TECHNOLOGY, BUSINESS AND REGULATION
AN INSEPARABLE TRINITY
By
Mark J Mwandosya
(Lecture given at the Public Dialogue of the College of Business Education, Dar es Salaam, Tanzania, 8 November 2023)
Introduction
At the outset, let me say how honoured I am to be invited to share some thoughts with you on issues of interest to the academic and non-academic community of the College of Business Education (CBE), students, invited participants and to the general public. It is not given to many people an opportunity such as this.
On many occasions young people request to have an audience with me, to seek guidance and wisdom. I discourage them by telling them two things. Firstly, upon retirement I relocated back to Lufilyo, my ancestral home in Busokelo, 60 km from Tukuyu, over 1000km from Dar es Salaam. As if this would discourage them. They respond by saying the flight to Mbeya is a mere one hour and 30 minutes. I should not worry. Secondly, I tell them that there is not much wisdom left in me. For, I tell them, I used my wisdom in my youth, and there is not much of it left! They counter by saying, wisdom is like water in a well. The more you use it, the more it gets replenished. Then of course I ask them if they have never heard of a dry well. And the dialogue goes on.
I have no idea why the choice of the guest speaker of this public dialogue this year fell on me. An educated guess is that it is because of my association with this important centre of learning and excellence in business. In 1970 I joined the Dar es Salaam Technical College (Dar Tech, the precursor to the Dar es Salaam Institute of Technology (DIT)) as a Form V student in Pure Mathematics, Applied Mathematics and Physics, in an experiment to prepare young Tanzanian students to be future engineers. Dar Tech, as we used to call it, and CBE were by all accounts one campus, two complementary institutions. Much later on, and as fate would dictate, I became Permanent Secretary for Industries and Trade, and Chairman of the Governing Board of CBE. It is just incidental that Godfrey, who many times I have to be reminded to call Dr Godfrey Mwandosya, my young brother, is part of the CBE faculty. A long digression it has been, just to emphasize how delighted I am to be here.
Regulation originating from Technology Development and Business Practice
My hosts proposed a topic on, Artificial Intelligence in Business and Industrial Growth: Current State and Prospects of Tanzanian SMES; a very pertinent and current subject. In that format, I thought the subject should belong to a worthy young scholar, in new technologies, and I am definitely not that young. CBE graciously agreed to my proposal, that I should share with you some perspectives on technology, business and regulation. I so doing I will try to show the way these three subjects interact, and how inseparable these subjects are.
I am not a fan of dictionary use. I was taught to guess the meaning of a word I found difficult through an appreciation of the context it is used in a sentence. However, for the purpose of this lecture, I persuaded myself to use one. According to Collins English Dictionary, regulation as a noun is a rule, a principle or condition that governs procedure or behaviour. Regulation, therefore, is about enshrining good governance in order to utilise technology and to foster good business practices for the betterment of economy and society in general. This linkage among Regulation, Technology, Business and Society, is what I would like to explore with you today.
Regulation, as we know it today, is a product of how technology shaped business practices in 18th and 19th century United States. With the inception of electric lighting using gas, utilities, run by business, had to request wayleave from municipalities. Municipalities charged utilities wayleave fees, and utilities in turn charged users to recover the expenditure and over and above make a profit. There were no rules to guide tariff setting then, and the consumers paid hefty prices.
At the Federal level, technology and business became intertwined. It was about the locomotive, as a technology, and railways as a business enterprise to effect interstate trade. Business, through cartels, or trusts, would own railways, fix tariffs and thwart competition in transport and in commerce. Trusts became so powerful that politicians became beholden to them. Enter Senator John Sherman of Ohio. He proposed the Sherman Act of 1890 which outlawed the formation of trusts, monopolies and cartels and prohibited the dictating of market prices. Another pivotal legislation was one introduced by House Representative Henry Clayton of Alabama. The Clayton Antitrust Act of 1914 strengthened the regulation of business by prohibiting uncompetitive mergers, predatory and discriminatory pricing, and unethical corporate behaviour.
These developments, and especially the intense dislike of the monopoly power of cartels, trusts and franchise holders, and its abuse, and the growing awareness by consumers to get involved in decision making, led to significant changes in regulation. The Supreme Court ruling giving responsibilities to the Federal Government to regulate interstate trade, led to the establishment of such regulators as: the Federal Communication Commission; the Federal Energy Regulatory Commission; the Nuclear Energy Regulatory Commission; the Securities and Exchange Commission, the Interstate Commerce Commission, the Federal Aviation Commission; the Federal Maritime Commission.
Regulation of Utilities and Infrastructure in Tanzania
From the foregoing, I do not need to stretch your mind as to the origins of the Tanzania Communication Regulatory Authority (TCRA); the Energy and Water Regulatory Authority (EWURA); the Land Transport Regulatory Authority (LATRA) (formerly the Surface and Marine Transport Regulatory Authority (SUMATRA)); the Tanzania Civil Aviation Authority (TCAA); the Petroleum Upstream Regulatory Authority (PURA); the Tanzania Shipping Agencies Corporation (TASAC), with an unenviable role as a regulator and a service provider as well. Non-utility regulators include: the Capital Markets and Securities Authority (CMSA); the Tanzania Insurance Regulatory Authority (TIRA); and, the Bank of Tanzania (BoT), which is responsible for monetary policy and financial sector regulation. The list is by no means exhaustive. For, there are a number of other sector-specific non-utility regulators; and standards and quality control regulators.
For the subject matter of my lecture today allow me to concentrate on utility and infrastructure regulation and how technology and business have influenced regulation, and vice-versa.
Let me confine myself to the regulation of utilities and infrastructure in Tanzania. The inception of regulation was the result of changes from a command to a market economy at the turn of the 21st century. While this economic policy shift provided the overall cover, in 1999 the Government announced The Policy Statement on Competition and Regulation in Public Utilities and Infrastructure, providing a backdrop to what has essentially become a sector-specific regulatory regime. A legislative programme to establish regulatory bodies was implemented between 2001 and 2003. The Fair Competition Commission (FCC); and the Fair Competition Tribunal (FCT) were established around the same time. Sector policies were promulgated, and sometimes amended to accommodate and give direction to the emerging regulators.
Regulators are a creation of legislation. However, legislation has empowered regulators to formulate rules and guidelines to implement the regulatory frameworks. This approach is by no means an invention of Tanzania but is rather the case of adopting experiences from the Commonwealth and benchmarking international best practices while taking account of national circumstances.
Promotion of economic growth, facilitation of efficient business and consumer protection are the essential tasks of regulation. At the centre of it all, and of paramount importance is the welfare of citizens, their participation in the regulatory process, and their willingness to accept price adjustments, more so if these lead to improvements to service quality and availability.
The Energy and Water Utilities Regulatory Authority (EWURA), the Board of Directors of which I am privileged to chair, has been established under the Energy and Water Utilities Regulatory Authority Act, Cap. 414 of the Laws of Tanzania. This legislation mandates EWURA to effect economic and technical regulation of: water and sanitation, electricity, and mid-stream and down-stream natural gas and petroleum. It also derives its responsibilities from the Electricity Act, Cap. 131; and the Water Supply and Sanitation Act, 2019; and the Petroleum Act, Cap 392 of 2015. EWURA is additionally guided by Regulations made by the Ministers responsible for water and energy, setting guiding principles and implementation methodologies. As of now, the Authority applies the Petroleum (Natural Gas) Pricing Regulations 2020.
Legally binding Rules and Guidelines have been established by EWURA in order provide for the procedures to be followed in the implementation laws and regulations, with stakeholder and public participation in rule-and guideline-making being required by law.
Such Rules include, among others, the following:
1. Energy and Water Utilities Regulatory Authority (Petroleum Products Prices Setting) Rules, 2022;
2. Energy and Water Utilities Regulatory Authority (Electricity and Natural Gas) Tarff Application and Rate Setting) Rules, 2021; and
3. Energy and Water Utilities Regulatory Authority (Water Tariff Application and Rate Setting Rules, 2020.
Guidelines include, among others, the following:
1. Tariff Application Guidelines for Electricity and Natural Gas Sub-sectors, 2017; and
2. Guidelines for Preparing a Business Plan for Regulated Water Utilities, 2022.
EWURA has also formulated standardised and model power purchase agreements. These are:
1. Standardised Power Purchase Agreement;
2. Standardised Tariff Methodology; and
3. Model Power Purchase Agreements.
Regulation should aim to facilitate, and not hinder, the development and use of new and efficient technologies. These technologies usually result from efficient business enterprise. It is therefore essential that legislation and regulatory tools should not be overly prescriptive. Technology neutrality of primary and secondary legislation should facilitate entry of emerging technologies without recourse to amendments of laws and regulations.
Technology as a driver of Regulatory Reforms
Technology can be a driver of regulatory reforms, just as regulation can influence technological development resulting from competition. Two cases come to my mind as I try to illustrate this duality. In early 2005, TCRA approached me with a plan to migrate from a technology-based telecommunication licensing regime to a technology-neutral service-oriented regime. The argument was that technology was advancing at a fast pace and we needed to take advantage of the emerging situation if we were to use telecommunications to promote economic growth. Changes were needed in the regulations guiding the sector, regulations which were and are issued by the Minister responsible for communications. As legislation required, I directed TCRA and my Ministry to make sure the stakeholders got involved in the process. In one such interaction with business, I was invited to preside over a workshop that was held at the international conference centre along Ohio Street. As soon as I finished my opening remarks, communications and broadcasting business representatives from the private sector stood up and left the hall. Ostensibly, they were against the proposed changes. A few months later, most of them, in fact all of them, separately went back to TCRA to request to migrate to the new licensing regime. Signing the new regulations which have thus far guided the development of the communications sector in Tanzania, was my last activity as the Minister responsible for communications, before I moved on.
One of the examples I frequently quote on how regulation can facilitate and drive technology development is the famous case of the breakup of the American Telephone and Telegraph Company (AT&T), the then behemoth of telecommunication in the US, and in the world. For much of the 20th Century AT&T operated within the States through its subsidiaries, the 22 Regional Bell Companies, and had a monopoly on long-distance calls within the US, and on international telephony. The fast pace in research and development in new technologies persuaded the Federal Communication Commission (FCC) that reduction of the monopoly of AT&T would be in the interest of America and the consumer. To that effect, in 1974, a lawsuit was filed by the Justice Department in the District Court of the District of Columbia.
In 1984 a landmark settlement was reached whereby AT&T had to divest its 22 Regional Bell subsidiaries. Independent Regional Bell Operating Companies (Baby Bells) were created, thus breaking the monopoly of AT&T. Its divestiture brought about intense competition, spurred on research in technology and led to dramatic reduction of tariffs.
I have chosen these two examples because I label them as 'textbook' examples of the interaction among regulation, technology and business (or industry), the title of my lecture today. The essence of this inseparable trinity is contained in the broad aim of regulation which is to facilitate growth of the economy. Specifically, the aims of regulation include:
1. Creation of a level playfield in competition in business;
2. Ensuring the availability of good quality and safe goods and services;
3. Promotion of investment through assurance of predictability and confidence building;
4. Protection of the rights and interests of consumers;
5. Promotion of efficient prices through regulation of tariffs and prices;
6. Prevention abuses of market power by dominant players; and
7. Ensuring that even the poor in society have access to basic services.
Consumer Protection
On the scale that balances the interests of goods and service suppliers and the consumers and the public at large, the latter are disadvantaged. They are at the receiving end, and information that would help them is sketchy and scant. Whereas suppliers of goods and services are well organized, consumers are disorganized. They fight their battles from their isolated corners. In order to win the numerous battles and to protect their rights and interests, they need to form consumer groups and organisations along the lines of, but not quite the same as, labour organizations. The communication of 15 March 1962 by President John Kennedy to the United States Congress on consumer rights and interests is one of the most outstanding declarations on consumer protection. It included the following: The right to safe goods and services, including protection against goods and services dangerous to consumers life and well-being; The right to information which protects the consumer against business propaganda and wrong information; The right to choose goods and services produced and supplied at competitive fair rates and prices; The right to participate and be heard during policy preparations; and the right to be heard especially in respect of complaints resulting from poor quality of goods and services. The 1985 United Nations guidelines on consumer protection policies by Member States derive largely from foregoing declaration.
The Government of Tanzania gave due consideration to this matter, and in the legislation establishing utility and infrastructure regulators, sector-wise consumer consultative councils (CCCs) were established. The idea was that these CCCs would nurture the evolution of independent consumer protection groups and, therefore, eventually phase themselves out. They have, unfortunately, come to be an end in themselves. Twenty years after the establishment of the existing regulatory regime is perhaps the right time to review this situation. The starting point could be the formulation of a coherent and cross-cutting national consumer protection policy.
New and Emerging Technologies shaping Policies and Regulation
Before I end, let me explore how electric vehicle technology (EV technology) will shape energy, transport and science and technology policies in developing economies. EV technology is as pertinent and timely, as it is fascinating. The rapid development of EVs has resulted from scientific research spurred on by the global environment debate, the imperative to lessen carbon emissions resulting from the use of the internal combustion engine. Developed countries are in a race in the production and manufacture of EVs. China is undoubtedly the leader in this race. The main challenge faced by the manufacturers has been limited battery power, requiring short distances between recharge stations. Research in this area, being driven by business imperatives, is leading to breakthroughs which are changing the equation in favour of EVs. Only recently Toyota has announced the development of an EV battery which has a range of 1199 kilometres, and can be fully charged in 10 minutes. A friend of mine in Kigali recently gave me a lift in his dual fuel and electric Hyundai vehicle. I foresee a situation, in not too distant a future, that importation of fuel driven vehicles will be problematic. Manufacturers will have migrated to EVs.
High grade lithium, an essential mineral in the manufacture of batteries for electric vehicles, has been found in significant quantities in Kilimanjaro, Arusha and Dodoma. Lithium is also used in the manufacture of other energy storage systems. Large quantities of other rear earth minerals, high grade Neodymium and Praseodymium (NdPr) have been found at Ngwala in Songwe District. These minerals are used in the manufacture of magnets which are used in the production of electric motors for EVs and wind turbines. NdPr mining could elevate Tanzania to be an important player in the global production of EVs.
These rare minerals, lithium and NdPr may position Tanzania to be an important player in global production of EVs in particular, and in the energy transition in general. This could be the right time for Tanzania to formulate a policy on EVs. Such a policy and the accompanying strategy should inform economic and technical regulation of EVs. I have no doubt our professionals at the relevant departments and institutions are working on this matter.
Regulating Artificial Intelligence
My lecture will be incomplete if I were not to cover, albeit briefly, the topical issue of Artificial Intelligence (AI). I do so from the perspective of how technology can drive policy, and from it, regulation.
AI is a field of science that uses computers and machines to simulate the capabilities of the human mind. AI works efficiently with large amounts of data and does very fast iterative processing, using intelligent algorithms. AI is already applied in: manufacturing automation; health; search engines like google search; systems like YouTube, Amazon, Netflix; self-driving vehicles; in generative tools such as ChatGPT (Generative Pretrained Transformers), and Elon Musk's xAI; in games such as chess; and in many other applications.
Because AI mimics the human mind, it can be programmed to simulate the intentions and biases of the developer. Research, development and use of AI has, therefore, to be guided responsibly. The paramount focus on AI should be how automation can be leveraged in increasing economic growth, and in solving problems and challenges faced by society. No doubt automation does assist human beings to perform our work much faster. It is efficient in performing routine and repetitive tasks. However, as more advancements in AI research and development are being made, even jobs being done highly skilled workers could be threatened. Therefore, the impact of AI on the labour market and its implication has to be known.
AI is getting better, sophisticated and smarter. There are, however, ethical and moral issues associated with the development and use of AI that need to be considered. The many opportunities and challenges of posed are such that regulation of AI is now a matter of global concern. Militaries of some countries are developing AI-based technologies as precise and efficient killing machines. Weaponizing AI should be a matter of global concern. Mis-use of AI could lead racial and economic biases and marginalization. Interestingly, even business, which is traditionally anti-regulation, supports the regulation of AI. However, and as alluded to before, policy informs regulation. Many nations are currently involved in the formulation of AI policies through the participation of governments, industries; institutions of research and higher learning; labour unions; the civil societies and the general public. At the international level, the Global Partnership on Artificial Intelligence is a collaborative venture on challenges and opportunities of AI by governments, industry, academia and civil society. Thus far the membership has reached 25, and Senegal is, I believe, the only African country in the group. And, at the recently concluded Summit on AI held at Bletchley Park, United Kingdom on risks and mitigation of AI, governments and AI developers have agreed to cooperate on testing of new frontier AI models in order to manage possible risks.
Concluding Remarks
My hosts initially invited me to share with you some perspectives on AI. They were gracious enough to allow me to change the topic of my discourse. The notice inviting me to give a presentation came rather late. As such I am not sure I have been able to meet your expectations. I started by underscoring the fact that regulation resulted from the exploitative and ugly face of business, which had total control over emerging technology development and utilisation. This unholy trinity led, initially, to regulation by contract between municipalities and service providers, and eventually regulation as we practice it today. I am unsure as to whether regulation is included in the curriculum of CBE. If not, today's public dialogue could serve as a starting point. Should you or any other institution of higher learning decide to embark on this enterprise, my colleagues at EWURA would be prepared to partner with you.
The second and final part of my lecture explored, briefly, the links between technology, business and regulation, taking into account emerging technologies, EVs and AI. New technologies influence policies, which in turn informs regulation. African institutions are challenged to 'ride on the wave' of science, technology and business, and, whenever possible, be 'ahead of the curve'. CBE, be there.
I started my discourse by acknowledging the honour CBE has done me, to invite me to speak to you. I end as I began by thanking CBE once again, as I thank you all for bearing with me.
Asante sana
8 November 2023