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Industry Papers on Utilities

Africa’s Water: Big issues with big consequences for a big continent
World Economics, June 2011
Water underpins the whole of Africa’s economy, be it municipal, agricultural, industrial or mining, and is, unfortunately, often a critical factor in limiting economic growth or peace and stability. Aside from the issues of poor health, inadequate water and sanitation infrastructure debilitates the continent’s potential. This happens by making life difficult for businesses, which have to contend with daily problems relating to security of supply for economic activity and international investors who are simply put off by not being able to drink tap water in hotels when exploring business development opportunities. But such observations are glib in light of the significant public health difficulties imposed on millions of Africans, which result from the lack of environmental regulation in the sector.

In the municipal supply sector, there is a long history of aid-related water schemes in Africa, from the micro to macro scale, which have met with varying degrees of success. Examination of the success of privatesector participation in both rural and municipal supply is presented, along with an analysis of where projects have encountered difficulties. The rise of food and commodity prices has delivered the economic justification to develop a better understanding of the water economy in Africa. The argument for Africa to develop an understanding of the wider water economy, to ensure profitable and sustainable development, is presented in relation to agricultural and industrial use. Consideration is also given to the role of water in conflict mitigation.

The benefits and pitfalls of water in the industrial economies of Africa, namely mining and hydrocarbon exploitation, are considered, along with a discussion on the need to understand the environmental regulatory framework for the water economy.

C onclusions are drawn in relation to how water underpins all of Africa’s economic activity along with a summary of the key points that need to be considered by policymakers in developing the continent’s potential.

Boosting Infrastructure Investments in Africa
Donald Kaberuka, World Economics, June 2011
The absolute and relative lack of infrastructure in Africa suggests that the continent’s competitiveness could be boosted by scaling up investments in infrastructure. Such investments would facilitate domestic and international trade, enhance Africa’s integration into the global economy and promote better human development outcomes, especially, by bringing unconnected rural communities into the mainstream economy. While there are yawning gaps in all infrastructure subsectors, inadequate energy supply is directly correlated to low education levels, poor health outcomes, as well as limited economic opportunities and technology choices. Efforts by government to invest in infrastructure have proved inadequate to close the infrastructure gap. These investment opportunities have not been seized by the private sector due to the unfavourable business environment, poor incentives and regulatory frameworks. Therefore, Africa’s infrastructure challenge is not only in closing the huge financing gap, but also in building the necessary skills and capacity to attract investments. Although scaling up infrastructure investments offers the private sector enormous opportunities, unlocking these investments should be preceded by appropriate policy and structural reforms. The good news is that there is hope, and current developments are signalling an increased awareness by African governments. Development partners should therefore take advantage of the increasing political will for reform through knowledge and capacity building activities, especially, in fragile and post-conflict countries where the need is greatest.
Hydropower in Bhutan and Nepal: Why the difference?
Jeremy Berkoff, World Economics, September 2003
Bhutan and Nepal have followed differing hydropower development strategies. Bhutan has co-operated with India and power export earnings have helped fund a broadly successful economic, environmental and social programme. In contrast, Nepal turned to the World Bank and other donors to fund its power projects. When World Bank funding for Arun III was withdrawn in 1995, its programme was thrown into disarray and it remains to this day a net power importer. Nepal’s current economic, environmental and social malaise can in part be attributed to these past decisions in the power sector by the Government and World Bank.
Global Challenges of Providing Water and Wastewater Services
Paul Seidenstat, World Economics, March 2003
A key problem of water is the provision of a safe water supply for domestic use. Given the characteristics of water as a commodity, the general misuse of the pricing mechanism, and the economics of developing and operating water and wastewater systems, governments are faced with the challenge of organizing operating systems. The goal is to maximize connections at a reasonable cost and acceptable quality. Developing countries, especially in Asia and Africa, have much work to do to achieve modern water systems. Effective utilization of private water producers may be the most cost-effective approach for many countries.
Is the Internet Better than Electricity?
Martin Brookes & Zaki Wahhaj, World Economics, June 2001
This article looks at the economic impact of electrification in the United States to gain insights about the possible consequences of today’s information technologies. A close study reveals that electrification significantly raised productivity growth by spurring a redesign of the optimal factory but, strikingly, neither the firms producing the new technology, nor those using it, were able to increase their share of profits in GDP. The authors conclude that even in the unlikely event that the internet and IT matches electricity in economic terms, the only unambiguous beneficiaries would probably be consumers who are able to enjoy lower prices of goods and services and newer products.