View
215
Download
2
Category
Tags:
Preview:
Citation preview
Kenya’s Infrastructure: A Continental Perspective
February 3rd and 6th, 2009
Vivien Foster & Cecilia Briceño-Garmendia, World Bank
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 Kenya’s infrastructure against African neighbors
– Benchmarking group includes LIC (non-fragile), East African neighbors, South Africa, and regional outliers
Why infrastructure matters
Infrastructure’s contribution to growth in Kenyahas been less than in other African countries
-0.5
0.0
0.5
1.0
1.5
2.0
Mau
ritiu
s
Uganda
Tanza
nia
South
Afri
ca
Kenya
Ethio
pia
Guine
a-Bis
sau
Telecom Electricity Roads
Changes in growth per capita due to changes in infrastructure (2001-5 vs. 1991-5)
As a result, Kenya has a lot to gain from improving its infrastructure
-2
-1
0
1
2
3
4
5
Niger
Uganda
Ethio
pia
Tanza
nia
Kenya
South
Afri
ca
Mau
ritiu
s
Main Telephone Lines Electricity Generating Capacity Length of Road Network
Potential changes in growth per capita from improving infrastructure to level of African leader (Mauritius)
The State of Kenya’s Infrastructure
Kenya’s transport network
Trunk network: of adequate length and adequate surface type Rural network: RAI 30% among best in Africa, although low in
absolute terms Institutional framework: high quality sector institutions Fuel levy at 12 US cents, which is close to Kenya’s
maintenance norms; no major collection problems Good maintenance provision, but huge unfunded rehabilitation
backlog, which absorbs maintenance funding Relatively low overall roads spending, exacerbated by
exceptionally low capital budget execution ratios and major implementation time and cost over-runs (26mos)
One-time spending spike would help clear the backlog, it is currently being implemented
Key findings for the road sector
Benchmarking indicates good quality, density low but adequate for connectivity
Source: Preliminary results AICD 2008
Unit LIC Kenya MIC
Paved road density km/1000 km2 of arable land
86.6 152 507.4
Unpaved road density km/1000 km2 of arable land
504.7 930 1,038.3
GIS Rural accessibility % of rural pop within 2 km from all-season road
21.7 32 59.9
Paved road traffic Average Annual Daily Traffic
1,049.6 1,108 2,786.0
Unpaved road traffic Average Annual Daily Traffic
62.6 38 12.0
Paved network quality % in good or fair condition
80.0 84 79.0
Unpaved network quality % in good or fair condition
57.6 63 58.3
Perceived transport quality % firms identifying as major business constraint
23.0 37 10.7
Fuel levy well aligned with maintenance needs and promptly collected
0 5 10 15 20 25 30
Niger
Ghana
Ethiopia
Kenya
Tanzania
US cents per liter
Optimal levy formaintenance plusrehabilitation
Optimal levy formaintenance
Actual fuel levy
Implicit fuel levy
Adequate provision for maintenance but large shortfall in allocation to rehabilitation
-150%
-100%
-50%
0%
50%
100%
150%
200%
250%
300%
Ethiopia Tanzania Uganda Kenya
Spe
ndin
g as
% o
f re
quire
men
ts
Maintenance Rehabilitation
Road investment average in absolute terms with room to be increased as share of GDP
0.00.51.01.52.02.53.03.54.04.5
% o
f GD
P
0
5
10
15
20
25
30
35
US
$/c
ap
As % GDP US$ per capita
One of Africa’s leading players in air transport: key gateway Air transport services:
International: Kenya Airways of SSA’s top three carriers and concentrates a large share in a oligopolistic market, safety rankings up to international benchmarks
Domestic: 4th largest domestic passenger traffic in Sub-Saharan Africa (after South Africa, Nigeria and Mozambique) with a marked trend toward route consolidation
Airport infrastructure: Kenyatta Airport in Nairobi among the three major SSA hubs Runway capacity not a limiting factor but major capital investment
needed for taxiways, parking and terminal space
PPI and Regulation: Greenfield project for Kenyatta Airport Cargo terminal (1998) Formed but not fully implemented East African Civil Aviation
Authority Enforcement aims at better safety at regional level
Key findings for the air transport sector
Mombasa one of the largest ports in Sub-Saharan Africa (both in cargo and container handling). Natural transshipment port for East Africa
Maritime transport services: Recently introduced modern frontline cargo handling improving
performance, yet Mombasa runs under a service port model ranking among the least advanced reformers in SSA
PPI experience mixed, with the only cancelled management contract in this sector (Operation Mombasa container terminal), but grain terminal concession operating very efficiently
Mombasa congestion worsened by poor interface transport system with roads and railways
Maritime infrastructure: Mombasa port facing sever capacity constraints (ratio
demand/capacity over 80% for both cargo and container traffic) consequently role in transshipment is declining
Key findings for the maritime transport sector
Rail in bad condition, 50% of assets in need of rehabilitation
25-year concession recently signed. Plans for a $206m investment over 5 years announced for rehabilitation of tracks
….
Key findings for the rail sector
Water
Average levels of access, but worrisome increase in use of surface water
In urban areas, utilities capture only 57% of corresponding revenues, institutional reform agenda recently advanced
In rural areas, little progress with reform agenda and discouraging trend in use of surface water
Sanitation
Majority of population using traditional latrine and flush toilet (only urban)
Discouraging increase in people practicing open defecation
Key findings for water and sanitation sector
Benchmarking indicate good access to piped water but high reliance on surface water
Source: Preliminary results AICD 2008
Unit LIC Kenya MICAccess to piped water % pop 10.1 17.9 56.4Access to stand posts % pop 16.1 9.4 20.4Access to wells/boreholes % pop 38.3 21.6 6.3Access to surface water % pop 33.8 46.4 13.9Access to septic tanks % pop 5.3 9.0 44.0Access to improved latrines % pop 9.3 8.0 0.9Access to traditional latrines % pop 47.9 64.3 33.0Open defecation % pop 37.1 18.3 15.8Domestic water consumption liter/capita/day 72.4 63.0 NaUrban water assets in need of rehabilitation
% 35.5 42.0 25.0
Revenue collection % sales 96.0 95.0 81.1Distribution losses % production 33.0 40.0 6.1Cost recovery % total costs 56.0 58.0 80.6Total hidden costs as % of revenue % 130.0 173.9 84.9
US cents per m3 Kenya Scarce water resources
Other Developing Regions
Residential tariff 38.9 60.263.0 – 60.0
Non-residential tariff 45.7 120.74
Growing reliance on surface water and static trend in improved sources is worrisome
Water
0%1%2%3%4%5%
% p
op
ula
tion
ge
ttin
g
acc
ess
eve
ry y
ea
r
Kenya SSA
Hidden costs of water utilities high, due to distribution losses and under-pricing
0% 50% 100% 150% 200% 250% 300% 350%
Cape Verde
South Africa
Uganda
Kenya
Tanzania
Ethiopia
Nigeria
% of revenues
Unaccounted losses Collection inefficiencies Under-pricing
Reliance on surface water increasing in rural areas and little progress on rural sector reform agenda
Reducing reliance on
surface water
Increasing reliance on
surface water
Aggressive reformers scoring over 80% on Rural Reform Index
Uganda Tanzania
Moderate reformers scoring 40-80% on Rural Reform Index
Ethiopia Chad
Slow reformers scoring under 40% on Rural Reform Index
KenyaNiger
0% 20% 40% 60% 80% 100%
Burkina Faso
Uganda
Tanzania
Chad
Ethiopia
Rwanda
Sudan
Kenya
South Africa
Niger
Rural Index score
Discouraging trend in open defecation and relatively slow expansion of traditional latrines
Sanitation
-2%-1%0%1%2%3%4%5%
% p
op
ula
tion
ge
ttin
g
acc
ess
eve
ry y
ea
r
Kenya SSA
Access rates lower than regional averages
Institutional reform have translated into huge efficiency gains for power distribution
Cost-reflective tariffs –high by regional standards 0.2$/kWh— reflect use of costly emergency generation
LRMC could be significantly lower ($0.08 kwh)
Poor reliability of service due to generation capacity constraints and inadequate capacity in the transmission backbone leads to major costs to the economy.
Power security likely the largest benefit of trade
Key findings on the power sector
Benchmarking indicates poor reliability and relatively high prices
Source: Preliminary results AICD 2008
Unit LIC Kenya MICInstalled power generation capacity MW/mil. people 24.4 33 796.2Power consumption kWH/capita 99.5 146 4,473Power outages Day/year 40.6 53 5.6
Firms’ reliance on own generator % consumption 17.7 15 0.5Firms’ value lost due to power outages % sales 6.1 3 0.8Access to electricity % population 15.4 18 59.9Urban access to electricity % population 71 51 83.7Rural access to electricity % population 12 4 33.4Growth access to electricity % population/year 1.4 1 1.8
Revenue collection % billings 88.2 98.7 99.9Distribution losses % production 25.7 18.1 15.7Cost recovery % total cost 90.0 108.0 125.7
Total hidden costs as % of revenue % 74.0 15 3.5
US cents Kenya Predominantly Hydro Generation
Other Developing
RegionsPower tariff (residential at 75 kWh) 12.7 10.27 5.0 – 10.0Power tariff (commercial at 900 kWh) 21.7 11.73Power tariff (industrial at 50,000 kWh) 19.0 11.39
Hidden costs of power utilities low, reflecting recent major efficiency gains in distribution
0% 100% 200% 300% 400% 500% 600%
South Africa
Kenya
Uganda
Tanzania
Ethiopia
DRC Congo
% of revenues
Unaccounted losses Collection inefficiencies Under-pricing
KPLC reforms save 1% of GDP by reducing under-pricing and collection losses
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2001 2002 2003 2004 2006
Pe
rce
nta
ge
of r
eve
nu
es
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
Pe
rce
nta
ge
of G
DP
Under-pricing Under-collection Distribution losses Total as % GDP
Constraints in generation capacity lead to unreliable service and high cost emergency leases
Power outages are a major issue in Kenya Power outages led to welfare losses of 2 percent of GDP More than 70% of firms report owning back-up generators
Immediate response has been leasing of emergency generation Lease payment absorbs 1.5 percent of GDP for <10% capacity Cost is around US$0.25/kWh relative to LRMC of US$0.08/kWh
Government working on long term solutions Expansion of supply will add more than 300MW Diversification by increasing trade and developing geothermal resources
Power outages are a major problem resulting in very high levels of own generation
0 20 40 60 80
South Africa
Ethiopia
Uganda
Eritrea
Tanzania
Kenya
% of firms with own generator
Own Generation Economic Cost
0 1 2 3 4 5
Burkina Faso
Cameroon
Benin
Niger
Cape Verde
Madagascar
Senegal
Kenya
Uganda
Tanzania
Percentage of GDP
Key findings on water resources
• Significant hydrological variability, which impacts the country’s economy (floods & droughts) up to 2% GDP per year.
• Water stressed country with per capita endowment of <650 m3 per year and storage infrastructure of <124 m3 per capita
• Large untapped hydropower and irrigation potential
• Urgent need to develop additional multi-purpose storage reservoirs (small, medium, large)
• WRM Authority needs further strengthening to effectively fulfill its mandate as custodian of the water resource base, and trans-boundary RBO also need special attention
Key findings on irrigation sector
Current irrigated area of 103,000 has represents only 2% of cultivated area
Simulation suggests could be economically viable to irrigate a further 370,000 has for a total investment of US$0.2b and a BCR of 2.2
About half relates to large-scale irrigation schemes associated with existing dams
Other half relates to small-scale irrigation schemes
Simulated location of potential large and small scale irrigation schemes
Leading African reformer in ICT sector
Market already quite competitive, but could support more competition both in fixed and mobile segments, as well as in backbone
Very high GSM coverage and tiny market efficiency gap, but prices relatively high in spite of competition
Prices falling as fourth mobile operator just began operations
Important to define suitable scope for public versus private investment in backbones
Internet: relatively high usage but costlyprices should fall with three new submarine cables (Seacom, TEAMS
and EASSy) competing to be first to start servicesbut critical to ensure competition between landing stations
Key findings for the ICT sector
Benchmarking indicates high GSM coverage but relatively high ICT prices overall
Source: Preliminary results AICD 2008
Unit LIC Kenya MIC
GSM coverage % population 48.2 86.2 97.2International bandwidth Mbps/capita 5.8 6.3 30.2Internet subscribers/100 people 0.1 0.3 2.0Landline subscribers/100 people 0.8 0.9 9.4Mobile phone subscribers/100 people 15.1 30.2 86.7
Kenya Without Submarine Cable
Other Developing Regions
Price of monthly mobile basket 15.9 11.12 9.9
Price of monthly fixed line basket 21.0 13.58 nav
Price of 20-hour Internet package 81.5 67.95 11.0Price of a 3-min call to US 0.62 2.59 2.0Price of inter-Africa tel. calls, mean 1.04 0.72 nap
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Pe
rce
nt
of
Po
pu
lati
on
Coverage Gap Efficient Market Gap Existing Coverage
Tremendous progress in expanding GSM coverage with market efficiency gap of only 5%
Financing Kenya’s Infrastructure
Key findings on infrastructure finance
Moderate spending needs of US$2.1b for infrastructure, almost balanced between investment and maintenance
Burden of spending needs is manageable given Kenya’s economy
Existing infrastructure spending of US$1.9b mainly on ICT and power
Effort on infrastructure spending relatively high
Particularly strong at leveraging PPI for ICT finance
Public investment in transport looks relatively low
Infrastructure financing gap of US$0.9b or 5% of GDP, mainly in power investment and water maintenance
Economic target Social target
ICT Fiber optic links to neighboring capitals and submarine cable
Universal access to GSM signal and public broadband facilities
Power 990 MW new generation, 270 MW inter-connectors
Electricity coverage of 50% (100% urban and 32% rural)
Transport Regional connectivity by good quality 2 lane paved road
National connectivity by good quality 1 lane paved road
Rural Accessibility Index 75%, Urban popn within 500m paved road
WSSNa.
Achievement of MDG for water and sanitation
Possible infrastructure targets over next ten years
$ bn/ year Capital O&M Total
ICT 0.03 0.03 0.06
Power 0.75 0.27 1.02
Transport 0.27 0.29 0.56
WSS 0.13 0.36 0.49
Total 1.17 0.96 2.13
To meet these targets, Kenya would need to spend US$2.1b per year for next decade
0 10 20 30 40 50 60 70
Cape Verde
Kenya
Sudan
Uganda
Tanzania
Ethiopia
DRC
MIC
Oil-Exporting
LIC-No-Fragile
LIC-Fragile
SSA
% GDP
Capex O&M
0 10 20 30 40 50 60 70 80
Cape Verde
Uganda
Kenya
Tanzania
Sudan
Ethiopia
South Africa
LIC-Fragile
Oil-Exporting
MIC
LIC-No-Fragile
SSA
US$ bln per year
Capex O&M
Burden of financing needs is relatively manageable for Kenya
Existing financing flows to Kenya, US$ billion per year
O&M Investment Total
Public Public ODA Non-OECD PPI Total Investme
nt
ICT 0.28 0.05 0.00 0.00 0.32 0.36 0.64
Power 0.41 0.15 0.06 0.00 0.01 0.22 0.63
Transport 0.28 0.08 0.09 0.02 0.02 0.20 0.49
WSS 0.01 0.03 0.05 0.00 0.00 0.09 0.10
Total 0.98 0.31 0.20 0.02 0.35 0.87 1.85
Kenya already spends US$1.9b on infrastructure with significant leveraging of PPI
Existing effort on infrastructure spending is already quite substantial
0 5 10 15 20
Sudan
Uganda
Tanzania
Kenya
Ethiopia
Cape Verde
Oil-Exporting
LIC-Fragile
MIC
LIC-No-Fragile
SSA
% GDP
Capex O&M
0 10 20 30 40 50
Lesotho
Sudan
Uganda
Tanzania
Ethiopia
Kenya
South Africa
LIC-Fragile
Oil-Exporting
LIC-No-Fragile
MIC
SSA
US$ bln per year
Capex O&M
Overall financing gap of only US$0.9b or 5% of GDP, mainly in power investment and water O&M
0%
2%
4%
6%
8%
10%C
apit
al
O&
M
Cap
ita
l
O&
M
Cap
ita
l
O&
M
Cap
ita
l
O&
M
Cap
ita
l
O&
M
ICT Power Transport WSS Total
% G
DP
Kenya: Financing Gap
Financing gap of US$0.9b pa could be reduced by efficiency gains
Evidence of historic under-spending on maintenance that is inflating current investment requirements
Enormous scope for reallocation of public funds from ICT to other infrastructure sectors if private finance could be captured
Significant scope for raising capital budget execution rates, particularly in rodas
Scope for improving distribution losses in power sector
Significant scope for improving cost recovery in the water sector
Capturing all possible efficiency gains would virtually close financing gap; many of these actions have already been undertaken by govt
Key findings on potential efficiency gains
About 25% of infrastructure assets require rehabilitation, indicating inadequate maintenance
0%
10%
20%
30%
40%
50%
60%
SouthAfrica
Tanzania Ethiopia Kenya Sudan Uganda DRC
% o
f in
fra
stru
ctu
re a
sse
ts in
ne
ed
of
reh
ab
ilita
tion
Roads Development Budget: Execution Ratio
Source of funding 2001/2 2002/3 2003/04 2004/5 2005/6
GoK (exchequer) 68 51 44 47 61
Appropriation in Aid 26 44 45 57 57
Total 42 46 45 55 58
Poor execution ratios and high overruns in road sector call for better planning, project selection and management
Based on a sample review of the roads portfolio in 2007:
Cost overruns: 90% of roads development portfolio reached more than 80 percent of the original contract sum
Time overruns: Actual time for completion more than two times that at the tender stage
Relatively efficient utilities, although distribution losses nonetheless absorb 0.4% GDP
Power
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
Kenya LIC
% o
f G
DP
Collection inefficiencies as % of GDPUnaccounted Losses as % of GDP
Water
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
Kenya LIC%
of G
DP
Collection inefficiencies as % of GDP
Unaccounted Losses as % of GDP
Under-pricing is relatively small, but nonetheless amounts to 0.4% GDP
Underpricing
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
Power Water
% G
DP
Kenya LIC
Access to power and water very inequitable making existing subsidies highly regressive
Electricity
0%20%40%60%80%
100%
Q1 Q2 Q3 Q4 Q5
% p
op
ula
tio
nKenya
Water supply
0%20%40%60%80%
100%
Q1 Q2 Q3 Q4 Q5
% p
opul
atio
n
Piped water Stand posts
Wells/boreholes Surface water
Those with access (and many of those without access) do not face major affordability problems
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2 3.4 4.0 4 6 8 10 12 14 16USD/month%
of h
ou
seh
old
s sp
en
din
g m
ore
tha
n 5
%
of t
he
ir m
on
thly
bu
dg
et
Cost of minimum household consumption of waterCost of minimum household consumption of electricityKenyaLIC
Cost of minimum household consumption of water
Cost of minimum household consumption of electricity
US$ billion ICT Power Transport WSS Total
Financing gap 0.00 0.39 0.07 0.40 0.86
Reallocate spending across categories 0.27 0.00 0.00 0.00 0.27
Raise capital budget execution 0.00 0.04 0.01 0.02 0.07
Reduce operating inefficiencies 0.00 0.05 0.00 0.02 0.08
Improve cost recovery 0.00 0.04 0.01 0.03 0.08
Remaining gap 0.00 0.27 0.05 0.32 0.36
Overall funding gap of US$0.9b can be substantially reduced by reallocating spending
Most of these measures have already been taken since 2006
Main findings
• Kenya compares very favorably with LIC benchmark, but remains some distance from MIC benchmark
• Port logistics and electricity costs are the biggest brakes on trade and productivity
• ICT reforms have brought major benefits in terms of universalizing GSM coverage
• Sound framework for maintenance of road network, but rehabilitation remains an issue
• MDGs seem to be receding with more people using surface water and practicing open defecation
• Government has taken many important efficiency measures to reduce infrastructure funding gap
Emerging policy messages
• Prioritize improvements to Mombasa port, moving towards landlord model and greater PSP
• Prioritize investments in expanding generation capacity and strengthening transmission links
• Ensure competitive access to submarine landing stations to ensure full economic benefits
• Consider one time investment effort to clear rehabilitation backlog of the roads sector
• Improve public investment framework: planning, project screening, procurement, budget execution and project implementation
Recommended