Benchmarking of the Electricity Sector in East Africa: An Assessment of Technical Efficiency

Abstract

The electricity sector has globally been subject to reforms since the 1990s. The reforms consisted of unbundling vertically integrated monopolies and attracting the private sector with a view of improving quality of service (QoS) and technical efficiency. In some East African countries, however, the electricity sector remains vertically integrated. Controlling electricity losses has been difficult, resulting in poor QoS. This paper analyzes and compares the performance of the East African power sector with regard to QoS. A non-parametric approach, Data Envelopment Analysis (DEA) was used to estimate the technical efficiency scores and the Total Factor Productivity Change (TFPC) for productivity improvement under two models, generation and transmission-distribution (TD). Data comprising two outputs and three inputs was collected in Burundi, Ethiopia, Kenya, Rwanda, Tanzania, and Uganda for the period 2008-2017. On average, the East African power sector exhibits performance gaps of 20% for the generation model, and 22% for the TD model. In the generation model, it exhibits Decreasing Returns to Scale (DRS) at a frequency of 34 out of 60, compared to 16 for Increasing Returns to Scale (IRS) and 10 for Constant Returns to Scale (CRS). However, in the TD model, IRS are the most dominant, with a frequency of 31 out of 60 compared to 19 and 10 for DRS and CRS respectively. Inefficiency is largely attributed to excess inputs, including high-voltage transmission line lengths and electricity losses, as well as a shortage of outputs, such as the number of customers. The study also shows a global productivity improvement, which is linked to efficiency change for the generation model and technological change for the TD model. Specifically, countries that have attracted the private sector into the generation and/or distribution sectors have improved their productivity compared to others with state-owned utilities.