A new World Bank study has presented a sobering assessment of the financial health of electricity utilities in Sub-Saharan Africa, as it suggested how utilities can be profitable while extending affordable services for the poor.
The bank said that a central but under-reported issue on the movement to reach universal access is the financial health of electricity utilities, adding that less than half of utilities cover operating expenditures while several countries lose in excess of US$0.25 per kWh sold.
In this context, it will be difficult for utilities to maintain existing assets, let alone facilitate the expansion needed to reach universal access goals,” said Lucio Monari, Director, Energy and Extractive Global Practice at the World Bank.
Mr Monari is expected to address the Utility CEO Forum at the upcoming African Utility Week in Cape Town from 16-18 May and present results of a recent World Bank study: “Making Power Affordable for Africa and Viable for Its Utilities”.
The study looked at utility financial statements and power tariffs in more than 40 countries, and spending data in household surveys for 22 countries.
“It remains surprisingly difficult to get basic bread-and-butter data such as tariff schedules, operational performance data, and financial statements. We focused heavily on raw data collection directly from Sub-Saharan utilities.
This study’s strength is that it distils lessons from dozens of countries. We hope it will help make Africa’s power sector financially sustainable and advance the goal of universal access to electricity,” Mr Monari explained.
Key messages from the report suggested several ways of recovering the cost of supply and making electricity affordable.
One third of countries may become financially viable through improving operational efficiency, it said.
It is almost certain that increasing tariffs will be needed in the remaining two-thirds of the countries studied, the bank said.
Individual meters in poor households can help utilities target cross-subsidies better while installing prepaid meters would benefit both utilities and customers.
The first priority in increasing access to electricity is to make the initial connection affordable to the poor.