Post on 30-Mar-2015
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Zambia’s Infrastructure: A Continental Perspective
Africa Infrastructure Country Diagnostic: a multi-stakeholder effort
Banque Africaine de Developpement
African Union Agence Française de Développement
Development Bank of Southern Africa
Department for International Development
European Union The Infrastructure Consortium for Africa
Kreditanstalt für Wiederaufbau The New Partnership for Africa’s Development
Public-Private Infrastructure Advisory Facility
Sub-Saharan Africa Transport Project The World Bank Water and Sanitation Program
Methodology and approach
Methodology Data collection by local/international consultants and Bank staff
based on standardized methodology Baseline year for data is 2006, does not reflect subsequent
evolution
Approach Focus on benchmarking Zambia’s infrastructure against African
neighbors Benchmarking group includes Resource Rich Countries (RR),
Middle Income Countries (MIC), South African neighbors, and regional outliers
Why infrastructure matters?
Despite Zambia’s strong economic growth, infrastructure’s contribution has been relatively low
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Telecom Electricity Roads
Changes in growth per capita due to changes in infrastructure (2001-5 vs. 1991-5)
Raising Zambia’s infrastructure to level of African leader could add 2.2 points to per capita growth rate
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Main Telephone Lines Electricity Generating Capacity Length of Road Network
Potential changes in growth per capita from improving infrastructure to level of African regional leader (Mauritius)
Key Message #1
Infrastructure has the potential to contribute more to Zambia’s infrastructure
than it has in the past
The State of Zambia’s Infrastructure
Zambia’s power network
Benchmarking highlights exceptionally low power tariffs and levels of electrification
Unit Resource Rich Zambia MIC
Installed power generation capacity MW/mil. people 43.17 154.9 798.6 Power consumption kWH/capita 205.68 771.0 4,479.3 Power outages Day/year 14.52 49.8 5.9 Firms’ reliance on own generator % consumption 44.92 19.5 10.9 Firms’ value lost due to power outages % sales 6.99 3.7 1.6 Access to electricity % population 46.05 20.1 59.9 Urban access to electricity % population 79.41 50.0 85.2 Rural access to electricity % population 28.03 3.5 31.8 Growth access to electricity % population/year
2.38 0.3 1.5
Revenue collection % billings 81.07 96.5 100.0 System losses % production 25.80 12.0 10.1 Cost recovery % total cost 53.94 39.1 100.0 Total hidden costs as % of revenue % of revenue 168.29 93.3 0.1
US cents Zambia Predominantly Hydro Generation
Other Developing Regions
Effective power tariff (residential at 100 kWh) 2.9 10.27
5.0 – 10.0
Effective power tariff (commercial at 100 kWh/mo) 4.4 11.73
Effective power tariff (industrial at 50,000 kWh) 2.9 11.39
Zambia’s power prices are the lowest in Africa, and also look low by global standards
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Power tariffs in other developing countries: lower bound
Power tariffs in other developing countries: upper bound
Zambia’s power tariffs appear in line with operating costs but far from long-run capital costs
Hidden costs of power utilities are high due to underpricing
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MadagascarBeninKenya
Burkina FasoCape Verde
Congo, Rep. Mozambique
EthiopiaLesothoSenegal
CameroonZambiaUgandaGhana
BotswanaRwanda
TanzaniaNigeria
NigerChad
MalawiDRC Congo
Percentage of revenues
Unaccounted losses Under-pricing Collection inefficiencies
Access to power highly inequitable making any subsidies to sector highly regressive
No affordability problems for those with access, nor even many of those without
Key Message #2
Meeting future power demands and raising
electrification will be difficult without higher power tariffs
Road network traffic concentrated between Lusaka and Copper belt
Main trunk network in good condition except in outlying areas
Benchmarking indicates possible over-engineering of paved network in contrast to poor unpaved network
Unit Resource Rich Zambia MIC
Paved road density km/1000 km2 97.6 56.3 146.8
Total road network density
km/1000 km2 of arable land
128.2 95.0 257.8
GIS Rural accessibility
% of rural pop within 2 km from all-season road
19.7 16.8 22.9
Over-engineering% of main road network
paved relatively to low traffic 15.0 65.0 20
Paved road traffic Average Annual Daily
Traffic 1408.2 736.6 2558.3
Unpaved road traffic
Average Annual Daily Traffic 54.2 45.2 14.9
Paved network condition
% in good or fair condition
67.9 83 82.0
Unpaved classified network condition
% in good or fair condition
61.4 21 57.6
Perceived transport quality
% firms identifying as major business
constraint 27.4 10.6 4.8
Zambia has secured resources to cover road maintenance and rehabilitation needs of main road network
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Maintenance norm Maintenance&Rehabilitation norm
Levels of road sector spending are high in absolute terms and relative to GDP
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Key Message #3
Strong budget envelope and apparent over-engineering of
main roads suggests potential to shift resources to under-served rural roads
Zambia’s rail sector is a critical input for a minerals based economy
Benchmarking indicates low traffic density and relatively poor performance in terms of efficiency
Railway institutional reform scores relatively low indicating need to further develop supervision
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Institutional Reform Score
Governance Regulation Reform
Key Message #4
Improving supervisory framework could help to boost performance of rail concession
Concentrated potential for large scale irrigation with modest returns
Simulated location of potential LARGE scale irrigation schemes
Simulated location of potential SMALL scale irrigation schemes
Scattered potential for small scale irrigation with higher returns
Benchmarking indicates tendency to focus on higher end solutions and poor utility performance
Unit Resource Rich Zambia MICAccess to piped water % pop 12.0 18.3 52.1Access to stand posts % pop 12.6 15.6 18.9Access to wells/boreholes % pop 49.0 46.9 6.0Access to surface water % pop 23.7 19.0 13.0Access to flush toilets % pop 1.6 18.1 40.8Access to improved latrines % pop 6.4 1.6 1.4Access to traditional latrines % pop 54.8 53.1 30.4Open defecation % pop 27.6 27.0 14.3Domestic water consumption liter/capita/day per population served 90.3 80.7 187.6Urban water assets in need of rehabilitation
% 42.0 42.0 25.0
Revenue collection % sales 69.7 68(*) 100Distribution losses % production 43.6 44.9 27.4Cost recovery % total costs 55.6 65.4 80.6Labor Costs connections per employee 95.7 98.8 210.8 Total hidden costs as % of revenue
% 286.7 311.4 1854.2
US cents per m3 Zambia Scarce water
resources
Other Developing Regions
Residential tariff 48 603.00 – 60.00
Non-residential tariff 59 120
(*) Average of 3 providers
Dramatic urban – rural gaps and apparent declining coverage of piped water with increases elsewhere
Strong expansion of wells and boreholes, but worrisome increase in use of surface water
Expansion of sanitation options below the SSA average and troublesome expansion of open defecation
Hidden costs of Zambia’s water utilities are the highest in the region
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Madagascar
South Africa
Lesotho
Namibia
Malawi
Mozambique
Zambia
Hidden costs (% of the revenues)
Unaccounted losses Under-pricing Collection inefficiencies
As of 2005
Key Message #5
Greater attention to sanitation and rural services needed, opportunity to harness new
resources by improving efficiency
Zambia’s ICT network very tightly clustered around economic centers
Benchmarking indicates relatively low GSM coverage and relatively high price of calls
Source: Preliminary results AICD 2008
Unit Resource Rich
Zambia MIC
GSM coverage % population 66.9 53.0 85.1International bandwidth Mbps/capita 4.0 4.4 104.0Internet subscribers/100 people 0.1 0.2 3.0 Landline subscribers/100 people 19.3 8.5 34.8Mobile phone subscribers/100 people 11.4 20.9 30.0 Labor productivity Subscribers/employee 405.1 505.8 756.8Quality of service Faults per 100 main lines 82.4 90.8 50.8 Zambia Without Submarine
Cable Other Developing
Regions
Price of monthly mobile basket 14.6 11.1 9.9
Price of monthly fixed line basket 8.9 13.6 nav
Price of 20-hour Internet package 81.5 68.0 11.0Price of a 3-min call to US 5.5 2.6 2.0Price of inter-Africa tel. calls, mean 1.19 0.7
High international call charges driven both by technology and market power
US$ Percent cases
Call within SSA
Call to USA
Internet dial-up
Internet ADSL
Without submarine cable 67% 1.34 0.86 68 283
With submarine cable 33% 0.57 0.48 47 111
monopoly on international gateway 16% 0.70 0.72 37 120
competitive international gateway 16% 0.48 0.23 37 98
Some potential for private expansion of GSM coverage and only minimal need for subsidy
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Existing access Efficient Market Gap Coverage gap
Key Message #6
Further competition across the board is needed to drive down
prices and expand access
The AICD Financial Framework
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Efficiency gap
Increasingcost recoveryImproving operational
efficiency $7.5
Spending budgetedresources $1.9
Prioritizingpublic spending $3.3
Existing spending
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Spending needs
All figures in US$ billion a year
Funding gap
Key Message #7
Zambia needs to spend around US$16 billion over the next decade to catch-up with the rest of the developing world
Economic target Social target
ICT Fiber optic links to neighboring capitals and submarine cable
Universal access to GSM signal and public broadband facilities
Power 1,700MW refurbished capacity,1,700 MW new generation OR,
7,500 MW inter-connectors
Electricity coverage of 24% (50% urban and 15% rural)
Transport Regional connectivity by good quality 2 lane paved road
National connectivity by good quality 1 lane paved road
Rural Accessibility Index 100% for high value agricultural land,
Urban popn within 500m paved road
WSSNa.
Achievement of MDG for water and sanitation
Illustrative infrastructure targets over next ten years
US$ bn pa Capital O&M Total Percentage
ICT 132 86 218 14%Power 532 99 631 39%Transport 145 144 289 18%WSS 317 154 471 29%Total 1,126 483 1,609 100%
To meet these targets, Zambia would need to spend US$1,609 million a year for the next decade
Trade expansion: 472
Burden of financing needs is substantial for Zambia at 15 percent of GDP
Key Message #8
Zambia already spends US$0.7 billion a year on
infrastructure
Existing financing flows to Zambia, US$ million per year
O&M InvestmentTotal
Public Public ODA Non-OECD PPI*Total
Investment
ICT Na. Na. 1 0 89 90 90
Power 99 70 2 8 0 81 180
Transport 99 85 52 6 3 145 245
WSS 35 67 47 1 9 123 158
Total233 224 99 15 101 439 673
Zambia’s spending mainly domestically financed though with significant contributions of ODA, PPI
(*) Includes household self-financed investments in sanitation
Existing infrastructure spending in addressing needs is moderate at 6 percent of GDP
Key Message #9
Zambia faces an ‘efficiency gap’ worth US$0.3 billion a year
Efficiency gap of US$315 million a year, much of it associated with under-pricing of power
Key Message #10
Zambia faces a ‘funding gap’ worth US$0.5 billion a year
Funding gap of US$500 million a year, mainly in power and water
There is a funding gap of US$500 million a year mainly in power and WSS
US$ mn pa ICT Power Transport WSS Total
Needs (218) (631) (289) (471) (1,609)
Spending 90++ 180 245 158 673
Efficiency Gap Na. 160 59 96 315
(GAP) or surplus Na. (291) 15 (217) (493)
What approaches can be taken to close the funding gap?
Greater reliance on low cost technologies Costs of reaching MDGs could be reduced by US$218 million pa Power from DRC could (eventually) lower costs by US$160mn pa More appropriate road standards could lower costs by US$80mn pa
Otherwise it may simply be a question of taking more time to reach the targets Holding spending constant but capturing efficiency gains, targets
could be reached within 15 years Holding spending constant but NOT capturing efficiency gains,
targets would take more than 30 years to reach
Final Conclusions
Policy measures
Certain cross-cutting themes emerge Relatively little attention paid to the rural sector Need to focus on ‘soft’ (policy, institutional) issues
Key issues in each sector Power – financing expansion through greater cost recovery Roads – shifting emphasis towards unpaved network Rail – strengthening regulation to improve performance WSS – capturing inefficiencies and remembering sanitation ICT – boosting competition to raise access and lower prices
Final Message
Zambia’s infrastructure situation is far more hopeful than that of many other African countries