Zambia’s Infrastructure: A Continental Perspective

2. Zambia’s Infrastructure: A Continental Perspective

3. Africa Infrastructure Country Diagnostic: a multi-stakeholder effort

4. 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

5. Why infrastructure matters?

6. Despite Zambia’s strong economic growth, infrastructure’s contribution has been relatively low Changes in growth per capita due to changes in infrastructure (2001-5 vs. 1991-5)

7. Raising Zambia’s infrastructure to level of African leader could add 2.2 points to per capita growth rate Potential changes in growth per capita from improving infrastructure to level of African regional leader (Mauritius)

8. Key Message #1 Infrastructure has the potential to contribute more to Zambia’s infrastructure than it has in the past

9. The State of Zambia’s Infrastructure

10. Zambia’s power network

11. Benchmarking highlights exceptionally low power tariffs and levels of electrification

12. Zambia’s power prices are the lowest in Africa, and also look low by global standards Power tariffs in other developing countries: upper bound Power tariffs in other developing countries: lower bound

13. Zambia’s power tariffs appear in line with operating costs but far from long-run capital costs

14. Hidden costs of power utilities are high due to underpricing

15. Access to power highly inequitable making any subsidies to sector highly regressive

16. No affordability problems for those with access, nor even many of those without

17. Key Message #2 Meeting future power demands and raising electrification will be difficult without higher power tariffs

18. Road network traffic concentrated between Lusaka and Copper belt

19. Main trunk network in good condition except in outlying areas

20. Benchmarking indicates possible over-engineering of paved network in contrast to poor unpaved network

21. Zambia has secured resources to cover road maintenance and rehabilitation needs of main road network

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

23. Key Message #3 Strong budget envelope and apparent over-engineering of main roads suggests potential to shift resources to under-served rural roads

24. Zambia’s rail sector is a critical input for a minerals based economy

25. Benchmarking indicates low traffic density and relatively poor performance in terms of efficiency

26. Railway institutional reform scores relatively low indicating need to further develop supervision

27. Key Message #4 Improving supervisory framework could help to boost performance of rail concession

28. Concentrated potential for large scale irrigation with modest returns Simulated location of potential LARGE scale irrigation schemes

29. Scattered potential for small scale irrigation with higher returns Simulated location of potential SMALL scale irrigation schemes

30. Benchmarking indicates tendency to focus on higher end solutions and poor utility performance (*) Average of 3 providers

31. Dramatic urban – rural gaps and apparent declining coverage of piped water with increases elsewhere

32. Strong expansion of wells and boreholes, but worrisome increase in use of surface water

33. Expansion of sanitation options below the SSA average and troublesome expansion of open defecation

34. Hidden costs of Zambia’s water utilities are the highest in the region As of 2005

35. Key Message #5 Greater attention to sanitation and rural services needed, opportunity to harness new resources by improving efficiency

36. Zambia’s ICT network very tightly clustered around economic centers

37. Benchmarking indicates relatively low GSM coverage and relatively high price of calls Source: Preliminary results AICD 2008

38. High international call charges driven both by technology and market power

39. Some potential for private expansion of GSM coverage and only minimal need for subsidy

40. Key Message #6 Further competition across the board is needed to drive down prices and expand access

41. The AICD Financial Framework

42. Spending needs 100% 80% Fundinggap 60% Efficiencygap 40% Existing spending 20% 0% Increasing cost recovery Improving operational efficiency $7.5 Prioritizing publicspending $3.3 Spendingbudgeted resources $1.9 All figures in US$ billion a year

43. 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

44. Illustrative infrastructure targets over next ten years

45. To meet these targets, Zambia would need to spend US$1,609 million a year for the next decade Trade expansion: 472

46. Burden of financing needs is substantial for Zambia at 15 percent of GDP

47. Key Message #8 Zambia already spends US$0.7 billion a year on infrastructure

48. Zambia’s spending mainly domestically financed though with significant contributions of ODA, PPI (*) Includes household self-financed investments in sanitation

49. Existing infrastructure spending in addressing needs is moderate at 6 percent of GDP

50. Key Message #9 Zambia faces an ‘efficiency gap’ worth US$0.3 billion a year