Electricity industry reform in Mozambique : rationale, impacts and challenges

Publication Type:
Thesis
Issue Date:
2008
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NO FULL TEXT AVAILABLE. Access is restricted indefinitely. ----- In recognition of the importance of the electricity industry, the Mozambican policy makers have traditionally accorded a high priority to the electricity sector. Hence, significant resources have been allocated for the development of the electricity industry. For example, more than $200 million have been invested in the last two decades for electricity infrastructure development. In spite of these investments, the Mozambican electricity industry has performed poorly. For example, there has been no appreciable increase in the access to electricity (currently, only about 5 percent of the Mozambican households have access to electricity); over the period 1990-1997, the EDM’s contribution to the investment has reduced from 50 percent to negative; and about 30 percent system losses were reported in 1998. This prompted the Mozambican government to initiate a reform program for the electricity industry, in the year 1997. It was argued by the proponent of reform that it would contribute to improving the performance of the electricity industry, expanding access to electricity, and promoting wider socio-economic goals. This reform entailed functional unbundling of the industry, establishment of an independent regulatory body, and privatization. The analysis undertaken in this research - employing a combination of analytical methodologies, for example, Data Envelope Analysis (DEA), Stochastic Frontier Analysis (SFA), econometrics and historical analysis - has demonstrated that the above noted reform has had no appreciable impact on industry productivity, nor has it produced any noticeable wider benefits. This is so because - this research contends - reform was essentially initiated under pressure from the international donor agencies, without a clear understanding of what ails the industry and what remedies would work. The causes of ailment, this research argue, are rooted in the socio-political fabric of the nation. This fabric has been largely shaped by the conflicting forces of ‘tradition’ and ‘forced change’ over the past several hundred years, especially since 1498 - the beginning of the era of colonization by Portugal, followed by political independence, civil war, nationalization, and more recently, liberalization. Outcome? Socio-political asymmetries; rich-and-poor, north-and-south, rural-and-urban divide; corruption; skills shortage; and low self-esteem. The contemporary electricity reform clearly did not take into consideration these factors; instead it tried to subsume them into a broader, ideological debate on productivity and market forces. Understandably then, the present reforms have not produced anticipated outcomes. This research proposes a phased approach to reform that is underpinned by a deeper understanding of, and respect for, the socio-political conditions in the country. The key measures and phases of this proposed approach include: initial segmentation of the electricity market into three - Maputo, other urban, and rural; marketization of Maputo, commercialization of other urban and socialization of rural markets; and eventual reconsolidation and public ownership of the industry. This research has also proposed some strategies that could be employed by the Mozambican policy makers in order to overcome the inevitable challenge that would arise while implementing the proposed reform program. Further, it is contended that this research - the first of its kind for Mozambique - has made significant contribution to developing valuable insights into an issue of contemporary significant, not only for Mozambique but also for other sub-Saharan countries in Africa
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