Transformative Opportunities in Natural Resource Management, Energy and

Transport Sectors in Africa

Presentation to Japanese Companies By

Jamal Saghir

Senior Regional Adviser

Africa Region

The World Bank

Tokyo, November 2014

Structure of the Presentation:

I. World Bank Strategic Vision: Critical Development Challenges and

Need for Transformative Activities in Africa

II. Examples of Ongoing Transformative Projects

III. Illustrative Additional Opportunities for Transformative Projects

IV. Next Steps to Make These a Reality

Nov 2014

I. Strategic Vision: World Bank’s10-year Vision for Africa:

3

Accelerated growth:

At least 20 countries with GDP growth of 3–4 percent a year

Another 20 countries with growth of 1–2 percent per year

Poverty rate reduced by 12 percentage points

Growth achieved with a more diversified production mix, with manufacturing and services growing rapidly and absorbing labor, and agricultural productivity increasing. Aim is for 15 countries—up from the current 8—to register at least 5 percent average annual agricultural GDP growth.

The continent’s share in world trade doubled to 8 percent, with regionally integrated infrastructure providing services at globally competitive costs.

Access to modern energy services increased to at least half of households.

Climate change adaptation measures will be put in place.

Source: Africa’s Future and the World Bank’s Support to It, March 2011

I. Strategic Vision:

To Meet the Transformative Challenge, Bank’s Africa

Strategy Rests on Two Pillars 4

Pillar 1: Enhancing competitiveness and increasing

employment to harness private sector growth for

sustainable poverty reduction and wealth creation

Pillar 2: Reducing vulnerability and building

resilience to shocks of all kinds

Both pillars to be supported by a foundation of improving governance

and public sector capacity

I. Strategic Vision

Strengthening these Pillars Requires Action on Many Fronts

5

Three key areas are:

Water and Other Natural Resource Management

Transport

Energy

I. Strategic Vision

Better Management of Water, Land, and Other Natural Resources is Critical to

Increase Competitiveness, Reduce Vulnerability to Climate Shocks, and

Promote Sustainable Growth 6

Critical for increasing agricultural productivity: yields lag other regions, partly because

irrigation is underutilized

While less than 3 percent of total renewable water resources are used, Africa has by far the lowest

irrigation development rate of any region in the world: < 5% of farmers benefit from water

management.

Intensification needed to combat land degradation and deforestation

Disaster management: resilience hinges on water management

Overwhelming majority of Africans hurt by disasters are affected by droughts or floods

Climate change will increase frequency of extreme events

Urbanization: basic services need scaling up to close the access gap in fast-growing

urban centers

In many countries, less than 65% of population has access to an improved water source

I. Strategic Vision

… And Transport Challenges Must be Addressed to Make Africa

Competitive in Global Markets and Promote Intra-regional Trade

7

Challenging geography: Land-locked countries cover 30% of Africa’s area and population—including Ethiopia, the most populous landlocked country in the World—with on average 50% higher transport costs.

Road systems are in poor condition: of the 50,000 km. of trans-African highways, 30% are unpaved and 50% in poor condition.

Poor inter-modal connectivity.

Congestion in ports: delays and higher costs for shippers.

Aged infrastructure facilities and technology.

Many man-made inefficiencies

Inefficient customs and logistics services

Illegal roadblocks/ checkpoints

Trucking cartels/ monopolies

Bottom line result: the cost of transport in Africa is the highest in the world. Without fixing this, Africa will never be competitive.

I. Strategic Vision

Energy access reduces poverty, promotes shared prosperity

8

Access to modern energy services linked to each of MDGs and SE4All targets call

for universal access to energy:

Low access and low supply: currently, generation is ~80 GW; 600 M people and 10 M SMEs

without access

Competitiveness: energy growth not in pace with GDP growth; demand growing to about 800

TWh by 2020

Quality of life: many countries below the 500kWh/capita consumption; 80% of households

rely on solid biomass

Great opportunities for transformative impact for the WB along the energy

value chain

Knowledge and Partnerships

Access Transmission

and Distribution

Generation

Leverage our limited resources and expand south to south cooperation

Regional integration

(regional power pool

development)

Improved pricing

(sector reform, effective

tariff structures)

Reduced cost of production

(low carbon, low cost

generation)

9

Some high risk/high reward projects are transformative because of their impacts, stemming from environmental, social and economic good practices (strategic environmental and social assessments upfront, the use of offsets and associated conservation measures, systematic monitoring of impacts, livelihood programs, adaptable management, etc). Examples:

Loess Plateau, China

Terraced 3000 km2 of degraded land

More than 2.5 million people in four of China’s poorest provinces—Shanxi, Shaanxi and Gansu, as well as the Inner Mongolia Autonomous Region—were lifted out of poverty.

Sediment flow to Yellow river was reduced by 100 t/yr

Nam Theun 2, Laos

Created1,070MW hydroelectric capacity: 75MW use in Laos, 995MW equivalent export to Thailand

Government of Laos transferring revenues (e.g. US$19 million in FY11) to poverty reduction and environmental protection

Risks: resettlement of 6,000+ people, livelihood improvements in adjacent areas, biodiversity protection, road access enhanced to mitigate isolation.

II. Examples

Ongoing Transformative Projects: Global Examples (1)

10

Some projects are transformative because they fix the “missing links” in regional transport corridors, playing a central role in enhancing intra-regional trade and eventually catalyzing sustainable growth in many sectors, especially for landlocked countries. Examples:

The TRACECA corridor (Europe-Caucasus-Asia corridor – the “New Silk Route”)

Planned to be operational by 2015, the corridor will run from Romania to Georgia and Azerbaijan, and will cross the Caspian Sea to Turkmenistan, Uzbekistan, Kazakhstan, ending in China

Will transform economic relations, trade and transport communications in Europe, the Black Sea region and Asia

Will ensure intermodal access to the world market for road and rail transport and commercial navigation

Includes traffic security, cargo safety and environmental protection, as well as harmonization of transport policy and legal structure

The Brazil-Bolivia-Peru-Chile corridor

Opened up trade opportunities for western part of Brazil and landlocked Bolivia through Port Arica in northern Chile

Regional transport volume through Bolivia increased significantly (about 40% increased) in 5 years after the corridor opened. This has contributed significantly to the growth of Bolivia’s economy

II. Examples

Ongoing Transformative Projects: Global Examples (2)

11

Nigeria Erosion and Watershed Management Project $500m program addresses severe erosion issues in south-eastern Nigeria that threaten livelihoods and assets

Program seeks to develop partnership across Federal and State agencies for common goal

Kandadji Growth Program (Niger River Basin) Access to water for 45,000 ha irrigation development

Additional 130MW hydroelectricity capacity

IDA resources leverages co-financing from 10 other development partners as well as counterpart financing from the Government of Niger (total US$785 million program).

Risks: political insecurity/instability, regional complexities, substantial resettlement of 35,000+, multi-purpose objectives, and weak institutions.

Shared River Basin Programs (e.g. on Niger, Senegal, Nile, Zambezi, etc.) Institutional capacity, networking , and knowledge enhancement

Facilitating cooperative investments

Irrigation Development and Agribusiness Programs (e.g. Zambia, Burkina Faso, Ghana, Senegal etc.) Irrigation projects involving public-private partnerships (PPPs) with commercial agribusiness investors, with

spillover effects for smallholder farmers and local communities.

Small projects can be ''transformational'' if they are innovative and replicable on a wider scale. Humbo Village, Ethiopia,-- innovative carbon emissions reduction project has had transformational impacts through a

landscape approach. It restored over 2,700 hectares and a barren, degraded landscape four years ago with a 70% loss in yields affecting nearly 50,000 impoverished people now enjoys good yields; more water and wood availability; tree products; more biodiversity; and up to 880,000 metric tons of CO2 over the course of the 30-year carbon crediting period. Revenue from the carbon credits is being reinvested in additional community-driven activities such as firewood sales, clothes tailoring, etc.

II. Examples of Ongoing Transformative Water and NRM

Projects in Africa

12

Regional W. Africa Transport and Trade Facilitation Project

Help improve land-locked countries’ access to ports; develop alternatives to historical corridors

Relieve congestion in Tema, a Ghanaian port, and increase efficiency at border crossings in the region

Reduce non-tariff barriers by introducing more mobile customs transit monitoring system to replace escort system

Regional E. Africa Transport and Trade Facilitation Project

Support implementation of EAC customs union

Improve efficiency and reliability of transport and logistics services

Reduce need for fiscal transfers to railways

Projects to reduce man-made inefficiencies, smuggling and corruption

Abidjan-Lagos Corridor Project: improve trade facilitation in port of Abidjan; monitor implementation of policy decisions in corridor; improve roads

CEMAC Corridors Project: improve customs efficiency and reduce legal and illegal barriers through cargo tracking systems, border post construction/ upgrading, custom performance contract systems, upgrading roads and railways

Projects to enhance inter-modal connectivity

Tanzania Intermodal Rail Project: Rehabilitate railway tracks and rolling stock; strengthen regulatory framework

II. Examples of Ongoing Transformative Transport Projects

in Africa: Moving Beyond Incremental Changes

13

II. Examples of Ongoing Transformative Energy Projects in

Africa

Bujagali Hydropower Project, Uganda (Commissioned in 2012)

$360 M in loans and guarantees, Approved by Bank Board in FY08

250 MW additional capacity

Reduces electricity tariff by 25% (From $0.17/kWh to $0.13/kWh)

Improves access to electricity, economic development, reduces grid carbon intensity

Eastern Africa Electricity Highway (Ethiopia-Kenya Interconnector)

$900 M under APL1 (Regional) approved by Bank Board in FY12

Key interlink (backbone) for EAPP - 400 MW bilateral trade initially

Kenya expects 20% reduction in tariff (From $0.17/kWh to $0.14/kWh)

Promotes regional trade, increases regional energy security & cooperation

Nigeria Electricity and Gas Improvement Project and Sector Reforms

PRGs for gas suppliers for an amount up to US$400 million (Approved in 2009)

Improves the availability & reliability of gas supply to increase power generation

Improves the power network’s capacity and efficiency to distribute electricity

Establishes credit enhancement and commercial framework for gas sales

Support for utility privatization and increased private sector participation

Improved pricing with multi year tariff orders (MYTO)

Kenya Geothermal Development and Electricity Expansion Project

US$330M IDA project (Approved in 2010) - total investment US$1,391M

280 MW ‘green’ geothermal additional capacity in African Rift Valley

Adding 220,000 customers a year, up from 60,000 customers four years ago

Electricity for some of the country’s largest slums and most remote rural areas

14

Sampling of projects

presented here are in

are at various stages of

preparation, and with

varying degrees of

World Bank involvement.

Projects include: Niger Basin •Fomi Project

•Rehabilitation of Lake Chad

•Benue Investments

Zambezi Basin •Kariba Dam Rehabilitation

•Malawi Shire valley Irrigation Project

Nile Basin •Kenya Water Security and Climate

Resilience Project

•Eastern Nile Multipurpose Development

•Nile Equatorial Lakes Water Resource

Management

•Regional Rusumo Falls Hydroelectric

Volta Basin •Pwalugu MPP

Regional & sub-regional • S. Africa Transport and Trade Facilitation

Project

• Tanzania Inter-modal and Railway

Rehab (incl. Rwanda and DRC in later

phases)

• Regional intermodal study for EAC

transport corridor

• Lesotho Highlands Water Project - Phase

2

• Africa Hydromet Program

• Africa Sustainable Land Mgmt

III. Additional Opportunities: Transformative Water Projects

Throughout Africa

III. Additional Opportunities:

Planned Water Projects with Transformational Benefits 15

Enhanced government revenue -- Lesotho Highlands Phase 2 could provide Lesotho revenues of 3-5% of GDP from water sales to South Africa

Hydropower generation -- Rusumo Falls Hydro uses run of river to minimize environmental and social footprint; Inga Hydro

Should be joint use (hydropower & irrigation)whenever possible – Fomi; Benue Investments; Kariba Dam Rehab; Batoka Gorge; Eastern Nile Multipurpose Development; Pwalugu Multipurpose; Kenya Water Security and Climate Resilience

Irrigation for agriculture/Water supply for rapidly growing urban areas -- Malawi Shire Valley Irrigation Project; Pwalugu Multipurpose; Lesotho Highlands Phase 2

Flood control -- Most dams enhance flood control for areas downstream; Kariba Dam rehab could prevent devastating downstream damages from dam failure

Community development -- Nile Equatorial Lakes WRM

Preservation of biodiversity and environmental services -- Lake Chad Rehab: 22 million people depend on resources of Lake Chad

Watershed management/ Adaptation to climate change -- Nile Equatorial Lakes WRM, Africa Hydromet Program for Climate Resilience; Kenya Water Security and Climate Resilience; Africa Sustainable Land Management

III. Additional Opportunities: Planned Transport Projects

with Transformational Benefits 16

Example: Southern Africa Trade and Transport Facilitation Project

Project rationale

The North-South corridor (Dar-es-Salaam to Durban) is a very important strategic trade route

Well-endowed with physical assets, but transport costs along the corridor are among the highest in the world: 7 days and 5000$ for the 2000km trip by road between Dar and Lusaka

Port performance remains a crucial issue for the corridor

Border crossings: 15% of the cost and 37% of the time between Durban and Lubumbashi, DRC

Proliferation of legal and illegal checkpoints: the total additional time is more than 5 hours – more than time savings from any physical improvement

Patchwork of (sometimes inconsistent) national regulations

The corridor also has a high social cost: spread of HIV/AIDS and road traffic crashes

Regional, multi-sector, and multi-phase project intended to facilitate trade integration by contributing to the alleviation of institutional, legal, policy and road infrastructure constraints

Activities

Institutional arrangements for transit and transport facilitation

Assessment of options to improve the port at Dar-es-Salaam

Definition and piloting of a regional customs bond

Diagnostic of divergence between different agreements and practice

Improvement of the professionalism of customs brokers, and harmonization

Upgrading or rehabilitating road transport infrastructure and improving transit facilities

Mitigating the social costs

III. Additional Opportunities: Other Planned Transport

Projects with Transformational Benefits 17

Tanzania Intermodal Rail Project A new intermodal transport strategy, integrating rail,

port and road systems, based on a clear business model for key

market and reliable services at a regional level. It will alleviate

bottlenecks, delays and increased transport costs for six

landlocked neighbors (eastern DRC, Rwanda, Burundi, Uganda,

Zambia, Malawi)

Activities

Implementation of regular and reliable containers rail services from

Dar-es-Salaam to Isaka intermodal platform

Rehabilitation of rolling stock and railway tracks between Dar-es-Salaam and Isaka

Strengthening of railways Institutional framework and regulation, with clear functional separation between infrastructure, operation and regulation .

East Africa Community Transport Corridor Scope of the study: Definition of a Regional Intermodal Strategy and Action Plan to implement an

efficient rail-centric intermodal transport system along the Central and Northern EAC Corridors

Stages:

Review of current operations and state of infrastructure and inter-connections (including ports)

Identification of effective maintenance and operation concepts

Preparation of traffic forecasts, cost estimates and business plan

Environmental and social scoping study

Expected completion: end 2013

III. Additional Opportunities: Planned Energy Projects with

Transformative Impact through Increased Generation 18

Country Hydro developed in last decade

(GW)

Hydro potential in next decade

(GW)

Ethiopia 2.8 8.2

Guinea 0.8 4.3

DRC 1.3 4.0

Sudan 1.4 3.7

Mozambique 0 3.2

Others ~2.2 ~6.6

TOTAL 8.5 30.0

Country IPPs to

date (GW)

Potential

(GW)

Technologies

South Africa 0.6 4.8 Coal, Gas

Nigeria 1.3 2.0 Gas

Botswana 0 1.2 Coal

Kenya 0.2 1.0 Geothermal, oil

Mozambique 0 0.8 Coal, Gas

Others ~0.8 0.8 Coal, Gas, Oil

Next 5-7 years 4.0 Mainly gas

TOTAL 3.1 13.3

Thermal 3.1 GW of thermal

IPPs to date

4 GW potential in next 5-7 years

5 highest potential: South Africa, Nigeria, Botswana, Kenya, and Mozambique

Opportunities in Gas to Power, in particular

Hydro 8.5 GW developed

in last decade 30 GW potential for

next decade 5 highest potential:

Ethiopia, Guinea, DRC, Sudan, and Mozambique

III. Additional Opportunities: Other Planned Energy

Projects with Transformative Impact 19

Power Pools

West Africa Power Pool

Finance key regional interconnection and large generation (e.g. hydro) projects

Support national utilities in project preparation & implementation

TA to WAPP Secretariat for investment planning

Key potential project: Cote d’Ivoire-Liberia-Sierra Leone-Guinea (US$400 m.)

East Africa Power Pool

Finance investments on key system-to-system interconnectors

Capacity building to national utilities

TA to EAPP Secretariat for regional planning and coordination

Key potential projects (US$ million): Kenya National Backbone ($2,400m.); Ethiopia-Kenya ($1,200m.); Zambia-Tanzania-Kenya line (780)

Southern Africa Power Pool

Finance investments on national transmission backbones and key interconnectors

Support national utilities in preparation of key generation expansion projects (Inga)

TA and risk mitigation at national/regional level

Key potential projects (US$ million): Inga-Zambia Interconnector ($655m.); Zambia Backbone ($100m.); Zimbabwe Backbone ($96m.) DRC-Angola (TBD); Mozambique Regional Transmission Backbone ($2,094m.) (Phase I, Stage I)

Central Africa Power Pool : Support early thinking about developing power pool.

Scaling up Energy Access

Major investment in large-scale high impact projects and PRGs for expanding generation base

Efforts to enhanced energy access and on fragile states

Complementary off-grid solutions (Lighting Africa, Clean Cooking)

Continuous policy dialogue to create better institutions/frameworks - can help bring private sector

Enhanced Affordability – reforming tariff structure taking into account the political economy of tariffs

Reducing inefficiencies of supply to reduce costs

Regulatory regimes to provide incentives and penalties

Sustainable business model for the utilities

Key projects: Inga III(DRC- $8,000m.); Lom Pangar (Cameroon -- $460m.); Menengai (Kenya -$850m.); Souapiti (Guinea - $1,000m.); Kaleta (Guinea - $450m.); Cahorra Bassa – North Bank (Mozambique$1,300m.)

IV. Next Steps

High Reward, but not Without Challenges 20

Resettlement/ environmental issues require careful assessments.

Complex financing issues require innovative solutions.

Implementation capacity lacking.

Regional water, energy and transport projects require regional, watershed-wide, power pool-wide cooperation, which has proven difficult.

Bank seen as go-to institution to tackle complex transboundary issues

Lack of adequate knowledge base in some areas at present.

No system for monitoring quality and quantity of freshwater resources to Lake Chad

Need for assessment of impacts of climate change on hydrology for dams

The potential of gas to transform national and regional power markets

The role of mining sector as an anchor customer for energy generation

Strong vested interests oppose reform: e.g. trucking cartels and corrupt officials fight measures to increase competition and reduce barriers to transit.

Poorly understood political economy of reform.

Asymmetrical distribution of benefits from improving transport, especially between landlocked countries and those with sea access.