Motivations for electricity market corruption

Since the 1990s, governments across Africa have increasingly involved private actors in electricity generation, although electricity distribution and retailing is still largely centralised – with state agencies maintaining considerable control.ab07343805d8 An estimated 573 million people in Africa – especially residents of remote locations – still lack access to electricity, while other regions of the world have made great progress in recent years.643cf8e10f70 Many individuals and businesses across Africa continue to count on government infrastructure and agencies for their power needs.

Electricity provision tends to be expensive and unreliable, and the infrastructure is deteriorating under routine bureaucratic neglect. As a result, some actors employ unsanctioned electricity connection and extension practices, involving power theft, bribery, and other illegal activities.f6d03962b979 Grid electricity is desirable to most people, and the high demand for connectivity has created space for clandestine deals, cartels and illegal financial transactions in electricity generation and distribution.feb9fd92baa5 These challenges are not only evident in Africa. Power theft and the offer of bribery to public officials in order to gain or expedite electricity connections are common in developing countries.fd500e8aff70

Kenya – a classic case of real-world electricity problems

Recent research points to gaps between conventional explanations for corruption’s prevalence and the real-world functionality of corruption in certain contexts.85318df9cbd1 Some have posited that corruption is a form of governance in itself and is not simply an aberration from ideal-type governance mechanisms.8c290acb2bf5 If corruption may be functional at certain times and in certain places, it is worth identifying what real-world problems are at stake, because this may help identify alternative, non-corrupt solutions.

Central governments in Africa currently strive for universal electricity access by 2030. In this setting – as an entry point for anti-corruption interventions – we suggest to focus on the planning stages of electrification initiatives, project implementation style, and their potential effects on societal perceptions of corruption.969674808ee5

Kenya is a classic case for testing this hypothesis. Kenya’s electricity grid centers on densely populated urban areas where grid extension costs are relatively cheap.958aba00499e In rural-peripheral locations, however, grid electricity is either unavailable or unreliable.050b24ea3346 Frequent blackouts, exorbitant electricity bills, perceived corruption, and frequent delays in the maintenance of power transmission systems in rural areas have driven massive uptake of solar photovoltaic (PV) systems.4bc7dbf59122

In response, the Kenyan government has expressed commitment to rural electrification as part of its economic transformationa79fd9c0e05c and universal electricity access visions.eb42a67d4ecf Ambitious grid electricity projects are underway and, in 2013, subsidised rural electrification initiatives were introduced under the auspices of Kenya’s electricity distributor, Kenya Power (KPLC), and the Rural Electrification Authority (REA). Yet, eligibility criteria for these initiatives are unclear and related bureautic processes are frustrating.a16580c5ce65 Red tape is a major challenge: it takes an average of 212 days to complete rural electrification projects in Kenya, resulting in widespread expectations among the rural population that they will encounter delays.a7c142883709 Moreover, Kenya’s electricity parastatals have lost trust over the last few years owing to scandals. These include alleged cheating on the part of KPLC via their monthly billing system, and a recent controversial tariff review by the Energy Regulatory Commission (ERC).

Corruption cartels and self-organisation of electricity

Kenya’s electricity access rate has dramatically improved in recent years, leapfrogging from 8% in 2000 to 70% in 2017, and through to 75% as of April 2019. Total installed power generation capacity has currently reached 2.700 mega-Watts and with a peak demand of 1.880 mega-Watts. Erratic supply persists, however, especially in peripheral locations – despite that the country records an excess power supply of almost 1.000 mega-Watts. Vandalism of transformers to steal components (eg copper wires and precious liquids) and installation of sub-standard transformers affect power supply in most rural areas, while power theft was widespread in slum areas until the introduction of pre-paid metering in 2011. 054257369feb Improved electricity provision is an integral part of Kenya’s recent economic transformation agenda rolled out by the Uhuru Kenyatta government, which seeks to increase electricity access – especially in the least-developed counties.

Before 2004, the cost of grid electricity access varied significantly depending on the distance from the nearest transformer. The grid connection process was slow and prices tended to be high. A standard grid connection cost of 35.000 Kenyan Shilling (KES)382bd62c8342¹ was introduced for consumers located within 600 meters of existing transformers. In 2013, grid connection costs to suit the circumstances of different customers were introduced. Premium connections were available to customers located far away from transformers, who could gain grid access by fully financing their own connection. Premium customers could either submit applications indvidually or as groups, and were assured of expeditious connections – usually within 45 days of approval.

In 2015, KPLC had over 17.600 underused transformers and so, in 2016, it introduced a Last Mile Connectivity programme. This focused on providing electricity to homes located within 600 meters of selected underused transformers at a cost of KES 15.000. This connection cost in practice included only the direct connection to existing local power transmission lines, excluding labour, material costs and standard charges. Homes located within the 600 meters, but that were still beyond the ‘drop-line range,’ incurred additional costs, including for low-voltage poles. Given scattered settlement patterns in Kenya’s periphery, only a few residents benefited from the programme. Residents in the periphery could however still gain grid connections via other rural electrification initiatives targeting schools, churches, markets, hospitals, and government offices.

These novel electrification initiatives, which involved different cost estimates and eligibility conditions, were confusing for many people, especially the illiterate. People were unsure whether to send applications to the KPLC or REA, and were disconcerted by delays introduced by persons posing as middlemen to facilitate the process. Perceptions of collusion between KPLC officials and grid-connected households began to emerge. In one case – highlighted during an in-field interview – an individual had gained approval for a premium grid connection, yet managed to convince other prospective customers in the area to pay additional money as part of an “appreciation package” for the middleman who facilitated the deal.

The rise of ‘tenderpreneurs’

Tenderpreneurship is a term combining the words tender and enterpreneurship. Originally, the term is a South African colloquialism for a businessperson who uses political contacts, networks, or affiliations to faciliate and secure government contracts, often exchanging favours or benefits.9ac78f91e6f3 The term has become associated with corruption, nepotism, and clientelism given that tenders can be awarded based on informal interests and/or political affiliation, rather than adherence to formal or legal procedures. Tenderpreneurship has become a challenge in government procurement across Africa, and Kenya’s electricity sector is emblematic of the practice.

Until 2004, KPLC was connecting only around 45.000 customers to the grid each year, and it was considering how to increase its annual connections. This coincided with the Energy Sector Recovery Program (ESRP): a USD 220 million loan facility from the World Bank between 2005 and 2013. One aspect of ESRP was a transmission line systems upgrade, and Canadian managers were hired to increase annual connections to 120.000 for timely recovery of the loan. When that target was achieved in 2005–2006, annual targets became more ambitious. Meanwhile, the KPLC had an understaffed engineering department and had to outsource grid construction to private contractors. Some KPLC officials set up their own companies to benefit from the new opportunities. KPLC increased its annual connections target to 160.000, then to 200.000 and later 400.000 connections. These figures even doubled to 800.000 connections in 2013–2014 and increased further to 1.38 million connections in 2016.

Ambitious connection targets correspondingly increased outsourcing of grid construction, thereby giving rise to tenderpreneurs in Kenya’s electricity sector. Corrupt practices came to a head in 2018 when two managing directors of KPLC and 19 officials faced prosecution for procuring low-quality transformers worth over KES 409 million, outsourcing line construction and other related services to non-qualified, unregistered firms.701cd466584b An internal audit report (2016–2017 financial year) also uncovered KPLC officials who colluded with unregistered supplier companies to facilitate tender approvals, contravening the Public Procurement and Disposal Act of Kenya. In response, since July 2018, KPLC has ended contracts with these private entities, and reverted to using its own engineers for grid constructions.

#Kenyapowerless

In 2018, the ERC increased tariffs by 100%. The increase was justified by the ERC with reference to the KES 10.1 billion needed for energy system expansion and maintenance. There were, however, allegations in the media that the government intended to illegally recover outstanding debts accumulated through diesel-powered electricity generation during the 2016 elections, and shift costs onto unsuspecting consumers. A petition – initiated by a Kenyan activist and lawyer, Apollo Mboya, on behalf of the Electricity Consumers Association of Kenya (ELCOS) in the Kenyan High Court – had earlier sought to prevent the tariff hike. The court verdict upheld the ELCOS petition and instructed the ERC and KPLC to stop the proposed tariff increase. This verdict was, however, rebuffed by the ERC and aggrieved customers took to Twitter to mobilise support for a follow-up legal case, using the Twitter handle #Kenyapowerless. Eventually, the ERC decided to settle the case and, in October 2018, a further tariff review led to price reductions.

Living with or without electricity in the Kenyan periphery

Rising living costs in urban areas and urban residents’ nostalgic impulses to retire in native homelands have both increased demand for grid electricity connections in the Kenyan periphery, even in homes that have already installed solar PV systems. Poorer households needing electricity for basic lighting, phone charging and radios usually resort to small solar systems (between 8 and 100 Watts). Relatively wealthier households seeking to use modern appliances to run home-based businesses urgently need grid electricity, however. Fieldwork findings show that households that switched between the city and the periphery, and that had installed between 100-Watts and 1-KW to power household appliances, generally did not offer bribes to gain electrical grid connections. The reverse was the case for those that needed grid electricity to replicate urban lifestyles and run home-based businesses in the Kenyan periphery.

Some households who submitted group applications to electrification initiatives were given cost estimates of between KES 1.2 and 2.5 million and were still required to offer bribes to KPLC officials and intermediaries to facilitate the entire electrification process. A household member who claimed to have been defrauded (with 37 others) by a KPLC impersonator explained: ‘the officer promised to include us in the list of Last Mile beneficiaries. (…) We paid KES 1.000 each but he never showed up again.’ffb50229dc68 When asked about the possibility of falling prey to such situations in the future, he responded in the affirmative: ‘I sent many application forms to the Machakos County offices, but I was later told to send the forms again to Nairobi. I don’t know what to do. (…) I think assistance from those in the city [electricity brokers] will be helpful.’5479b17949be Thirteen households claimed to have gained grid connections without paying bribes because they were part of the first groups selected for electrification initiatives. Nonetheless, some admitted offering “gifts” to officials to express their appreciation.

This does not imply that decentralised self-organised solar PV systems is a straightforward remedy to corruption in the electricity sector. Many households used plug-and-play solar PV systems (8 to 20 Watts) by a private company: M-KOPA¹,96d91051ffc7 accessed through instalment payment mechanisms. M-KOPA customers pay between KES 50 and 125 per day for approximately 400 days before owning the systems. This translates into a monthly tariff range of KES 1.500 to 3.750, meanwhile the average grid electricity tariffs for low-income groups seldom exceeds KES 500 per month. Some middle-class households had installed 100-Watt solar PV systems at the cost of KES 50.000 but poorer households who cannot afford the high initial costs of the system had no alternative but to use the M-KOPA instalment arrangement.

Moreover, although the ERC has regulations guiding the issuance of licences to solar PV technicians, the services of licensed technicians are usually too expensive for poorer households. Many low-income groups therefore often employ “quack” solar energy technicians who impersonate licensed technicians but offer affordable technical services. Some might assume that decentralised solar PV systems reduce the incidence of electricity sector corruption. On the contrary, the high price of such systems in Kenya has resulted in the illicit use of unlicensed technicians to install them.

Moving beyond conventional anti-corruption approaches

Many anti-corruption interventions occur when the corrupt practice has already happened, or assume the existence of incorruptible principals who set and enforce non-corrupt “rules of the game.” Sector reforms can, however, be deliberately crafted to undermine the effectiveness of conventional anti-corruption approaches. This makes efforts to monitor and sanction corrupt behaviour less effective. Marquette and Pfeiffer (2018) in particular have argued that understanding how corruption serves those who engage in it is an important first step in remedying the problem.

Our evidence from Kenya’s electricity sector largely supports Marquette and Pfeiffer’s (2018) point-of-view. Corrupt practices in the procurement of electricity have, in general, been linked to poor monitoring of contractors in mass electrification programmes.80bbe84e43f8 In Kenya, pre-paid metering systems and sanctions following power theft, payment defaulting, and transformer vandalism, have produced quite good results. Yet, grid electricity expansion initiatives in Kenya’s periphery have created several safe havens for corrupt practices. Setting ambitious grid connection targets without carefully planning for the availability of qualified engineers and contractors created avenues for opportunistic officials to become tenderpreneurs.

Moreover, setting confusing eligibility criteria for subsidised electrification schemes, with a lack of clarity on fees and application process duration, opened up spaces for households to bribe public officials, technicians, and contractors, on the one hand, and for officials and private actors to extract bribes from residents, on the other.

To us, it is obvious that proactive measures such as educating the public about grid connection modalities, removing bureauractic bottlenecks in application processes, and speeding up grid application processes, could all have discouraged corruption in Kenya’s electricity market. Instead, we observe that a lack of detailed planning together with problems in accessing subsidised initiatives, led to people perceiving and using corruption as a problem-solver for expediting their much-needed grid connections.