CHAPTER 2. Making Regulation Work for Services in Africa
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concerns about competition (asymmetries of information and abuse of dominance) and consumer interests (universal access, affordability and quality). With the increasing integration of infrastructure systems across Africa through pan-territorial initiatives (e.g. Programme for Infrastructure Development in Africa) and common electricity markets, potentially significant benefits from economies of scale and shared resources require effective regional regulation.3 Infrastructure services regulation is also critical as a guarantor of access, affordability and quality control, which are interconnected. For example, if high technical, health, safety or environmental standards are not achieved, the poorest segments of society cannot afford formal infrastructure services and consequently rely on low quality and unsafe informal and unregulated suppliers. The type of regulation matters; simply regulating inputs or processes rather than outputs or outcomes may reduce a utility or firm’s incentive to improve quality, access and efficiency. If a country decides to open up the sector, the sequencing of privatization and development of regulatory institutions are also important, as establishing an institutional framework conducive to promoting competition and governing access, affordability and quality control before privatizing infrastructure services is correlated with improved investment and wider services provision (Zhang et al., 2004, and UNCTAD, 2012). Since the 1980s, it has become both technologically and commercially possible to separate infrastructure networks (e.g. electricity transmission lines and railways) from services provision and, as a consequence, to introduce competition in some segments of the market. This has fundamentally changed the nature of regulation, but has not lessened the need for it, particularly where infrastructure services are unbundled (or separated) from traditional monopoly utilities. In recent years, there has been growing recognition that significant welfare gains may be realized through deep forms of regional integration that entail the harmonization of legal, regulatory and institutional frameworks. Reforms that reduce cross-border transaction costs and improve the performance of infrastructure services are arguably as important for the creation of an open and unified regional economic space as trade policy reforms (Kessides et al., 2009). The preferred institutional organization of regulation is generally a body appointed or authorized by the Government, but independent of it, and thus less subject to political or electoral pressures (see box 2).4 With regard to professional services (credibility products) the market is often self-regulated by the collective action of providers, though the State may provide them legal authority to do so. Establishing