cecilia briceño-garmendia and nataliya pushak. republic of congo’s infrastructure: a continental...
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Cecilia Briceño-Garmendia and Nataliya Pushak
Republic of Congo’s Infrastructure: A Continental Perspective
Africa Infrastructure Country Diagnostic:a multi-stakeholder effort
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 Republic of Congo’s infrastructure
against African neighbors
Benchmarking group includes Resource rich countries, DRC, Benin, Nigeria and Cameroon
Why infrastructure matters
Headlines
Historic contribution of infrastructure to growth lower than in other SSA countries
Most of that contribution to growth comes to increased access to ICT. In contrast, ICT quality acts like a constraint
Quantity and quality of power supply has set a break to the economy
Quantity and quality of power supply has set a break to the economy
Congo
Ethio
pia
South A
frica
Nigeria
Gabon
DRC
Camero
on
Chad
Benin
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
ICT Power Roads
%
Changes in growth per capita due to changes in infrastructure (2001-5 vs. 1991-5)
Congo still has a lot to gain from improving its infrastructure
Chad
Nigeria
Ethio
pia
CongoDRC
Camero
on
Benin
Gabon
South A
frica-0.5
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
ICT Power Roads
%
Potential changes in growth per capita from improving infrastructure to level of African leader (Mauritius)
Headlines
If Congo’s infrastructure platform could be improved to the level of the African leader – Mauritius – per capita growth rates could increase by 3.7 percent per annum.
Substantial share of this impact would come from improvements in the power sector.
Quantity and quality roads would also have significant contributions
The State of Congo’s Infrastructure
Republic of Congo’s power network
Highly under-developed power sector in terms of generation capacity, power consumption, access and reliability.
Installed capacity. National power system very small and dependant on imports from DRC.
Reliability. Outages are quite frequent forcing firms to accumulate a stock of self-generation capacity.
Access. Electrification rates very low particularly for rural areas. Current investment program aims to create a national electricity grid.
Quality of Network. Close to half of the energy produced is lost in transmission and distribution.
Key findings for the power sector
Benchmarking indicates very poor reliability of power provision, low capacity and high prices
Source: Preliminary results AICD 2008
Unit Rep. of Congo
Resource- Rich
Installed power generation capacity MW/mil. people 28.7 42.2Power generation kWH/capita 108.0 200.2Power outages # in a typical month 27.4 15.8
Firms’ value lost due to power outages
% sales 15.7 7.2
Access to electricity % population 34.9 46.1Urban access to electricity % population 51.3 78.7Rural access to electricity % population 16.4 27.6Revenue collection % billings 91.0 77.5System losses % production 47.4 26.5Cost recovery of tariffs % total cost 100.0 55.9
Total hidden costs as % of revenue % 27.0 167.5
Effective Power Tariff (US cents/kWh) Rep. of CongoPredominantly Hydro
GenerationOther Developing
Regions
Residential at 100 kWh 15.0 10.27 5.0 – 10.0Commercial at 900 kWh 10.0 11.73Industrial at 50,000 kWh 9.9 11.39
While costs of power utility inefficiencies are relatively low, distribution losses are significant
Benin
Cameroon
Ethiopia
Congo Rep
Chad
Ghana
Nigeria
Congo, Dem. Rep.
0% 100% 200% 300% 400% 500% 600%
Unaccounted losses Collection inefficiencies Under-pricing
Over-manning
% of revenues
Congo’s power prices among the highest in AfricaC
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15
20
25
30
35
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Power tariffs in other developing countries: lower bound
Power tariffs in other developing countries: upper bound
Congo’s transport network
Trunk road network. Low density, quality and road condition major concern
Rural road network. Poor coverage. No effective network of rural roads
Institutional framework. Second generation road fund recently created but not fully functional.
User charges. Fund replenished by collecting 50% of taxes on forestry activity, 40% of VAT on fuel products, and other taxes.
Financing trends: Maintenance funding steadily increasing : doubled between
2005-07, and added additional 50% in 2008 Investment program represents huge effort with strong focus
on multimodality
Key findings for the road sector
Benchmarking indicates low density and very poor quality of roads
Unit Congo Resource Rich
SSA
Paved road density km/1000 km2 of arable land
25 111 101
Unpaved road density km/1000 km2 of arable land
11 287 340
GIS Rural accessibility % of rural pop within 2 km from regional and national
roads
34 21 23
Paved road traffic Average Annual Daily Traffic, cars per day
850 1,570 1201
Unpaved road traffic Average Annual Daily Traffic, cars per day
50 56 54
Paved network condition % in good or fair condition 38 67 79
Unpaved network condition
% in good or fair condition 21 62 59
Over-engineering % of total network
Roads funding aligned with maintenance and rehab needs, however actual transfers of resources flawed
Benin
Cameroon
Congo, Rep.
0 10 20 30 40 50 60 70
Optimal levy for main-tenance plus rehabilita-tion
Optimal levy for main-tenance
Implicit fuel levy
Actual Fuel Levy
$US cents per liter
Recent spike on roads fund spending sufficient to fund maintenance and even rehabilitation
Congo, Rep. Nigeria Benin
-150
-100
-50
0
50
100
150
200
250
300
Maintenance Maintenance&Rehabilitation
% d
evia
tion
of a
ctua
l spe
ndin
g fr
om n
orm
s
Rail Network. Operating below potential. One third of the 885-km network out of operation
Institutional Framework. Publicly owned and administered. 2005-concession failed.
Traffic and Usage. From 1987 to 1996 traffic reduced by two thirds. Stop functioning due to conflict. Rail never resumed to work at full capacity
Tariffs. At 0.16 $/ton-km among the highest of the region (up to 3 times as high as in southern Africa)
Reliability. Very slow service and bad safety condition. Among the worst in Africa in both accounts.
Key findings for the rail sector
Benchmarking indicates poor unreliable service and high cost for users
Railway OCBN CAMRAIL CFCO CFMK SNCC SETRAG GRC NRC
CountryBenin-Niger Cameroon Congo DRC DRC Gabon Ghana Nigeria
Traffic Density, Freight, 1000 ton-km/km 149 1,019 427 172 206 2,815 242 15
Performance
Staff: 1000 UT per Staff 113 565 195 20 47 1,485 87 24
Coaches: 1000 passenger-km per coach 1,015 4,718 2,202 76 595 1,961 447 1,684
Cars: 1000 ton-km per wagon 200 881 408 196 334 2,296 454 58
Locomotive Availability in % 40 nav 40 32 33 75 nav nav
Speed Passenger Traffic(km/h) 45-35 45-35 40-30 25-35 30-40 45-30
Fatalities per Km Travelled(%) 0.001 0.05 0.03 0.03 0.01
Pricing
Average Unit Tariff, Freight, US cents/ton-km 5.8 5.2 16.0 12.5 13.7 2.5 4.4 nav
Average Unit Tariff, Passenger, US cents/passenger-km 2.0 2.2 5.7 3.1 4.2 8.6 2.4 nav
Physical Infrastructure. One of the best natural deepwater ports in SSA in good operational conditions
Institutional Framework. Service port under a 27-year concession with a target to expand port to receive large vessels (up to 6,000 TEU)
Modernization plan: extend container terminal, rehabilitate wharfs and warehouses, drainage and electricity supply networks, construct a timber yard.
Performance. Productivity could be increased by improving custom and logistics procedures (particularly in Pointe Noire)
Key findings for the ports sector
Benchmarking underscores port’s good performance and competitive tariffs
Port Luanda Boma Matadi
Pointe Noir Apapa Cotonou Tema
Country Angola DRC DRC Congo Nigeria Benin Ghana
Traffic
Containers handled (TEU/year) 377,208 10,000 200,000 150,000 430,000 158,201 420,000
General cargo capacity (tons/year) 4,000,000 500,000 1,700,000 5,000,000 5,000,000 2,500,000 8,500,000
TARIFFS: handling charge (USD/ton)
General cargo 8.5 10 10 5.5 8 8.5 10
Dry bulk 5 NA 8 2.8 NA 5 3
EFFICIENCY:
Container dwell time (days) 12 NA 25 18 42 12 25
Truck processing time (hours) 14 NA 18 12 6 6 8
Crane productivity (containers/hour) 7 6 10 6.5 28 NA 39
Crane productivity (tons/hour) 16 5 6 7.5 9 15 13.5
Access. Domestic market is medium size and international market small, with a declining trend in traffic
Service. Seat capacity high for route served
Connectivity. Significant loss of connectivity as measured in city pairs between 2004 and 2007
Safety concerns. recent ICAO audit found Congo well below international standards in safety oversight
Key findings for the air transport sector
Benchmarking suggest the market is well served though poor connectivity, safety a source of concern
Country Angola DRC Congo Nigeria Benin Ghana
Traffic (2007)
Domestic Seats11,990,16 327,988 443,633 9,304,568 N/A 144,183
Seats for international travel within Africa 484,178 468,216 351,882 1,373,745 323,132 909,819
Seats for intercontinental travel 588,978 193,414 117,962 2,437,702 99,268 832,895
Seats available per capita 0.134 0.016 0.240 0.089 0.047 0.082
Quality:
Percent of seat km in older aircraft 0 25 22 20 7 3
Percent of seat km in newer aircraft 60 74 73 71 89 96
Percent of seat km in aircraft- unknown age 40 1 6.5 9 4 1
Note: All data based on estimations and computations of scheduled advertised seats, as published by the Seabury Aviation Data Group. This captures 98% of world-wide traffic, but a higher percentage of African traffic is not captured by the data.
Republic of Congo’s ICT network
Access. Two-thirds of the population under GSM coverageCompetition in mobile market (3 operators) Fixed line market is monopolized by the incumbent
SOTELCO (la Société des Télécommunications du Congo)Access is decreasing in fixed lines due to malfunctioning
incumbent
Pricing.Telecom prices are high, particularly for broadband services
Key findings for the ICT sector
Benchmarking indicates high coverage, high mobile subscription and high prices
Source: Preliminary results AICD 2008
Unit Rep. of Congo
Resource-Rich
GSM coverage % population 75.0 47.7International bandwidth bps/capita 0.29 2.7Internet subscribers/100 people 0.03 0.3Landline subscribers/100 people 0.41 1.1Mobile phone subscribers/100 people 35.4 23.7
Rep. of Congo
With Submarine
Cable
Other Developing
RegionsPrice of monthly mobile basket 18.8 13.6 9.9
Price of monthly fixed line basket nav 16.7 nav
Price of 20-hour Internet package 84.5 47.3 11.0Price of a 3-min call to US 5.4 1.4 2.0
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
Important infrastructure projects WACS - Project West Africa System Cable
financed and initiated as a partnership of 5 South-African operators (MTN, Neotel, Telkom s.a., Infraco et Vodacom) to connect RoC to the West Africa System
CAB2 -Central African Backbone The aim of the project is to improve transparency, governance and fair
competition
PCN - Project de couverture national The purpose of the project is to extend access to remote areas and
increase affordability
Pricing.Telecom prices are high, particularly for broadband services
Key projects in the ICT sector
Water.
High proportion of people using piped water sharply contrast with one third of the population using surface water, overall
Coverage by improved water sources in rural areas a huge problem. Two thirds of rural population use surface water
Costs due to utility inefficiencies amount to 150% of the utility turnover, mostly driven by under-pricing
Sanitation.
High reliance in traditional latrines but excellent progress in reducing open defecation
Key findings for the water and sanitation sectors
Year 2005 RoC Resource- Rich SSA
Access to Water Supply (% pop) Piped water 25.8 12.8 16.6 Stand posts 23.5 12.6 15.6 Wells/boreholes 15.3 49.0 41.5 Surface water 30.3 23.7 32.7Access to Sanitation (% pop) Flush toilets 5.3 11.2 9.8 Improved latrines 15.1 6.4 9.2 Traditional latrines 69.8 54.8 52.4 Open defecation 9.5 27.6 34.2Domestic water consumption(liter/capita/day) per pop. served
21.0 78.9 102.9
Performance Revenue collection (%sales) 88.0 53.9 89.6 Distribution losses (%prod.) 27.7 42.8 33.5 Cost recovery of Tariffs % on costs) 51.6 59.3 44.2
US cents per m3 RoCScarce water
resourcesOther Developing
Regions
Residential tariff(at 30 m3)
48.6 60.263.0 – 60.0
Non-residential tariff(at 100m3/mo)
48.6 120.74
Benchmarks indicates relatively high population share still uses poorest water quality while tariffs are set low
Piped Supply Public Standposts
Wells/boreholes
Surface Water 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
urban rural
% o
f pop
ulati
onAccess to piped water skewed to urban areas,
while rural relies on surface water
Septic tank Improved latrineTraditional latrine No facility0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Urban Rural
% o
f pop
ulati
onTraditional latrine main source of sanitation
across the board
Water utility losses due to inefficiencies more than double revenues, driven by huge under-pricing
Benin
South Africa
DRC
Rep. of Congo
Ethiopia
Ghana
Nigeria
0% 50% 100% 150% 200% 250% 300% 350%
Unaccounted losses Collection inefficiencies Under-pricing
% of revenues
Financing Republic of Congo’s Infrastructure
Key findings on infrastructure finance
Spending needs of US$780 mln for infrastructure are skewed towards capital expenditure and transport and power sectors
Burden of 13% of GDP is not as daunting relative to Republic of Congo’s economy
Existing infrastructure spending of US$365 mln mainly on roads and power
Effort on infrastructure spending relatively high
Public financing accounts for a lion share in both O&M and capital funding
Infrastructure financing gap of US$302* mln or 6% of GDP, mainly in power investment
* assuming complete fungibility of funds across sectors
Economic target Social target
ICT Fiber optic links to neighboring capitals and submarine
cables
Universal access to GSM signal and public broadband facilities
Power 1,689 MW new generation 498 MW inter-connectors
Electricity coverage of 53% (83% for urban zones)
Transport National and regional connectivity GIS Rural Accessibility Index 80%
for land with highest agricultural value already in production
WSS n.a. MDG for water and sanitation
Possible infrastructure targets over next ten years
$ mln/ year Capital O&M Total
ICT 40 44 84
Power 438 44 482
Transport 92 69 160
WSS 46 nav 46Irrigation nav 7 7Total 615 164 780
To meet these targets, Republic of Congo would need to spend US$780 mln per year for next decade
Burden of financing needs not daunting relatively to Congo’s economy
Cameroon
Nigeria
Congo, Rep.
Benin
DRC Congo, Dem. Rep.
MIC
Resource-Rich
LIC-NoFragile
LIC-Fragile
SSA
0 10 20 30 40 50 60 70 80
Capex O&M % GDP
Benin
Congo, Rep.
Cameroon
DRC Congo, Dem. Rep.
Nigeria
LIC-Fragile
LIC-NoFragile
Resource-Rich
MIC
SSA
0 20,000 40,000 60,000 80,000 100,000
Capex O&M $US bln
Existing infrastructure spending in addressing needs is already substantial
DRC Congo, Dem. Rep.
Cameroon
Nigeria
Congo, Rep.
Benin
Resource-Rich
LIC-Fragile
MIC
LIC-NoFragile
SSA
0 1 2 3 4 5 6 7 8 9 10 11
Capex O&M
% GDP
DRC Congo, Dem. Rep.
Congo, Rep.
Benin
Cameroon
Nigeria
LIC-Fragile
LIC-NoFragile
Resource-Rich
MIC
SSA
0 10,000 20,000 30,000 40,000 50,000
Capex O&M
$US bln
Existing financing flows to Republic of Congo, (average over period 2004-07 US$ million per year)
O&M Investment Total
Public Public ODA Non-OECD PPI Total Investment
ICT 6 6 0 0 18 24 30Power 44 33 2 30 0 65 109
Transport 69 78 8 6 0 92 160WSS 28 19 0 1 0 20 48
Irrigation 7 10 nav nav nav 10 17Total 154 150 13 30 18 211 365
Most of the existing spending directed to transport and power
Existing budgetary flows to Republic of Congo, US$ million per year
Roads Non-Roads
year CapexO&M
Central Gov
O&M Road Fund
Total CapexO&M
Central Gov
Total
2004 68 2 0 71 14 2 162005 67 1 16 84 42 2 442006 12 1 26 39 7 13 20
2007 208 1 35 245 91 8 99Averag
e 89 1 26 110 39 6 45
2008 276 3 54 333 73 7 80
Road public spending dramatically increased in recent years
20042005
20062007
20080
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
Power
Roads
Other transport
Other infrastructure
Budget expenditures plummeted in 2006 but increased dramatically in recent years,
notably in Roads
ICTPower
TransportWSS
Irrigatio
nTotal
ICTPower
TransportWSS
Irrigatio
nTotal
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Central Gov
Off-budget
O&M CAPEX
% o
f G
DP
O&M is predominantly financed by SOEs and the Road Fund in the case of transport, while
investments by central government
Potential gains from inefficiencies amount to $US 113 million per year or 1.9% of GDP
Substantial scope for improving cost recovery in water and improving operational efficiency and budget execution in the power sector
Scope for reallocation of public funds across sectors of 1.7% of GDP
Over manning amounts to $US 20 annually, chiefly in power sector
How much more can be done with existing resources?Potential efficiency gains:
Potential efficiency gains: Composition and details
ICT Power Transport WSS Irrigation Total
Over manning nav 17 nav 3 nav 20
Losses nav 20 nav 2 nav 23
Under-collection nav 7 0 1 nav 7
Under-maintenance nav nav 0 nav nav 0
Budget Execution 2 0 33 2 4 41
Tariff Cost Recovery nav 0 5 17 nav 22
Total 2 45 38 25 4 113
The funding math
US$m pa ICT Power Transport WSS Irrigation Total
Needs (84) (482) (160) (46) (7) (780)
Spending 30 109 160 48 17 365 Potential Efficiency Gains 2 45 38 25 4 113
(GAP) or surplus (52) (328) - - - (302)*
* assuming complete fungibility of funds across sectors
Overall financing gap of only US$302 mln or around 6% of GDP, mainly in power investment
ICT Power Transport WSS Irrigation Total0
1
2
3
4
5
6
7
CAPEX financing gap O&M financing gap
% o
f G
DP
Absent any spending increase, efficiency gains can accelerate progress by over 50 years
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
-60
-40
-20
0
20
40
60
80
100
a. Existing resource envelope plus potential efficiency gainsb. Existing resource envelope
Number of years needed to attain funding targets
Var
iati
on in
res
ourc
es n
eed
ed (
% d
evia
tion
fr
om c
urr
ent
enve
lop
e)
The funding math using 2004-2005 levels of public spending
US$m pa ICT Power Transport WSS Irrigation Total
Needs (84) (482) (160) (46) (7) (780)
Spending 24 95 60 39 12 330 Potential Efficiency Gains 0 45 29 23 2 100
(GAP) or surplus (60) (342) (71) - - (350)*
* assuming complete fungibility of funds across sectors
The funding math using 2008-2009 levels of public spending
US$m pa ICT Power Transport WSS Irrigation Total
Needs (84) (482) (160) (46) (7) (780)
Spending 50 226 390 76 51 564 Potential Efficiency Gains 6 45 29 29 15 183
(GAP) or surplus (28) (211) - - - (33)*
* assuming complete fungibility of funds across sectors
Main achievements and challenges
Achievements Challenges
Power•Rapid expansion of generation capacity
•Accomplish institutional reform for efficient regional integration and power costs reduction
Transport
•Pointe-Noire concession on track, CFCO concession planned•Establishment of second-generation road fund
•Rehabilitate the national road network•Improve rural connectivity
ICT •Good GSM coverage
•Reduce the service costs via increased competition, especially when connected to submarine cable
Water•Reasonably good coverage in urban areas
•Reform water tariffs to achieve financial viability
Summary
Bad news• The state of RoC infrastructure is well below the
benchmark for other Resource rich countries in SSA.• Power and road infrastructures put the major contraints
on the economy.
Good news• The country has the means to rectify the bottlenecs• The funding gap that persisted for several years is
greatly reduced by recent budget increases
The way forward
• Sustain the level of recent spending during the next decade
• Improve sector effectiveness:– Budget execution for roads ($33m pa)– Distibution losses in power ($20m pa)– Over-manning in power ($17m pa)– Increase water tariffs to cost-recovery level ($17m pa).
• Tackle other sectoral challenges– Finish the rehabilitation of PN-CFCO corridor– Seek better regional integration in transport and power (in the
context of CAPP)– Link the strategy of rural infrastructure with the agriculture
sector development plan