Why Context, Not Blueprints, Determines the Success of African Utilities

Reforms in Africa’s electricity sector are by no means new. Many African nations have introduced “a series of policy, regulatory, and institutional changes aimed at improving the performance, efficiency, transparency, and financial viability of the electricity sector” since the 1990s but with uneven outcomes. Although some African countries such as Uganda have made progress, others such as Nigeria and Ghana continue to struggle with significant operational and financial challenges. African countries must balance a host of reforms such as privatization, unbundling of power sector services, regulatory restructuring, tariff rationalization among others. Many of these reforms are externally imposed by international donors and lenders.  Governments, donors, and multilateral agencies are mobilizing behind the imperative of improving utility performance which in turn contributes to expanding electricity access. Yet, many of these efforts risk falling into a familiar trap: deploying standardized solutions without sufficient regard for the local realities they aim to transform. The importance of “context” has long been acknowledged in Africa’s power sector discussions, but too often, this insight is sidelined in practice. Past reforms have repeatedly shown that uniform blueprints, whether privatization, cost-reflective tariffs, or unbundling, can flounder when applied without adapting to political economies, governance structures, and societal conditions. As new energy initiatives are rolled out on the continent and resources are more limited, the need to truly internalize and act on contextual understanding has never been more urgent.

The Mirage of Uniform Solutions

Most utility reforms have been rooted in neoliberal economic theory, which holds that market liberalization, private sector participation, institutional restructuring and market-based pricing enhance efficiency. International financial institutions (IFIs), especially the World Bank and the International Monetary Fund, have consistently promoted utility reform models borrowed from Western experiences. These models emphasize privatization, cost-reflective tariffs, institutional restructuring, and unbundling. These reforms were introduced across much of Africa in the 1980s and 1990’s under structural adjustment programs, which aimed at restoring macroeconomic stability and improving public sector performance. Utility reforms, in particular, were intended to enhance financial viability, efficiency, competitive markets etc., and were often tied to conditionalities for donor funding. While these standard reform models have improved efficiency in some cases, in many instances they have not led to significant improvement in utility financial viability. Hence, their blanket application across African countries has had mixed results.

For instance, Nigeria, one of Africa’s largest economies, unbundled its state-run utility into multiple private generation and distribution companies under the 2013 Power sector reforms. The government broke up the vertically integrated Nigerian National Electricity Power Authority—later the Power Holding Company of Nigeria—into eleven distribution companies (DisCos), and six generation companies (GenCos), all sold to private investors. The goal was to improve performance through competition and private sector participation. Despite privatization, DisCos remain financially weak due to high losses, power theft, poor metering, and low revenue collection. Tariffs are still not cost-reflective, as they are regulated and politically sensitive—requiring government subsidies to cover shortfalls. In addition, the DisCos face chronic technical and commercial losses, frequently reject available power due to degraded networks, and struggle with low metering, under-billing, and poor revenue collection. Nigeria’s reforms, while ambitious, were implemented in a context with limited institutional capacity to enforce accountability or sustain private investment incentives.

Contrast this with Uganda, where reforms in the early 2000s, including the concessioning of the distribution company to a private operator, have yielded more positive financial outcomes. In 2005, following a long and cautious bidding process, the government awarded a 20-year distribution concession to Umeme Ltd., the sole surviving bidder, with the commitment of a 20% return on network investment. This was not devoid of challenges. A harsh drought put pressure on supply and prompted a renegotiation of terms in 2006 that provided Umeme with further protections. This triggered a political backlash, as the concession remained controversial for years. However, continued government support and learning by regulators served to stabilize the reform. Over time, system losses were cut from close to 38% in 2005 to 16.2% in 2023, billing and collections rates climbed to over 90%, as investment in infrastructure rose. Yet, the Ugandan government continues to navigate complex trade-offs, including rural electrification targets, tariff subsidies, and public expectations. Yet even Uganda, with a more coherent regulatory environment and relatively stable investment climate, has recently chosen not to renew the private concession, citing high tariffs and limited access—opting instead to return distribution to state control.

These two cases illustrate a deeper lesson: the success of utility reforms hinges not on the technical design alone, but on the maturity of the underlying power market, institutional capacity, and political commitment to long-term reform. Countries with relatively well-developed power markets and regulatory consistency are more likely to sustain reforms. In contrast, where these fundamentals are weak, reforms may be enacted under pressure but are often reversed or undermined over time. Reforms, in other words, cannot be transplanted wholesale—they must be adapted to local conditions.

When Cost Reflective Tariffs Meet Poverty: The Burden of Affordability

One of the key tenets of the reform was the introduction of market-oriented pricing, in the form of cost-reflective tariffs, as a way of raising financial sustainability and stimulating private investment. From an economic and commercial standpoint, this approach is theoretically sound as pricing electricity at its true cost is expected to create the right incentives for efficiency and investment. But across most of Africa, this is anathema to the stark realities of poverty and uncertainty of income. On the continent, electricity affordability remains a critical challenge as over 35% of the populace live in extreme poverty. In Ethiopia, for instance, the lowest grid connection fee equals 130% of average monthly household income forcing low-income families to share meters or forgo connections entirely.

Meanwhile, the reforms in Zambia’s electricity prices have currently stalled due to resistance from the public, rising costs, and a devastating drought. Lower hydropower generation and emergency imports have raised load-shedding, yet a suggested cost reflective tariff increase was thwarted by regulators fearful of inflation and job losses. Torn between affordability and commercial viability, the government now has to contend with a deepening energy crisis. The crisis is deepened by Zambia’s informalized labor market, in which stagnant wages make households unable to absorb higher energy prices. The mismatch undermines market-based pricing, forcing utilities to compromise between financial sustainability and universal access. The impasse exposes a basic question: how to reconcile economic efficiency and equity in a strained energy system.

Whereas Zambia, among other African countries grapple with how to render electricity to be both cost-recoverable and affordable, Senegal embarked on an intelligent subsidy strategy. The Senegalese scheme protects the poor but continues making the wealthy pay their own fair share. Rather than untargeted subsidies to advantage high-consuming households, Senegal’s two-tier structure guarantees lifeline tariffs to poor consumers and cost-reflective rates to larger consumers and industries. If designed appropriately (i.e., ensuring that benefits reach those who truly need them), contextual solutions like lifeline tariffs, targeted subsidies, and cross-subsidization can support African utilities reforms without undermining social equity. However, designing and implementing these mechanisms effectively require data, digital billing systems, and strong governance; tools that many African utilities currently lack.

Institutional Strength Over Ideology: How Governance Shapes Utility Performance

Another often-overlooked contextual variable is the institutional maturity of the utility itself. Utilities that are technically competent, relatively autonomous from political interference, and transparently governed tend to perform better financially. In countries like Morocco and Côte d’Ivoire, strong state-owned utilities have defied the narrative that only privatization can lead to efficiency.

Morocco’s electricity sector reform is notable not for following the default privatization blueprint, but for setting a new pattern based on selective liberalization, close political coordination, and carefully calibrated public-private partnerships. Instead of unbundling or fully privatizing its state utility (ONEE), Morocco had retained a single buyer system and introduced private participation incrementally, mainly in generation and chosen urban distribution concessions. The 1990s reforms opened the door to independent power producers (IPPs) through long-term power purchase agreements. Projects such as the Jorf Lasfar Energy Company and Tahaddart CCGT plant enabled the addition of capacity without putting a strain on public finances. Morocco’s launch of renewables—supported by high-level political commitment—also facilitated large-scale private investment through MASEN, the nation’s national renewables agency. Renewables in 2017 accounted for 34% of installed capacity, with solar and wind setting regional standards. Rural access sped up markedly under the PERG program, raising electrification from 18% in 1995 to 99.5% in 2017. This was realized via a mix of public funding and IFI financing, with implementation managed by ONEE. Private distribution was unleashed in certain cities such as Casablanca and Rabat on the basis of delegated management contracts, but further privatization slowed in the wake of governance issues and domestic opposition.

In Côte d’Ivoire, the vertically integrated utility CIE (Compagnie Ivoirienne d’Électricité) remains publicly controlled but operates under a performance-based contract that incentivizes results. As a result, the country enjoys one of the highest electrification rates in West Africa (over 90%) and a relatively healthy utility balance sheet. Whereas, in countries where utilities are treated as vehicles for patronage or political messaging, rather than service delivery, their financial troubles are often structural. These utilities may be forced to expand access rapidly without matching investment or delay tariff adjustments for electoral reasons, leading to mounting debt and declining service quality.

Toward a Context-Aware Utility Reform Agenda

A more grounded, context-sensitive approach to utility reform begins with diagnostics, not dogma. Reform efforts must be rooted in a thorough understanding of a utility’s specific situation, rather than the application of ready-made solutions. This means asking foundational questions: Is reform even necessary? Is the utility financially sustainable, or are revenues being lost through theft, poor billing, or non-payment? Are governance structures robust enough to protect decisions from political interference, or is the utility captured by vested interests? From a political economy perspective, who benefits from the status quo, and who might lose if changes are implemented?

In some cases, struggling African utilities do not require wholesale transformation, but rather fundamental strengthening. This includes practical measures such as electronic meter reading to curb theft and improve billing accuracy, as well as revenue protection initiatives like prepaid metering systems to reduce corruption and collection losses.

Reform priorities should focus on outcomes rather than on ideological debates about whether utilities should be privatized, unbundled, vertically integrated, or independently operated. Structural models are not ends in themselves; the real measure of reform is performance. Are utilities delivering affordable, reliable energy? Are they recovering costs without excluding the poor? Are there ongoing investments to sustain and expand the grid?

Capacity building is equally important. Many reforms falter because institutions lack the technical and managerial capabilities needed for effective implementation. Regulators must have both the technical expertise and the political will to set fair tariffs and enforce performance obligations. Utility staff require training in financial planning, customer service, and grid operations, while planners need modern tools to forecast demand, integrate renewable energy, and prioritize investments. A reform agenda that embeds these context-aware elements is far more likely to deliver lasting improvements.

Conclusion

The next generation of electricity reforms in Africa—from renewed privatization drives to unbundling and cost reflective tariffs assumptions, must avoid repeating past mistakes. Initiatives like Ghana’s proposed ECG privatization is laudable in ambition but remain vulnerable to the same structural pitfalls that derailed earlier efforts. The lessons are not new, but the consequences of ignoring them are now steeper. Emerging programs such as Mission 300 must be careful not to impose timelines, funding conditions, or market structures on countries, utilities, or energy sectors without sufficiently addressing foundational issues: governance, capacity, affordability, and political economy. Otherwise, they risk becoming expensive cautionary tales. Reformers, investors, and policymakers must recognize that context isn’t just a consideration; it is the determining factor between transformative progress and systemic failure.