CHAPTER 2. Making Regulation Work for Services in Africa
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to encourage investment and improve efficiency in the sector. Domestic regulation should be addressed first, in order that countries do not lose their regulatory policy space in the drive for greater liberalization and attraction of FDI through free trade agreements and bilateral investment treaties. For African countries with limited experience of the economic regulation of infrastructure services there are few useful examples of how to transition from initial arrangements (e.g. on subsidies and regulatory risk guarantees) to consistency between regulatory legislation and contractual arrangements and to an effective independent regulatory body. Given the heterogeneity of institutional quality and economic development in Africa, it is difficult to directly apply particular country examples in other countries. The example from Uganda in box 3 highlights some elements of regulatory best practice. Countries also need to improve the capacity-building efforts of regulatory bodies with regard to human resources, to enhance performance, which may be supported regionally through shared training programmes, twinning arrangements and information sharing arrangements to more effectively disseminate best practices and benchmark regulatory performance. Cross-country regulation, at the regional economic community level or more broadly, is of particular importance. A key issue in such regulation is the harmonization Box 3. Uganda: Best practice in electricity industry regulation The Ministry of Energy and Mineral Development is responsible for overall management, policy formulation and monitoring of the energy sector in Uganda. The Electricity Regulatory Authority is responsible for the electricity sector. Authority members are appointed by the minister responsible for energy on approval of the cabinet for a period of five years. The Authority is financed by the Ministry of Finance, Planning and Economic Development, by fees prescribed by the Authority on licensing and by a levy not exceeding 0.3 per cent of the revenue generated from the sale of electrical energy. The Authority is independent in the performance of its functions and duties and is not subject to the direction of any person or authority. It is a competent and well-managed regulatory body operating under a well-designed legal framework. The Electricity Regulatory Authority of Uganda provides an effective framework for the support of commercialization and use of private investment in the electricity industry. In addition, the Authority successfully combines concession agreements with the economic regulation of electricity distribution, along with the Ugandan Rural Electrification Fund, to increase electrification rates. The Authority has also made use of a World Bank Partial (regulatory) Risk Guarantee facility to support the concessions and the regulator for the first seven years of the distribution contract. Source: (UNCTAD, 2014d).