A Tale of Reforms, Structure and Institution
I stumbled on an article by Gretchen Rubin, speaking on another approach to conducting her research, stating that she adopted a ‘because of’ instead of ‘despite’ approach. This was intriguing for me because when we achieve winning results, we say despite so so…challenges, we achieved this. Meanwhile, it is those challenges that was the drive to a winning formula. Coincidentally, I was putting together this piece on reforms, policies and structures, my arm chair research, on an “African Reform’. So, I decided to surf for case studies on reforms in Africa, and of course experiment with the concept by searching for the ‘because of’ instead of ‘despite these challenges’ reform happened.
On reforms, the ease of doing business report by the World Bank remains a credible source to learn and get updated on happenings and innovation across the world. The report with of course the right backing of resources has shown the capacity to highlight and review such reforms, gathering information and building case studies that can be replicated.
Globally, it is a phenomenon that inefficient and inadequate regulations can stifle entrepreneurial activity and economic growth. And as we know and expect it, regulation should protect and stir growth in the positive direction.
I am quite passionate about the energy sector, and its transformational effect in serving as a springboard for economic growth. Maybe it is my why is it so difficult to achieve, that led my curiosity to Morocco (elitist Africa) in North Africa.
I start my findings with Morocco from the Doing Business report by World bank. In year 2020, the country made the list on countries implementing reforms in the energy sector. It is known to have made getting electricity easier through online applications for fresh connections and expanding the use of transformers. Of course, this sparks my curiosity to understand how the country started its power sector reform.
As with most African countries, there is usually a “back against the wall’ moment, the ‘because of’ and Morocco is no exception as its power sector reform happened because of. Crisis birthing opportunities.
In 1990, there was serious power supply shortage in the country, coupled with poor performance of its coal powered plants. Debt was 84% of GDP and 300% of export earnings (World Bank), FX reserves could cover only a few weeks of imports, protests on food price increases amongst other economic challenges. The usual African story. Usually, reforms take place when those benefiting from the past rot see that their pack of cards are actually crumbling.
Financial hardship and power outages led to the first step of the power sector reform through the introduction of the Independent Power Producer (IPPs), private sector to the rescue. Concessional agreements and plans with the private sector to build the energy sector, particularly in electricity generation and distribution, while retaining the national power as the single buyer at the core of the value chain.
How they did it?
Following all of the economic challenges and then huge power shortages, the 24.6million population country (1990), entered into power purchase agreements with IPPs. It was a partial liberalization of the entire system and full liberalization came years after. They initially adopted a Build-Own-Transfer model (BOT) which still gave the government power to operate, given fears of leaving the private sector too powerful and in charge of a key sector of the economy.
By 2010, the model failed, and had to transition into the Build-Own-Operate-Transfer model (BOOT) which proved successfully. More transparent pricing for the private sector and reduced financial burden for the government agency in charge was key to its success.
By 1996, they had commenced the Rural Electrification Agency (REA) program, adopting both local and international financing and on grid and off-grid renewable energy to bring electricity to remote communities. By 2008, there was further liberalization, with more private sector investments in installed capacity of up to 50MW. Over the course of two decades, by 2017, they had achieved 99.5% electrification across remote communities.
There was a drive for energy self-sufficiency. Morocco was also vying for strong geopolitical leadership across the region and ‘because of’ this had the political will to attract private investments.
The Moroccan government used the substance of the law, enabling attractiveness of the market and entry to private investors. Initially, there was a single buyer generation market and partial unbundling eventually had to take place. For the power sector, in today’s world, to reform is making changes through liberalization, unbundling, privatization, institutional effects- such as an independent regulator and competition in power generation amongst many other intricacies.
Office National de l’Electricité et de l’Eau Potable’s (ONEE)- (the National Office of Electricity and Drinking Water as transcribed in English), Morocco’s energy sector agency was the ‘main man’ as they say. And was successful- “because” there was focus on short term planning, over a 3–5 year period, that fit into the overall master plan. This meant they had implementable plans in the midst of their grandiose goals.
Today, Morocco is a next exporter of electricity, with goals for 100% renewable energy sufficiency by year 2050. Morocco is one of the few countries in the world with advanced renewable energy strategies and in Africa advanced power supply.
The Morocco’s power story is simply a tale of, the strong political will power to ‘Reform’, the set up of a multi-stakeholder business model as ‘Structure’ and a competent independent implementing agency — ONEE as the ‘Institution’.
#Reform #Energy #Power #Institutionalchange #Willpower
Policy Research working papers by Energy and Extractives Global Practice& Africa Region (World Bank Group) was very instrumental to this piece.
