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Economic Development in Africa Report 2015
the independent economic regulation of network utilities and infrastructure services (transport, telecommunications, water and energy, including petroleum, piped gas and electricity) has emerged as a key economic policy issue in the past 30 years, with the rise of public utility privatization. Regulation in infrastructure involves (at least) the following four elements: market access and barriers to entry; operational regulation and pricing; competition; and investment requirements for services providers. The latter element is significant in Africa, where networks are often quite limited in range and poorly maintained, but private providers may be reluctant to expand and upgrade. National Governments define policy for public services and regulate many private services markets. This applies in particular to infrastructure services (transport, telecommunications, water and energy), financial services, education, health care and professional services (medical, legal, engineering, accounting and auditing), that is, services that display some public good characteristics and/or that are credibility products whose quality may be difficult to assess even after consumption. The need for regulation of such essential economic infrastructure and utility services is critical for three reasons. First, for achieving post-2015 sustainable development goals related to social welfare, water and sanitation and health-related indicators, greater emphasis is placed on regulation that protects consumers, attracts investors and enables Governments to achieve policy objectives (Stern and Cubbin, 2005). Second, Africa’s infrastructure services, in particular road freight, are more expensive and of lower quality than in any other region of the world (African Development Bank, 2010). Inland transport costs are much higher than elsewhere. One study estimated that international transport costs faced by African countries, at 12.6 per cent of the delivered value of exports, were more than twice as high as the world average of 6.1 per cent (International Labour Organization, 2014, and UNCTAD, 2003). In addition, freight moves slowly and uncertainly and the reduction in trade resulting from poor transport performance could exceed 20 per cent (Infrastructure Consortium for Africa, 2013). Third, access to electricity is low across Africa and the amount of electricity being generated, reliably and consistently, is too low to meet rising demand (Vagliasindi and Nellis, 2009). What are the key features of a modern regulatory framework? There is growing consensus on the key design features of a modern regulatory framework and ancillary agency (see box 2). The main features of effective regulation