Electricity Sector Reform Performance in Sub-Saharan Africa: A Parametric Distance Function Approach

Since the late 1980s, electricity sector reforms have transformed the structure and organisation of the sector in many countries across the world. While the outcomes of reforms in developed and some developing countries have been extensively examined, there is limited analysis on the outcomes of the reforms in sub-Saharan Africa (SSA). This paper analyses the performance of electricity sector reforms in 37 SSA countries between 2000 and 2017. We use a Stochastic Frontier Analysis approach to estimate a multi-input-multi-output distance function to assess the impact of reform steps and institutional features on sector-level performance. The results indicate that reforms in SSA increased the installed generation capacity per capita and plant load factor but did not reduce technical network losses. Also, the presence of an electricity law, sector regulator, vertical unbundling, and private participation in the management of assets have a positive impact on reform performance. Perceptions of non-violent institutional features such as corruption, regulatory quality and governance effectiveness do not seem to have significant effect on reform performance, but perceptions of political stability, violence and terrorism influence reform outcomes. The effects of hydroelectric capacity on reform performance was found to be negligible while larger electricity systems were found to be more efficient reformers. We conclude that a workable reform in SSA involves vertical unbundling with an electricity law, a regulator and private ownership and management of assets where desirable. However, the positive outcomes go hand in hand with an increase of technical network losses, and hence emphasis should be placed on decoupling these losses from generation capacity and plant load factor.