Competition is the name of the game in the battlefield of ideas in the
era of globalisation. As ideas are
transformed into products, the battle
extends to the marketplace with each idea
valued in monetary terms. As long as
competition matters, institutions endure
trading within it.
While the rule remains, practice falls short, excluding some sectors
from the sphere of competition. Public
utilities are excluded from the whole,
driven by monopolistic lineage.
However, globalisation has eroded their exclusion to such an extent
that partial competition has become the
trend. As the developed world becomes
accustomed to the trend, least developed
countries still struggle to learn the
Driven by their ideology of a democratic developmental state, which
promotes state driven economic development,
the EPRDFites have sheltered public
utilities from competition. A monopolistic
market structure for utilities ensures
universal access to services, they argue.
Cross subsidisation, within which overtaxed
urbanites finance rural infrastructure
expansion, is claimed to be the way to this
A transformational model of institutional reform, which ended up
splitting utilities into weak regulators and
powerful operators, pass competition up,
argue opponents. The poor technical capacity
and lack of resources of regulators has
driven them to the edge, while the promise
of competitive service delivery was broken,
Consumers are exposed to soaring prices, suboptimal service quality,
and limited service choices while they are
excluded from involvement in any operational
By contrast, the world has gone far to recognise that monopolies reduce
aggregate welfare. The privatisation and
partial privatisation of utilities proved to
be the best way to serve consumers. In
India, the most populous democracy in the
world, there are over 20 privately owned
power utilities with a power generation
capacity ranging from 1,650MW to two
Likewise, each of the 50 states of the United States (US) is served
with a minimum of three power utilities,
whereas Turkey, another vibrant democracy,
has 13 electricity operators.
Liberalising the telecommunications sector has even gone further, with
most Sub-Saharan African countries boasting
more than two operators. Kenya has four
operators, while Sudan has six. Similarly,
Uganda has seven telecom operators, of which
only the state owned company, Uganda Telecom
Ltd, operates fixed line services.
With utilities being monopolised in the electricity, water supply, and
telecommunications sectors at home,
Ethiopians have no alternatives. No
foreseeable hope of privatisation exists, as
Prime Minister Meles Zenawi affirmed at the
seventh party convention of the EPRDF held
in Awassa, the capital of Southern Regional
State, in 2008.
The universal access agenda of the EPRDFites has brought changes in
access to utilities.
To their credit, the number of telephone users has grown from 500,000
in 2005 to 6.5 million in 2010, while the
size of the population with access to
telephone services within a radius of five
kilometres has grown from 13pc to 62.5pc
during the same period. Similarly, the
national electricity generation capacity
reached 2,000MW in 2010, while electricity
coverage stands at 41pc.
Eschewing the global trend of partial competition, the Revolutionary
Democrats have also divided the utility
sectors along the lines of service delivery
The Ethiopian Electric Agency (EEA), established in 2000, oversees the
lone power generator and distributor,
Ethiopian Electric Power Corporation (EEPCo).
Similarly, the Ethiopian Telecommunications
Agency (ETA), which was established in 1996,
supervises the telecom monopoly, Ethio-Telecom
(formerly the Ethiopian Telecommunications
Other such modes of institutional arrangements can be witnessed in the
aviation, roads, and commodity exchange
sectors. In each instance, the regulators
were born from the operators. Most are so
shockingly understaffed and under resourced
that they remain ceremonial. As opposed to
the promised competition, they foment market
Replicating institutional reform is not typical to Ethiopia, as Japan’s
growth after WWII can be attributed to
copying US institutions. Dubai, the largest
city in the United Arab Emirates (UAE),
replicated the financial institutions of
London to transform itself into the
financial capital of the Arab World.
Yet, isomorphic reforms are risky as they mostly fail to take the
peculiarities of the sector and political
priorities into account. The incessant
Japanese recession and the bankruptcy of
Dubai in 2009 can partially be explained
through the exogenous nature of their
institutions, analysts argue.
Institutional reforms initiated by the Revolutionary Democrats are
politically driven, top down, and
prearranged. Biased towards separating
regulators and operators, they overlook
competition and efficiency in allocating
resources. Rather than inspiring innovation,
they breed wastefulness.
Ironically, and if not rhetorically, all the regulators claim that
their objective is to ensure competition.
The EEA aims to ensure competition and righteousness in electricity
provision, it stated in its vision
statement. Ensuring telecom service quality
and customer satisfaction is the primary
agenda of the ETA, it claims. The same goes
for the Ethiopian Commodity Exchange
Authority (ECXA), which is mandated to
establish fair competition among commodity
markets. There is only one on the block.
In reality, the regulators are overseeing monopolies with an
oligopolistic capability of fixing prices.
With a nominal rate of 0.045 dollars per
kilowatt hour (KWH), the price of
electricity in Ethiopia may appear cheap,
especially in comparison with Kenya, which
charges 0.085 dollars per KWH, and Uganda,
charging 0.16 dollars per KWH. Yet, since an
average Kenyan and Ugandan earns 809 dollars
and 501 dollars annually, respectively, and
not the 350 dollars an Ethiopian earns, the
net charge remains a burden.
In response to the high net price and poor service delivery, the public
confidence rating remains too low. Only 28pc
of Ethiopians have confidence in federal
government institutions, revealed the 2007
Gallup Institutional Confidence survey. Only
45pc confirmed confidence on financial
institutions in the same survey.
In the absence of competition in utility sectors since then, less
improvement can be expected in terms of
The one-size-fits-all reforms instituted by the Revolutionary Democrats
in different sectors have also disowned
public participation in decision-making.
Compounded by weak regulators, operational
changes in service provision and tariffs
happen randomly. Besides, service
interruptions pass unaccounted for.
The unusually frequent power interruptions two weeks ago, to the great
irritation of many across the country, would
no doubt pass without the regulator daring
to hold Meheret Debebe et al at EEPCo
publicly accountable for their failure to
Indisputably, flexible institutions are the basis of sustainable
economic growth. However, flexibility can
only be achieved if institutions are
established in line with the stage of
economic growth of the country, industry
peculiarities, and resource availability.
Superimposing institutions does not
To expand access to and quality of public services, reforms should be
undertaken on a case by case basis, instead
of copycatting. The focus should be on high
impact changes, not worthless splitting. In
case the EPRDFites’ resistance to partial
privatisation continues, customised
incentive structures could be established to
initiate innovation within the monopolies.
No measures can compare with the benefits that privatisation or partial
privatisation would bring. Only if
competition is institutionalised through
market based service provision will idle
regulators become active and relevant. In a
way, private investors should be afforded
the opportunity to offer an alternative to
paying high prices for poor quality.