The timing of sector reforms and asset investment did not produce the expected outcomes. Specifically, there were compact tariff reform requirements that led to more equitable pricing of electricity for the mainland utility, TANESCO, from which ZECO purchases its power, and this resulted in higher cost electricity for ZECO. However, there were no timely changes in the Zanzibar tariff rates to compensate for ZECO’s increased cost of power, and this situation negatively impacted ZECO’s financial and operational performance. MCC has learned the importance of better coordination between policy reforms and infrastructure investments. Earlier requirements for key sector reforms and the linkage of the achieving these reforms to the size and types of asset investments considered for a compact are two mechanisms now in use to realize more of the expected outcomes.
Lesson Learned