- Trevor Alleyne, and Mumtaz Hussain
- Published Date:
- August 2013
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1This section was prepared by Javier Arze del Granado, Philippe Egoume-Bossogo, Christian Josz, and Anton Op de Beke, with research assistance from Promise Kamanga and Douglas Shapiro.
2The analysis of the dynamics of fuel price pass-through, fuel taxes, and fiscal costs in SSA between end-2008 and 2011 is based on data collected by the Fiscal Affairs Department of the IMF. Less than full pass-through implies a reduction in the tax per liter (or increase in the subsidy per liter). The change in fiscal cost is calculated by multiplying this change in tax/subsidy per liter by the change in annualized consumption between the two periods.
3Prepared by Mumtaz Hussain.
4The effective tariff rate is the price per kWh of electricity consumed at a specific consumption level when all charges—variable and fixed—are taken into account (Briceño-Garmendia and Shkaratan, 2011).
5Prepared by Mumtaz Hussain and Clara Mira. This section draws on Arze del Granado, Coady, and Gillingham (2012) and World Bank (2012).
6Indirect effects can be calculated through price shifting models, assuming that increases in fuel costs are fully passed to domestic prices (Arze del Granado, Coady, and Gillingham, 2012).
7Household surveys also indicate that as much as 60 percent of households at the bottom with service do not pay their electricity bills, compared with about 20 percent of those in the highest consumption quintile (Briceño-Garmendia and Shkaratan, 2011).
8Prepared by Farayi Gwenhamo, Slavi Slavov, and Mauricio Villafuerte.
9For example, Burke and Nishitateno (2011) study a sample of 132 countries around the world and obtain estimates of the long-run price elasticity of gasoline demand between –0.2 and –0.4. In contrast, Golombek, Hagem, and Hoel (1995) estimate price demand elasticities of around –0.9 for Organization for Economic Cooperation and Development (OECD) countries and –0.75 for non-OECD countries.
10Seven countries reported frequent or significant fuel shortages, but fuel shortages were not a serious problem in 17 countries (see Appendix 1).
11Madagascar and Tanzania are examples of SSA countries that have shut down inefficient refining facilities. See Gillingham, Lacoche, and Manning (2008); and Kojima, Matthews, and Sexsmith (2010).
12However, it is important to note that SSA countries emit low levels of CO2, relative to the rest of the world.
13Prepared by Edgardo Ruggiero, Mumtaz Hussain, and Sukhwinder Singh.
14Uganda unbundled generation, transmission, and distribution. Kenya separated generation (KenGen) from transmission and distribution (KPLC). Ghana has unbundled transmission and has a separate distribution company. Nigeria has technically unbundled, but has not yet separated entities from the umbrella holding company.
15Thirty-three out of 48 countries have a total installed capacity of less than 500MW, and 11 have an installed capacity of less than 100 M W.
16Almost half of medium- to long-term power sector transactions in SSA involving the power sector are IPPs.
17IMS are used by the following state-owned electricity companies: KPLC in Kenya (CMS, IRMS, ERP); ZESCO in Zambia (CMS, IRMS, ERP); ZETDC in Zimbabwe (CMS, IRMS); UMEME in Uganda (CMS, IRMS); EEPCO in Ethiopia (CMS); and EAS Sonel in Cameroon (CMS). EMD in Mozambique may install IMSs in 2013.
18In a state-owned enterprise, managers could receive a portion of the additional profits.
19To partially meet a sharp demand increase related to rapid economic growth and the ongoing electrification program, Ethiopia distributed 5.3 million CFLs. While one CFL cost $0.83, it saved $3.5 per month to the sector. When half of the CFLs were distributed, the load reduction was about 80 MW (equivalent to total capacity in Sierra Leone and a multiple of Liberia’s capacity). The electricity utility CEET in Togo started in 2012 the distribution of 400,000 CFLs to 100,000 households on a pilot basis.
20This group would comprise all consumers supplied by high- and medium-voltage lines and the largest consumers connected to low voltage. The group usually comprises large industrial and commercial enterprises, particularly mining, and state-owned enterprises and public institutions.
21This approach is akin to the focus on large taxpayers through the creation of a Large Taxpayer Unit, to increase tax collection and drive tax administration reform.
22Metering and billing should remain functions of the utility. Where billing is too costly, for example, in poor areas with no metering, transaction costs can be reduced by assuming a minimum level of consumption per household (i.e., a fixed volume under a lifeline band).
23Pricing for nonresidential consumers is typically based on linear tariffs, and the regime is more complicated than for residential consumers and includes fixed, demand, and volume charges.
24The interest-free loan contributed to doubling the customer base in Kenya from 800,000 to 1,600,000 in the five years since 2006.
25Half the 40 countries in the World Bank’s Africa Infrastructure Country Diagnostic (AICD) sample have rural electrification agencies, and more than two-thirds have rural electrification funds (Eberhard and others, 2011).
26Multifunctional platforms appear in Togo’s latest draft Poverty Reduction Strategy Paper (PRSP).
27The membership of the power pools is as follows (date of establishment in parenthesis). Southern Africa Power Pool (1995): Angola, Botswana, the Democratic Republic of the Congo, Lesotho, Mozambique, Malawi, Namibia, South Africa, Zambia, and Zimbabwe. Nile Basin-East African Power Pool (2005): Burundi, Djibouti, Egypt, Ethiopia, Sudan, Rwanda, Kenya, Tanzania, and Uganda. West African Power Pool (2000): Benin, Burkina Faso, Côte d’Ivoire, The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, and Togo, Central African Power Pool (2003): Cameroon, Central African Republic, Chad, Republic of Congo, Equatorial Guinea, and Gabon.
28Prepared by Trevor Alleyne and Christian Josz.
29Prepared by Antonio C. David and Brian Moon.
30In Niger, new distortions are emerging as the country becomes an oil producer, while fuel subsidies are considered to have been effectively eliminated with the introduction of the new formula in Rwanda.
31This includes the stock of liabilities of SENELEC amounting to CFA franc 341 billion at end-2011, in addition to SENELEC payment arrears amounting to CFA franc 157 billion as of end-March 2012.
32Prepared by Antonio C. David.
33Prepared by Geneviève Verdier, African Department.
34LEAP is a among the most well-targeted safety net programs; on the other hand, poorly targeted fuel subsidies reached weekly levels in August 2012 that matched LEAP’s annual budget (World Bank ).
35Prepared by Farayi Gwenhamo, African Department.
36Prepared by Clara Mira, African Department.
37This is calculated as a weighted average of the prices of gasoline, kerosene, and diesel. Full pass-through includes import prices, taxes and margins in the formula. In both cases, price increases were considered preconditions for the IMF to issue an assessment letter, and to proceed with the ECF-supported program review.
38Prepared by Anton Op de Beke, African Department.
39President Jonathan officially inaugurated the program on February 13, 2012, and appointed Dr. Christopher Kolade as Chair of the SURE Board.
40Prepared by Antonio David, African Department, with inputs from the IMF’s Resident Representative Office Staff in Nairobi.
42Members of the Kenya Association of Manufacturers account for approximately 60 percent of total industrial energy consumption.
43These authors define affordability as the percentage of households that are able to purchase a subsistence level of consumption of electricity of 50 kWh per month at the prevailing average effective tariff without spending more than 5 percent of their household budgets.
44Prepared by Mumtaz Hussain, African Department.
45The QFD of a power utility is defined as the difference between the actual revenue collected at regulated electricity prices and the revenue required to fully cover the operating costs of production and capital depreciation. This measurement of QFD captures both the explicit and implicit electricity costs arising from underpricing of electricity, nonpayment of utility bills, and excess line losses.
46In addition, prices of fuel (mainly diesel) in Uganda are relatively high compared to other countries in East Africa—prices were, on average, 20–25 percent higher than those observed in Kenya in the past 10 years.