Liberia's power sector is in a crucial transition phase. The state-owned utility is reverting to government control after the end of a privatisation programme financed with grants. There are proposals to lower operating risks by limiting political interference and checking electricity theft. The political costs will be weighty as President George Weah prepares to run for another six-year term in 2023.
Significance – Transition
ESB International ended its management services contract for the LEC on 20 July, six months before the five-year contract will expire. This project was largely funded by the US Millennium Challenge Corporation (MCC) through one of its compact programmes. The Irish firm ESB was hired to reduce the utility's commercial losses, strengthen its human capacity and increase new electricity connections. Now, the MCC programme has been completed and the utility has returned to state management.
An immediate task for the government is to appoint local senior executives for the LEC and maintain stability of the corporate governance framework. Subject to senate approval, the president is responsible for appointing the board and chief executive according to the Public Authority Law, 1973 (Amended).1 However, the political process for setting up local management has not recently been tested. The LEC has mostly been run by foreign firms since 2010.
The vertically-integrated utility (and the entire sector) is now in a critical transition phase. In May, President Weah met the World Bank, IMF and donors such as the US to plot the way forward. The most urgent priorities expressed include:
1. Increasing output,
2. Widening the customer base and
3. Curbing power theft.
Over the next two years, the government wants to budget USD60 million to connect the grid to the CLSG regional network.2 The US is also looking to develop another MCC compact scheme and support the continued rehabilitation of the country's main hydropower plant Mt. Coffee. Meanwhile, the World Bank is seeking private investments for solar mini-grids in towns outside the capital Monrovia. Finally, the government has restated a commitment to curbing illegal connections, which have increased the LEC's commercial and technical losses from 35% to 63% since 2017. There were only 75,000 legal connections last year.3
Outlook – Reform steps
Liberia is currently recasting the 2022/2023 budget to respond to external disruptions. Finding the fiscal space to mobilise resources to the power sector in the medium term will be challenging. Recurrent spending in the revised budget is nearly 80% of total, and rice subsidies are proposed to cost nearly as much as the initial outlay for the CLSG grid connection.4 This means the government will continue to rely on donor support to fund another potential tender, but it will need to take more concrete steps toward reform to stimulate donor appetite.
Those reform steps would involve improving legislation to allow for new LEC management to emerge and continue through a competitive, independent process rather than a political one. Here, we note initial setbacks experienced when a key political appointee at the utility clashed with ESB in 2018. Appropriate law enforcement to check electricity theft would further lower risk in the operating environment. However, the political costs for taking these steps will be weighty for whoever wins the presidential election next year. See: Who's Who: Liberia 2023 Elections.
Footnotes
1 An Act to Amend the Public Authorities Law (1973). Government of Liberia.
2 CLSG stands for Côte d'Ivoire, Liberia, Sierra Leone and Guinea.
3 Liberia Electricity Sector Strengthening and Access Project (2021). World Bank.
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