que constituyen el aspecto abrir el camino a los agentes que no cuentan fundamental del nuevo programa. Hasta que con los medios t6cnicos y financieros para dichas reformas se afiancen, es probable que invertir grandes sumas. La distribuci6n debe las garantias encaminadas a atraer grandes descentralizarse en zonas de servicio para inversiones privadas en el sector electrico que haya interes en la licitaci6n de las conce- resulten muy costosas. siones. A juzgar por el buen historial de ser- vicios comunitarios descentralizados como Teniendo en cuenta las conclusiones expues- en el caso del suministro de agua, vale la tas, en este estudio se formulan las siguientes pena experimentar con este tipo de organi- seis recomendaciones principales. zaci6n para el suministro de energia electrica de bajo voltaje en las zonas en que los Primera recomendaci6n. En las estrategias de sistemas de gobierno informales funcionan asistencia a los paises de Africa al sur del mejor que los formales. Sahara se deben analizar los fundamentos del financiamiento para el sector de energia elec- Informaci6n sobre el sector. La realizaci6n de este trica y la armonia de las estrategias con la asis- estudio revela que el Banco tiene conocimien- tencia del Banco para el ajuste econ6mico tos valiosos (aunque insuficientes en algunos amplio y el desarrollo y uso racional de otros aspectos) del sector de energia electrica de recursos energeticos (especialmente Africa al sur del Sahara. Estos conocimientos renovables). han servido de base para las opciones de politica y la participaci6n de los donantes. Sin Segunda recomendaci6n. Salvo en el caso de embargo, los principios de las nuevas orienta- las pequenas operaciones destinadas al forta- ciones de politica exigen mas informaci6n para lecimiento institucional o la rehabilitaci6n de supervisar y evaluar el desempehio del sector instalaciones, se debe evitar otorgar financia- de energia electrica y sentar las bases para miento para el sector electrico de paises de la adopci6n de decisiones acerca de la partici- Africa al sur del Sahara cuando el desempefio paci6n del sector privado. de dicho sector este por debajo de puntos de 15 referencia aceptables en esferas tecnicas y personas del lugar y extranjeros. La difusi6n financieras2, y donde al momento de la evalua- eficaz de las practicas exitosas y el logro del ci6n inicial se hayan introducido pocas de las apoyo de los interesados deben formar parte siguientes reformas previstas. integral de la preparaci6n de los proyectos. * El establecimiento de marcos reglamenta- Quinta recomendaci6n. El Banco debe promover rios transparentes y de plena competencia, la formaci6n de alianzas estrategicas con otros con garantias legales de que las empresas organismos de financiamiento y donantes a fin de servicios publicos podran funcionar con de lograr consenso acerca de los objetivos de autonomia, por ejemplo, mediante con- politica y los criterios aplicables a su partici- tratos de administraci6n o concesi6n. paci6n en los paises de Africa al sur del Sahara. Tambien debe asociarse con otros para * La aplicaci6n de principios reglamentarios el aprovechamiento de los recursos humanos y a fin de asegurar la disciplina fiscal, tarifas compartir las responsabilidades inherentes a adecuadas, y la contrataci6n de servicios las tareas que se beneficiarian de los diversos seguin procedimientos basados en incen- activos existentes en el terreno y las especiali- tivos y condiciones competitivas. dades de los donantes. Tercera recomendaci6n. Al promover la rees- Sexta recomendaci6n. Con la colaboraci6n tructuraci6n y la privatizaci6n del sector de de otros organismos de financiamiento y energia electrica en Africa al sur del Sahara, el donantes, el Banco debe ayudar a coordinar e Banco debe considerar la fijaci6n de tarifas de institucionalizar un esfuerzo sistematico compra, la descentralizaci6n de la distribu- encaminado a recopilar y analizar datos acerca ci6n y su separaci6n de la generaci6n y la del sector de energia electrica que se necesi- transmisi6n, mediante el uso de contratos de taran para implantar los principios de la concesi6n para agentes del sector privado y la nueva politica. emisi6n de garantias para productores inde- pendientes de energia electrica. Notas Cuarta recomendaci6n. El Banco debe estimular 1. C. Jayarajah y W. Branson, Structural and Sectoral Adjustment: la identificaci6n de los prestatarios de Africa al World Bank Experience, 1980-92, Estudio del Departamento de la sur del Sahara con los nuevos principios de EvaluaCdn de Operaciones del Banco Mundial, Washington, polftica sectorial, con los programas de fortale- DCBacMudl,unoe195 coimietoinastiectonal, en losprograoa de lasrrer- 2. Los indicadores que deben vigilarse son las perdidas tecni- cimiento institucional en apoyo de las refor- ccas, las cuentas por cobrar y las tasas de rendimiento de las mas y la prestaci6n de asistencia tecnica por inversiones. 16 Resume analytique Les projets de la Banque dans le secteur de mation d'e1ectricite par habitant a suivi celle 1'electricite donnent de moins bons resultats du PIB, passant de 134 kWh en 1971 a 200 en Afrique subsaharienne que dans les autres kWh en 1991 avec une pointe de 247 kWh en regions. Pourquoi? Pour repondre a cette 1980. On peut comparer ces chiffres avec 580 question, la presente etude detaille les resul- kWh pour la Chine et 350 kWh pour l'Inde. tats des projets achev6s et evalue la perfor- mance de la Banque et celle des emprunteurs. Le defi principal. En regle g6n6rale, la fourniture Elle identifie les facteurs li6s aux pays, aux d'e1ectricite ne devrait ni progresser a un projets et aux procedures qui ont favorise ou rythme superieur a la croissance economique, entrave la bonne marche des projets. Elle ni rester a la traine. Nombreux sont les pays en evalue egalement les perspectives d'applica- developpement qui ont essaye de prendre les tion de la nouvelle politique de la Banque devants en fixant des tarifs d'electricite anor- dans le secteur et propose un certain nombre malement bas, esperant ainsi stimuler leur de demarches propres a rendre l'intervention croissance economique. Cette politique s'est de la Banque plus efficace. averee a la fois cofiteuse et inefficace du fait que les programmes d'electrification n'ont Le produit interieur brut (PIB) moyen des 26 guere d'impact sur la croissance economique pays d'Afrique subsaharienne qui ben6ficient si les autres conditions prealables au develop- de credits ou de prets de la Banque pour des pement ne sont pas remplies. En Afrique sub- projets dans le secteur de l'electricit6 etait de saharienne comme ailleurs, il s'agit pour le 304 dollars par habitant en 1994. Leurs secteur de 1`6lectricit6 de satisfaire la demande economies ont connu une croissance de 5,5 reelle au moindre couit (a) sans alourdir le pour cent par an entre 1970 et 1980, puis une deficit public et/ou (b) sans solliciter les rares stagnation jusqu'en 1985, avant de tomber fonds publics au detriment de certaines priori- aux niveaux recemment enregistres. Ces pays tes sociales comme l1'ducation et la sante. disposent au total d'un potentiel energ6tique consid6rable comprenant de nombreux sites Le modele des services publics des annees 70 hydrauliques, des gisements de charbon et et 80. La plupart des compagnies d'electricite d'uranium, et d'importantes reserves de beneficiant de prets de la Banque sont des petrole et de gaz. Ils n'utilisent cependant entreprises publiques et tous les projets qu'une faible partie de ce potentiel puisqu'ils acheves avant 1993 ont et6 concus dans le ont consomme trois TWh d'electricite en 1971 cadre de la Directive 3.72 du Manuel opera- et 81 TWh en 1991. L'evolution de la consom- tionnel de la Banque mondiale. Cette directive, 17 publiee en 1978, fixe les grandes orientations a credits accordes par la Banque aux pays suivre conformement au modele de services d'Afrique subsaharienne pour des projets publics en vigueur a l'epoque. La Banque se d'infrastructure, soit 5,6 milliards de dollars, donnait pour mission d'aider a (a) fournir la part du secteur de l'electricite a et de 21 1'electricite sur la base de programmes de pour cent. developpement au moindre cout, (b) renforcer les organismes du secteur et ameliorer leur Objectifs et e'ements des projets. Les projets ont efficacite, (c) renforcer la mobilisation des mis 1' accent sur les capacites physiques et le ressources locales et catalyser des cofinance- renforcement des institutions, et la plupart ments, et (d) ameliorer l'acces des populations d'entre eux etaient cofinances. L'aamlioration defavorisees a l'electricite. de l'acces des groupes defavorises a l'elec- tricite a ete tentee dans cinq pays seulement. R6vision de la politique. A la fin des annees 80, il- La priorite a et6 accordee a la creation de etait devenu evident que les projets de la nouvelles centrales, en particulier hydro- Banque avaient insuffisamment repondu aux electriques, et au transport font l'extension du objectifs essentiels de la Directive 3.72, en par- reseau de distribution. Plus r6cemment, c'est ticulier du point de vue de la viabilite finan- la remise en etat des installations, en parti- ciere et environnementale. La Banque a donc culier du reseau de distribution, qui a eu la adopte, en janvier 1993, une nouvelle politique priorite absolue. En moyenne, environ 12 qui soulignait qu'il est souhaitable de sou- pour cent du cofit des projets a correspondu a mettre l'exploitation du secteur a des regles des composantes non physiques, essentielle- commerciales, important de faire des ment des 6tudes. economies d'6nergie et imperatif de preserver l'environnement. Cette nouvelle politique Resultats. Les resultats obtenus ont e juges traduisait une evolution notable en ne mettant satisfaisants pour 64 pour cent des projets, plus l'accent sur l'acces des pauvres a l'elec- contre 79 pour cent pour l'ensemble des pro- tricite et en definissant cinq principes jets finances par la Banque dans le secteur directeurs desirables pour obtenir l'aide de la depuis 1978. Sur 22 projets acheves entre 1989 Banque: transparence de la reglementation, et 1993, les objectifs en matiere de developpe- orientation commerciale, organisation du ment institutionnel ont ete substantiellement secteur en societ6s autonomes, et importation atteint dans seulement 27 pour cent des cas (38 de services, volonte de reforme, et developpe- pour cent pour l'ensemble de la Banque), et la ment de l'investissement prive. durabilite des acquis a ete consid6ree comme probable dans seulement 36 pour cent des cas (contre 68 pour cent pour l'ensemble de la Examen des projets acheves Banque). Depuis la publication de la Directive 3.72 en Taux de rentabilite economique. En fin d'execu- 1978, la Banque a participe, dans 26 pays tion des projets, le taux de rentabilit d'Afrique subsaharienne, a 69 operations de economique a ete recalcule pour 22 projets pret pour le secteur de l'electricite. Ces opera- seulement sur les 41 achev6s. Dix des 22 pro- tions ont compris 44 credits ou prets pour 41 jets avaient des taux de rentabilite de moins de projets acheves dans 22 pays, dont une 10 pour cent, contre un taux moyen de 12 a 15 douzaine ont benefici6 de deux operations. pour cent pour l'ensemble des projets de la Seuls le Kenya et le Zaire ont beneficie de Banque acheves depuis 1978 dans le secteur de plus de deux operations. Sur le total des l'electricite. Seuls trois avaient des taux de 18 rentabilit6 plus 6lev6s a leur achevement ments de la Banque ne font pas etat de l'im- qu'au moment de l'evaluation ex ante. A pact sur l'environnement des autres projets quelques exceptions pres, on a calcule les taux acheves. Cela dit, dans trois cas sur cinq oii de rentabilite en utilisant les prix du marche des problemes de reinstallation se sont pos6s des intrants, hors taxes et droits d'importation, - les projets de centrales hydroelectriques et les tarifs comme mesure indirecte de la sont a l'origine du deplacement de 18 pour valeur 6conomique de l'6nergie electrique. cent des 190.000 personnes qui ont dfi tre reinstallees du fait de projets finances par la Developpement institutionnel et assistance tech- Banque en Afrique subsaharienne - les pro- nique. L'assistance de consultants techniques jets n'ont pas e g6res conformement aux pour la conception des projets et la supervi- directives actuelles de la Banque, bien qu'ils sion des travaux a et la forme d'assistance aient e approuv6s apres la publication de technique la plus frequente et celle qui a celles-ci au debut des annees 80. Cet etat de donne les meilleurs resultats. L'assistance dans fait confirme que les lecons de l'experience du le domaine de la gestion a e plus efficace Ghana (projet d'Akosombo approuve dans les lorsque le pouvoir de decision 6tait confie a annees 60) - pour retablir les systemes de des expatries. Les actions de formation ont production et lYenvironnement social des per- revetu diverses formes, mais on ne dispose sonnes deplacees - n'ont pas e mises a guere de donnees sur les resultats. profit de maniere systematique dans les autres pays de la region. Respect des clauses. De maniere generale, les clauses n'ont WtS le plus souvent que partielle- ment respect6es. D'importantes clauses finan- Impact du programme cieres ont ete particulierement mal respectees, notamment en ce qui concerne le recouvre- Developpement au moindre cou^t. En participant ment des arrieres clients, l'approbation des au d6veloppement du secteur de l1'nergie augmentation de tarifs et la rentabilite finan- electrique en Afrique subsaharienne, la ciere des actifs immobilises. Banque visait, conformement a sa politique, a encourager le developpement au moindre Environnement et r6installation. Les projets cout, et elle y est parvenue dans une large entrepris en Afrique subsaharienne dans le mesure. Au lendemain des deux chocs petro- secteur de l'eectricite ont rarement suscite de liers de 1973 et 1979, les centrales hydro- problemes critiques en ce qui concerne l'envi- electriques relativement grandes etaient ronnement et la reinstallation de populations. consid6rees comme la meilleure solution, L'impact des lignes electriques et des sous- mais elles ont perdu de leur int6ret econo- stations sur les ressources naturelles a e mique apres la chute des prix du petrole en relativement faible. La production d'energie 1986. Celles qui ont ete financees par la thermique dans plusieurs pays s'effectue au Banque dans les annees 80 demeurent tou- moyen d'unites alimentees au gasoil, tech- jours un bon investissement, mais les cen- nique relativement peu polluante, et les cen- trales a gaz semblent actuellement plus trales a charbon, construites seulement au interessantes, en C6te d'Ivoire, au Nigeria et Botswana et au Zimbabwe, utilisent des tech- en Tanzanie. Les etudes economiques et sec- niques appropriees pour reduire la pollution. torielles et les evaluations du secteur de L'impact sur l'environnement de neuf des l'energie n'ont pas toujours influe sur l'iden- 15 projets hydroelectriques etait, des le depart, tification des projets: la Banque a refuse de consider6 comme negligeable, et les docu- financer plusieurs projets non rentables, 19 mais, sauf au Nig6ria, peu d'options autres m6dian de la Banque. Cela a egalement et le qu'hydroelectriques ont e envisagees. cas pour l'autofinancement dans trois pays d'Afrique subsaharienne sur quatre, ce qui Efficience. Les surcouits et les retards, bien constitue un resultat decevant compte tenu de que considerables, n'ont pas et plus graves la faible croissance des actifs dans les annees en Afrique subsaharienne que dans d'autres 80. Les taux de rentabilite eleves ou acceptables regions. Par contre, l'amelioration de l'effi- (comme c'est le cas au Malawi et au Zim- cience de la gestion technique et commerciale babwe) tiennent A l'efficience de l'exploitation des compagnies d'electricite en Afrique sub- autant qu'au caractere approprie des tarifs. saharienne a et moins marquee, voire n6gli- geable, A quelques exceptions pres. Les Acces des pauvres a I'electriciteW. A quelques resultats de la plupart des projets ont ete exceptions pres (Burundi, C6te d'Ivoire, mitiges, et la perennite des am6liorations Guinee, Ghana et, dans une certaine mesure, d'ordre materiel incertaine faute de disposi- Nigeria), l'approvisionnement en electricite tions efficaces en matiere de maintenance. aux m6nages A faible revenu en Afrique sub- Des le debut des annees 90, le taux de pertes saharienne n'a que peu ou pas et6 assure. d'6nergie etait sup6rieur au niveau m6dian de Dans les pays ou il l'a ete, dans le cadre de la Banque dans les deux tiers des pays plans de distribution ou d'electrification d'Afrique subsaharienne. La productivite rurale, il ne s'est pas avere viable. Les tarifs mesuree au nombre de clients ou A la produc- genereusement subventionnes destines essen- tion par employe etait egalement faible. tiellement aux consommateurs de basse ten- sion ont profite davantage aux anciens Recouvrement des coats. En Afrique sub- abonnes qu'aux nouveaux. Toutefois, l'envi- saharienne, le recouvrement des cofits a et, ronnement macro6conomique d6favorable A quelques exceptions pres, insuffisant et qui est responsable de la baisse des revenus et generalement inferieur A celui des autres des demandes de nouveaux branchements a regions. Au debut des ann6es 90, le recouvre- WS le facteur determinant. ment des factures d'electricite etait inferieur au niveau median de la Banque dans les deux Mobilisation des ressources. Pour les projets dans tiers des pays d'Afrique subsaharienne. Plus le secteur de l'electricite acheves depuis 1978, de 75 pour cent des comptes impayes accu- la Banque a prete 1,2 milliard de dollars (36 saient plus de 90 jours de retard, et les arrier6s pour cent des besoins de financement totaux avaient tendance A augmenter avec le prix fac- des projets) et ses partenaires ont participe A ture de l'electricite. Dans la conjoncture hauteur de 1,4 milliard de dollars (44 pour economique difficile des annees 90, les entre- cent). Quant aux compagnies d'electricite et prises et les menages avaient des difficultes A aux gouvernements, ils ont financ6 le reste, payer leurs factures, mais l'essentiel des soit 700 millions de dollars (20 pour cent). arrieres etait le fait du secteur public. Les resultats financiers des compagnies d'elec- Facteurs ayant influe sur les resultats tricite en Afrique subsaharienne ont ete d'une maniere generale insuffisants. Dans environ 60 Facteurs externes et internes. En Afrique sub- pour cent des pays de cette region, les taux de saharienne comme dans d'autres regions, les rentabilite des immobilisations nettes reeva- taux d'interet internationaux et les fluctuations luees en exploitation - et la couverture du ser- des taux de change et des termes de l'echange vice de la dette - ont et inferieurs au niveau ont influe n6gativement sur les resultats du 20 secteur. Les cours intemationaux des luations de l'OED' indiquent que, dans les combustibles ont egalement affecte les annees 80, les prets a l'ajustement structurel finances des compagnies d'6lectricite utilisant ont permis de reformer efficacement le essentiellement des centrales thermiques secteur de l'energie lorsque: (a) les reformes jusqu'en 1986, annee oii la tendance a revetaient un caractere urgent du fait que la commence a s'inverser. Dans les pays du consommation d'energie par unite de PIB Sahel, la longue secheresse qui a dure de 1978 etait elevee et les prix tres biaises, (b) les a 1985 a epuise les reservoirs et mis a mal les reformes 6taient plus faciles du fait que cette reserves financieres des compagnies. Au-dela consommation unitaire et la part de la con- de ces facteurs exogenes, la faiblesse des sommation industrielle 6taient considerables, ressources humaines et l'inefficacite du cadre et (c) des plans d'action techniquement au institutionnel ont contribu6 aux defaillances point avaient ete 6tablis (souvent dans le techniques. Malgre tout cela, les facteurs qui cadre de prets d'investissement anterieurs). dependent de la Banque ont largement influe Les deux dernieres conditions 6taient sur les r6sultats des projets, comme on le verra rarement r6unies dans le secteur de l'energie plus loin. electrique des pays d'Afrique subsaharienne. De'finition des objectifs. Au cours des ann6es Adhe'sion des emprunteurs. L'adhesion des 80, des considerations energetiques d'ordre emprunteurs aux objectifs des projets a e g6neral ont influe sur la conception des pro- considerable en ce qui concerne l'expansion jets, augmente leur complexite et rendu les des capacites, mais pas pour l'assistance priorites plus floues. Bien que les sources technique ni pour les r6formes des institu- d'energie traditionnelles telles que le bois de tions et des politiques. Leur adhesion etait feu revetent une grande importance pour les minimale en ce qui concerne l'autonomie des pays d'Afrique subsaharienne (plusieurs pro- services publics, les hausses tarifaires impor- jets de foresterie concernaient ces sources tantes et les compressions de personnel ou les d'energie), leur transformation et leur utilisa- ajustements des r6munerations. De facon tion rationnelle meritaient davantage d'atten- generale, la Banque n'a guere reussi a susci- tion que l'inclusion a titre experimental de ter un engagement reel des interesses eux- certains e6lments dans des projets relevant du memes sur les reformes. Dans certains cas, secteur de l'electricite. elle a contribue a perpetuer les approches traditionnelles, bien qu'a certains signes on Dans certains cas, les objectifs sectoriels ont puisse penser que des approches plus auda- e subordonn6s au transfert de ressources et cieuses auraient e acceptees. Elle s'est bien a d'autres buts generaux des operations souvent abstenue de sanctionner les pays d'ajustement. A l'inverse, les prets a l'ajuste- meme apres plusieurs violations des clauses, ment etaient parfois assortis de conditions s'empressant parfois d'accorder des prets et relatives au secteur de l'energie: dans les approuvant des prets importants qui n'ont annees 80, sur les 23 prets a l'ajustement pas donn6 lieu au moindre changement poli- structurel accordes au total a des pays tique. Les seminaires ESMAP sur les d'Afrique subsaharienne, huit, dans huit politiques energetiques portaient g6nerale- pays, comportaient ce type de conditions. ment sur des principes plut6t que sur des Toutefois, les operations d'ajustement ont le solutions concretes. plus souvent manque des occasions de s'attaquer a la charge que les compagnies Ainsi, la conviction intellectuelle des deci- d'electricite font peser sur le budget. Les eva- deurs n'a pas e mise a l'epreuve. La volonte 21 politique, lorsqu'elle s'est manifestee, etait Mise en oeuvre des nouvelles moins due aux efforts de persuasion de la directives Banque qu'aux crises budgetaires qu'ont connues, entre autres, le Burundi, la C6te D'une maniere g6n6rale, le succes fut modeste d'Ivoire, le Ghana, et la Guinee. Rien lorsqu'il s'est agi de mettre en place un proces- n'indique que la Banque se soit efforcee sus r6glementaire transparent, d'introduire ou d'obtenir le soutien des beneficiaires poten- reaffirmer les principes d'une exploitation tiels des reformes et de modifier les commerciale et de susciter l'interet du secteur incitations offertes aux perdants potentiels. prive. Toutefois, des tendances positives sont recemment apparues. La situation s'est consi- Efficacite de l'assistance technique. La aussi, derablement amelioree grace a l'efficacit6 des l'adhesion des interesses aux programmes services de gestion importes la cu ils ont et d'assistance, ou plut6t son absence, a joue un utilises. Par ailleurs, de plus en plus de pays role determinant. Le programme de jumelage montrent des signes concrets d'une ferme du Ghana pour I'assistance dans le domaine volont6 reformatrice dans plusieurs des pro- de la gestion a 6t6 couronne de succes grace A jets recemment approuves par la Banque. de bonnes relations entre quelques expatries et une nouvelle equipe de gestion composee Transparence de la reglementation. Les donnees d'elements jeunes et ambitieux qui etaient disponibles indiquent que, dans le secteur de fortement motives et avides d'apprendre. l' nergie electrique de tous les pays d'Afrique Cette experience est toutefois exceptionnelle. subsaharienne, la separation des responsa- Le personnel de la Banque est souvent trop bilites entre les autorit6s chargees de la regle- eloigne ou n'a pas les competences neces- mentation et les compagnies d'eiectricite laisse saires pour superviser l'assistance technique. A desirer. Afin de renforcer la transparence, la D'autres bailleurs de fonds sont davantage Banque a lance des << contrats de plan >> entre presents sur le terrain et plus efficaces, mais les gouvernements, proprietaires des corn- leur competence est essentiellement tech- pagnies d'electricit6, et les equipes qui en nique. Le defi est de trouver des approches assurent l'exploitation. Ces contrats ont per- innovatrices pour former le gouvernement A mis de clarifier les objectifs, de favoriser le son role de regulateur et de decideur en dialogue entre le gouvernement et la direction matiere de politiques sectorielles. des entreprises, et d'adopter de meilleures methodes de gestion, de comptabilite et Cofinancement et coordination entre les bailleurs d'audit. Toutefois, du fait que les objectifs fixes de fonds. La Banque a tres bien reussi A cata- dans ces contrats n'ont pas force juridique lyser le cofinancement des projets, mais elle a contraignants, ils n'ont pas renforce eu moins de succes pour ce qui est de coor- l'autonomie des entreprises publiques, ni donner les roles et les activites des autres resolu leurs principaux problemes. preteurs et bailleurs de fonds. Elle a perdu de son influence lorsque d'autres bailleurs Orientation commerciale et organisation en socijets ont finance des projets qu'elle avait rejetes autonomes. De nombreux services publics de la pour cause de non-rentabilit6. Par ailleurs, region sont dotes du statut de societe auto- la conception de l'assistance technique a norne (ou assimril6) et se comportent A maints parfois ete mal coordonnee entre les bailleurs egards comme des entreprises commerciales. de fonds, d'oii l'existence de zones floues, Cependant, ces organismes n'ont pas exclu- d'elements contradictoires, de lacunes et sivement, ni meme essentiellement, un but d'incoherences. lucratif, et continuent A grever les finances 22 publiques. Les perspectives d'6volution sont initiales et un prealable au decaissement. neanmoins reelles, etant donne qu'un consen- Pour l'exercice de 1994 selon L'examen sus com:mence A se faire jour sur les avantages annuel de la performance du portefeuille, 87 que comporte une exploitation commerciale pour cent de ces projets avaient des chances des services publics et que la region semble d'atteindre leurs objectifs de developpement. sortir de la depression des annees 80. Toutefois, meme si les emprunteurs sont fermement attaches A ces objectifs, ce pro- Participation du secreur prive. Nonobstant les nostic semble optimiste par rapport aux eva- contraintes politiques et economiques, il luations ex post de la Banque qui situent le semble possible de privatiser certaines opera- taux de realisation A 72 pour cent pour tions dans le secteur de l'electricite, comme le l'ensemble des projets du secteur de 1'elec- montrent les donnees concernant certains pays tricit6 A la fin de leur decaissement. d'Afrique subsaharienne. Les operateurs prives devraient en principe investir s'ils Restructuration du secteur. La Banque pr6conise reussissaient A couvrir les risques auxquels ils egalement que des modifications soient ont le sentiment d'etre exposes, et une applica- apportees A la structure du secteur electrique. tion resolue de la politique de la Banque per- A quelques exceptions pres, dans les pays mettrait de r6duire largement ces risques. d'Afrique subsaharienne, ce secteur est con- trole par l'etat dans le cadre de monopoles Importation de services. Le recours A des publics integres charg6s du transport et de la prestataires de services exterieurs au pays ou distribution de toute 1'61ectricit6 qu'ils meme a la region n'est pas nouveau, notam- produisent. Au stade actuel, du fait que les ment dans les domaines de la planification A reseaux sont de taille limitee et que le cadre long terme, de la conception des projets, de la r6glementaire laisse A desirer, il est difficile de construction et de la supervision des chantiers, recommander leur elatement comme cela a des 6tudes tarifaires, de divers conseils tech- ete le cas au Chili et au Royaume-Uni. Toute- niques et de la formation. Toutefois, parmi les fois, des producteurs independants pourraient services importes, ce sont les contrats de regie peut-etre, dans certaines conditions, concur- et les contrats d'affermage qui ont le plus de rencer les services publics pour la production chances d'avoir des effets durables sur les pro- d'electricite. n importe donc de reconsiderer jets. Les services importes ne risquent-ils pas les barrieres qui empechent leur acces au de susciter un ressentiment de la part du per- marche ainsi que les regles de fixation des sonnel local? Pas necessairement, si l'on con- tarifs d'achat de leur production. sidere 1'experience de la C6te d'Ivoire et celle du Ghana. La distribution doit faire l'objet d'une atten- tion toute particuliere, car c'est elle qui permet Projets recents. Sur les 25 projets en cours de fournir les services et de recouvrer les dans le secteur de l'electricit6 en Afrique cofits. De plus, en s6parant la distribution du subsaharienne, 11 ont ete approuves apres transport et de la production, on pourrait les nouvelles orientations adoptees pour ce ouvrir la voie aux op6rateurs qui n'ont pas les secteur, et la plupart de ceux-la ont integre moyens techniques et financiers d'investir de certains elements de la nouvelle politique, grosses sommes. Cette action doit s'accom- notamment en ce qui concerne la reforme de pagner d'une decentralisation consistant A la reglementation et les contrats de regie par cr6er des zones de service susceptibles de des operateurs prives. Dans bien des cas, ces rendre attrayantes les appels d'offres pour elements ont constitue des conditions l'obtention d'une franchise. La devolution au 23 niveau des collectivites locales de leurs Sur la base de ces constats, l'etude presente six services d'approvisionnement en eau et grandes recommandations. d'autres services a donne de bons resultats; l'experience merite donc d'etre tentee pour Recommandation 1. Les Strategies d'assistance l'alimentation en basse tension dans les zones aux pays d'Afrique subsaharienne doivent ott les arrangements informels fonctionnent determiner dans quele mesure l'octroi de mieux que les contrats officiels. pr8ts pour le secteur de l'energie 6lectrique est justifie et compatible avec l'assistance de la Donnees concernant le secteur de l'electricite. La Banque pour l'ajustement economique, ainsi r6alisation de la presente 6tude montre que la que pour la mise en valeur et l'utilisation Banque a une bonne (bien qu'insuffisante dans rationnelle d'autres ressources energetiques certains domaines) connaissance de ce secteur (notamment les ressources renouvelables). dans les pays d'Afrique subsaharienne. C'est cette base de connaissances qui a guid6 les Recommandation 2. Sauf pour les petites choix et la participation des bailleurs de fonds. operations visant A renforcer les institutions Toutefois, les nouvelles orientations rendent ou A remettre en etat les installations, il faut necessaires de meilleures informations dans le s'abstenir d'accorder des prets au secteur de but specifique d'evaluer periodiquement les l'6nergie electrique en Afrique subsaharienne r6sultats du secteur et d'eclairer les decisions dans les pays ott les resultats de ce secteur sur la participation du secteur prive. sont en deca de seuils acceptables dans les domaines technique et financier essentiels2, et out l'on a constate, au moment de l'evalua- Recommandations tion ex ante, des progres insuffisants dans l'ex6cution de reformes dans les domaines Les nouvelles orientations en ce qui concerne suivants: l'octroi de prets au secteur de l'nergie elec- trique se revelent tres pertinentes pour * Mise en place d'un cadre reglementaire l'Afrique subsaharienne - la pauvrete de transparent et objectif comportant des cette region et sa dependance A l'egard d'une clauses juridiques qui garantissent que les assistance exterieure ne justifient aucun services publics peuvent fonctionner de relachement au niveau des normes de qualite. facon autonome, par exemple, dans le cadre En fait, les services publics d'Afrique sub- de contrats de regie ou de contrats de saharienne sont particulierement vulnerables A concession. une mauvaise gestion, et leurs m6diocres per- formances sont l'une des causes de la situation a Application de principes reglementaires budgetaire delicate que connaissent de nom- destines A garantir la discipline financiere, breux pays d'Afrique subsaharienne. des tarifs appropries et l'attribution des contrats de services par appel a la concur- La Banque et les autres cofinanciers pourraient rence et avec des interessements aux jouer un r6le beaucoup plus actif de leader resultats. dans la promotion des reformes du secteur qui sont au cceur du nouveau programme d'action. Recommandation 3. Quand elle encourage la En attendant la concretisation de ces reformes, restructuration et la privatisation du secteur les garanties qu'ils peuvent donner pour de l'energie en Afrique subsaharienne, la favoriser d'importants investissements prives Banque doit se concentrer sur les actions dans ce secteur risquent d'etre tres cofiteuses. prioritaires suivantes: fixer les tarifs d'achat, 24 dkcentraliser la distribution et la separer de la saharienne. Elle doit egalement mettre en production et du transport, recours a des con- place des partenariats pour le deploiement des trats de concession pour des operateurs priv6s ressources humaines et partager la respon- et foumiture de garanties aux producteurs sabilite de l'accomplissement de celles des d'electricite independants. taches qui beneficieraient le plus de la diver- site des moyens d'action sur le terrain et com- Recommandation 4. La Banque doit aider petences des bailleurs de fonds. de ses meilleurs soins les pays emprunteurs d'Afrique subsaharienne a assumer par eux- Recommandation 6. En collaboration avec memes ses nouvelles orientations dans le d'autres preteurs et bailleurs de fonds secteur de l'energie 6lectrique, les pro- interesses, la Banque doit aider a coordonner grammes de developpement institutionnel a et institutionnaliser une action systematique l'appui des reformes et la fourniture d'une visant a rassembler et a analyser les donnees assistance technique par le personnel local ou n6cessaires a la mise en oeuvre des principes expatrie. La diffusion effective des pratiques de la nouvelle politique dans le secteur de menant au succes et le renforcement de l'electricite. l'adhesion des int6ress6s aux reformes doivent faire partie integrante de la pr6- paration des projets. Notes 1. C. Jayarajah et W. Branson, Structural and Sectoral Adjustment: Recommandation 5. La Banque doit conclure World Bank Experience, 1980-92, rapport du Departement de des alliaces stra6giques vec d'aures pr& 'Evaluation des Opt-rations de la Banque mondiale, des alliances strategiques avec d'autres pre- W.ashington, DC, 1995. teurs et bailleurs de fonds afin d'aboutir a un .les objectifs et crit.es de leur 2. Les domaines qui doivent faire l'objet d'un suivi sont les consensus sur les oolectlrs et crlteres ae leur pertes techniques, les comptes fournisseurs et le taux de intervention dans les pays d'Afrique sub- rentabilite des investissements. 25 1. Introduction Do Bank-financed power projects in Sub-Saharan * identifying project design and process fac- Africa present a special case? What is the past tors that have enhanced or inhibited project record? Do recent trends bode well for the applica- performance; and tion of the new sector policy introduced in 1992? As a backdrop to the study, this introduction recalls * suggesting approaches to improve the the evolution of Bank policy since the 1970s. It impact of Bank interventions in Sub- describes the challenge of power sector development Saharan Africa. in Sub-Saharan Africa, a challenge that consists not so much of overcoming energy crises as of ensuring financial viability and reliable and efficient supply. Study scope and methodology The study assesses the outcomes of a cohort of Study objective 44 credits and loans for 41 completed projects based on Operational Manual Statement 3.72, Power projects are less successful in Sub- which was the prevailing Bank policy for the Saharan Africa (SSA) than in other regions. Is power sector until the end of 1992. It also con- the challenge specific to Africa? Was the intro- siders the implications of the Bank's revised duction of a new Bank policy for the sector in power sector policy by examining 25 ongoing 1992 relevant to SSA circumstances? credits and loans, of which 11 have been processed since 1992. The study concentrates on low-income African countries south of the Sahara and on com- Thus, the study involved a review of 69 lend- pleted projects initiated since the energy crises ing operations projects in 26 Sub-Saharan coun- of the 1970s. The study aims at: tries, with a special focus on six representative countries: Burundi, Ghana, Guinea, Mali, * establishing the outcome of Bank-financed Nigeria, and Tanzania. It included visits to sev- projects, particularly the extent to which eral countries as part of the Operations Evalua- they met policy objectives, and assessing tion Department's (OED) audit programs. It Bank and borrower performance; made use of loan and credit documents (staff appraisal and project completion reports, mem- o assessing the progress in and prospects of oranda of the president, and legal documents), implementing the principles of the Bank's audits, sector strategy papers, energy sector new power sector policy; assessments, and studies of the Energy Sector 27 Management Assistance Program (ESMAP). stated in the Bank's Operational Manual State- The study also used OED, task manager work ment for public utilities projects, OMS 3.72, station, and Industry and Energy Department issued in 1978. OMS 3.72 set out broad policy databases, as well as Bank policy papers and objectives in consonance with the public utili- general publications and United Nations and ties paradigm that prevailed at the time. Intemational Monetary Fund statistics. Namely, the Bank was to help: * provide power service on the basis of least- Report outline cost development programs; To set the stage, this chapter reviews the evo- * strengthen the sector's institutions and lution of Bank policies in the power sector improve their efficiency; since the early 1970s and the underlying chal- lenges for SSA countries. Chapter 2 presents a increase local resource mobilization and an overview of the design and performance of catalyze cofinancing; and completed projects. Chapter 3 assesses the portfolio's impact with respect to the policy * improve access to electricity by disadvan- objectives of OMS 3.72. Chapter 4 analyzes the taged population groups. most important factors in the performance of the portfolio and of the Bank and its borrow- ers. Chapter 5 assesses the prospects for the Response to the energy crises Bank's 1992 power sector policy. Finally, con- clusions and recommendations are presented OMS 3.72 largely formalized a time-honored in Chapter 6. practice, one so strong that it was largely unaf- fected by the oil crises of 1973 and 1979. It was changed in 1987 to incorporate environmental Public utilities paradigm of the concerns. 1970s and 1980s The Bank's reaction to the energy crisis was The Bank's tradition of lending for electric multifaceted. It spawned reviews of lending power dates back to 1946 when the first loan for oil and gas projects, which culminated in was made to Chile. It began its power lending 1984 in the policy formulation of OMS 3.82 for to Africa in 1961 with an $8.4 million loan to petroleum lending with an emphasis on mobi- Uganda. By that time, many privately owned lizing private sector resources. Concern with utilities in less-developed countries (LDCs) energy conservation spilled over in the power had been nationalized and most of the power sector. In 1980, a major internal study, "Energy utilities benefiting from Bank loans were state- in Developing Countries," was completed and owned enterprises. SSA countries shared that for the first time a comprehensive review was trait without exception. Also, most became undertaken, not only of supply but also of independent nations in the early 1960s, and demand issues. In 1983, the Bank issued a fur- had low-income and mostly rural economies ther study, also internal, entitled "Energy in with low per capita electricity consumption Transition in Developing Countries." This and relatively small and fragile power sectors. study confirmed and refined the Bank's energy strategy. In the 1980s, the Bank All Bank-supported projects completed in SSA increased its emphasis on management of by end 1993 were designed under the policy energy demand and provision of technical 28 assistance. In collaboration with the United By the late 1980s, it was evident that some fuel Nations Development Program (UNDP), it oil substitution had occurred but, with few carried out a 60-country program of energy exceptions, sector performance in LDCs had sector assessments. These assessments were deteriorated. At the same time, it appeared designed to serve as a framework for invest- that Bank projects had delivered too little on ment and policy decisions by governments key OMS 3.72 objectives and on financial and and external aid agencies. That program in environmental sustainability. turn gave birth to the Energy Sector Manage- ment Assistance Program. At the end of 1992, the Bank introduced a new policy stressing the desirability of operating Sub-Saharan Africa received an important the sector on a commercial basis, energy con- share of this attention. Between 1981 and 1994, servation, and the requisites of environmental 41 energy sector assessments, all of them deal- sustainability. It thus implicitly de-emphasizes ing with the power sector, were carried out in access to electricity by disadvantaged groups. 37 countries. Out of 57 ESMAP studies, 21 were about the power sector, mostly loss The new policy was based on evaluation reduction. results Bankwide, including OED's. The 1992 policy paper attributes the deteriorated sector As for many LDCs, the energy crises had performance to three sets of factors: raised a double challenge for SSA countries- on the one hand, to develop domestic energy a external factors such as commodity prices, resources and substitute fuel oil; on the other, access, and cost of foreign loans; to increase supply and demand efficiency. It was recognized that the latter provided a more * inappropriate governance and national broadly available avenue than the former. Not policies on trade, fiscal, monetary, and all countries had cheap fuel alternatives, but energy sector matters; and they all exhibited high technical losses and fuel procurement costs, especially landlocked * enterprise-related factors such as conflicting countries, which depend on regional trans- objectives, weak management, and staff port corridors. resources. 1992 policy revision Core challenge for Sub-Saharan African countries In the early 1980s, the Bank felt no need for a change in power sector policy. Up to this SSA countries are poor, and their economic point and more so than in other sectors, growth in the 1980s was slow. For the 26 SSA most investments had been successfully countries taken as a whole, GDP expressed in implemented, least-cost expansion had been 1994 dollars was $141 billion in 1970 and $130 an established practice, and human resources billion in 1993, that is $304 per capita. GDP were increasingly skilled. It was thought that grew at 5.5 percent per year in the period all this could continue in a context of higher 1970-80, hovering around $240 billion until oil and coal prices. Energy had become so 1985, when it began to plummet to its recent strategic a sector that government, utilities, low. Nigeria dominated the picture early on and consumers alike would rise to the but not in later years, so part, but not all, of occasion. this evolution can be traced back to the rise in 29 oil prices until 1980 and the sudden drop in case for the deterioration in the terms of trade 1986-87. for major export commodities, and for the mis- guided exchange rate and fiscal policies, the Many of the factors cited above to explain the weak technological and human resources base, deterioration of sector performance apply to and the dysfunctions present in many public the economies of SSA. This is particularly the sectors. SSA countries have no local manufacturing FIGURE 1.1: INSTALLED CAPACIrY OF POWER SYSTEMS IN capacity for power equipment, but their AFRICA VS. OTHER COUNTRIES energy resources endowment is substantial though unevenly distributed. Technically, South Afnica Nirem hydroelectric power could provide some 2,500 Zimbabe 0 TWh per year; there are some 60,000 million C6te dlvoire i tons proven coal reserves, enough for 2,700 Cameroon ¢ I TKn.a a TWh/year for 100 years; crude oil and natural MopbNiaqE"D gas reserves are in excess of 7,000 million tons MO-"'biqe ecs ilo Senetgoal i : and 5 million r3 respectively; and uranium MGaunea deposits greater than 500,000 tons have been Iganda I | deemed recoverable. However, only 0.1 per- Sie- Leone USe cent of the hydro potential is exploited. The Norway oa s A'renti.a cost of harnessing the untapped potential is Colombia . Pakistan high, though with notable exceptions (such as Portugal MalMe: natural gas in C6te d'Ivoire and Tanzania, and Bolivia jB_ _ _ _ hydro power in Guinea and Zaire). These 0 10 20 30 40 50 60 70 exceptions call for large-scale projects, which T'housand megawatts often exceed the country's absorptive capacity, Source: World Bank, Industry and Energy Department. as exemplified by the hydro power schemes of Konkoure in Guinea, Manantali in Mali, and Inga in Zaire. FIGURE 1.2: GDP PER CAPITA VS. ELECTRICITY Power generation systems in SSA countries are relatively small (Figure 1.1), a result of 450 Ghana low levels of electricity consumption: 31 TWh $ 400- ¶ AI I in 1971 and 81 TWh in 1991, that is, a fraction C 350 of the hydroelectric potential of the site of K 300 Inga in Zaire. On a per capita basis, con- *0 250 ' sumption has risen and fallen with GDP: 200 - CtedIvoire_ from 134 kWh in 1971 to 247 kWh in 1980 e 150 and 200 kWh in 1991. These figures are less :_________oo_______-__________ tharL 580 kWh for China and 350 kWh for 1500 TnaTuinea N India but congruent with SSA's low level of 50 50- 0 "-B-rndi development and the predominance of its 0 200 400 600 800 1000 1200 rural sector. First, in all such countries, con- GDP per capita, 1987 constant US$ sumption of commercial energy is very low Note: The arrows point from 1980 (1986 for Guinea) data to 1992 data. and remains so up to a per capita income of $1,000. Second, the share of electricity in 30 commercial energy consumption does not cities because of the low levels of consump- exceed 25 percent except in very industrial- tion and in rural areas where the cost ized countries that are poor in fossil fuel. typically doubles. Evaluations of electrifi- cation programs by OED and others show Power consumption has been more resilient to that the programs' impact on economic econornic recession in Nigeria where prices are growth is not significant in the absence of highly subsidized and in poorer countries like other development prerequisites. Burundi and Tanzania where industrial demand, which is most GDP elastic, is low. The priority for the power sector of SSA coun- Power supply seems to have been a constraint tries is not to catch up with accelerated eco- to growth only in Ghana and Guinea where nomic growth, as is the case in East Asia, or consumption fell because of frequent and mas- repair the environmental damage caused by sive power outages (Figure 1.2). high energy intensity and demand for restruc- turing, as in Eastern Europe. The challenge lies Power supply should not, as a rule, lag primarily in meeting effective demand with- behirnd or race ahead of economic growth. out adding to public deficits or diverting Many LDCs have tried to use the sector as a scarce public funds for social sectors, such as leading edge of development by setting education and health. Efficiency is also an unduly low power prices with the objective of essential indicator of sector performance and spurring economic growth. But facilitating also helps to maximize social welfare (that is, access to and subsidizing consumption of the sector should provide a reliable service at electricity on any substantial scale is an extra- least cost). The imperative for financial viabil- ordinarily costly proposition. This policy has ity is not unique to Africa: many low-income proven unaffordable, even in medium- and countries of Latin America and South Asia high-irncome countries. Electricity generation face the same challenge. That the challenge is is very capital intensive. In most SSA coun- still prominent after years of low petroleum tries, unit generation costs are on the high prices shows that it is daunting and calls for side. Power distribution is also expensive in new and radical measures. 31 2. Review of completed projects From 1978-93, completed infrastructure and Since the issuance of OMS 3.72, the Bank has energy projects in SSA countries received about supported 69 power operations in 26 Sub- $5.6 billion in financing, of which 21 percent was Saharan countries. The cohort reviewed here for electric power. The projects promoted vertical consists of 44 completed credits and loans for 41 integration and an expansion of centralized least- distinct projects in 22 countries. Of these coun- cost planning to capture economies of scale. They tries, a dozen had two operations; only Guinea, emphasized physical components and institutional Kenya, and Zaire had more than two. There are strengthening; projects today give priority to currently 25 power projects under supervision rehabilitation. Technical assistance was strongly in 19 countries; 14 of these were approved by oriented toward power utility management. Over- the board while OMS 3.72 still prevailed (Figure all performance of projects in the study cohort was 2.1 and Annex Tables 1.1 and 1.2). worse than that for other regions: 64 percent of the projects had a satisfactory outcome, and From 1978-93, completed power projects world- institutional development was substantial for wide received a total of $16.5 billion in Bank only 25 percent (27 percent since 1989). Cost funding, of which power projects in SSA recovery results were particularly poor. Sustain- accounted for about 7 percent. Of the total Bank ability of project benefits was likely in only 48 financing of $5.6 billion for infrastructure in percent of the cases (and has declined to 36 per- SSA, the share for electric power was 21 percent. cent since 1989). Objectives and components FIGuRE 2.1: POWER PROJECTS The cohort review indicates that the projects' 11 projects under broad development objectives and the princi- supervision ples used to achieve them were in line with (1992 policy) those established in OMS 3.72 (Figure 2.2). Projects emphasized provision of physical 41 copleted components and organizational strength- 13 pro jc projects ening. Mobilization of cofinancing was often under supervision (OMS 3.72) implicit in the financing arrangements. How- (OMS 3.72) ever, access to electric service by disadvan- taged groups was attempted in only five - countries. 32 TABLE 2.1: LENDING FOR COMPLETED INFRASTRUCTURE PROJECTS IN SUB-SAHARAN AFRICA, 1978-93 Projects Loan amount Sector Number Percent $ million Percent Telecommunications 15 6 308 5 Transport 121 47 2,868 51 Oil and gas 38 15 428 8 Water and sanitation 42 16 817 15 Power 41 16 1,189 21 Total 257 100 5,611 100 Project design included a combination of eight management, including some management categories of physical components: generation, performance contracts. Training components, transmission, distribution, rural electrification, however, were somewhat less focused: ten rehabilitation, general plant, interconnection of (about 30 percent) targeted unidentified sector countries, and multinational generation (Figure needs, confirming that training was not part of 2.3). Vertical integration of power generation- a well-planned training program. transmission-distribution and expansion of cen- tralized least-cost planning were promoted to capture economies of scale. To the same end, Performance attempts were made to integrate national and multinational markets by constructing high Major ratings. Sixty-four percent of the cohort voltage transmission lines and generating projects were rated satisfactory, compared plants designed to supply multinational mar- with 79 percent for Bankwide power projects kets. New generation-particularly hydroelec- (Table 2.2). The cohort's rating reflects more tric plants-and transmission had priority over the projects' relative efficacy in meeting physi- expanded distribution. In more recent years, cal objectives than their success in meeting rehabilitation in general has had the highest institutional development and economic priority, particularly distribution rehabilitation. efficiency goals. Not all power projects com- pleted in the period 1978-93 have institutional On average, about 12 percent of project cost was allocated to nonphysical components. Pro- ject design was typically comprised of a mix of FIGURE 2.2- PROJECT OBJECTIVES studies, training, and technical assistance com- ponents (Figure 2.4). Studies, 106 of them or ,Other (7%) about three per project, were the dominant = __= component followed by 31 instances of techni- cal assistance and 35 training components. strthen institutions- Most of the studies were directed toward (38%) investment planning. The majority of financial aid institutional strengthening studies focused Provide basic an tariffs and organization of sectors and nfrastructure power utilities. Studies on rehabilitation and Increase efficienc the environment were few. Technical assistance (18%) was strongly oriented toward power utility 33 FIGuRE 2.3: DisTRIBUTiON OF PHYSICAL COMPONENTS IN THE COHORT Interconnection of countries/ multinational generation (4%) Transmission General plant (18%) (10%) Rehabilitaon Gtieneration Rural electrification (2%) Rehabilitation Generation Other (6%) - ~~~~~\\ ~~~Combustion i Distribution Generation (23%)o_s\ (38%) _(35%) _2% i ~~~~~~~~~~~~Hydro (61%) Stiam Transmission (27%) development and sustainability ratings. But a percent. This downward trend in sustainabil- comparison can be made for the period ity is another cause of concern in SSA. 1989-93, during which 64 percent of SSA's 22 completed projects had satisfactory outcomes The poor performance of institutional devel- compared with 74 percent Bankwide. The pro- opment was given little weight in the outcome jects' institutional development impact was rating. This was because loans were often the rated as substantial in 27 percent of the cases sector's first or second, which, given the long- (38 percent Bankwide), while sustainability term effort needed for institutional develop- was considered likely in 36 percent (68 percent ment, did not allow sufficient time for Bankwide). When earlier projects in the cohort change-hence, the uncertain and sometimes are included, sustainability ratings rise to 48 unlikely sustainability. 34 TABLE 2.2: OED RATINGS OF COMPLETED POWER PROJECTS, 1978-93 Rating Number of projects Percent Outcome Satisfactory 28 64 Unsatisfactory 16 36 Institutional development impact Substantial 11 25 Modest 21 48 Negligible 11 25 Not rated 1 2 Sustainability Likely 21 48 Uncertain 18 41 Unlikely 4 9 Not rated 1 2 Economic rates of return (ERR). ERRs were recal- lower than 10 percent because the cost overrun culated for 22 of the 41 projects. The results are and the lower-than-expected electricity output paltry when compared with the 12-15 percent offset the consumers' surplus, estimated as the average ERRs of all Bank power projects com- difference between willingness to pay and pleted since 1978: ten projects were below the power price. minimum 10 percent of Bank guidelines, and only three were greater than the appraisal esti- Consistently low ERRs in a given country can- mates-one each in Liberia, Tanzania, and not be dismissed on grounds that tariffs are a Zimbabwe (Figure 2.5). With few exceptions, poor proxy of project output value. Tariffs ERRs were calculated using input market reflect, if not the reality, at least the perception prices, net of taxes and import duties, and tar- by the regulators of the consumers' willingness iffs as a proxy for the economic value of power. to pay for electricity, and it is difficult to argue In eight projects, the ERRs were not recalcu- that economic value of electricity is high but lated because of lack of data. In ten technical that the willingness to pay for it is low. A low assistance and one sector adjustment ERR is a telltale sign of either one, two, or three operation, the ERRs were not applicable. important facts: the regulators' perception and cost recovery policy underestimate the The low values of the recalculated ERRs stem consumers' willingness to pay; generation and from a combination of factors, the most frequent delivery costs are excessive; or the project does of which, in order of decreasing importance, not meet an effective demand. follow: (a) project output valued at the prevail- ing electricity average price; (b) actual volume of power sales lower than forecast; and (c) pro- Institutional development and ject cost overrun. In rare cases, such as the First technical assistance Power and Water Project in Mali, an attempt was made to value the economic benefits by The purpose of technical assistance (TA) is to using the estimated willingness to pay for elec- fill gaps in local skills. Early Bank operations tricity service. Yet, the recalculated ERR was still in SSA (for example, in C6te d'Ivoire, Guinea, 35 FIGURE 2.4: DISTRIBUTIoN OF NON-PHYSICAL COMPONENTS IN THE COHORT Technical assistance Training approaches On-the-job (3%) Operations Management Unspecified Fellowships (32%) (29%) (29%) ~>Manpower T.winnmn > ( 6 Fo~~(6) Twmn% Trtaining center Engineering and construction (29%) (34%) (29%) Technical assistance Training approaches (25%) (19%) Studies (56%) Studies Environment (3% Institutional _ development Investment (21%) planning _ \ ~~~~~(29%) Finance l l l Rehabilitation Fi(n3a2n%C) 5 - | | | | (15%) 36 and Mali) were TA projects with modest FIGURE 2.5: DlSTRIBUTION OF PROJECT ECONOMIC RATE investment components. In the case of OF RETURN Guinea and Mali, the lack of success of lo investment operations resulted in two follow- on projects that were, for all intents and pur- 8 poses, TA projects. The performance varied r with the type of TA, which took the form of 6 - help with project design and construction supervision, utility management, studies, and l 4! training. Management assistance essentially took three forms. The first was "twinning," 2 where management and backup, sometimes including counterpart training, were * provided by a foreign organization. This 0-5 5-10 10-15 15-20 20 and up approach was used successfully in the forma- Economic rate of return (percent) tive stage of Ghana's Volta River Authority in U Staff appraisal reports [] Project completion and performance audit reports the 1960s and of Nigeria's National Electric Power Authority (NEPA) in the 1970s, and again in the reform of Ghana's electricity cor- neering firm for project preparation and con- poration in the late 1980s. The second form of struction supervision. This worked well, par- management assistance was in the "second- ticularly when the consultant came from a ment" of expatriates from other well-run util- country willing to finance the services, as was ities to fill management positions without the case in Ghana, Guinea, and Nigeria. close institutional backup or short-term oblig- ation to train successors. Such an approach Management assistance. Management assis- was used in Botswana to fill the chief execu- tance was most effective when the expatriates tive officer and other crucial management providing the assistance were given executive positions. It was also used by the Uganda authority (Cote d'Ivoire, Ghana) for a period Electricity Board and by the Swaziland power of time. To be accepted, such a transfer utility to fill some key managerial positions. needed the strong commitment of parent The third type of assistance included "hiring ministries and of the local entity's managers. of untied," qualified expatriates, as occurred Where expatriates were not given executive in Malawi. powers, new management practices did not take root (Guinea, Tanzania). Project design and construction supervision. This type of TA was the most common. Practically Management assistance, especially the tem- all Bank-financed power projects in SSA porary assignment of managerial authority to included project design and construction expatriates, is usually strongly resisted, par- supervision in one form or another, whether or ticularly by the organization receiving the not specifically financed by the Bank. Engi- assistance (for example, Ghana, Guinea, neering consultants usually provided these Nigeria). In most cases, opposition is unlikely services. This kind of TA was generally suc- to disappear until constraints turn into crisis cessful, even in less-developed countries, (C6te d'Ivoire, Ghana, Guinea), or when it is which reflects its recognized usefulness and obvious to all that a new organization would acceptance by country counterparts. The coun- have no chance of taking off (Nigeria's newly tries' preference was to retain the same engi- created NEPA in the early 1970s). 37 Studies. Studies covered a wide variety of sub- often partial (nine cases) than substantial (four jects. They were carried out predominantly by cases). The degree of compliance with impor- foreign consultants, Ghana being an exception: tant financial covenants appears to have been the Volta River Authority executed some of the less satisfactory than the overall ratings imply: studies required for the Power VI Project. The compliance with rate of return covenants was studies' impact as instruments of knowledge negligible in four cases out of six; for accounts transfer was mixed because of problems con- receivable, it was negligible in six out of ten; cerning relevance, specificity of findings, and and for tariffs adjustments, compliance was absorptive capacity. negligible in eight out of 13. Compliance with such covenants was not given an important Studies of least-cost development programs, weight in the overall ratings on covenants and tariffs, and human resource development borrower performance for the same reason that appear in many TA programs as a part of institutional performance was discounted in Bank-financed power projects. In most cases outcome ratings-that is, in most cases these they are well justified, except where they tend loans were the sector's first or second and eval- to substitute for action, or where they are car- uators thought finances needed more time to ried out according to "blueprints" that fail to improve than was planned at appraisal. address some of the most important institu- tional capacity problems. C6te d'Ivoire, Noncompliance with financial covenants was Ghana, Guinea, Nigeria, and Uganda provide as pervasive in the distant past as it was in the examples of these weaknesses. recent operations discussed above. The per- centage of negligible compliance is sensibly Training. Training components-often funded the same for rate of return (ROR) and tariff by cofinanciers-are found in almost all the covenants and worse for accounts receivable. power projects in SSA. Training occurs in Performance was better on self-financing and varied forms: on-the-job (often used to train on debt service because utilities had very managers); formal courses and seminars, or a modest targets on both and borrowing was on combination of formal instruction and learning- very favorable terms or restructured into gov- by-doing in the country or abroad; and scholar- einment equity. Table 2.3 summarizes the ships in the country or abroad. In addition, study cohort's performance. suppliers often provide training for personnel operating the equipment being supplied, a gen- erally successful activity carried out both in the Environment and resettlement country during the equipment's installation and initial operation, and abroad in the Completed power projects financed by the supplier's manufacturing facilities. Bank- Bank in SSA seldom raised critical environ- financed projects sometimes build training mental and resettlement issues. Many were facilities and provide teaching materials. Unfor- about plant rehabilitation and had negligible tunately, the performance of training activities or positive impacts. Even when power is only vaguely documented. networks expanded, they were (and still are) at such an early stage of development that the encroachment of power lines and substations Compliance with covenants on natural resources was relatively minor. Thermal generation in several countries was Compliance ratings for 13 recent cases show based on small diesel-fueled sets, a relatively that compliance with covenants was more clean technology. Also friendly to the environ- 38 TABLE 2.3: COMPLIANCE WITH FINANCIAL COVENANTS Covenant Substantial Partial Negligible Rate of return on assets 4 3 9 Accounts receivable 1 3 9 Tariff adjustments 5 5 8 Self-financing 5 4 1 Debt service 10 2 3 Asset evaluation 4 4 4 ment were the coal-fired power plants devel- reservoir were already in place by 1978 as part oped only in Botswana (Morupule) and Zim- of the previously constructed Kidatu dam. babwe (expansion of Huange), which use appropriate technology to abate pollution. Resettlement. A review of environmental and The potential for large impacts on nature and resettlement aspects of projects financed by population, however, was greatest where gen- the Bank in Africa since 1981 noted that eration was based on hydro power. power and other sectors have similar reset- tlement outcomes. Hydro power projects Environment. In the 15 hydroelectric projects account for about 18 percent of the 190,000 completed in SSA, the Bank assessed to vary- people displaced.' Evaluation of resettlement ing degrees their impact on the biota and agri- in the 15 Bank-financed hydro projects in cultural land upstream and downstream of SSA shows that results are mixed but no the plants. In nine cases, the environmental worse than those for other regions. Resettle- impact was considered insignificant where ment was an issue in only five SSA power the projects were small (six cases) or were to projects. In four of them, the number of expand existing facilities (three cases). The families or persons to be relocated was experience for the other six projects was grossly underestimated, as was the magni- mixed. In Ghana, Akosombo and its expan- tude of the effort to restore their livelihood: sion were approved in 1962 and 1969, and Akosombo (about 84,000 people); Kpong (not Kpong was approved in 1977, long before spe- the 5,700 people estimated at appraisal but cific Bank guidelines on environment and about 7,000 people); Kiambere (not 1,000 but resettlement were published (1980 and 1984). about 6,500 people); and Ruzizi (not 30 but The project completion and performance about 2,600 families). Although the lapses for audit reports emphasize resettlement issues Akosombo-the 84,000 resettlers were dis- and do not discuss physical impacts. placed in a last minute operation at the time Although these projects were approved in of reservoir impoundment-helped improve 1984, project documents do not report on the resettlement in the Kpong project, 80 percent impact of Kiambere's 25 km2 reservoir in of the settlers and hosts remain dissatisfied, Kenya or that of Ruzizi at the borders of particularly with post-resettlement services. Zaire, Rwanda, and Burundi. For Nangbeto, Similar errors and lateness occurred later for the University of Benin concluded that the Ruzizi (no resettlement plan, allocation of flora and fauna did not need special protec- land was still pending in 1992) and Kiambere tion because the affected species were well where 4,500 people received only cash com- represented elsewhere in Togo. For Mtera in pensation for cultivable land and property Tanzania, satisfactory health programs, a valued well below market. On the other nature reserve, and a fishing program in the hand, 11,000 people affected by the Nangbeto 39 project were successfully resettled in Togo. In environment was not systematically applied sum, in the three out of five cases where elsewhere in the region. resettlement issues arose, these issues were not handled in compliance with Bank guide- lines, even though projects were approved Note after the guidelines were published in the early 1980s. More importantly, the learning 1. Cynthia C. Cook (ed.), Involuntary Resettlement in Africa: that took place early in Ghana to restore Selected Papers from a Conference on Environment and Settlement Issues in Africa, World Bank Technical Paper No. 227, Washing- resettlers' productive systems and social ton, DC: World Bank, March 1994. 40 3. Program impact Overall, Bank lending had a substantial impact on their very size caused financial problems least-cost expansion and mobilization of cofinanc- when demand growth proved considerably ing, but in terms of other OMS 3.72 objectives, the less than originally estimated, as in the case of impact was limited. After the two oil shocks, large Tanzania's Mtera project. hydroelectric plants were often seen as the least- cost alternative. Investment in transmission con- From 1973 through 1991, hydroelectricity's tributed to market integration. Cost and time share of total power output increased from 42 overruns, while substantial, were no worse than percent to 59 percent. It is estimated that in those for other regions. Labor productivity was low, 1991, hydroelectric generation of some 28,000 and planned service objectives and standards were GWh helped SSA save 8.3 million tons of fuel. seldom met. By the early 1990s, losses were still high, as were arrears, particularly those of the pub- ESW and later energy assessments provided lic sector. Cost recovery and utilities' contribution good quality analyses of development issues to investment financing were inadequate. Increased and options. But these analyses did not always access to service by the poor did not-and probably influence project identification. With the could not-take place on a substantial scale given exception of Nigeria, few options other than thefinancial woes of the utilities and the stagnation hydro were considered: coal was developed of per capita income. only in Zimbabwe; geothermal power only in Kenya; and gas could have been justified in The impact of completed projects is assessed C6te d'Ivoire and Tanzania but was not pur- below with respect to the policy objectives of sued because neither the Bank nor the country OMS 3.72. was ready for that option. The Bank gave tem- porary support to hydro projects that were marginal, such as Soubre in C6te d'Ivoire and Least-cost development Manantali in Mali. Worth noting, however, is that the Bank refused to finance several hydro Most completed projects included generation projects that were not economical (Kompienga expansion. In the aftermath of the 1973 and in Burkina Faso, Konkoure in Guinea, and 1979 oil shocks, relatively large-scale hydro- Bumbuna in Sierra Leone). electric plants were often considered the best alternative for expanding generation. These As may be expected, the drop in oil prices large schemes provided economies of scale and since 1986 has reduced the expected benefits of contributed to market integration, although hydroelectric plants in a few SSA countries. 41 Gas altematives now look more attractive in Bankwide median on losses, accounts receiv- Nigeria, Tanzania, and C6te d'Ivoire, which is able, self-financing, and, to a lesser extent, most vulnerable to hydrological uncertainties. debt servicing and returns on fixed assets. Electricity prices ranged from the very low Still, hydro has an edge over thermal power in (2¢/kWh) to the very high (25¢/kWh) and other countries. The annual generating costs of very seldom covered the full cost of service. three completed hydroelectric plants (150 MW Kiambere in Kenya, 80 MW Mtera in Tanzania, Time overruns. Of the 41 completed projects, 17 and the small 26.6 MW Ruzizi shared by experienced time overruns in excess of 50 per- Burundi, Rwanda, and Zaire) range from 4.6 cent and six in excess of 100 percent. The aver- to 7.7¢ per kWh. For the large 40 MW diesel age time overrun of 49 percent compares well and 30 MW gas turbine generating plants built with the average 60 percent time overrun for in landlocked places of SSA and operated with all Bank power projects since 1974.1 None of liquid fuel from crude oil at $20/bbl, the gen- the lumpy infrastructure projects were com- erating costs range from 7 to 10¢ per kWh, or pleted on schedule, although a few sectoral 11 to 170 per kWh if crude oil prices were to adjustment, technical assistance, and engineer- jump to $30/bbl. These costs are higher for ing operations were. The most frequent causes smaller diesel and gas turbine plants. of time overruns include delays incurred by borrowers in meeting credit/loan effectiveness Distribution expansion received a smaller conditions and in providing counterpart share of attention. Overall, generation (with funds; protracted procurement processes; 31 components) and transmission (with 30) bureaucratic delays affecting the importation dominated over urban and rural distribution of goods; unexpected technical problems; defi- networks (with 20). Distribution normally cient project management; and delays in carry- does not fare as well in other regions for two ing out studies. Less frequent causes include reasons: (1) many countries in other regions the suspension of credit/loan disbursement have a greater problem coping with genera- because of borrower noncompliance with tion requirements, which are very capital- major covenants and government failure to intensive; and (2) current Bank power lending meet its obligations with the Bank. practices are not well adapted to projects that involve smaller, dispersed components, use Cost overruns. Forty-one percent of projects little foreign exchange, and call for relatively had cost underruns, 24 percent had costs less procurement through international com- about the same as the original estimate, and petitive bidding. the remaining 35 percent experienced overruns about evenly distributed in the range of 10 percent to 50 percent (only one project Efficiency and strengthening having exceeded 50 percent). Compare with institutions the 30 percent cost overrun experienced by all Bank power projects since 1974 .2 The most fre- Project cost and time overruns, while substan- quent causes of cost underruns were cancella- tial, were no worse in SSA countries than in tion of project components for lack of other regions. But improvements to the effi- financing (shortage of counterpart funds or ciency of technical and commercial operations failure of cofinancing to materialize) and of SSA power utilities were, with few excep- prices lower than those estimated for major tions, only marginal. By the early 1990s, most equipment procured through international SSA countries were faring worse than the competitive bidding. The most frequent causes 42 of cost overruns were underestimation of base Labor productivity. Productivity, measured by costs and contingencies at appraisal, claims by operation and maintenance costs, number of contractors of civil works, and additional engi- customers per employee, and production per neering and administrative costs induced by employee, was also low (Table 3.1). To address time overruns. Importation of services tended these deficiencies, most projects chose the route to be beneficial for engineering and construc- of skills enhancement, but their approach was tion supervision. piecemeal and did not form part of comprehen- sive manpower development programs Rehabilitation versus new capacity. Power plants embracing the entire sector. The impact of the and distribution systems were rehabilitated efforts deployed ranged from modest to negli- (Ghana, Guinea, Tanzania, and Zaire), but gible. As a way to circumvent the weak human sometimes after less urgent expansions (Tan- resource base and to gain time to redress this zania, Zaire). In Ghana, the Volta River situation, new options have recently been con- Authority was particularly successful in sidered: management contracts in C6te d'Ivoire, assisting the Electricity Corporation of Ghana Ghana, Guinea, and Mali, and independent to rehabilitate its northern distribution net- power generation in C6te d'Ivoire. work. The outcome of most projects was mixed, and the sustainability of the physical The operating indicators presented in Table 3.1 improvements uncertain (Guinea, Tanzania), are generally used to gauge productivity. The due to lack of effective maintenance. In other number of consumers and MWh per employee cases, the outcome was unsatisfactory as the depend to a great extent on the general eco- targets were only partially met and achieve- nomic conditions of individual countries and ments unlikely to be sustained (Sudan, Zaire). the size of their power systems. Still, a major- By any standards, total electricity losses were ity of the countries under review exhibit ratios very high, ranging between 15 percent and 20 below the Bankwide median. percent for most countries, with a few in the 30-40 percent range. Two-thirds of the coun- Service objectives and operating standards. Ser- tries experienced a loss rate higher than the vice objectives and operating standards are Bankwide median of 15 percent (Table 3.1). embodied in laws, decrees, regulations, and The lack of disagregated data makes it impos- policy statements, and in concession, manage- sible to assess the extent of nontechnical ment, performance, and other contracts. They losses by cause, that is, illegal connections, purport to define the service area, including and underbilled and unbilled electricity. who should be served, and the quality of TABLE 3.1: OPERATING INDICATORS IN THE EARLY 1990S Total system losses (%) Consumers per employee MWh per employee Sub-Saharan Africa High 40 122 1,308 Low 7 9 5 Median 18 31 240 Bankwide Median 15 104 602 SSA cases above Bank median (%) 67 5 15 43 service. All the countries under review have a financial projections before they can be used more or less elaborate body of objectives and as targets for setting average tariff levels. In standards. Among the obligations of power C6te d'Ivoire, capacity was abundant, and producers, the planned quality and reliability the long-run marginal cost so small that it of service have seldom been met. In extreme was not considered viable. This case is typi- cases, low service quality causes industry and cal of many SSA countries where growth has individuals to install backup auto-generation been slow and capacity expansion has beyond the extent that would be economically increased debt service burdens. justified. In 1985, for instance, Guinea had a power generation shortfall of about 47 percent In spite of the many pricing studies carried of estimated requirements; load shedding had out, information on electricity supply costs in become a daily reality. From 1983 to 1992, the SSA is unreliable and insufficient to allow private sector installed for its own use some meaningful comparisons of revenues with ser- 70 MW of power generation, and in 1993 pro- vice costs. But a comparison of average rev- duced some 109 GWh of electricity, that is, enues across countries does provide an almost as much as ENELGUI, the national indication of the relative efforts made to electricity enterprise. recover costs. Table 3.2 and Figure 3.1 portray the ranges of average revenue per kWh and Tariff setting. Technically, electricity pricing is compare the experience of the early 1990s with complex. Thus, in most countries, the work that of the late 1970s. In some countries, prices of consultants has often been used as an show a decreasing trend toward levels as low "anchor point" from which subsequent as 3-4/kWh. Such prices are lower than the adjustments have been made, frequently long-run marginal cost and prices in most based on cost of living or other price indices. countries. In Asia and Latin America, with the Long-run marginal cost (LRMC) has usually exception of China, Ecuador, Honduras, featured prominently in these tariff studies. Nepal, Trinidad and Tobago, and Vietnam, the LRMCs provide good guidelines for improv- price of electricity is in the range of 7-14¢/kWh3 ing tariff structure but must be vetted by while in OECD countries 13¢/kWh is the average tariff.4 Only a few SSA countries FIGuRE 3.1: AVERAGE REVENUE FROM ELECTRICIrY SALES collect 18 to 22¢/kWh: Benin, Niger, Senegal, and Togo. None of the countries under review has incor- porated tariff setting rules in their laws or set W 4I up independent tariff boards. Instead, govern- ments have formulated their tariff objectives in t 3 - m n _ r policy statements, issued mostly prior to exter- nal borrowing, including when borrowing 2 2 j f _ _ _ r from the World Bank. However, due to politi- cal expediency, such statements have often been diluted or ignored. 0-2 4-6 8-10 12-14 16-18 20-24 Another difficulty has been the lack of up-to- US t/kWf2 date financial information. In many of the Sub- * 1978 G 1991 Saharan countries, sector entities can run out - of cash long before financial statements are 44 TABLE 3.2: FINANCIAL INDICATORS IN THE EARLY 1990s Outstanding Rate of return on Debt service accounts receivable revalued assets (%) coverage (incidence) (days) Sub-Saharan Africa High 15 80 462 Low -16 -534 60 Median 4 4 131 Bankwide Median 6 16 84 SSA cases above Bank median (%) 41 23 67 available. Tariff adjustments are frequently with arrears at 460 days with the low price of made on the strength of tentative financial 3.2¢/kWh and Sierra Leone at 390 days with a projections, mostly on an ad hoc basis, too late price of 10.8¢/kWh. to enable an entity to meet its obligations. This results in the need for additional measures, Ineffective billing and collection systems, such as rescheduling or converting into equity weak management, and lack of penalties or part or all of the sector's debt. willingness to apply them to delinquent cus- tomers are often cited as the causes of this Accounting, billing, and collection. Without chronic problem. In the harsh economic envi- exception all Bank loans/credits include ronment of the 1980s, enterprises and house- standard covenants aimed at ensuring ade- holds were hard put to pay their electricity quate accounting, billing, and collection. bills-the bulk of the arrears were from the However, in SSA the results are not encour- public sector. The problem was exacerbated by aging. In the early 1990s, collection of elec- government not allowing the power compa- tricity bills in two-thirds of SSA countries nies to withdraw service from public sector was worse than the Bankwide median (Table entities for nonpayment. Repeated Bank 3.2). More than 75 percent of outstanding efforts to address this problem (covenants, dia- accounts receivable were more than 90 days logue, and other understandings), particularly old: 24 percent were between 90 and 150 in the periods preceding the approval of a new days, and the remaining 52 percent were credit, produced only short-lived results. It is more than 150 days. While there is a percep- not exaggerated to conclude that until govern- tion that collection efficiency was no better in ments regain fiscal control, and adopt a more the early 1980s, the fragmented nature of commercial outlook, the problem of public available information precludes a meaning- sector arrears will continue. ful comparison. A handful of countries have started using Arrears tended to increase with the billed management contracts or lease contracts with price of electricity: both were small in Malawi reputable independent operators as an expedi- and Zimbabwe; both were high in the Benin, ent way to introduce commercial discipline in Central Africa Republic, and Mali. However, the power utilities. Box 3.1 delineates the dif- the worst performance belonged to Nigeria ferences between the two. These contracts 45 Aefmanagemento coangeact poisy anfrs agreemet thecontrcbugtars caledasue managementd pearlior- sthroughy whinh oxperaina is con 6trodlIofirea corn mance ontract. budgets o i dl mn T'epan riparte company nwrnis g dlgthed towe an reoeeeetiiycnsmto,nn exsternaloerato Thise agreementhis fomlan opyertationstcntract isana agrement oes ivrwedlyameium-iterms i contractin Peersnnel cothrough which lcanly authoriiges grnt Gcon-, from ctheoexers,nalit opearnsaitingeeonl c onGn et) an op ratorl. the right cedtehoo someofnthecmays kfetveycleytd positions3, buts the , istallatos. Therd beneficiary ofer wthe lreas compatiny raemaopinsathe ownsuers ofais pnaaym(essr)ma bevs as privatgorosmi-pubicdcon- tironsund 98pecntr al finv6pes ent decisins p98; a tany. Tsh less or i oinsib fore and otera The topgoerating company'senterisvention is adong and ageels to maintain instllaction csts. aicoetion ,to plachion h -e persnn. e ' t-. T ontr wimethin ar aue the companysheacy itoma earry provnidl erformamnim.Um levea ofs/cervice andS about one-othr shortf th m tmiatssons Thae establfishnqality standards ftot ergy ge foperator spi ihrb the goemetaecompaspnysitbis atequanddsrbtedrtun The less ors is opeatidn on th foraerviing bye finacial' dbtCAdce aDdespbassto prdtherie operatfingabalanceatInstallations 46 not tre foebathesks related to oper- are m adeaviable to the lessor by the local ations When he opeator' reuerto is auhrty nxhaneora entl fee, whichff (b illing rate, reovr rats an g-gso on)0i or l giertly tog-term- contract lastingfrom0 i00040 qult criteria ^ (availa ii$ty sg rate,Vssgg andB soi on), 10-2 years.40 Sow -cc W orld Bank..00i ):;ig0j:-t$0 l,Bt004sil4020 : t;gB:0;42:i 042 :0000g :00020ll0;0giiJ:0, r400g 0000 :l40 reflect a major change in policy. The first albeit specific budgetary measures introduced earlier still very young experience is in Cote d'Ivoire. to ensure that the budgets of individual mini- The private company now running the power istries covered electricity consumption, non- system under a lease contract has an payment has continued. Management or lease overwhelming interest in collecting revenue contracts have recently been signed in Ghana, from customers, as it earns its fee only on Guinea, and Mali. Use of advanced technol- amounts effectively collected. In FY92-93, its ogy, such as hard-to-tamper meters with pre- collection rate for private consumers was paymnent devices, is being considered in around 98 percent, up from 63 percent in 1988; Tanzania as a way to avoid arrears and meter due to government nonpayment, its overall reading, as well as to decrease collection costs. collection rate reached only 85 percent. Gov- ernment arrears caused the company to retain Financial performance. All loans/credits in SSA about one-third of the money that should have have financial covenants that promolte flowed to the government agency responsible adequate returns on assets in operation or a for servicing the sector's debt (CAA). Despite predetermined self-financing ratio. Few ccun- . ox 3.2: : j ~ERTA: .:C : lRNG:CASHCUSThAD f V fmITO ::::;3 e*2. Nl .g 0:? ,...A.~~~~~~~~~,: :. V :. .; Electicit tarW,iff emai-ned unrchanged:lid dl!bt fserivk afte covesin f tn betwe~en: I9794and 1989. Avrae tariff were ter det nt equt n rn qlan inadte -ute even to cover c rt s Yo a yosts. Substantial ixnceases in mk 989 -ed assets basis, a ea2percent pre -. eale dthe Nationalo ho h n e e .it (NEA to ee opeatngcots(ith u aiise-NEAs dfcts inctas dep reqatin cau oe on i -stra ct rpl Sone World an.------r,.. .'' '''''' ,' .... Pe _ S S'., d ''oes g tries met these objectives, among them, Cote 5¢/kWh, reflected efficient operations as much d'Ivoire and Ghana (Volta River Authority as adequate tariffs. And some countries exhib- only). The financial rate of return is of special ited negative RORs, even with average interest when compared with the prevailing revenues over 10¢kWh. These were mostly opportunity cost of capital. However, to be small systems such as those in Central African meaningful, the ROR must be calculated on Republic, Guinea, and Sierra Leone. the basis of revalued assets, a condition that seldom obtains (Box 3.2). Ensuring an adequate threshold rate of return on revalued assets is difficult in a period of An analysis of available indicators from the high inflation or after a major currency deval- early 1990s points to generally inadequate uation. Generating sufficient cash internally financial performance. In about 60 percent of to finance the largest possible portion of the SSA countries, rates of return on revalued net cost of investments can be far from satisfac- fixed assets in operation-and debt service tory given the "lumpiness" of investments coverage-were worse than the Bankwide and the long-term nature of power facilities median (Table 3.2). On self-financing, three out (see Box 3.3). of four SSA countries were again worse than the Bankwide median, disappointing results The facilities of the electric power sector are given the slow asset growth of SSA countries long-term assets and for this reason long-term in the 1980s. RORs ranged from 2.5 percent to business and financial planning are of para- 7.5 percent, an improvement over the 0-5 per- mount importance. The lack of integrated cent rates of return observed in the late 1970s. business planning within the utilities is one of Kenya, Malawi, and Zimbabwe were excep- the greatest weaknesses in SSA. Investment tions with RORs around 15 percent, while planning and financing are sometimes carried Guinea, Nigeria, Rwanda, and Sierra Leone out entirely independently of the operating obtained negative returns in the range of -7.5 utilities and of the willingness of the consumer percent to -16 percent. to pay. If tariffs that are already insufficient to cover costs are too high to be increased, what High to acceptable rates of return as in Malawi is the justification for expanding capacity? Yet and Zimbabwe, which charge less than this happens, while governments allow the 47 lated between a00*t rate o0f re02,ttunand a cash4 objecives When it 2did i4meet; obetives,00g$0 it flow.33 ll0000It changed three42i t 5imes, jeac2h timA02e200 tl2wa.s&t:U usuall afte 2a debt toequt conver:sion.l;0 met. Poor 0004403operating effici00ency, infation,000 003had no disc0ern}ibeipacBt 'on the&j2 uitys00000000 Souret World Bank. ~ ~ ~ ~ r utility to default on its debt, and to reschedule 13,000 in the period 1985-90. In COte d'Ivoire, or convert debt into equity, thus tolerating Bank and cofinancier lending helped bring elec- inadequate tariffs, hiding operating tricity to more than 120 villages, including theft inefficiency, or both. health centers, schools, and community services, and to about 2,700 low-income house- The implementation of viable operating and holds in isolated grids and "reseaux araignees." financial policies would also require readily In Guinea, Bank financing helped 1 0,000 addi- available foreign exchange for servicing debt, tional households receive electricity by 1986. timely acquisition of spare parts and repair Current Bank lending is helping Ghana imple- material, and investment of temporary cash ment the District Capital Electrification and the surpluses, a rare occurrence in the Sub- Self-Help Electrification Program: by 1994, 20 Saharan region. district capitals had received electricity, as had 240 towns and villages located within 20 km of eine supply routes in the national electrification Access by the poor scheme. In the latter case, the towns and villages made material contributions (poles, Falling or stagnant per capita consupe tion of labor) to the construction of lines. Earler, in the electricity in many SSA countries could be a mid-1970s, Bank lending assisted Nigeria in sign that more small customers have been con- increasing residential connections by more than nected to electricity. Progress was made on con- 600,000 in 43 cities and 41 towns. In the 1980s, nections, but in most countries it was too the addition of 930 distribution transformers modest to affect per capita consuiption. With electrified as many villages. few exceptions-Burundi, C6te d'lvoire, Ghana, Guinea, and Nigeria among them-the Overall, electricity service coverage in SSA provision of electricity service to low-income countries is modest (Figure 3.2). Massive con- households was pursued weakly or not at all. nection programs such as Nigeria's became Where it was pursued through distribution or the exception in the 1980s. The economic crisis rural electrification components, it did not depressed incomes-mostly rural-and prove sustainable. In Burundi, 6,225 additional demand for new connections. Also, cost recov- connections brought the total number of con- ery policies in SSA have generally tended to nections to households in Bujumbura up to protect existing customers, wealthy or not, 48 even when the need to reduce utilities' deficits FIGuRE 3.2: ELECTRICITY COVERAGE IN AFRICA VS. OTHER was pressing. Everywhere, generously subsi- COUNTRIES dized tariffs existed for most, if not all, low- voltage customers.5 That they benefited the sA=a == Nigeri landlords rather than the poor consumers is Cbte _ Ghana plausible given the pattern of urban housing 52b0neb _ Canmeroon tenure in many SSA countries. Kenya F MozaynbiqeI maUganda Madagascar A household connection to the grid is expensive h (for example, $600 in Burundi, $240 in Cote Sierra LZeone d'Ivoire). It is the recovery of that cost, not the UK price per kWh, that constitutes the greatest hur- ANo- Argentina dle to getting electricity. More consumers Co would be able to afford it, and more utilities Bolivia India could recover their expenses, if the connection Pakist. cost were spread over the life of the distribution 0 20 40 60 80 100 system. In this regard, a worthwhile lesson may Percent population with electricity be borrowed from Cote d'Ivoire's water supply Source: World Bank, Industry and Energy Department. sector, where, in the early 1990s, the cost of con- nection for those with limited consumption was included in the general water tariff, and "free" cent. In the Asia and Latin America and connections made. The result was dramatic: in Caribbean regions, the Bank has funded the space of two to three years, about 30 percent respectively 24 percent and 31 percent of more customers were connected. Bank-financed power projects. Table 3.3 reveals a steep decrease in the coun- Resource mobilization tries' share of project financing, from 20 per- cent in the past to about 5 percent for ongoing Since 1978, investment in Bank-financed, com- projects. The countries' relatively low contri- pleted projects in SSA has reached $3.3 billion, butions stem from their poor overall economic of which the Bank and the cofinanciers have performance, low cost recovery, and weak or funded 36 percent and 44 percent respectively absent local capital markets. However, as the (Table 3.3). For ongoing projects, commitments countries make good on their obligations to amounit to $2.3 billion, of which the Bank's provide financing for costs overruns, typically share is 49 percent and cofinanciers' is 46 per- 20 percent of total costs, the respective shares TABLE 3.3: FINANCING OF POWER PROJECTS IN SUB-SAHARAN COUNTRIES ($ millions) Bank Cofinancing Country Total $ millions Percent $ millions Percent $ millions Percent $ millions Percent Completed projects 1,189 36 1,447 44 634 20 3,273 100 In supervision 1,136 49 1,066 46 121 5 2,323 100 Total 2,325 42 2,513 45 760 14 5,596 100 49 of financing may be expected to remain essen- five, AFDB five, CDC three, and SIDA, tially the same as in the past. Total cofinancing KFAED, and NORAD, with one each. One can of 45 percent of project costs is substantial, and speculate that the lending institutions and the Bank deserves some of the credit for its countries that have participated in only one or catalyzing presence. two operations since 1978 do not have a strong commitment to the region's development. Cofinancing since 1978 has involved as many as 39 cofinanciers comprising 28 multilateral The study examined the power sector's foreign and bilateral lending institutions, nine coun- debt in relation to total country debt in six tries, and two private lenders (Figure 3.3). countries for the period 1987 to 1991. As a per- Next to the Bank, the African Development centage of total country debt, the foreign debt Bank (AFDB) has contributed $266 million and of the power sector was found to have the European Investment Bank (EIB) $203 mil- decreased from 13.4 percent to 10.5 percent in lion. Other cofinanciers having provided $30 Burundi; 8.6 percent to 7.7 percent in Cote million or more include Commonwealth d'Ivoire; 4.9 percent to 3.3 percent in Guinea; Development Corporation (CDC), Caisse 12.6 to 9.2 percent in Mali; 17.2 percent to 6.1 Francaise de Development (CFD), Kuwait percent in Nigeria; and 8.0 percent to 7.4 per- Fund for Arab Economic Development cent in Tanzania. In absolute dollar terms, the (KFAED), Canadian International Develop- power sector's foreign debt has remained more ment Agency (CIDA), Kreditanstalt fur or less constant in Burnmdi, Ghana, Guinea, and Wiederaufbau (KfW), Norwegian Agency for Mali, but has increased by 42 percent in C6te International Development (NORAD), and d'Ivoire and decreased by 42 percent in Nigeria. Swedish International Development Agency Its composition has shifted significantly from (SIDA).6 In terms of the number of projects bilateral to multilateral sources of financing. cofinanced, EIB heads the list with 14, The ratio of multilateral to bilateral and other followed by CFD with eight, KfW six, CIDA sources of financing was 30:23:47 in 1987 and changed progressively to 48:25:27 in 1991. FIGURE 3.3: COMPLETED PROJECTS: CONTRIBUTIONS BY MAJOR COFINANCIERS Niotes 300 1. 1992 Evaluation Results, World Bank Operations Evaluation Department, Washington, DC: World Bank, 1994, Figure 1.11, 250 - p. 73. 200 - 2. 1992 Evaluation Results, Figure 1.12, p. 74. 3. A. Malhotra, 0. Koenig, and P Sinsukprasert, A Survey of Asia's Energy Prices, World Bank Technical Paper No. 248, 150 * Washington, DC: World Bank, 1994. 100 - B - | 4. Organizaci6n Latino-Americana de Energia, Energy Statistics 1992, Quito, Ecuador, 1992. 50 * * * * 5. In Ghana, for instance, most of the low-incoine residential households consume less than 200 kWh of electridty per month; one-quarter consumes less than 52 kWh. Yet, every consumer is 0AD CDC KFAED W SIDA entitled to a life-line block of 100 kWh per month at a flat $0.87. EIB CFD CIDA NORAD Consumption above that block is priced at only 3 /kWh. Cofinanciers 6. $30 million equivalent is the average amount lent by the Bank in 41 completed projects. 50 4. Performance factors External and country factors-the oil crises, macro- design and implementation variables. Most economic instability, and recession-influenced external factors, such as international interest project outcome and impact. But these factors also rates, currency movements, and terms of trade, existed in other regions. Process factors often played a role in power sector and project per- viewed as defining Bank relationships with Sub- formance insofar as they influenced the cost of Saharan countries played a major part. Varying capital, fuel, spare parts, and other imports, as project objectives created difficulties. For example, well as the economy at large. This influence the introduction of nonpower components increased was definitely negative. In many cases, local project complexity, and the numerous adjustment currency devaluations caused cost underruns operations seldom supported sector objectives. Bor- in dollar terms; in local terms, they caused rowers did not own institutional and policy objec- overruns and increased the debt burden tives, except in rare cases, when the situation had (Ghana, Tanzania). International fuel prices become dismal. No evidence was found that the also influenced the finances of power com- Bank had a significant influence on nurturing own- panies with mainly thermoelectric systems ership. Bank tolerance of inadequate compliance (Senegal, Sierra Leone); the impact was nega- with covenants compounded the problem. Except for tive until 1985, and positive afterwards. some studies, technical assistance was generally relevant, but seldom elicited borrower commitment; Regional/country factors played a role as well. where it did and consultants adapted well to local Indeed, the influence of fuel prices was conditions, success occurred, even in the delicate masked or aggravated in many countries by area of management assistance by expatriates. fluctuations in the availability of hydroelectric Donor coordination was reasonably good on project energy. For instance, in Sahel countries, a long implementation, but competition among donors period of drought between 1978 and 1985 sometimes undermined the Bank's policy and com- depleted reservoirs and eroded utilities' finan- plicated the design of technical assistance. cial reserves; the drought also hampered eco- nomic and therefore power demand growth. External and country factors The weakness of the human resource base in SSA countries is often cited as a problem. It Most factors influencing project performance may partly explain some of the technical inef- are usually grouped into three categories: (1) ficiencies encountered in project execution and external factors, (2) country and sector charac- utilities operation (high losses, low capacity teristics, and (3) process factors, for example, availability). Still, a comparison with India's 51 state electricity boards-where skilled labor is Power and infrastructure. Bank objectives as not scarce but where similar inefficiencies are stated in OMS 3.72 were the same for all utili- frequent-indicates that more factors are at ties: power, telephone, and water/sanitation. play here, in particular the institutional frame- Strictly though, the emphasis should have work that determines autonomy and incen- been different. For example, promoting access tives in management and execution alike. to service by disadvantaged populations can be justified more easily for water and sanita- All external factors and many of the country tion than for power-an expensive energy factors listed above were shared by many with often cheaper substitutes-and telephone countries in other regions. In particular, Latin services. Also, achieving reasonable cost of America was rocked by macroeconomic insta- service is often possible at a local scale for bility as much if not more than SSA. If there is water and telephone, but almost never for a specific difficulty with Africa, it must there- power. Differentiation in the identification and fore come down to Bank and borrower per- design of the various utilities should have fol- formance. This performance was rated as lowed, but the Bank usually fostered planning satisfactory in a high percentage of cases at the national level for all sectors, and chose because of the good execution of physical to overlook the cost and socioeconomic justifi- components. The evaluation would have been cation of underpricing electricity almost as less favorable if policy and institutional com- much as it did for water. ponents and covenants had been assessed more critically. With this in mind, it is appro- Power and biomass. Objectives and components priate to focus on a few factors related to the dealing with traditional energy resources process of project design and implementation. started appearing in power projects in the These factors, often seen as central to project 1980s. This occurred in Mali where the projects outcome, include: also dealt with water supply, and in Burundi, Madagascar, Tanzania, and Zaire where they * choosing project objectives and ensuring included biomass and improved stove compo- their relevance; nents. The latter were mostly pilots, and met their objectives in two out of three cases. In the * obtaining borrower ownership; same period, about 19 agriculture/forestry projects featured fuelwood plantations, 70 per- * optimizing Bank involvement; cent of which were successful. The inclusion of biomass components was not overly detrimen- * providing effective technical assistance; and tal to the outcome of the biomass or power components, but it tended to make priorities * mobilizing cofinancing and donor more diffuse and demanded a broader range coordination. of skills that often was not available to super- vision missions. Choosing project objectives Traditional energy is essential to most people in Sub-Saharan Africa. It raises not only a need Bank-country relations in the electric power for fuelwood plantations, but also raises issues sector could be expected to be affected primar- of rational distribution, pricing, and use. The ily by the dictates of OMS 3.72, which lists the Energy Sector Management Assistance Pro- broad objectives to be pursued by staff in lend- gram dedicated 13 studies to household ing to the sector. energies in 11 countries and 23 studies to 52 nonconventional technologies in 14 countries objectives were specifically addressed in sepa- (biomass, charcoal, stoves, peat). These studies rate power projects, which were coordinated provided fresh opportunities for the Bank not with broader adjustment operations. only to pilot a few biomass components in power projects but also to develop stand-alone OED evaluations' show that SALs in the 198Cs operations that could demonstrate its ability to were most effective in reforming the energy design small but cost-effective loans in a non sector when (a) reforms were urgent because capital-intensive area of the energy sector. Yet, energy consumption per unit GNP was high the study did not spot any such operation and prices were very distorted; (b) reforms among the completed projects. were easier because energy intensity and the share of industrial consumption were high; Power and macroeconomic objectives. Power is and (c) technically sound action plans had also at the heart of the fiscal and foreign been prepared (often under previous invest- exchange imbalances of many SSA countries. ment loans), and all they needed was a deci- In some cases, power projects became vehi- sive push by core government entities cles for granting balance of payment relief, (finance ministry). These conditions existed with their power sector objectives subsidiary less for power than for petroleum and less for to broader goals. Sometimes (Nigeria), the SSA countries than for other adjusting ones. It efficacy of nonpower-specific projects suf- is only recently though that ESW and ESMAP fered with respect to power sector objectives studies have begun to focus on preparing when major sector principles were left aside, country-specific reform action plans for the which might have been avoided had a free- power sector. standing power project been implemented instead. Conclusion. All of the findings point to the need for a carefully designed country as- In the 1980s, a total of 23 SALs were imple- sistance strategy that is based on substantive mented in SSA countries, of which eight, in sector work undertaken in cooperation with eight countries, had energy sector conditions. the borrower. The pursuit of multiple objec- More often than not, adjustment operations tives is inevitable, given the Bank's agenda, were missed opportunities to address in a sus- but how many objectives can be successfully tainable manner the fiscal burden posed by tackled in one project? Power projects are not power utilities. For example, C6te d'Ivoire's the best instruments to deal with fossil fuels or Energy Sector Adjustment Loan correctly iden- rural energy issues. Similarly, public sector tified the sector's problems and proposed management issues should be addressed as approaches that seemed appropriate. part of institution-building interventions, However, in seeking to be comprehensive, the which require limited to no lending resources. operation emphasized too many issues, many Power projects should support the broad strat- of them in the oil sector, and therefore failed to egy, but focus on power sector objectives with pay appropriate attention to the dismal finan- up-front actions designed to ensure appropri- cial performance of the nation's energy com- ate borrower commitment. pany (EECI). In the case of Ghana, power sector objectives were well coordinated with those seeking changes to the macroeconomy, Eliciting borrowers' ownership yet little progress was made on cost recovery. At other times (Burundi), the sector benefited Country commitment is a key determinant of and advances were made because sectoral project quality at entry. Ownership of objec- 53 tives varied markedly among stakeholders The measure that governments usually resist and with the nature of the objective: most is electricity tariff increases. The huge size of the increase needed to make a dent in * Expansion of supply was generally well sector deficits makes it impossible to effect owned by government and even more by the increase in one installment. The need for the concerned utility. such adjustments comes mostly from past failures to adjust tariffs regularly in small * Expansion of facilities was owned more increments. A major obstacle is the general than their rehabilitation, and power genera- belief that electricity should be "affordable," tion more than electricity distribution. meaning highly subsidized for most of the cuLstomers, especially where operations are * Institutional strengthening was owned by inefficient. There is also the practical diffi- the beneficiaries, but the degree of owner- culty of making transparent the relationship ship varied with the know-how to be trans- between the cost of service and the electricity ferred and the mode of delivery. rates paid due to lack of cost accounting. Finally, it is difficult to justify increased tar- • Policy and institutional reforms (tariff iffs when service is of decidedly poor quality increases, reduction of arrears, reduction of and operating efficiency is obviously poor. over-staffing, deregulation) were owned less by the government than by the power Measures involving staff reductions and changes utilities. in remuneration, though often agreed on paper, are rarely owned by the entities that have to The least-owned institutional measures. The least- implement them. This is not only because of owned institutional measures in the power the social repercussions in an environment sector usually have been the most crucial- with high unemployment, but also because it the achievement by the utilities of a reason- is often politically impossible to deal with able measure of autonomy, large tariff adjust- these issues in the power sector alone. ments, and staff reductions or adjustments in remuneration. Four power projects in Ghana provide an excellent example of the different degrees to The resistance to increased autonomy stems in which various stakeholders own objectives part from the sector's capital-intensive nature, (Box 4.1). which gives tremendous clout to whomever controls investment and financing decisions. Ownership of reforms. OED reviews of policy Also, where governments retain the ownership refDrms show that ownership stems from sev- of sector assets-the general case-they must be eral factors: (a) locus of initiative; (b) intellec- involved if only to discharge their fiduciary tual understanding of issues by government; (c) responsibility and keep the power sector cornmitment to act and spend political capital if solvent. This and the utilities' inefficiencies usu- needed; and (d) acceptance by major stakehold- ally provide the excuse for govermment inter- ers. The Bank had little success in eliciting the vention in day-to-day operations, which in turn sta:keholders' ownership in bringing about perpetuates insolvency and inefficiency. In the reform in the SSA power sector. It did not pay case of multinational undertakings, such as the systematic attention to the four factors above. Ruzizi hydroelectric plant, the interested coun- tries have been reluctant to curtail prerogatives The locus of initiative has to be the country, or to delegate them to the entity they control. and it must be perceived as such by major 54 Box 44 GAN A CASE OF MIXE OWNE OFPOWER PjET The last fu powerprojedts financed b the that Ghana Iully owned Even the ruc- Bank in Ghana lElectricity Co ra tu of ICh Gha-a (kEC) Rehabilitatio Vta Rkver r tem of ECGsman ageet by a Auth ri (RA) Northern Grd,EC f g was endoirsed bu Pow.erV, and VRA POwer prvid three aeas.n contrast. exce lent example of (a) the differences m in e fia th vernen ai ownershipofpro- to adst taris was . lmited, w ECG'' -- li biii p, of just t'r is ,,w,: - ject robjectives and strategies and (b) the determinain tomaintan pressure on its weakness of coercion not supported by a customers was weak, and whe a detailed ln of action. Indeed, the rehabi- had relieo n wp t-tion of SCG's- facilities, VIAls develop- (fo 6 examl, i Pside-letters) the ds ment w of CG's Northern, GGid and the rn r iev oals, theeults fl institutional reform of ECC were objec ives shotof the objectives. SorCc World Bank. stakeholders. Timing is also important: an ties vanished. It could have been helpful to implementation schedule that suits the coun- have had a more thorough discussion of try may not agree with the Bank's view. In issues2 and to have conducted visits to coun- some cases (Cote d'Ivoire and Guinea) the tries where similar measures were originally thrust of the action plan seemed to be coming resisted, but ultimately successfully from the Bank, who even helped perpetuate implemented. traditional approaches, although signs existed that bolder approaches would have been Political commitment to act, when it emerged, acceptable. For example, in Burundi, the Bank was less the result of Bank persuasion than of supported a substantial but gradual reduction inescapable facts, namely the fiscal crises that in the power utility's personnel, while the afflicted Burundi, C6te d'Ivoire, Ghana, and country decided to reduce staff by 30 Guinea. Reforms went faster and farther percent-in a single step. where they were conducted outside the nor- mal framework by strongly empowered units The Bank did attempt to promote intellectual such as C6te d'Ivoire's Direction Gen6rale des understanding in the area of loss reduction Grands Travaux. through hands-on seminars and 17 studies in 13 countries organized by ESMAP. Policy sem- Potential losers accept reform only if they can inars were also organized, but they tended to see some long-term gains or immediate com- dwell mostly on principles. As a result, intel- pensation to offset their losses. Stakeholders lectual congruence with government on policy who saw themselves as potential losers issues existed but was often shallow. When the (whether true or not) were existing consumers, actual implications of the measures envisaged government leaders, and sometimes even util- became clear, ownership by the interested enti- ity staff; they were effective in obstructing 55 reforms until incentives changed. The immedi- tation. In Guinea, the second project came too ate winners, utilities and long-term winners soon to extract government commitment or (would-be consumers, consumers of other incorporate the lessons of the first one. services, and tax and duty payers), were never heard. Incentives for obstructionists Larger loans did not buy better performance weakened, however, when service deteriora- on policy and institutional development. For tion and fiscal deficits reached abysmal pro- instance, five loans of about $100 million each portions. Governments were then forced to were made, but sustainability is likely for discourage rent seeking. In any event, sources only two of the projects supported and insti- of rent were quickly drying up for everyone. tutional impact was considered substantial for There was no case of reform being attempted only one. Policy adjustments never met before that point was reached. agreed targets in C6te d'Ivoire and Nigeria where initial conditions were dismal and in No evidence was found of Bank efforts to Kenya and Zimbabwe where a surge in capac- enlist the support of potential reform ity expansion made it urgent to improve cost "winners" and change the incentives of poten- recovery. tial losers of reform. Recently, it did change those incentives in a way, when it started link- The desire to maintain a presence in the sec- ing its flow of aid to performance. This rela- tor, to ensure a positive aid flow, and to not tively blunt approach worked in Burundi, undermine broader-scale adjustment efforts Cote d'Ivoire, and Ghana. It did not, however, supported by the Bank may have been at the work in Nigeria where the foreign exchange root of the Bank's decision to rush a second generated by oil exports reduced the clout of loan or to not invoke remedies. Arguments foreign lenders and donors. also exist in favor of big loans: they boost aid flow, leverage the uncompressible cost of Bank staff involvement, and can be turned Optimizing Bank involvement into a visible show of donor coordination when several cofinanciers are involved. Persistence of involvement. Bank involvement in None of these reasons for large loans is com- SSA's power sector has been driven by the pelling though if the assistance does not sup- perception that the sector is very important for port the ultimate reason for getting involved economic growth, is demanding in terms of in a particular sector-to achieve progress on capital and natural resources, and presents specific development issues. Ensuring that issues that touch on many institutional, effi- sectoral goals support overall development ciency, and economic aspects affecting not objectives is a test of coherence and credibil- only the power sector, but the economy at ity. But the power sector can seldom claim to large. The projects analyzed show that in be part of a core Bank assistance program. many instances, the Bank was keen, too keen The examples of Egypt and later Brazil, perhaps, to give its financial support. More Colombia, and India, where Bank power often than not, it avoided sanctioning coun- lending was scaled down when borrower tries, even in the face of repeated breach of commitment to reform was unmistakably covenants, to the extent that it sometimes absent, illustrate this interplay of broader undermined its own agenda. In Zaire for development objectives. Such a reduction instance, suspension of disbursements was can yield results, especially if combined with avoided, even though suspension would have a well-articulated argument that draws on been easy given the project's focus on rehabili- the Bank's global experience. 56 Intensity of involvement. Once the Bank decides * 90 staff weeks spent on supervision, 27 per- to lend to a country, a substantial amount of cent above the Bank average; and Bank staff involvement is inevitable: staff have to make sure that policies and procedures are * on average, 1.8 supervision missions per correctly understood and have to agree with project per year. government on objectives and strategies. Implementation also entails a substantive use Evaluators have never rated supervision inten- of staff resources. Bank involvement in project sity as excessive. On the contrary, completion preparation and implementation is always a reports of unsuccessful projects in SSA balancing act between too little and too much. often conclude that Bank supervision was Too little involvement leads to projects that insufficient. In Guinea's unsuccessful projects, cannot be processed or to operations whose however, an average of two missions per year value added is unsatisfactory. In the context of visited the country. It is unlikely though that Sub-Saharan Africa, this usually means a the Bank could field, on a sustained basis, worthless project because of the lower average more than two supervision missions per pro- level of development, and because most of the ject per year. It is also unlikely that more projects under review (except perhaps those intense Bank supervision could have reversed for Ghana and Nigeria) were among the the outcome of projects that failed mainly Bank's first operations in the sector. Too much because of insufficient quality at entry. No involvement, on the other hand, leads to a amount of supervision can make up for a confusion of roles and responsibilities with the country's lack of commitment to bring about borrower. This reduces the borrower's owner- change. Evaluations of portfolio management ship and increases the risk that the Bank's suggest that the Bank should restructure or approach will not be fully understood, and its cancel projects earlier and more often and intervention will be resented as overbearing. refocus rather than increase supervision. In The Bank's Portfolio Management Task Force particular, concentration of supervision in the reported that excessive Bank involvement was first third of the implementation period has one of borrowers' most frequent complaints been strongly correlated with success. and one of the greatest sources of their low performance. Identification and appraisal often require the Bank to exercise strong judgments about national pri- Has Bank involvement in SSA countries been orities and project quality. Although necessary more intrusive than in other regions? In the and in the interest of the countries, borrowers at power sector, such a perception could arise first rarely appreciate these judgments, which from the large number of studies and consul- they see as intrusive. Although not more so tants involved in Bank projects, but not from than in other regions, this was the case in Sub- the intensity of average Bank staff involvement, Saharan Africa, where the Bank rejected the which is line with Bankwide averages: Kompienga hydroelectric project in Burkina Faso, Konkoure in Guinea, and Bumbuna in * 180 staff weeks per project, less than 10 per- Sierra Leone and where it chose to downsize cent higher than the Bankwide average for Ruzizi in Burundi, Rwanda, and Zaire. By con- power projects; trast, Bank interventions were generally wel- come when they mobilized cofinancing. * 90 staff weeks from identification to approval, 18 percent below the Bankwide During preparation, when the potential for con- average; fusion of roles is greatest, the Bank was often 57 Ingconection woeisrthiheohnar aciviping proec, fsccsivepoliticalechnclang st epistpance lthe pagain aisor rl in orn i pann ad mt pces i t atgiong. the wontrctbetwyeenmthesi Voxt River poertn spaectr. alThus,intathe eaorly an0,dur Aut ehorityn suVRA ss atgenoteratn company, ands moaing s.I the eaprasal-ofetelPowerd ponroject, itsaeh mainglent VALscOh acprivaties alumthinumt akstf-reae the firssdeeope t invncestmentproill somelotern Ietehadplaed amaor roe byco ntr the Brmand, financial statooementshapor Thete fctonributedn sbstBantill toe heform uleI igratio Autogrity. In the lSAteontext, winthe itsrepaa- whic iantroducedrt toiprtov bottomn cange atinduce thmpe Niectrians to nebalanc theironvst icuigtmoaymanagement ofldeetog they utir - gneedtionr In thes takid-1nots whcile prepr talstonhavly involvue, winlte uncohnvenitioa oes andltia srterms of referven.Exersuiesnto strient ofs acceted ivnstthutional capablits a showsetatT successfull ree sived iexmany forn rcognietional ThtrAd ul usit tris.ciatein Nigheria n the recommendatin 58 Source: Wo, Bg aitjX: engaged in mor disceinr atvie, Effetiveess f technicalassistance coe fe dttie more by&EB s ! 0ountry the Bank, play2ggO22 a2 major role in shapingTA402 fatr Bthan0f gbygg Bank pefomace BIn Ngeia, pro2BB gra BmgfBs. & Ing the SSA context,i with itrla the~B B- Bak' efot oipoepanngadtvl ipescor n eeal biu trad:BB;g:Bif::BUtionlint natre whil in Ghana,B f B B i tsB0 analytBBIB 00:-ical scrutin itg deevd Experience advice as ccpte, eenthoghit a es sosta Ascesislusive, exetBo covetonl TA associated v <>B wihdein n ipemna 58BB f ; l B B g B B 2ii,l5§B0BB| f02:§0Aj-Bi B0t " '0 f EEB0B ft20 tion of physical project components, which is 1980s, it was neither realistic nor meaningful usually implemented in accordance with the to call for traditional least-cost development spirit and the letter of donors' rules. studies that assumed demand depended essentially on exogenous factors and foresaw In capacity-building areas, the performance of coverage of such demand by a least-cost TA programs has been affected by the degree of investment sequence. Power sector develop- local ownership, the relevance of the TA com- ment in these countries was rather obvious ponent, the individual sectors' absorptive and largely determined by their financial and capacity, and the knowledge of (and sensitivity physical implementation capacity. A simpler to) local conditions possessed by expatriate study would have made more sense: it could consultants. have provided an outline of short- and medium-term development, which could have Local ownership. The success of TA programs been the basis for Bank-financed projects. The depends a lot on the degree of borrower own- Bank recognized this in Nigeria in the early ership. Countries generally assign low priority 1970s, when it carried out a rough analysis of a to technical assistance and TA programs, in likely program on its own, and included an in- contrast to the urgency they give to develop- depth study in the project. On the other hand, ing infrastructure. This bias and the lack of the Bank required sophisticated tariff studies agreement that may follow between the Bank in Guinea in the early 1980s and Uganda in the and borrowing country are frequently late 1980s, where available data were of poor resolved by postponing action programs until quality and where reasonable estimates of tar- after studies have been carried out. The reform iff level and structure could have been deter- of Ghana's Electricity Corporation in the late mined at much less expense. 1980s, however, was an exceptional success without the benefit of a previous study. The Capacity for absorbing technical assistance. Some twinning program for management assistance SSA countries face inadequate basic schooling, succeeded because of the good interaction especially for lower echelons. This not only between a few expatriates and an essentially affects the starting point but also the pace of new management team of young, ambitious carrying out a TA program. Hence, many people who were strongly motivated and actions contemplated in TA programs are never eager to learn (Box 4.3). carried out, and their planned outcome is only partially or never achieved. When a sector with By contrast, in Nigeria after 1975, ownership limited staff capability has embarked on a rela- was consistently lacking, mostly because the tively large infrastructure development pro- supervising agency was itself weak and exist- gram, the more capable staff are very likely to ing managers retained their old positions. The be mobilized as a matter of priority to ensure outcome was an unmitigated failure. Failure the program's success. Imparting the very first also occurred in Guinea in part because expa- knowledge is always the most difficult. triates were limited to a weak advisory role to Absorptive capacity should increase over time unresponsive local managers. because there is synergy in learning. This is evidenced in SSA countries where some sec- Relevance. Least-cost sector development and tors, notably the power sector in Ghana, have other studies often lack relevance in that they developed a remarkable absorptive capacity. fail to take account of the sector's stage of development and performance levels. In Training needs in SSA are tremendous due to Guinea, Mali, and Nigeria through the late the pressure to employ as many local people 59 Box & TINNIG t EXPTRITES 00 RATC ratwinnin arrangemnatbetweeno ntal io of Gnadeq Cat Esa prvide manu gers m cos =opisiydrodosCanad and Va River. A o tainimbe no psitdion (maningtirec- (YRA)of Gana ade u hrVRA' lackof b'ar,firetsothr ofoerations,o projecnmanaer One of0 0 theWl) difficultie ote fae ;is th inad-gS : 0 1 equnicl basic schalnag,empe citlly uri co-porianci of t a ct . These A hg incidence ltws erl sta jge of dmevBBi,eloectricnt. A BBam of missan r hpi e ECO bervepa a corporat liexptraes, mconanage dmVRAioprations, and.plmetsandfo sethe entitie 1 ith9 eg92 to be toled for- traned The lustocals whow progrssverym took wardnande povidedsu staffs traineding Theiortln ovrVR as maint:ainedJ a oril B B BB BB and c*lose rsosibilite were we;0;ll 5Baccpted andl shrelationshp.it Ontarpion coydroe for morlue rf elatioswrorefienyaddiael.oSuess wasudi tsha e25 l ntgas and derives fom - i th be a in the ul- a ad M . Largea onsnn fma ofy' bthrpeinist experastisomeandateann faorl annt(eartohvdioffincutesnteraives sitaf redic- it, the oducation,setn on sr is ti ale to a tions of mosa t dsieveo mse nit)s and pair tograme inae. mrse reci ent win Taaning ar aneme tosses. Aftr t a yearsi matt locals, with nefly bTwNEenO the electricity Supply, Broardd of Ire- sdevelsoped copeendicisedan rexplacned.th landcesB)u anderthe ElectricitytCorporation Seexptioriates. o ucoslanssol as possible, in spite of their inadequate prepa- mostly to the private sector, mainly because ration to fill positions in a technologically of inadequate salary levels (although the cost sophisticated sector such as power. of training is not wasted since it partially benefits other sectors of the economy). One of the difficulties often faced is the inad- equacy of basic schooling, especially for Performance of consultants. A high incidence lower level jobs (mechanics, electricians, of dissatisfaction is observed among govern- linesmen, accountants, administrators, and so ments and sector entities with regard to the per- on). The question is how to overcome this formnance of consultants employed in support shortcoming. One option could be to include of sector efficiency and development (Burundi, some elements of basic schooling in the util- Guinea, and Mali). Large consulting firmns ity's training programs to compensate for appear to have difficulties interfacing with utili- what the educatiletiosecos une to ies of modest size. These firms are said to take vide. A case in point is Tanzania, where too much for granted in matters that local o6i- TANESCO, the electricity utility, provided a cials feel should be discussed and explained. successful literacy program that resulted in Selection criteria for such consultants should every employee being able to read and write, include their proven ability to work with small Another difficulty has been the lack of organizations. The most experienced consul- enlightened management and business orga- tants are not necessarily the most desirable in nization capable of justly valuing and using this environment since they tend to advocate fresh skills. Last, utilities lose trained staff sophisticated solutions and to be paternalistic. 60 Conversely, lack or scarcity of well-prepared sultants has the best chance to succeed government and sector counterparts limits the when (a) the overseeing authority in the quality of the consultants' performance. Fur- country is fully committed to the TA ther, there is the never easily solved question of program and prepared to enforce the pro- compatibility between trainer and trainees, gram's execution, (b) the expatriates are especially when cultural backgrounds differ. able to adapt their work style to suit the Finally, local managers of small entities such as needs of modest power utilities, and (c) a those in Burundi, Mali, and Swaziland are often large number of the local management overly suspicious of the motives of expatriates, team are new to the positions for which especially when they belong to powerful they are being trained. worldwide organizations. * Training programs should be designed as Limitations of Bank instruments. Bank staff are components of a comprehensive program often too remote or lack the skills to super- for the sector. When urgent measures need vise and help implement TA. Field offices as to be taken without the benefit of being part currently constituted cannot make up for of a comprehensive program, it is impor- these shortcomings in most areas. On the tant to ensure that they (a) address pressing other hand, donors, such as Deutsche needs, (b) are coordinated with other mea- Gesellschaft fur Technische Zusammenarbeit sures (for example, those funded by cofi- and Swiss Development Corporation, have nanciers), and (c) are not in jeopardy greater field presence and effectiveness, but because of a lack of necessary parallel or their areas of expertise are mostly in tech- supportive action. nology. The Bank has not used donors enough in situations where it would have * Training programs must be seen against been advantageous to substitute them for the background of the trainees' general Bank staff (Burundi). Further, the Bank has schooling: some skills that are usually not been effective in forging partnerships imparted in school may have to be taught with entities able to dispense experienced or upgraded in the context of power sector personnel to meet the challenge of building training. government's role as regulator and policy- maker through innovative approaches. * The Bank should avoid studies as a proxy for concrete action when the type of action Conclusions. The following conclusions are needed is well known (for example, tariff particularly, if not exclusively, valid for SSA adjustments, personnel cuts, changes in countries: salary structure, and so on) but the quan- titative adjustments required are uncer- * Technical assistance needs to be embedded tain. With or without a study, it is always in a program to ensure that the TA (a) pur- possible to define steps-albeit falling sues worthwhile objectives, (b) contributes short of the estimated ultimate goal-that to synergy, (c) is within the implementation could be included as a prerequisite for capability of the entities concerned, (d) fits lending. within the context of the local culture, and (e) is properly timed. * As a corollary, studies and the implementa- tion of their recommendations need to be * Management assistance involving delega- taken seriously, or left out altogether as pro- tion of executive power to expatriate con- ject components. 61 Cofinancing and donor coordination resulted in gaps and inconsistencies. For instance, in Uganda in the late 1980s and early The Bank has been very successful in catalyz- 1990s, the TA program was a superimposition ing cofinancing-less so in coordinating the of essentially donor-driven programs, which roles and actions of other lenders and donors. taxed the country's absorptive capacity. The extent of Bank involvement in such coor- Rwanda experienced a similar situation dur- dination depends essentially on its relations ing the same period. In C6te d'Ivoire, inconsis- with and the capability and willingness of the tencies in the TA program resulted from a lack government and other interested entities to of clarity of sector objectives and strategies, play their roles in a way that is compatible and the differences in their interpretation by with the Bank's approach. Even in straight the country and the main donors. Here, the cofinancing the Bank had virtually no role to Bank was hampered in its efforts by the fact play in Nigeria, where the country's revenues that its participation was that of a minor donor from petroleum in the 1970s and early 1980s and its relations with the main actor in the precluded the need for cofinancing coordina- country were strained. tion. In C6te d'Ivoire, because of other major participants in the sector, the Bank played only Coordination during implementation seems a minor role. to h-ave gone reasonably well. There were only two recently reported cases of unmet Donor competition has many advantages for expectations. In the first case (Tanzania borrowers, but it can be a mixed blessing, par- Power IV), one of the co-lenders withdrew its ticularly for smaller countries. Because of the contribution because the civil works contract pressure on development agencies to help the was not awarded to a contractor of its coun- priority countries of Sub-Saharan Africa, try; another cofinancier reneged on its pledge plenty of money was available in principle to to finance TA; and two of the cofinanciers did develop their power sectors. But the kind of not disburse funds because of the country's competition that developed for project identi- arrears to them. In the other case (Guinea Sec- fication among would-be lenders sometimes ond Power Engineering Credit), the Bank became detrimental. The Bank's influence was organized and chaired donor meetings, but undermined when other donors financed pro- the Bank-financed team that was to assist in jects it had rejected as uneconomical (for the coordination of donor-financed rehabilita- example, Kompienga in Burkina Faso). In tion did not arrive in the field until very late. Burundi, competition led to delays in the con- struction of the Ruzizi II regional hydro pro- Conclusions. The Bank needs the credibility ject and to the premature construction of the provided by a sustained and reasonably suc- Rwegura hydro plant, a project that was not cessful sector involvement to effectively pro- the least-cost solution. In Uganda, in the late mote its sector improvement agenda. An 1980s and early 1990s, the investment program understanding and congruence of views was driven mainly by the availability of funds among co-lenders on broad sector issues and and donors' preferences. Lately, however, the how to address them are necessary ingredients policy agendas of the most important donors for successful coordination. have increasingly converged. Most power sector entities in the least- Sometimes the design of TA was not closely developed SSA countries are ill-equipped to coordinated among donors-so that it became prepare and implement complex financing diffuse, included conflicting elements, and arrangements involving several co-lenders. 62 There is a need for streamlining. The Bank delegating supervisory functions to agencies could take the lead in introducing new that permanently have specialized staff in the approaches with little risk if operations are country and that are often more experienced small, as they often are in SSA. than the Bank in field operations. The Bank should forge a strategic partnership Notes in the sector and arrive at a division of labor with co-lenders. Even in cases where a nearly 1. c. Jayarajah and W. Bransor, Structural and Sectoral Adjust- ment: World Bank Experience, 1980-92, A World Bank Operations permanent presence is needed and where the Evaluation Study, Washington, DC: World Bank, June 1995. Bank might wish to continue overseeing a par- 2. A non-African example is the Seminar on Power Sector ticular project component, it might consider Issues in India, which took place in Jaipur in October 1993. 63 5. Implementing the new policy The Bank's new power sector policy stresses the new policy maintains the implicit principles of commercial nature of power supply, an elusive goal economy and efficiency of OMS 3.72, it signals in Africa. The Bank is optimistic about the perfor- a notable shift in emphasis.' It also reaffirms mance of ongoing projects. However, the picture is the importance of Bank policies on resettle- mixed. SSA countries still lack a transparent and ment and environmental sustainability, but arms-length regulatory process, and even corpora- abandons access to a minimal electricity ser- tized utilities lack a business orientation and vice as a welfare objective. autonomy. "Contrats de plans" have clarified utili- ties' objectives but do not provide a legal basis to The 1994 World Development Report (WDR) curb government interference. In one country, argues that, given its current dominance, the progress has come recently from lease and manage- public sector will continue to have prime ment contracts for utility operations. Importation responsibility in most countries for the provi- of services has been key to these contracts and to sion of infrastructure services. This is certainly the success of twinning arrangements for manage- the case for SSA countries. Improving the ment assistance in a few other cases. Most recent effectiveness of providers of public sector projects feature elements of the new policy with infrastructure is thus critical, and WDR pro- upfront conditionality on regulation and manage- poses instruments akin to those found in the ment contracts. They signal that more countries are new policy to reinforce the commercial opera- committed to reform. However, private investment tion of the public sector. has not occurred yet on a substantial scale. The new policy identifies five guiding principles for Bank support of power sector restructuring The new policy programs. These are transparent regulation, commercialization and corporatization, impor- The fourth objective of OMS 3.72-Improving tation of services, private investment, and Access by the Poor-was arguably the least commitment lending. These principles make feasible objective of completed projects for up the menu from which "committed" coun- SSA countries, given their financial and fiscal tries are expected to choose when resolving woes, their low per capita income, and their their specific problems. stage of economic development. This is also true for the foreseeable future. The Bank's lat- Concomitantly, a new policy was introduced est power sector policy was approved in Octo- to emphasize the need for demand manage- ber 1992 and issued in January 1993. While the ment and energy conservation in several 64 sectors, one of which was electric power. This approved in 1993. This evaluation suggests chapter reviews recent project trends and that Bankwide appraisal of power projects examines the prospects for a sample of six SSA still suffers from many of the weaknesses countries to internalize the guiding principles diagnosed by the Portfolio Management Task of the new policies. Force: lack of risk analysis, unrealistic assump- tions about tariff increases, weak integration of environmental impact assessments into project Trends in recent projects design, and lack of analysis of social impacts. Two projects in SSA-Ghana National Electri- Of 25 ongoing projects in SSA, 11 were fication and Tanzania Power VI-were in the approved after the new sector policy was intro- sample of ten power projects reviewed by that duced (Annex Table 1.2). These projects decid- study. They exhibited some of these flaws but edly stress rehabilitation (34 components) and were cited as good practice examples in two distribution expansion (11) over expansion of different areas: analysis of fiscal impact and generation and transmission (20). The number cost recovery in Tanzania and a very good of studies (48) is decreasing from three to two quantitative sensitivity analysis in Ghana. per project, mostly because rehabilitation and pricing have all but disappeared as a topic. On Also, quality at entry depends a great deal on average, one out of two projects includes ele- the project's relevance to the five principles of ments of the new policy, particularly for sector the new policy and on the chances of the SSA structuring and regulating, management con- countries adopting these principles. The mean- tracts by private operators, and manpower ing of project success would be diminished if development. Rehabilitation generally involves project objectives were only marginally rele- greater energy efficiency; the projects do not vant to these principles or too modest to make include a direct demand management compo- an impact. This chapter reviews how much nent and continue to rely on tariff reform. progress has been made thus far on each of these principles and in particular how far the The performance of these projects has been Bank has gone in applying the principle of rated as high by the region. The FY94 Annual commitment lending. Review of Portfolio Performance (ARPP) indi- cated that 87 percent were likely to meet their stated development objectives. This percent- Transparent regulatory process age is optimistic when compared with the FY93 ARPP rating (74 percent), the Bankwide Regardless of ownership of power sector assets, rating for power projects (84 percent), the government must set objectives, articulate over- regional average for all sectors (81 percent), all policies, and coordinate sector development. the Bankwide rating for power projects exiting It must also establish the legislative and legal the portfolio (72 percent), and the historical framework to protect the interests of the various average at completion. In the past, project rat- stakeholders. Aspects to be covered by the ings have been consistently more optimistic at framework include, among other things, invest- supervision than at completion, with a discon- ment programs, pricing, access to and reliability nect of about 5 percentage points at the last of service, energy conservation, environmental supervision mission. issues, and disclosure requirements. A joint OPR and OED internal study reviewed The purpose of transparency is to enable the the quality of economic analysis of projects greatest possible degree of accountability, thus 65 prompting and enlightening public debate. they are not legally enforceable, and often gov- Accountability means answering for an ernments have not carried out their part of the assigned responsibility-an activity best per- understandings; (b) the hope that performance formed when responsibility is clearly defined contacts would enhance the autonomy of gov- and information on the area of responsibility er.nment-owned enterprises has not realized; readily available. and (c) they have not proven particularly effective mechanisms to help enterprises with The regulatory process should be arms-length serious difficulties. The experience with perfor- and should ensure an unequivocal separation mance contracts in Burundi, Ghana, and Sene- of responsibilities between the government gal is revealing: the government still acts (responsible for policy formulation, compli- unilaterally and violates agreements. However, ance review, and enforcement) and the entities the problems with performance contracts stem responsible for power supply. An autonomous more from their implementation than from regulatory agency should also be instituted to conceptual weaknesses. enforce regulations and settle disputes. In spite of their limitations (they are not Evidence suggests that separation of responsi- legally enforceable), contrats de plans have bilities between regulating authorities and clarified the objectives of many state-owned operating companies is deficient in the power enterprises, stimulated a dialogue between sectors of all SSA countries. Government government and enterprise management, and financing and ownership create budgetary and introduced better management information, stewardship responsibilities, which require accounting, and audit systems, as well as some government involvement, not all of which physical and financial performance indicators. can be delegated. However, in the countries under review, this involvement has gone way It is easy to imagine the power that can accrue beyond discharging statutory responsibilities. from the ability to make major investment and procurement decisions in a sector as capital- One must look beyond the text of the enabling intensive as electric power. For this reason, in legislation or entity by-laws that generally countries with long traditions of governments give the utilities the theoretical authority to making those decisions, it may prove very dif- manage their sectors. In practice, the chairper- ficult to change the de facto allocation of son and often all of the directors of state- responsibilities to empower the utilities with owned utilities are government-appointed, a the desired authority. cozy arrangement that makes it easy for par- ent ministries to ignore the board's authority Another reason for government interference, and make decisions for the utilities (Box 5.1). although possibly more amenable to change, is the iministries' lack of training in policy formu- Performance contracts (contrats de plans). In order lation, control, and enforcement. Yet another to enhance transparency and performance of reason often mentioned for government the public enterprises, the Bank has promoted invclvement in sector operations is the oppor- the use of performance contracts by its borrow- tunity for nepotism and patronage, or simply ers. These define, in more or less detail, the to find jobs for new graduates. The extent to relationship between governments and the which this exists is not easily ascertained. management of their public enterprises. A Bank review of some of these contracts2 con- Disclosure requirements. Without information, cludes that (a) their major weakness is that markets cannot function properly or at all. 66 -.B ,... . .... 22 t '<---'' Z+f ie . Q - 'b " MG ES uderthe ab Mul .: goy:etnma-we eneprs e"i',j,.'"i' <,." 'ta ' 'gcls .'t 'h' overall rcsontibiusrlityle iformatlic onnua therTe borrwng rocrmet waritesand preogative tcan. The bo tasardn of d hEIenc,Sit if~xps nonyitbospetaiding. the got rnenfcotiue sOf goenmn appointees and rersna1ofnnepn flEIECsepnin ivsfomnthite Ch mer ofaCommercetaniing hen Mur ntpiey o b the ceapitaf rereente in trod ond five accoutin sysItems bord iftestf ( ho prncpe)- showr performane moact betweenothed gov- rtesposibem for ah l s ecestantia delayinlsionsgt ernmient copoaion-o EI examipl9e,ha addlied, metthe ompany'se objiediactives setadements af neiwas focuso on-improvinectommrciaelyoi- traie TandzfnianElctial ruples regulate paen manyrespects this hase not chnedlthielyocu not Withoe uoin tinos rt I elabl aton tere borong, procureent,a, and con di- accountablt Onver ofuthert cf haractrstc hofee, rtzn ulcy wenepiesn masdny SSA l cBounrexsteiaeuc of2) Experience ina they reion oeandelabsewhere accoun: ting systems and of the staff who oper- showsethat ienya wow ly on gov- Cat te, a thaesutin andt dlcepayizt in ong iemnent corportions-f exa mple,ains, accountabihty. ~ ~~ areeen One use the cheracrgeistambere acoue ntepingsstems and oferthe staf whomm peria ishowsner.hlan hllwedgv the books. The audited financial statements of railways, and so on-behave commercially in the Tanzania Electric Supply Company have many respects, they are not exclusively or not been issued with such delays as to be mean- strongly profit-oriented, and continue to ingless as feedback and control mechanisms. drain public resources. In other words, corpo- The Volta River Authority of Ghana, however, ratizing publicly owned enterprises is no has done well (Box 5.2). assurance that they will operate as business enterprises. Kenya's power utility is partly privately owned, yet it was instructed by Commercialization and corporatization government to not comply with its lease agreement for use of the large Kiambere The new power sector policy states that "for Dam. This led to the financial insolvency of power enterprises to operate on commercial its owner. principles, they must be treated (and behave) like commercial enterprises. They should pay Many of the region's utilities that have a cor- interest and taxes; earn commercially competi- porate or similar status behave in many tive rates of return on equity capital; and have respects like commercial enterprises-for the autonomy to manage their own budgets, example, the Tanzania Electric Supply 67 0In tGhana, The accou tinganbuge9tig exetedasareutofthefl :inte0grat0fion0 o0f2 ggt sysem usedu byVAaegnrlystsfc iaca aaee rateplannin andfirtnanely function iany of99 TAnceasCO, haospeiy beenunabl torf meeutmis epots thas bngedentscompee a bsndeth kTeynmanagerial wllug cm dead ines t enteFY80 and FY1,audte pistions filledImpntromns ine financialfinranpcitstafcommte nterciproduced onel yea m e ogefmet gandenformion are saystems d ,eei cate nth again, aud ited accuts feo 1983 porate planndig and repornn g havbe been0m- madeifollowingdrthe full onamput; erizton-o conswr umitdol nFbur VR' p ccoustr Other i ovem saren 1m993andnthe191aco i g Jsuer 193s :the000 ut;ilities foreign exhange04f ist400 difficult: to Source: fGora-rrentneedsPower Prujch improvie-nThlsespruet7Evamentof AssriessinledntgR9 exp 4er- Wasentoisneee in Woprl atnk, panurfomne, ts19rln-tr4.nnn,pojc eig,cn Ciomanyial Uanfemente, though incesedtr , postprutit rupegrvi tariff tmets the B ingredients of a Business orientatin are stlle sb ac ea sier o tertain andc any mising irnvstomentdeiionofm st ariites theohraspectsraiin-fof commrcstiaiztieountwil be pundrview fof governiment wtarff aremaprovbed seven. asioi natra andw morte readoiy a fccpted onvance and hoc uasis; servkicg etannotsb system-e motainofsrvcs icuinh nhs,tel policyai sharedo btwee govrnmen and Impolraiing ofntoaseric oes g onrisoh teutilities; foryeig ecanger isjo dificlt. toe- ueo oegntanr nlclntttosa obtaeine for crrsent need; meandmuc improve- bee o procuement o aservices-includi epr mpntais needed inuoperating, eperforallnve, tihae for longter iplaconning, coprojectdesin con-ur The transfoirmationsnu of most utilfitis hasom o beenstraining-f om soucs outsliides the outrybor unerwiay foz alng pulcuiitmes, widthe rearktabl evcenpreion ias notn Ghnew. In lthe majority thofrou- advpanes andoequnally, striing setbof sh I d s t icrheased mpora"tionoeic inarcuadingementh tis, te genta of the worenda a ed wit tofme oeasign foreignd uties or thae economy:hasvplayedtadveryimajorrrole. Nev er- use et of forig mtaiersnlcial institions has b thrveles the prospectfrnr meanttainful aepprogress been too piece-mal and narerowdly fcusedptod thn an lug onbsensus onrvthe benefits of corne- orcsstuueoflaltite.Onntbe problems have been resolved, governments ist advice and management services, including should be able to clear up arrears. With term assigoment in Ghana and staff training in odm .ok 53: MANAGE CONTRACTAND FF STRE.NGOOD PRC Te ma p oi's elc i,s c ered a Success. t oy three power seor d gover ys, h extrite team has lt th - otherwsen t comptent ein, a e -, 'an governet reutnet privtz an Duing tisheeyer pro, personnel was-- activityA a f stw, a t f fe expa e foru y 1 ot -riate was given--executiveresponsibilit an notieale- social problem. Thi wa.s'- "--. ','a6 ithm and charged wihAmpo ingpedrat :ing f pe- dn y nuigtattesafreesdwr -...forraceand training local managers. Each -placed in the privatefirms thatbegan tocay t team memer had, a cif. s o w has, humandrelations and ca,pa buoildig (the thepodtonofw oden poles,the connec- .- team leader); 'investment programming, don hofne customers, an so onr Anothe economic ustification,and tariff develop- ma''jor accomplishment was the redutmhio of ment;inventorymanagement; accounting ,accountsrecvab ex those fre and finane; adnd. ch'dompute ionof the 'tor, f ut nem thof sa mana,gemn inomtio system.Th eer' equvlen to' lsstathemohs the foreign utilit's country, ever since its estab- partners in CIE, the private company that lishment more than 25 years ago. nns Cote d'Ivoire's power sector, have rawn on their intimate knowledge of the Among imported services, though, manage- local culture to improve overall performance. ment and lease contracts have the greatest Expatriates comprise less than 1 percent of potential to make a strong impact. But they CIE's 3,500 employees. Its African manager are usually seen as complex and are believed considers that with appropriate adjustments to have little chance of success since local this approach can be replicated in other staff are bound to res them. Experence in African countires.3 two of t]he countries under review does not support such apprehensions. In Burundi, for instance, in a period of just three years a for- Commitment lending eign management group successfully realized considerable improvement, including the The new policy leaves no room for com- transfer of certain functions to the pAvate placency. Yet, it is not couched in "absolutes"; sector accompanied by a substantial staff it only requires substantive progress toward reduction (Box 5.3). Cote d'Ivoire provides an the objectives embodied in the first three example of a long-term lease contract with principles of the new policy. A review of ten equally impressive results (Box 5.4). T T hBank-financed projects in SSA (five approved 69 '''''' Box Sl 'g'l' # 5.4: LES CONTRACT ('tAFERAGT GOO PRACTICE5' sggl ''0jg'"gl''j00BlJ g't0j02l;0i l0;42 l'gS' t00j0'l$0tj0''0 Until~~~~B the0 ,i)B--l i igA '90s t' electri power seto of ceafu pr 000ivaeLik companyB B2B); @that habeenrespon-)0B C& dB'lvie a peae relativly B004 effi-00 siNeBBl00000B000l0j ,o- the0 operation and maintenance30j o'gBgB cier ftlyn dera BXpjBBj ioncessincontracwithE BB C8t0ed' ' virs uBa wae supl sinc 195TBQ)l00 li;BEB \0@0 B )B\ a copn aoiyondb the goe-- Eha sbtantal adopted th m u me.Hwvr,drn h decade that fofi ;. B l-B 0 ~ B t opeand andg B cc rteclur fSO ELI lowed,the sctor eperieced a enera if isvery ecentrlized has :ff elbrt proce-& naio of00 low oprtn eficem and 0 wea goo rear system,Bi andSBB 20 0 a0tw ston bug ting4 9+ finaca aaeetbgttesco ino adtm aaeet system and ofer prgrssiel deeper 0financialdifficultie, ranig.B anid other soc,ial supor to- its staff. eventuai0; g i$00gfllyi leading f gfl00jB to; its B inaility00gBB0 to0 serviceBfB0 ifts Some 004Bl05025Blj0ji0 percent of0g it hre r qoe o'h B- ' f B Abidjan: stc are,an t epoes can.4 owne copnis pr:0 0 tles$0 fided 6re r0 §000l th ector' fro 193t; percentiS toil 17A pecn,:n h reranfization. As Fa resl t, ECIf rtaine avraenu be f hor o0iiif powe ouae contract~~~~~~~~~~~~~~~~~Ba forf opraio and maitennce Som 2,90000 @000 emlyesot ofB@a total ofi; 04abou0 tB On f GE'sg0;j ma ; in shareholders0 tis: also on of whc CIE spnd th eqialn ogf: 4 percent tha aB,BB few ar st;aj@ill designe ina .§ a rathe trdi pBet the commercia BBB0 a B9 lizaBt00 ion of thei powerti@i 00f t;i t00 tina way ; (Tgo Ben in, Maai).Hw ever companieB -s.vyCj0 0 2 S i BR @-a00 th vast majorityf.;s of0Bij th oasinld elemensof thenewBan poicy. In Gu;00inea,anwd reglaor framework and00 0 sa@@2 l fSsga->iaf i i Ba@ BfBBig0iR ;R B :) 2B @ Bf$:the restructuring ofi the powerB company,i: :i:g:SS::::B:i0;\0 i00i:f::i:0B * nZmaw, noeainl lni ie EN'ELGUI wil alo the0 trsPgsf06s@t2 ansfer of opea-j& l; atB chanin0 g thelegakflB and regulaoryfram-ionmngemen toaprvtgop 70 i X - BB l B t t BB iB0 Bi B BBt 0fBtBB: 00i:..i0BB0BBt Bi 0t .0:BttBj:B (B ;Q BfBB gB B t * In Rwanda, similarly, sector operations will Leone), and for government to settle arrears be contracted out following the creation of of certain public sector entities (Tanzania). a mixed company in which the government will own no more than a 20 percent share of * One condition of board presentation was used capital. to ensure the settlement of public sector arrears (Sierra Leone). * In Sierra Leone, a performance-based management contract will lay the basis for * Conditions of effectiveness were used for the an autonomous and commercially viable signing of a performance-based manage- entity. ment contract and the settlement of cross- debts (Ghana); the reduction of staff by 200 * In Angola, a new institutional and legal employees, the conclusion of the power structure will be created, including the sep- company's capital restructuring, the prepa- aration of regulatory functions from the ration of a regulatory and institutional administration and management of the util- framework, and the invitation to bid for the ities and the development of commercially management of the power company viable and autonomous power companies. (Guinea); the completion of a new tariff structure, a 15 percent tariff increase, and * In Ghana, the commercial operations of the invitation to bid for the management of ECG, the power distribution company, will the gas company (Rwanda); the implemen- be carried out by a private firm under a tation of a 45 percent staff reduction (Sierra performance contract (Box 5.5). Leone); the selection of external auditors (Angola); a tariff increase and the * In Tanzania, the power company will offer settlement of government agencies' debt for sale the construction activities of its in- (Tanzania). house transmission and distribution net- works and will study other privatization * Conditions of disbursements were used for the options. enactment of a regulatory framework, for holding sector assets, and for the conclu- Upfront and disbursement conditionality. Con- sion of arrangements to transfer the power vincing SSA countries to change their modus company's management to a private opera- operandi after condoning it, for decades in tor (Guinea); the publication of the law some instances, is difficult, and a good design establishing the regulatory and institutional does not guarantee commitment on the bor- framework for public enterprises, and the rower's part. After having accepted many hiring of a private operator to run the gas breaches in covenants it seems that the Bank is company under lease contract (Rwanda); now more cautious. In this respect, the follow- and the hiring of a private firm under a per- ing examples of upfront conditions-such as formance-based management contract for negotiations, board presentation, and effec- (Sierra Leone). tiveness-are worth noting. So are conditions of disbursement when the project components Supervision reports show "normal" imple- are appropriately phased. mentation with a good deal of compliance, as well as a few examples of delays in taking * Conditions of negotiations were used to action. Angola offers an interesting lesson. The obtain a satisfactory proposal for technical power sector rehabilitation project approved in assistance with a mature utility (Sierra May 1992 had to be modified in mid-1994 as a 71 ox5.5 CONMMECAIAINWT AAEMN OTA GO RCIE, tons are ihyatooosadcaal f bse prah soeof ~Which were, intae ne h otatro h ai fapromne reguatoy athorty vertariffs an te nain oslatt recomeda related mtiites shem ofsriefrbt utiiie,includ- ing matr uh astff depoyment structure arrangements o npaei is esne! Soure~: "Ghana-Thrnn Poe Prjc:Evrnena seIetfnvrnetlAssmetRpr o M Wahingon DC: Worildbank, Janr 1994.X. result of the war. Along with changes in the preneurs (assuming their interest could be physical components, funds were reassigned to elicited) may be a touchy political and reinforce the institutional component, to be economic issue in SSA, although privatization achieved through a study to define a corporate of some segments of the operations appears strategy, and to restructure ENE, the national possible. power company. The case of Angola shows that, even when already committed to change, it is Private operators can be expected to invest in possible to accelerate the move toward greater almost any country if they succeed in hedging transparency and commercialization without their perceived risks. Generally, the higher the having to wait for the "next" operation. risk, the higher the return and the shorter the paY-back period they will insist on. However, the return on investment is not the only con- Private investment sideration. Guarantees also play an important role where the perceived risk is so high that As with other infrastructure sectors, owner- the expected return would have to exceed a ship of power sector assets by private entre- certain level. Because of guarantees, deals are 72 seldom if ever consummated with returns in that have applied these principles, the risks excess of say 20 percent to 24 percent. Some- perceived by would-be investors soon after times, an intimate knowledge of the market implementation would still call for a premium and long exposure to a country's culture suf- and guarantees that governments may not fice to sufficiently reduce the perceived risk. wish or may not be in a position to entertain. Such was the case of the recent creation of CIPREL (C6te d'Ivoire's power producing Notes company), a new private venture formed by the two major shareholders of CIE to 1. The World Bank's Role in the Electric Power Sector: Policies for Effective Institutional, Regulatory, and Financial Reform, World construct and operate a combined-cycle gas Bank Policy Paper No. 11676, Washington, DC: World Bank, turbine plant. January, 1993. 2. John Nellis, Contrats de Plans and Public Enterprise Perfor- Implementation of the first three principles mance, World Bank Discussion Paper No. 48, Washington, DC: enunciated in the Bank's policy would go a long way toward reducing the perceived risk 3. Zadi Kessy, "Presentation d'une methode de management appliquee a la Compagnie Ivoirienne d'Electricite," CIE: to potential investors. Even in the countries Abidjan, April 1994. 7,, 6. Conclusions and recommendations The Bank's policy for power lending makes good toward a concession offers a good example of priva- sense for SSA. Power lending should form part of a tization issues and feasible solutions. carefully balanced country assistance strategy that takes into account other energy resources, such as Much remains to be done to ensure that utili- biomass, and should be supportive of economic ties operate in a business-like fashion. But management objectives. Large loans should be some countries are showing that it can be done avoided where either performance is below accept- in SSA. This concluding chapter makes sugges- able benchmarks in key technical and financial tions for the task ahead. These suggestions fall areas or no acceptable platform of sector reforms is into two categories: first, a common menu for underway. The Bank should work at increasing all countries and, second, suggestions about ownership in SSA countries of its policy objectives sector restructuring and private sector financ- and principles, TA programs, and the mode of TA ing-the "new frontier" of institutional devel- delivery. It should forge partnerships with other opment. The chapter then outlines the Bank's donors to obtain a consensus on criteria governing possible role in helping to implement this their involvement in the SSA countries and to agenda. It closes with a few recommendations. improve the deployment of resources. The Bank should be selective when promoting The road ahead: immediate agenda restructuring and privatization. Enabling condi- tions for competition in generation are absent in Whether or not utilities remain vertically SSA, but an adequate tariff for small- and integrated, attention continues to be needed medium-bulk purchases should be put in place on four fronts: sector policies, regulatory everywhere. Decentralized community-based sup- principles, investment program, and human ply, which has worked well in other sectors, is resources. worth exploring for low-voltage service. Commer- cialization of distribution is key. Unbundling it Sector policies. Some tenets must be enforced from transmission and splitting it into franchise with vigor, often with the help of specific areas would open the field for private operators to legislation: compete for management contracts. Privatization is controversial but probably necessary for invest- (a) Governments should concentrate on their ment funding. In COte d'Ivoire, the introduction of roles as regulators and policymakers and an independent power producer for new thermal refrain from any other form of control over capacity and the drifting of the lease contract the sector. 74 (b) Power utilities should operate on the basis comprehensive manpower development pro- of clear objectives enshrining sound principles gram at all levels is necessary for both the utili- of technical and commercial management, ties and the government. The integration of including the possibility of contracting out ser- expatriates, and twinning arrangements with vices currently done in-house. well-functioning utilities, can initially help both to fill skill gaps and transfer skills to local Regulatory principles should strive to ensure employees. The task is no less challenging and sector efficiency and financial viability is largely in uncharted waters when it comes to through the following: training government in fulfilling a more sharply defined, and more limited role, as sec- (a) Promoting efficiency and equity through: tor regulator. Finally, incentive systems must be created to help power utilities and govern- * a considerable reduction, if not complete ment institutions make the most of new skills abandon, of tariff subsidies and cross acquired by managers and staff. subsidies; * a shift from cost-plus-based regulation to The new frontier: restructuring and incentive-based contracts; and assets privatization 3 contracts that are awarded through a trans- With few exceptions, the power utilities of SSA parent and competitive process. countries are government-owned, integrated monopolies responsible for the transmission (b) Enforcing certain rules of financial discipline and distribution of all electricity that they pro- on accounts receivable by private and public duce. Varying degrees of competition already sector, self-financing (30 to 60 percent), returns exist in the running of even the most integrated on assets (8 to 12 percent), and transparent power utilities, as for example to construct compensation by government for any noncom- facilities, to contract out certain functions, and mercial obligation that it imposes on the utility, so on. One of the tenets of the new policy is such as subsidized service to rural areas. that exposure to markets and competition should be increased in order to enhance sector Investment program. Power sector investment performance. In particular, recognition that not must be limited to the sector's financial lever- all of the activities involved in the provision of age capability. Its composition should be pri- infrastructure services are a natural monopoly oritized initially to rehabilitate generation and is central to achieving greater efficiency. distribution and later to expand distribution and generation. The internal economic rate of Competition in generation. At this stage, the return of the investment program and of Bank- small size of the power systems and the weak- financed projects should be greater than 10 ness of the regulatory frameworks of SSA percent when benefits are calculated at the countries make it difficult to recommend their prevailing tariffs. breakup (unbundling) as was done in some countries like Chile and the United Kingdom.' Human resources. The availability of abundant Unbundling generation from transmission and and skilled human resources and the capability wholesale competition for generation are com- of institutions to put these resources to work plex affairs. One consequence is the prolifera- are key to social and economic development. tion of contracts both in the short and long For the power sector, the implementation of a term not unlike those found on spot and 75 future commodity markets. Another is the decentralized community-based supply. fragmentation of the generation system into Whether in education, health, water supply several pieces for competition to really and sanitation, rehabilitation, or supply of emerge, and a trend toward smaller plants new housing, this mode of service delivery and less capital-intensive generation. has elicited responsible behavior and good cost recovery from beneficiaries, and respon- This model also assumes that economies of sive supply by producers. However, these scale in generation can be obtained in spite of promising results were generally obtained for sector fragmentation or are less important technologies with no economies of scale and than the efficiency brought by competition. It little demand for specialized technical and also implies a streamlined but sophisticated managerial skills. Decentralized community- regulatory framework, commercial skills in based low voltage power supply is worth abundance for contracts management, and exploring, but it should exclude most tradi- above all a strict legal framework to enforce tional generation technologies except minihy- them. Absent these, as they are in most SSA dro. Decentralization has one drawback in countries, producers will minimize transaction the eyes of many: it often translates into costs and the risks of not having contracts markedly different power prices from one enforced with cartelization and vertical inte- area to the next, a significant departure from gration (whether tacit or institutionalized). In the prevailing practice of a national tariff for essence, transaction costs can make a monop- small consumers. oly natural even when economies of scale do not. Besides, such economies exist in SSA Unbundling of distribution. Restructuring distri- countries where large-scale hydro or coal- bution has attracted less attention than compe- based power is least cost. From that point of tition in the generation market. This is because view, competition on a broad scale and system the business orientation of distribution is fragmentation are desirable only in systems taken for granted in industrialized countries. where small diesel sets or gas turbines are eco- Distribution should be the prime focus of nomic over the long term, for example in land- attention: it is where service delivery and cost locked or gas producing countries. recovery happens. In SSA countries, whatever improvements are made in efficiency at the Independent producers might be able to com- plant and grid levels will be jeopardized if dis- pete with utility-based generation in specific tribution remains grossly overstaffed and circumstances, so there is a need to review the unreliable and if utilities do not collect bills. barriers to their entry in the market and the Management contracts can make a big differ- rules for pricing their output. To start with, a ence, but a major issue can be the scarcity of marginal cost-based tariff for all small- and bidders or the dominance of a few, as has medium-bulk purchases should be put in occurred in water supply in some countries. place. Thus, most SSA countries would con- Unbundling distribution from transmission tinue to have a dominant but not unique gen- and generation opens the field to private oper- erating company until conditions for a fully ators who would not have the technical and competitive market are met. financial wherewithal to invest large sums. It has only one drawback: distributors may have Decentralization of distribution. The weaknesses to set prices above efficient marginal cost- that prevail at the national level in the formal based tariffs in order to remain financially governance system of SSA countries suggest afloat. Unbundling of distribution should be another avenue-that of less sophisticated accompanied by its decentralization into sev- 76 eral service areas designed to make bidding clear: first, governments are not prone or for the franchise attractive. financially capable to be good shareholders; and second, management contracts, which by Privatization. In less-developed countries, the definition do not require operators to finance share of privately owned power sector assets investments, are no guarantee of adequate is increasing as a result of two movements: the cost recovery. In many ways, C6te d'Ivoire is divestiture of existing assets by government, showing both the contours of the issue and mostly in Latin America, and the emergence of possible solutions for SSA countries: arrears independent power producers (IPPs), mostly are low enough and efficiency and power in Asia. In SSA, only the latter is happening, prices high enough for CIE to meet its man- and it is happening only in C6te d'Ivoire. date, but this is not sufficient to finance sys- tem expansion. Even EECI is unable to fund An OED evaluation of completed privatiza- new connections and minor overhauls of the tions shows that ownership of privatization distribution system. A recent amendment to programs by SSA countries was generally CIE's management contract extends CIE's lacking, even in the industrial and agricultural responsibilities to investments, thus making sectors. The issues of asset valuation, fair it evolve toward a concession contract. C6te price, labor redundancy, statutes, and d'Ivoire is also mobilizing private equity with perceived need for government control often an IPP contract for gas-based generation. lie at the heart of this lack of ownership. In addition, assets privatization in the energy Reform agenda items are interdependent. Privatiza- sector raises specific problems such as the dis- tion is often not easy, and in the power sector of comfort of having a private monopoly when SSA perhaps not possible, until physical rehabil- regulatory capacity is known to be weak, and itation and/or organizational restructuring has the transfer price of national resources such as taken place. Privatization, on the other hand, hydropower and natural gas, which can gener- can make life simpler if it reduces the need for ate a rent fnr its producers. All these issues can the regulator to enforce minirnum financial tar- in principle be solved-through the setting of gets. Organizational restructuring, by contrast, royalties and strong regulation-but their increases the regulatory burden as the number practical solution is likely to be controversial of entities and pricing arrangements multiply and protracted. It is likely to be least contro- with unbundling and decentralization, clearly a versial for new thermal power and, if labor serious constraint for SSA countries to consider problems can be overcome, for distribution. in setting the pace of reforms. Although sharing The problem has often been eased in French- similar cultural traditions, historical evolutions, speaking countries by the signing of BOT and several common problems, each country (build, operate, and transfer) concessions for a should select its own institutional options2 for limited time after which asset ownership is the power sector and design its own program. transferred to government. One of the major determinants of the extent of Private ownership of assets is probably necessary change sought by govemments will be the for investment funding. Though currently less level of awareness among the stakeholders pressing a problem than in booming economies, (public officials, political leaders, consumers, investment funding will soon become a prob- and interest groups) about the "correct" behav- lem in SSA countries where growth for ef-ective ior in the more successful countries. Another demand is picking up and cannot be met by will be their perception that other countries at efficiency gains. Lessons from the past are similar stages of development in the region or 77 in other parts of the world have benefited from dysfunctions of public management, and applying the principles the Bank is promoting. poorly performing utilities in turn have a Without that awareness and perception, the depressing imnpact on the countries' fiscal per- status quo may well prevail. Action programs formance-already a very weak spot of many seeking to enlighten the stakeholders' leader- SSA economies. ship of those countries would appear to be essential for the successful transition to a more Power lending should form part of a carefully bal- business-like operation of the sector. anced country assistance strategy. The Bank has a strategic interest in the sector but it would be counterproductive for the Bank and borrowers Role of the Bank to pour money into unsustainable power sector expansions. The priority given to power lend- The Bank and other multilateral and bilateral ing can be questioned where borrower owner- institutions have had in the past an important ship of sector policy reform is not assured: role in assisting the countries build up the sec- power infrastructure does not trigger growth tor and overcome energy crises. The Bank, on its own and poverty alleviation as well as UNDP, and bilateral lenders have also made important energy and natural resource man- important contributions in energy assessments agement objectives are best served by the and ESMAP initiatives. However, based on development and rational use of traditional sector performance in the early 1990s, their energy resources such as charcoal, fuelwood, institutional development impact has been and other biomass. Because they are capital mixed. Together, donors could exercise much more intensive, power projects should be especially leadership and achieve more than they have in the supportive of economic management past in helping the SSA countries implement the objectives (fiscal restraint, efficient use of finan- agenda presented in the above paragraphs. cial and human capital by public and private sectors) and should complement adjustment The Bank's comparative advantages are (a) the operations. Power lending should not be financial resources that it can provide; (b) its viewed as a vehicle for transferring resources knowledge and experience in infrastructure- or for targeted subsidy interventions. related issues; (c) its capacity to pool informa- tion; (d) its capacity to insert a power project Signs exist that the Bank is well on its way to in a broad policy framework; and (e) its influ- realigning its sector strategy in SSA. Operations ence on adjustment policies through its lend- dealing with the management of forestry ing and technical assistance operations. The resources, fuelwood distribution, and improved Bank faces strong competition though in stoves are picking up in scope and number. financing and in knowledge of and experience This reflects changes in the countries (decen- with infrastructure-related activities. Further, tralization of resource management) and expe- the Bank is increasingly seen as a knowledge rience accumulated by the Bank in many and policy advice bank. It should cultivate this studies and pilot projects. For example, projects relative strength in many SSA countries. in Mauritius, Mozambique, and Niger will introduce technologies for transforming bio- Bank policy for power lending makes eminent sense mass-bagasse, fuelwood-into briquettes/ for SSA. Sub-Saharan Africa's poverty and charcoal and for manufacturing stoves and fur- dependence on foreign assistance do not jus- naces for household and industrial use. They tify a relaxation of quality standards. Indeed will also create institutions to monitor preserva- power utilities are peculiarly vulnerable to the tion of biomass. Moreover, six ongoing power 78 projects in Burundi, Ethiopia, Malawi, Mali, New-style interventions necessitate major modifi- Niger, and Rwanda have one or more compo- cations in the Bank's role and modus operandi, nents for producing, marketing, and distribut- such as: ing charcoal and crop residues and efficient household stoves. * the nurturing and gauging of borrower ownership of the project at every step and The Bank is now applying, albeit still not for all in all its dimensions: locus of initiative, SSA recipients of recent loans, the principle of intellectual congruence, political commit- "commitment lending" enshrined in the new policy. ment, and stakeholders' acceptance; It is encouraging to note the increased use of upfront conditionality for larger operations * better agreement and coordination with addressing system expansion. Also encourag- other donors on each country strategy; and ing is the association of these conditions with measures that would have seemed too radical * for smaller and TA-focused operations, only a few years ago-for example, manage- better deployment of Bank staff and con- ment contracts with private and mostly off- sultants, and better division of labor shore operators in half a dozen cases. among donors with experience and pres- ence in the field. The Bank's continuing emphasis on physical and financial rehabilitation is well placed. It allows for The Bank can help countries build up awareness of very relevant interventions that are modest in the need for sector reforms, by having dialogues size. Such operations can help build up the with the government, management, and staff capacity and test the commitment of borrow- of sector entities and interest groups (commu- ers in tackling increasingly challenging objec- nity consumers, industrial consumers, tives on the road to power sector reform. nongovernmental organizations); and spon- soring regional or national seminars and Few of the SSA countries have reached a stage workshops on successful cases appropriate to where the Bank can and should induce large-scale the particular conditions of the countries. Such private investment in the power sector by provid- help was provided to Latin America (Cocoyoc ing guarantees. The cost of these guarantees Conference in Mexico, seminars in Colombia would end up as unacceptably high compared and Bolivia in the early 1990s), to Eastem with the benefits as long as the policy risks are Europe and former Soviet Union countries still very substantial or perceived as such. A (1993 and 1994 workshops in Vienna, Austria), few such operations, however, may be desir- and to India (1993 conference). able in SSA countries that stand most to gain from the involvement of independent power The Bank has accumulated valuable knowl- producers, as in Cote d'Ivoire or Tanzania, for edge through studies of the energy sector and example, to develop gas-fired generation. In the power subsector in SSA countries, which most other cases, the Bank group can assist in has provided a sound basis for policy choices many ways as it has done in other parts of the and donor involvement. The execution of this world: provide advice and training for project evaluation, however, has shown that this identification, evaluation, and contract knowledge is often scant, inconsistent, and bidding; and help govemments obtain altema- not adapted to today's needs. In the region's tives to sovereign or Bank guarantees, equity, changing political and economic environment, or syndicated debt-financing by the Interna- improved data gathering and analysis is tional Finance Corporation. needed to monitor and evaluate sector perfor- 79 mance and to provide a reliable basis for facil- mance is below acceptable benchmarks in key itating private sector involvement. technical and financial areas3 and where little of the following reform platform is under Finally, the Bank also has relevant and fresh implementation at the time of appraisal: experience in forging strategic partnerships with other donors with respect to infrastruc- * The establishment of a transparent and ture development-for example, the Road arms-length regulatory framework with Maintenance Initiative, a five-year program legal guarantees that utilities can operate carried out as part of the SSA Transport Pro- with autonomy-for example, through gram initiated in 1987, which has already management or concession contracts. yielded rich lessons. * The enforcement of regulatory principles to ensure financial discipline, adequate Recommendations tariffs, and incentive-based, competitive contracting of services. The Bank's new policy orientations for power lending make sense for SSA, where poverty Recommendation 3. When promoting power and dependence on foreign assistance do not sector restructuring and privatization in SSA, justify relaxing quality standards. Indeed, the Bank should explore setting up purchase power utilities are peculiarly vulnerable to tariffs, decentralizing distribution and un- bad management, and their poor performance bundling it from generation and transmis- is a contributing factor to the weak fiscal situa- sion, using concession contracts for private tions of many SSA economies. operators, and providing guarantees for independent power producers. The Bank and other cofinanciers could exercise much more leadership in promoting the sector Recommendation 4. The Bank should nurture reforms that form the thrust of the new SSA borrower ownership of its new sector pol- agenda. Until such reforms take hold, the Bank icy principles: institutional development pro- must exercise caution in providing guarantees grams to support the reforms, and the delivery to induce large power sector investments. of technical assistance by locals and expatri- ates. Effective dissemination of good practice Based on the foregoing findings, this review and buildup of stakeholders' support should has six main recommendations. be an integral part of project preparation. Recommendation 1. The country assistance Recommendation 5. The Bank should forge strategies for SSA countries should examine strategic alliances with other lenders and the justification for power lending and estab- donors to obtain a consensus on the policy lish its coherence with Bank assistance for objectives and criteria for their involvement in broad economic adjustment and for the devel- SSA countries. It should also establish partner- opment and rational use of other (especially ships in the deployment of human resources renewable) energy resources. and share responsibilities in performing those tasks that would benefit from the diverse field Recommendation 2. Except for small operations assets and competencies of other donors. aiming at institution building or rehabilitating facilities, power lending in SSA should be Recommendation 6. In collaboration with other avoided in countries where sector perfor- interested lenders and donors, the Bank 80 should help coordinate and institutionalize a DC: World Ba ik, 1994. This document has a restricted systematic effort to gather and analyze data distribution. on the power sector in line with the princi- 2. Country parameters influencing the choice of options are level and growth rate of gross domestic product; country size; ples of the new power sector policy. population size, distribution, density, size, and growth rate (number and size of urban and rural centers); and population literacy. Power sector parameters influencing the choice of Notes options are demand size and growth rate [MW; electricity con- sumption per capita and growth rate; share of electricity con- 1. Alvaro J. Covarrubias and Suzanne B. Maia, "Reforms and sumption by industry sector; and endowment in energy Private Participation in the Power Sector of Selected Latin resources (hydro, gas, coal, petroleum)]. American and Caribbean Industrialized Countries,' Vols. I and II, Latin America and the Caribbean Technical Depart- 3. Areas to monitor are technical losses, accounts receivable, ment, Regional Studies Program, Report No. 33, Washington, and rate of return on investments. 81 Annex 83 ANNEX TABLE 1.1: THE STUDY COHORT'. COMPLETED PROJECTS Loan/credit Total Total Total Institutional Loan/credit Fiscal Major amount disbursed canceled undisbursed Outcome Sustainability development Country number Poject name year objective ($millions) ($millions) ($millions) ($millions) rating rating rating Botswana L22090 Power I 1983 Thermal 32.50 18.23 14.27 0.00 Sat. Likely Partial Burundi C15930 Transmission and Distribution/ Distribution System 1985 transmission 12.30 11.59 3.84 0.00 Sat. Likely Partial Eastern Africa C14190 Ruzizi/Zai/Rwa/Bui 1984 Hydro 15.00 16.56 0.10 0.00 Unsat. Unclear Partial Eastern Africa C14200 Ruzizi/Zai/Rwa/Bui 1984 Hydro 15.00 16.55 0.11 0.00 Unsat. Unclear Partial Eastern Africa C14210 Ruzizi/Zai/Rwa/Bui 1984 Hydro 15.00 16.54 0.11 0.00 Unsat. Unclear Partial Ghana C16280 Power 1986 Distribution/ transmission 28.00 34.87 0.00 0.00 Sat. Likely Substantial Ghana C17590 North Grid Extension 1987 Hydro 6.30 6.88 0.00 0.00 Sat. Unclear Substantial Guinea CS0220 Power Engineering 1980 Power 1.13 0.00 1.13 1.13 Unsat. Unlikely Partial Guinea C10850 Power I 1981 Power 28.50 23.68 0.00 0.00 Unsat. Unlikely Negligible Guinea C15950 Power Engineering 11 1985 Power 8.00 10.95 0.05 0.00 Unsat. Unclear Negligible C6te d'lvoire L18960 Power I 1981 Power 33.00 33.00 0.00 0.00 Sat. Unclear Substantial Cote d'lvoire L31500 Energy Sector Loan 1990 Power 100.00 100.00 0.00 0.00 Sat. Likely Partial Kenya LS0120 Engineering Loan/OlkaTia G 1979 Power 9.00 8.40 9.00 0.00 Sat. Likely Substantial Kenya L17990 Power III 1980 Power 40.00 38.70 1.30 0.00 Sat. Likely Substantial Kenya L22370 Power IV Olkaria Third 1983 Power 12.00 7.46 4.54 0.00 Sat. Likely Partial Kenya C14860 Energy Egr Geo 1984 Oil and gas 24.50 30.04 0.00 0.00 Sat. Likely Partial Kenya L23590 Power V (Kiambere) 1984 Power 95.00 79.00 16.00 0.00 Sat. Unclear Negligible Liberia L16000 Power IV 1978 Power 10.00 10.00 0.00 0.00 Sat. Unclear Partial Madagascar C08170 Power I (Andekaleka) 1978 Hydro 33.00 33.00 0.00 0.00 Unsat. Likely Partial Madagascar C08171 Power I (Andekaleka) 1978 Hydro 10.00 7.57 2.43 0.00 Unsat. Likely Partial Mali C12820 Power/Water 1983 Power 24.00 23.36 0.01 0.00 Unsat. Unclear Negligible Mauritius L15480 Power 11 1978 Power 15.00 11.10 3.90 0.00 Sat. Likely Partial Niger CISIIO Power 1985 Power 7.50 8.72 0.18 0.00 Sat. Likely Substantial Nigeria L17660 Power V 1980 Distribution/ 100.00 100.00 0.00 0.00 Unsat. Unlikely Negligible transmnission Nigeria L20850 Power VI 1982 Distribution/ 100.00 100.00 0.00 0.00 Unsat. Unlikely Negligible transrnission Rwanda C14950 Transmission and 1984 Distribution/ 9.00 10.05 0.00 0.00 Unsat. Unclear Partial Distribution Systems transmission Senegal CS0260 Power TA and 1980 Power 3.30 3.30 0.00 0.00 Sat. Likely Partial Engineering Senegal C17100 Energy Sector 1986 Power 20.00 22.16 1.50 0.00 Unsat. Undear Negligible Sierra Leone C07340 Power III 1978 Thermal 8.20 8.19 0.01 0.00 Sat. Unclear Negligible Sierra Leone C12650 Power Engineering 1982 Power 5.00 5.13 0.00 0.00 Unsat. Unclear Negligible Swaziland L20090 Power III 1981 Thermal 10.00 10.00 0.00 0.00 Sat. Likely Partial Swaziland L20091 Power III 1981 Thermal 5.60 5.60 0.00 0.00 Sat. Likely Partial Tanzania C14050 Power IV 1984 Power 35.00 33.32 2.88 0.00 Sat. Likely Partial Tanzania C16870 Power Rehabilitation/ 1986 Power 40.00 44.27 1.40 0.07 Sat. Undear Negligible Energy Uganda C15600 Power n1 1985 Power 28.80 40.17 0.00 0.00 Sat. Unclear Partial Western Africa C11890 Nangbeto 1982 Power 1.80 1.70 0.10 0.00 Sat. Likely Substantial Engineering Credit Western Africa C11900 Nangbeto 1982 Power 1.98 1.85 0.06 0.00 Sat. Likely Substantia Engineering Credit Western Africa C15070 Nangbeto II 1984 Hydro 15.00 17.73 0.00 0.00 Sat. Likely Substantial Western Africa C15080 Nangbeto II 1984 Hydro 15.00 17.73 0.00 0.00 Sat. Likely Substantial Zaire C m2240 Rehabilitation Shaba 1982 Power 19.00 17.65 0.00 0.00 Unsat. Unclear Partial Power System Zaire C17120 Power II 1986 Power 37.00 50.33 0.00 0.00 Unsat. Undear Partial Zaire C22930 SNEL TA 1992 9.89 7.51 2.82 0.00 Unsat. Undear Partial Zimbabwe L22120 Power I 1983 Power 105.00 105.00 0.00 0.00 Sat. Likely Substantial Zimbabwe L29000 Power II 1988 Power 44.00 42.52 0.00 1.48 Sat. Note. Sat. means satisfactory; unsat. means unsatisfactory. 00 ANNEX TABLE 1.2: ONGOING PROJECTS Loan/credit Total Total Total Loan/credit Fiscal Major amount disbursed canceled undisbursed Country number Poject name year objective ($millions) ($millions) ($millions) ($millions) Africa region C23660 Togo/Benin Engineering 1992 2.75 0.63 0.00 2.38 Africa region C23670 Togo/Benin Engineering 1992 2.75 0.63 0.00 2.38 Angola C23850 Power Systems Rehabilitation 1992 Energy 33.50 1.31 0.00 34.08 Benin C22840 Power Rehabilitation 1991 Distribution/ 15.00 1.59 0.00 14.37 Transmission Burundi C22300 Energy Sector Rehabilitation 1991 Energy 22.80 6.10 0.00 17.22 Central Africa Republic C19780 Energy 1989 Power 18.00 15.93 0.00 2.48 Ethiopia C17040 Energy 1986 Power 62.00 49.55 0.00 24.28 Ghana C20610 Power Sector (ECG Fifth Power) 1990 Distribution/ 40.00 24.30 0.00 18.04 Transmission Ghana C21090 VRA/Sixth Power 1990 Hydro 20.00 4.32 0.00 17.14 Ghana C24670 National Electrification 1993 Distribution/ 80.00 0.17 0.00 77.83 Transmission Guinea C24160 Power 11 1993 Hydro 50.00 10.35 0.00 41.07 Kenya C19730 Geothermal Development 1989 Power 40.70 35.03 0.00 8.76 Madagascar C17870 Energy 1 1987 Power 25.00 21.67 0.00 5.62 Malawi C19900 Energy 1 1989 Hydro 46.70 32.68 0.00 15.60 Malawi C23860 Power V 1992 Power 55.00 1.87 0.00 53.49 Mali C19980 Power 11 1989 Power 33.00 7.95 0.00 25.97 Niger C18800 Energy 1988 Distribution/ 31.50 11.89 0.00 22.44 Transmission Nigeria L31160 Power Maintenance/ 1990 Distribution/ 70.00 37.81 0.00 32.19 Rehabilitation Transmission 26.00 0.85 0.00 25.28 Rwanda C24560 Energy Sector 1993 Power Sierra Leone C23560 Power Rehabilitation 1992 Distribution/ 21.00 1.19 0.00 20.43 Transmission Tanzania C24890 Power VI 1993 Power 200.00 1.29 0.00 202.48 Tanzania C23300 Engineering Credit 1992 10.00 7.02 0.00 3.69 Togo C21710 Power Rehabilitation 1991 Power 15.00 5.30 0.00 10.66 Uganda C22680 Power III 1991 Power 125.00 21.17 0.00 101.43 Zimbabwe L36960 Power III 1994 Power 90.00 0.00 0.00 90.00 Supplement Introductory note 88 Management response 89 Committee on Development Effectiveness (CODE) response 93 87 Introductory note Feedback of evaluation results within the World Bank Each study by the Bank's independent Operations Evaluation Department is reviewed by the Bank's management before being discussed by a committee of the board of executive directors. Management provides a detailed response to the recommendations outlined in the study. This response is discussed by the committee and, together with a record of actions promised and taken, is recorded in a "policy ledger" accessible to all Bank staff. The Bank's executive directors have requested that all published studies by the Operations Evaluation Department include a synopsis of the management response and the committee's findings. 88 Management response Overall performance of the power sector in Sub-Saharan Africa (SSA), in particular financial performance, has been generally inadequate. This situation is unsustainable and needs to be changed to ensure efficient sector performance and national economic growth. Reforming the power sector is an essential objective that is being pursued actively by the Region. We therefore broadly agree with the analysis and the thrust of the six recommendations proposed in the report, which we find well written and documented. Our earlier comments have been substantially incorporated in the final draft. Our response and status of action on the main observations/recommendations are summarized in the attached matrix. In addition, the following comments are worth mentioning. The report concludes that the Bank and cofinaniciers have played an important role in assisting the countries build up the power sector and overcome the energy crisis but that the Bank could more forcefully support implementation of the reform agenda. In particular the report states that the Bank should assist the countries in building up awareness of the need for sector reforms, as was done for Latin America. With limited success, the Africa Region has taken some initiatives in line with the proposed recommendations, particularly with respect to building borrowers' ownership of the Bank's policy and principles, disseminating good practices and successes, forging strategic alliances with lenders and donors, and sharing information on the power sector. In addition to country- specific actions, the Bank, together with several key donors, is currently preparing a symposium entitled "Power Sector Reforms in Sub-Saharan Africa" to be held in December 1995 in South Africa, which, we hope, will help build commitment around the reform agenda. For reforms to be sustainable and successful, flexibility must be part of the design and the implementation of reform programs. Research and experience suggest the importanlce of carefully crafted regulatory arrangernents to be operable within the legal, constitutional, and cultural frameworks of the countries. The same model will not necessary work everywhere. As experienced in the case of Mali with IDA's involvement, implementation of reform programs may also need to be carried out in a phased manner to secure ownership and to take political realities into account. 89 We are in general agreement with the recommendation to avoid lending where performance is below acceptable benchmarks and that in such cases progress on power sector reform should be required by the Bank. There are cases, however, where Bank lending has played a catalytic role for change. In these cases, lending provided a framework for dialogue and implementation of key reforms, which otherwise would not have been considered or would have been delayed. Commitment of the government to the reforms should obviously condition the lending. With the exception of one or two countries, power systems in SSA are of relatively small size and therefore all may not be suitable for unbundling at this stage; the promotion of private invest- ment in generation may be a more viable approach to improving efficiency. For this to be feasible, retail tariffs set at economic levels are essential. For instance, independent power production, which is currently being promoted in C6te d'lvoire with IDA's involvement, should be actively encouraged wherever justified. Similarly, activities that could be more efficiently performed by private interests should be removed from the public domain, for example, billing and revenue collection. Another feature of the power systems in SSA is the relatively low level of access to electricity. Rural areas where poverty reduction should be a priority are particularly affected by extremely low levels of access to electricity. To improve access to electricity in SSA, the public sector has a role to play, preferably in combination with private interests. Finally, we agree with the recommendation that the Bank should help institutionalize and coordinate a systematic effort to sector data gathering and analysis adapted to the principles of the new power sector policy. The "Live Data Base" recently developed by the Region would be a useful tool for the promotion of this initiative. 90 OED Ledger Lending for Electric Power in Sub-Saharan Africa Major OED recommendations Management response Actions proposed 1. Based on sector work, the country assistance We agree. The country assistance strategy provides Lending and nonlending activities must, in all strategy (CAS) for SSA countries should examine the basis for the preparation and implementation cases, be consistent with the CAS and must be the rationale for power lending, and establish its of Bank lending and nonlending activities. reviewed by the country teams and the DMTs. coherence and relative importance with respect to Bank assistance for broad economic adjustment and for the development and rationale use of other, especially renewable, energy resources. 2. With the exception of operations for institution We agree that Bank lending should be conditioned The Region will define acceptable technical and building or the rehabilitation of facilities, lending on governments' commitment to reforms. financial benchmarks applicable to the power in SSA should be avoided in countries where However, in implementing the Bank's power sectors of SSA countries. performance is below acceptable benchmarks in sector policies, it is necessary to consider each key technical and financial areas and no country's situation, and develop solutions that take For each country, we must assess the most substantial part of a platform of sector reform is account of constraints. appropriate ways to develop in a sustainable way under implementation at the time of appraisal. The the power sector, consistent with the Bank's key lending platform should include:. The regulatory framework, which should be lending principles as formulated in the power implemented in conjunction with other sector policy. * policy reform to establish a transparent and economywide initiatives, should focus on setting arms-length regulatory framework with legal up transparent and consistent regulatory processes guarantees that utilities can operate with that are dearly independent of power suppliers autonomy; and and that avoid government interference in day-to- day power company operations. The regulatory * the enforcement of regulatory principles to framework should establish a sound basis for open ensure financial discipline and adequate discussion of power-sector economic, financial, tariffs, as well as incentives-based, competitive environment, and service policies. contracting of services. 3. When promoting sector restructuring and/or We agree that a menu of options needs to be We must continue to review internally and discuss privatization in SSA, options to be explored in explored. Each situation should be assessed with the governments the feasible options for priority are: setting up of purchase tariffs, carefully. Unbundling may be appropriate in some power sector restructuring and/or privatization in unbundling and decentralization of distribution countries with relatively large power systems. It SSA. and advising on concession contracts with private may not be appropriate for small systems, while operators, and the provision of guarantees for private investments in generation negotiated independent power producers where cost- within the framework of satisfactory retail tariffs effective. may be feasible. 4. The Bank should work at nurturing ownership We agree that ownership of the reform is essential. We will strengthen efforts to nurture borrowers' in SSA countries for its policy and principles; the While we recognize that ownership was higher for ownership of the reform agenda, and disseminate technical assistance programs that will support the capacity expansion than for technical assistance relevant information. reforms; and the modality of technical assistance and reforms, the Bank and other donors have delivery by locals and expatriates. Effective financed some useful technical assistance. This has dissemination of good practice and successes led to least-cost expansion, tariff changes, achieved in similar countries on each of the topics management training, and preparation and where ownership is at issue must form an integral implementation of other reforms. The Africa part of project preparation. Region has taken initiatives to foster borrowers' ownership of the Bank's policy and principles in the power sector. The symposium on power sector reform scheduled in Johannesburg for end of CY95 is one illustration. 5. The Bank should forge strategic alliances with We agree that strategic alliances should be forged Periodic formal and informal consultancies with other lenders and donors to obtain a consensus on with other lenders and donors. Illustrations the lenders and donors, already in large part the the policy objectives and criteria governing their include Central African Republic and Mali, where practice in the Region, should be generalized. involvement in SSA countries. It should also the approaches used to power sector reform were establish partnerships in the development of coordinated and agreed with the donors, human resources and share responsibilities in improving effectiveness of the dialogue. performing those tasks that could benefit the diverse field assets and competencies of donors. 6. In collaboration with other interested lenders We agree with this recommendation. The "Live We will expand the "Live Data Base" for this and donors, the Bank should help institutionalize Data Base" developed by the Region will help. specific purpose. and coordinate a systematic effort to sector data gathering and analysis adapted to the principles of new power sector policy. Committee on Development Effectiveness (CODE) response The Committee on Development Effectiveness of the Bank's board of executive directors dis- cussed the study. While many speakers agreed that the Bank should avoid lending for power where performance is below acceptable benchmarks and where little progress has been made on reforms, the consensus was that the Bank should be proactive in helping its developing member countries overcome policy and institutional constraints. They noted comments by management that independent regulatory agencies, designed to ensure the autonomy of utilities, do not succeed in Africa and that efficient performance is better sought through other means, including contracts. Unease with the notion that Bank policy no longer emphasizes provision of basic electricity to the poor was prevalent, even though members noted that power lending was not the most effective way to reduce rural poverty unless it formed part of an integrated rural development strategy. Here again, the Committee wished to see a proactive posture by the Bank. Speakers asked how management treated violations of loan covenants, and the Chairman noted that this important issue was part of the broader question of management accountability which the committee planned to examine in 1996. On coordination with donor agencies, the committee suggested and management agreed that power sector issues should be discussed at consultative group meetings, to be chaired by borrower governments locally, so as to ensure issues were thoroughly addressed. A speaker said that both the OED study and the management response were too cautious on the scope for private sector involvement. The Committee requested man- agement to act on its comments and the OED recommendations. 93 Distributors of CHINA FtRANCE ISRAEL Private Mail Bag 99914 RUSSIAN FEDERATION Wennergren-Williams AB Distributors o CHna Financial & Economic WoOdBank Publicaeions Y uzmol LileNaeure Lid NPw Market lsdatelsbno Ves Mir, P 0 Box 1305 W orld Bank Publising House 66. avenue dlina PO Box 56055 Auckland 9a, Kolpachniy Pereulok S-17l 255Solra . P Do Fo StDong Jie 75116 Paris TOtAuio61560 Tel (9)5246119 Moscow 101831 Tel (8) 705 97-50 Publications Beijing Tel (1) 40-69-30-56/57 Tel (3) 5285-397 Fax. 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