Electricity Licensing and Tariff Laws in
Tanzania - Implications for Private Investment
Prof.Edward Marandu and Mr. Rwabangi Luteganya
investigates the licensing and tariff provisions in the Electricity Ordinance of
Tanganyika and their implications for private investment. There were three
strands to the analytical methodology - textual analysis of the Electricity
Ordinance, investigation of what is actually taking place on the ground and
investigation of opinions of key stakeholders. The aim of the second and the
third strands was to provide better insight into the central objective.
Furthermore, the Act governing telecommunications, a sector that has made
significant reforms was investigated in order to discover lessons for power
sector legislation reform.
was sufficient evidence (analysis of legal text and actual practice) to
support the belief that the existing Laws in Tanzania do not provide the
necessary features for private investment, namely clarity, efficiency and
rigid tariff system - adjustment only after the lapse of a specified period that could be 7 years or more.
The tariff is a function of time lapse rather than cost and other market factors.
The existing Ordinance does not provide mechanisms for tariffs to reflect actual costs.
The ordinance has no provisions for meaningful encouragement of mobilisation of financial resources for growth, through the tariff.
There is too much direct involvement of the political machinery in tariff setting – tends to push tariffs down below cost.
basis of the findings the following policy options emerge: The 1931 Electricity
Ordinance, enacted during colonial times, is so much outdated that it is not fit
for amendment; instead it should be considered for revocation and a new one be
enacted. The new law should:
for a clear licensing procedure in the sense that it should specify: What
activities need license; who can apply for license; where one can apply for
license; what documents to fill.
for an efficient licensing procedure in the sense that it should contain
efficiency-enforcing provisions such as stipulating the time frame for the
regulator to finish processing an application. The relevant time frames for
selected African countries are as follows: Ghana - 2 months; Ethiopia - 3
months; Uganda, Kenya and Zimbabwe - 6 months. Six months is recommended for
for a transparent licensing procedure in the sense that it should prescribe
a large amount of transparency: publishing of applications and minutes be on
open display as required in Uganda and Zimbabwe. Tanzania should go even
further to require these to be placed on the internet.
proposed mechanism of appeal and scrutiny by a parliamentary committee –
step in the right direction.
direct involvement of the political machinery in tariff setting by
separating between policy formation (Ministry) and policy implementation
Introduce an automatic tariff adjustment formula to track movement in costs,
inflation and currency rates in order to maintain the tariff level in real
Need legal provisions granting, through the tariff mechanism, a meaningful encouragement of mobilisation of financial resources for growth.
The proposed multi-sector regulator for
utilities - a step in the right direction for it reduces the chances for 'regulatory capture'.
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