Vivien Foster & Cecilia Briceño-Garmendia World Bank

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

Key Message #1

Water spending needs are US$32 billion a year,

(of which US$22 billion for WSS MDGs)

An illustrative water investment agenda for the next decade

Water supply – meet MDG target by 2015 (and rehabilitate existing systems to ensure sustainability)

Sanitation – meet MDG target by 2015 (and rehabilitate existing systems to ensure sustainability)

Irrigation – develop all viable large and small scale irrigation opportunities amounting to 7 million has.

Water resources – develop all water storage associated with feasible hydro-projects (of at least 35 GW)

Overall price tag of US$32 billion annually – mainly MDG related

US$ billion pa Investment O&M TOTAL

Rehabilitate Expand Total

WSS MDG Targets 22.2*

Water 4.2 6.9 11.1 5.5 16.6

Sanitation 2.8 1.3 4.1 1.5 5.6

Water Resources 10.1

Irrigation 0.6 2.1 2.7 0.6 3.3

Storage - 6.8 6.8 - 6.8

TOTAL 7.6 17.1 24.5 7.6 32.3

* Assuming medium level of service

How investment needs here are different from previous estimated?

Analysis expands existing methodologies: Includes non-standardized infrastructure costs, reflecting

country-specific patterns of demography and geography and differences in levels of technological innovation and local market development

Assumes that the relative prevalence of water and sanitation supply modalities will remain constant from 2006 to 2015

Estimates rehabilitation needs based on the specific status of assets and rehabilitation backlog of each country

Allows running sensitivity analysis on different parameters (quality of service, costs, timeframe) and exploring affordability issues

0

5

10

15

20

25

30

35

SS

A

LIC

-Fra

gile

LIC

-Non

Fra

gile

MIC

Res

ourc

e R

ich

Equ

a.G

uine

aG

abon

Mau

ritan

iaS

outh

Afri

caB

otsw

ana

Cam

eroo

nS

waz

iland

Zim

babw

eC

had

Nig

eria

Nam

ibia

Sen

egal

Leso

tho

Bur

kina

Fas

oM

ozam

biqu

eG

hana

Cot

e d'

Ivoi

reU

gand

aG

uine

aR

wan

daM

ali

Zam

bia

Ben

inM

alaw

iS

udan

Tanz

ania

Nig

erE

thio

pia

Ken

yaC

AR

Mad

agas

car

Erit

rea

Gam

bia

Sie

rra L

eone

Libe

riaD

RC

Togo

Per

cent

age

of G

DP

Investment O&M

18 countries (many fragile) would need to spend more than 5 percent of GDP to achieve MDG in WSS

Assuming medium level of service

Key Message #2

First step towards achieving water security

is to develop priority hydro-power schemes

Achieving full water security is an unquantified challenge

Africa’s hydrological legacy is particularly challenging High rainfall variability within and across years 60 international rivers

Extreme hydrological events (droughts/floods) have major macro-economic impacts Ethiopia, Kenya, Mozambique all losing 1% GDP annually

Africa’s per capita water storage capacity is 200m3 versus at least 1,000m3 in other developing regions

Cost of increasing storage by these multiples would be prohibitive in economic terms Raising Ethiopia’s storage to RSA levels would cost US$35bn,

Major development of hydro-power over next decade particularly with regional trade

Power generation capacity (MW) Water storage

Trade stagnation

Trade Expansion

millions m3 m3 per-capita

Central Africa 3,567 4,847 30,383

0.32

Eastern Africa 4,170 10,675 65,444

0.25

Southern Africa 10,797 16,764 21,121

0.11

Western Africa 14,845 17,620 18,667

0.08 Total 33,379 49,546 135,615 0.19*

* Simple average

Key Message #3

Potential to viably double existing irrigated area but crucially sensitive to costs

About 7 million hectares of new irrigation potential – predominantly small scale

IRR threshold of 12% Agricultural area(millions hectares)

Investment(US$billion pa)

Internal Rate of Return (%)

Small scale schemes 5.4 1.8 26Large scale schemes

1.4 0.3 17Total new schemes 6.8 2.1 25Rehabilitating existing schemes

1.7 0.6 Na.

Total 8.5 2.7 25

Irrigation is mostly viable only for cash or high value food crops (horticulture) with revenues >US$2,000/ha/yr

Small scale gives much higher returns, but potential area much more sensitive to cost

0 2,000 4,000 6,000 8,000 10,0000%

50%

100%

150%

200%

250%

Large scale schemes

Small scale schemes

Cost (US$ per hectare)

Hec

tare

s as

per

cent

age

of b

ase

case

Spatial extension of large and small scale irrigation potential identified

Irrigation potential concentrated in some 15 countries, most notably Nigeria

Note: Graphs show all countries with more than 50,000 hectares of potential for large or small scale irrigation

Key Message #4

Access stagnant and inequitable, main action at lower end of ladder

Access trends stagnant at best, fastest growth takes place on lower rungs of ladder

0.0%

0.5%

1.0%

1.5%

2.0%

Pip

ed W

ater

Flus

h To

ilet

Impr

oved

latri

nes

Sta

nd p

osts

Land

line

Bor

ehol

esE

lect

ricity

Cel

l pho

nes

Trad

ition

al la

trine

s

Ann

ual i

ncre

ase

in

perc

enta

ge c

over

ed

0%5%

10%15%20%25%30%35%

1990-95 1996-2000 2001-2005

Per

cent

age

of h

ouse

hold

s

Piped water Flush toiletElectricity Landline

Second best solutions as inequitably distributed as first best solutions

Sanitation presents a number of different typologies that drive policy choice

Septic tankImprovedlatrine

Unimprovedlatrine Open

defecation

Prevalence of open defecation

Septic tank Improvedlatrine Unimproved

latrine Opendefecation

Prevalence of unimproved latrine

Septic tankImprovedlatrine Unimproved

latrine Opendefecation

Prevalence of improved latrine

Septic tankImproved latrine Unimproved latrine

Open defecation

Bimodal pattern

Key Message #5

Existing spending on MDG targets at US$7.6 billion a year more than

previously thought

Spending of US$7.6 billion annually

US$billion pa

Investment O&M

TOTALPublic Sector ODA

Non-OECD financi

ers

Private sector

Household self-

finance

Total Public Sector

Middle income 0.2 0.1 0 0 0.3 0.5 2.2 2.6

Resource rich 0.7 0.2 0.1 0 0.8 1.6 0.2 1.7

Low income - Non-Fragile 0.3 0.8 0.1 0 0.8 1.5 0.3 1.8

Low income - Fragile 0 0.1 0 0 0.3 0.3 0.1 0.5

TOTAL 1.1 1.2 0.2 0 2.1 4.6 3.1 7.6

0

1

2

3

4

5

6

SS

A

LIC

-Fra

gile

LIC

-NoF

ragi

leR

esou

rce-

Ric

hM

IC

Sou

th A

frica

Nam

ibia

Cam

eroo

nC

ote

d'Iv

oire

Cha

dN

iger

iaK

enya

Mal

awi

Uga

nda

Sen

egal

Bur

kina

Fas

oM

adag

asca

rG

hana

Tanz

ania

Leso

tho

Moz

ambi

que

Rw

anda

Nig

erZa

mbi

aB

enin

Cap

e Ve

rde

Eth

iopi

a

Per

cent

age

of G

DP

O&M Investment

16 countries are already spending more than 2 percent of GDP

LICs heavily dependent on donor capital, households play key role in sanitation

SS

A

LIC

F

LIC

NF

MIC RR

0.1648204584652120.0793135284705296

0.224738939167880.0631434058741464

0.323090592370882

0.1911237774106950.274374178392762

0.709281413067317

0.0306716369433761

0.107048400538550.0254368856432132 0.0519608751988987

0.0495989925561509

0.0360279200495254

0.3326648765388080.429103356333329

0.410186411638241

0.0767204414465348

0.23791874211367

percentage of GDP

Public ODA Non-OECD HH Self Finance

Key Message #6

There is a ‘funding gap’ of US$11.4 billion a year for WSS,

even after the US$2.9 billion ‘efficiency gap’ is

recouped

What do we mean by an efficiency gap?

Water tariffs recover less than 2/3 of the full capital cost of the service (60%)

Operating inefficiency of utilities creates a drag Non-revenue water of 34% versus best practice 10% Revenue collection of 72% versus best practice 100% Low number of connections per employees (259

connections/employee on average)

Low public sector budget execution ratios lead to unspent resources (US$0.2 bn)

There is a funding gap of $11.4 billion a year – even after recouping inefficiencies

US$billion pa LIC – Fragile

LIC - Non-

Fragile

Resource Rich MIC SSA

Needs (4.8) (7.6) (6.1) (3.6) (21.9)

Spending 0.4 1.8 1.7 2.3 7.6

Efficiency Gap 0.4 0.6 0.7 1.3 2.9

Capital Execution 0.0 0.0 0.2 0.0 0.2

Operational Inefficiencies 0.1 0.2 0.3 0.3 1.0

Cost Recovery 0.2 0.3 0.2 1.0 1.8

Financing Gap (3.9) (5.2) (3.7) (0.0) (11.4)

A number of countries have an efficiency gap in excess of 0.5 percent of GDP

SS

A

LIC

-Fra

gile

LIC

-NoF

ragi

leM

ICR

esou

rce-

Ric

h

Tan

zani

aB

enin

Nig

eria

Eth

iopi

aN

amib

iaR

wan

daB

urki

na F

aso

Ken

yaN

iger

Sou

th A

frica

Leso

tho

Cap

e V

erde

Moz

ambi

que

Cot

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Ivoi

reS

eneg

alM

adag

asca

rM

alaw

iG

hana

Zam

bia0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4Capital Execution Cost Recovery Operational Inefficiencies

Per

cent

age

of G

DP

A number of countries have a funding gap in excess of 2 percent of GDP

SS

A

LIC

, Fra

gile

LIC

,Non

-Fra

gile

MIC

Res

ourc

e R

ich

Sou

th A

frica

Cam

eroo

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hana

Nam

ibia

Cha

dN

iger

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soth

oB

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na F

aso

Moz

ambi

que

Sen

egal

Rw

anda

Uga

nda

Zam

bia

Cot

e d'

Ivoi

reM

alaw

iB

enin

Nig

erT

anza

nia

Eth

iopi

aK

enya

Mad

agas

car0

2

4

6

8

10

12

O&M Investment

Per

cent

age

of G

DP

Key Message #7

Cost recovery could be improved without major

detrimental poverty impacts

On average water tariffs cover less than two thirds of full capital costs of US$1.00/m3

SS

A

LIC

NF

LIC

FR

RM

IC

Con

goM

adag

asca

rC

ote

d'Iv

ore

Cha

dE

thip

iaN

iger

iaN

iger

Sen

egal

Moz

ambi

que

Ken

yaLe

soth

oS

outh

Afri

caR

wan

daG

hana

Sud

anB

enin

Zam

bia

Bor

kina

Fas

oN

amib

iaca

pe V

erde

59

6

42

43

128

5

6

6 2

2 2

3 2

5 36

37

38

39

43

47

50

52

53 63 74

76

115

3

09

Effective residential tariffs per m3 at 10 m3/year (US cents)

Piped water subsidies are highly regressive in their distributional incidence

0 0.2 0.4 0.6 0.8 1

Rwanda Burkina

Malawi Lilongwe Uganda Guinea Ghana

Malawi BlantyreBurundi

Cape Verde ChadNiger

Côte d'ivoire Cameroon

Nigeria FCTRDC Togo

Nigeria KadunaCongoGabon

CARSenegal

Measure of distributional incidence

REG

RESSIVE

PRO

GR

ESSIVE

Cost recovery tariffs would be affordable to MICs and LIC populations with access

Cost recovery tariffs would be affordable to MICs and LIC populations with access

LOW

ER B

OU

ND

LOWER BOUND – subsistence consumption defined as six cubic meters at $1 each or 10 cubic meters at $0.60 each

Cost recovery tariffs would be affordable to MICs and LIC populations with access

LOW

ER B

OU

ND

Cost recovery tariffs would be affordable to MICs and LIC populations with access

UPPER

BO

UN

D

LOW

ER B

OU

ND

UPPER BOUND – subsistence consumption defined as ten cubic meters at $1 each (full capital cost recovery)

Cost recovery tariffs would be affordable to MICs and LIC populations with access

UPPER

BO

UN

D

LOW

ER B

OU

ND

Key Message #8

Improving efficiency has a tangible impact in sector

performance

Detrimental impact of utility inefficiency on service expansion and quality

0.0%0.5%

1.0%1.5%

2.0%2.5%3.0%

3.5%4.0%

Employees per connection

Hidden cost

Aver

age

annu

aliz

ed

incr

ease

in a

cces

s

Above average Below average

65

70

75

80

85

90

Employees per Connection

Hidden CostsPe

rcen

tage

of s

ampl

e

pass

ing

chlo

rine

test

Below average Above average

Mixed evidence on impact of institutional reforms on improving efficiency

0

50

100

150

200D

ecen

traliz

atio

n

Priv

ate

sect

or

man

agem

ent

Unb

undl

ing

Hig

h go

vern

ance

Hig

h re

gula

tion

SO

E

corp

orat

izat

ion

Hid

den

Cos

ts a

s pe

rcen

tage

of u

tility

rev

enue

yes no

Key Message #9

Considerable cost savings could be made by adopting alternative

technologies

Adopting lower standards can reduce costs of meeting MDG by 6 percent of GDP for fragile states

0

2

4

6

8

10

12

14

16

SS

A

Res

ourc

e R

ich

MIC

LIC

-N

onfra

gile

LIC

-Fr

agile

Per

cent

age

of G

DP

of c

ount

ry g

roup

ing Zero scenario Base scenario

Key Message #10

Some countries may simply need more time to reach MDG targets

Time needed to meet MDG targets with today’s budget envelopes

Years taken to reach MDG target (counting from 2006)

MIC RR LICNF LICF

Existing spending only 10 >30 >30 >30

Existing spending plus efficiency gains <10 20 20 >30