1

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

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

Su

dan

Mau

riti

us

Bo

tsw

ana

Mal

awi

Mad

agas

car

So

uth

Afr

ica

Zam

bia

An

go

la

Zim

bab

we

Gu

inea

-Bis

sau

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

-2

-1

0

1

2

3

4

5

Nig

er

To

go

Mal

awi

Mad

agas

car

An

go

la

Zim

bab

we

Zam

bia

Bo

tsw

ana

So

uth

Afr

ica

Mau

riti

us

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

0

5

10

15

20

25

30C

had

Cap

e V

erd

e

Mad

agas

car

Ug

and

a

Sen

egal

Ken

ya

Rw

and

a

Cam

ero

on

Nig

er

Ben

in

Cô

te d

'Ivo

ire

Nam

ibia

Tan

zan

ia

Gh

ana

Les

oth

o

So

uth

Afr

ica

Mo

zam

biq

ue

Eth

iop

ia

Co

ng

o

Mal

awi

Nig

eria

Zam

bia

US

$ ce

nts

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

0 100 200 300 400 500 600 700

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

-100

-50

0

50

100

150

200M

oza

mb

iqu

e

So

uth

Afr

ica

Mad

agas

car

Les

oth

o

Mal

awi

Nam

ibia

Zam

bia

per

cen

tag

e d

evia

tio

n fr

om

n

orm

Maintenance norm Maintenance&Rehabilitation norm

Levels of road sector spending are high in absolute terms and relative to GDP

0

5

10

15

20

25

30

35

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5M

ala

wi

Mo

zam

biq

ue

Za

mb

ia

Ma

da

ga

sc

ar

Le

so

tho

Na

mib

ia

So

uth

Afr

ica

US

$/ca

p

% o

f G

DP

As % GDP US$ per capita

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

0%

5%

10%

15%

20%

25%

30%

35%

Ken

ya

Ug

anda

Sen

egal

Mal

awi

Cot

e d'

Ivoi

re

Moz

ambi

que

Cam

eroo

n

Bur

kina

Fas

o

Tanz

ania

Mad

agas

car

Zam

bia

Sou

th A

fric

a

Nam

ibia

Con

go

DR

C

Rw

anda

Ben

in

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

0% 50% 100% 150% 200% 250%

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

0%10%20%30%40%50%60%70%80%90%

100%

Perc

ent o

f pop

ulati

on

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

100%

80%

60%

40%

20%

Efficiency gap

Increasingcost recoveryImproving operational

efficiency $7.5

Spending budgetedresources $1.9

Prioritizingpublic spending $3.3

Existing spending

0%

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