Most utilities in sub-Saharan Africa (SSA) are in dire financial straits, unable to invest in system expansion and refurbishing, maintain existing networks, or even connect new customers. The financing requirement and investment gap is too large and lags other regions of the world, constraining the achievement of outcomes like universal access. At the same time, utilities’ governance arrangements and performance are suboptimal. Fixing the distribution and transmission segments is a top priority as the viability of the power sector and its ability to attract private investment ultimately hinge on the strength of the distribution sector.
Privately managed or listed companies (like Umeme in Uganda and Kenya Power) face the discipline of private capital, which subjects them to rigorous scrutiny, penalties, and liabilities. They also face greater pressure for compliance regarding transparency in reporting, including on performance targets, to ensure there is a sustained positive trend in performance. State-owned enterprises, in contrast, are not subject to rigorous scrutiny, penalties, and liabilities. However, since they are taxpayer-funded companies, citizens should be seen as shareholders of these companies. When ordinary citizens, civil society, and consumers act as shareholders to hold SOEs accountable, they are exercising active citizenship.
Currently, many utilities do not hold annual general meetings (AGMs) or account to consumers in a public forum. For utilities where ownership structures do not allow for public shareholding, some utility board meetings and AGMs are held secretly. Even when AGMs are organized, the information disclosed is minimal and touches only on peripheral issues. This lack of transparency undermines good corporate governance and makes it difficult for civil society and consumers to access sufficient information to suggest ways to combat inefficiencies. Civil society should insist that SOEs have AGMs where shareholders get the chance to elect representatives to the board of directors, receive updates on annual plans and accountability mechanisms, and voice their interest in having a well-managed and profitable utility. Consumers and new stakeholders, including the media and civil society organizations, could then challenge utilities’ strategies and risk mitigation measures, ask questions about activities, and hold the board and management accountable (Newell, 2008). This case, however, requires civil society to be well informed and knowledgeable about the workings of utilities.
Industry groups, consumers, and civil society groups should be accorded voting rights at board and shareholder meetings. Participation models include dedicated civil society seats, advisory committees, stakeholder engagement representations, partnership structures, and public board meetings. These examples are evident in Kenya Power’s board representation as well as Umeme’s shareholding, which allow civil society to demand better performance from the board and management. Board supervision roles may include the design of remuneration strategies for staff and executive management to minimize weak allocations to service delivery. Ghana’s electricity regulator, PURC, has industry and customer representation on its board; these representatives help safeguard consumer interests during applications for electricity connections and in various service delivery decisions involving energy customers.
Civil society should call for rational, strict budgets relating to remuneration and incentives for the board and executives and ensure these budgets are made public. In cases where SOE executives and boards earn enormous remuneration packages and annual bonuses while the utilities they manage incur losses, requiring constant state bailouts with publicly mobilized tax resources, civil society participation would help cut this excessive fat. Excessive remuneration gives managers no incentive to become efficient, honest, or accountable and only leads to entrenchment and pilferage of cash, ultimately resulting in a growing public debt burden.
Another governance weakness of SOEs consists of incompetent boards and executives, resulting in noncredible decision-making and nontransparent practices. The appointment of these two levels of leadership is often heavily politicized. Appointees may lack industry-specific skills and the dynamism to reform, and they are often nonprofessionals and lacking in diversity. They are frequently recycled from one SOE to another since the appointment process is usually shrouded in secrecy. Nowhere on the continent does an open, publicly advertised, and transparently vetted process exist for the selection of board members. Civil society agents should campaign for transparency and public and media access to information about SOE board and CEO appointments and highlight conflicts of interest among board members and politicians. Civil society organizations should insist on public participation in SOE board appointments and even push for legislation to make such participation compulsory. In addition, the performance measures of the board should be arranged on a contractual basis rather than through political rewards.
Civil society and individual citizens should contest irregular board and executive appointments in courts of law. Failing this, citizen activists should go to court to challenge poor SOE board appointments. They must also target failing but politically connected board members for dismissal and have incompetent, corrupt, and neglectful board members and executives declared delinquent. The Organisation Undoing Tax Abuse (OUTA) and Greenpeace in South Africa, the Africa Institute for Energy Governance (AFIEGO) in Uganda, the ACCESS Coalition in Kenya, and the Institute for Energy Security and the Consumer Protection Agency in Ghana are some of the civic groups advocating for better governance in the energy sector.
Furthermore, most of the irregular spending, wasteful spending, and corruption take place in SOEs’ procurement systems. There must be greater public participation in the awarding of tenders by SOEs. Citizens, civil society, and the media should sit in on tender award deliberations. These groups must work to get corrupt companies blacklisted from tendering for government services. They should also take SOEs to court when incompetent companies have been fraudulently awarded tenders to provide services and products.
Civil society groups should call for SOEs to have forums for users, including customers, watchdogs, and community groups, who can monitor the quality of SOEs’ services, determine whether they fulfill their social obligations, and hold them accountable. Innovative utilities like the National Water and Sewerage Corporation (NWSC) in Uganda, NamPower in Namibia and the Kenya Power and Lighting Company (KPLC) in Kenya have introduced citizen and consumer satisfaction surveys as part of their corporate performance contracts with governments. These go a long way toward improving customer voice and participation in utility service delivery. Such surveys and forums should be made mandatory and results made public. Sunshine regulation may follow to shame poor performers.
Regarding financial management and discipline, evidence from the World Bank UPBEAT analysis shows that only 14 utilities in 11 countries are able to post a net profit. Among these, only three utilities have achieved cost recovery of operating and debt-service costs since 2012, with a collection rate above 97% without state subsidies. Most other utilities are in dire financial distress, with their assets and resources mismanaged. South Africa, for example, Eskom’s debt has ballooned to over R442.7 billion in 2023/24, of which over R70 billion is from municipality distribution utilities, which are also publicly managed with limited or no incentives for hard budget controls. Its profitability, solvency, and liquidity ratios are of great concern and unsustainable. Even when utilities promise to turn around their performance, they often do not. Civil society and consumers, therefore, should demand solid turnaround plans that incorporate governance reforms, including private sector participation, enforcement of hard budgets, anticorruption measures, recruitment of competent staff with appropriate skills, and incentive arrangements that promote commercial behavior. This would change the political economy of utilities.
Excerpt of: Understanding electricity utilities in sub-Saharan Africa: The role of civil society in improving performance, governance, and accountability (Oxfam 2024)