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Electricity Licensing and Tariff Laws in Tanzania - Implications for Private Investment


Prof.Edward Marandu and Mr. Rwabangi Luteganya


This study investigates the licensing and tariff provisions in the Electricity Ordinance of Tanganyika and their implications for private investment. There were three strands to the analytical methodology - textual analysis of the Electricity Ordinance, investigation of what is actually taking place on the ground and investigation of opinions of key stakeholders. The aim of the second and the third strands was to provide better insight into the central objective. Furthermore, the Act governing telecommunications, a sector that has made significant reforms was investigated in order to discover lessons for power sector legislation reform.  

  1. There was sufficient evidence (analysis of legal text and actual practice) to support the belief that the existing Laws in Tanzania do not provide the necessary features for private investment, namely clarity, efficiency and transparency.

  1. A very rigid tariff system - adjustment only after the lapse of a specified period that could be 7 years or more.

  1. The tariff is a function of time lapse rather than cost and other market factors.

  1. The existing Ordinance does not provide mechanisms for tariffs to reflect actual costs.

  1. The ordinance has no provisions for meaningful encouragement of mobilisation of financial resources for growth, through the tariff.

  1. There is too much direct involvement of the political machinery in tariff setting tends to push tariffs down below cost.

On the basis of the findings the following policy options emerge: The 1931 Electricity Ordinance, enacted during colonial times, is so much outdated that it is not fit for amendment; instead it should be considered for revocation and a new one be enacted. The new law should: 

  1. Provide for a clear licensing procedure in the sense that it should specify: What activities need license; who can apply for license; where one can apply for license; what documents to fill.

  1. Provide for an efficient licensing procedure in the sense that it should contain efficiency-enforcing provisions such as stipulating the time frame for the regulator to finish processing an application. The relevant time frames for selected African countries are as follows: Ghana - 2 months; Ethiopia - 3 months; Uganda, Kenya and Zimbabwe - 6 months. Six months is recommended for Tanzania.

  1. Provide for a transparent licensing procedure in the sense that it should prescribe a large amount of transparency: publishing of applications and minutes be on open display as required in Uganda and Zimbabwe.  Tanzania should go even further to require these to be placed on the internet.

  1. The proposed mechanism of appeal and scrutiny by a parliamentary committee step in the right direction. 

  1. Reduce direct involvement of the political machinery in tariff setting by separating between policy formation (Ministry) and policy implementation (Regulator).

  1. Introduce an automatic tariff adjustment formula to track movement in costs, inflation and currency rates in order to maintain the tariff level in real terms.

  1. Need legal provisions granting, through the tariff mechanism, a meaningful encouragement of mobilisation of financial resources for growth.

  1. The proposed multi-sector regulator for utilities - a step in the right direction for it reduces the chances for 'regulatory capture'.

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