cecilia briceño-garmendia and nataliya pushak

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

Ethiopia

South Afric

a

Nigeria

GabonDRC

Cameroon

ChadBen

in

-1.0-0.50.00.51.01.52.02.5

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

Ethiopia

CongoDRC

Camero

onBen

in

Gabon

South Afric

a-0.50

0.51

1.52

2.53

3.54

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 15.8Firms’ 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 55.9Total hidden costs as % of revenue % 27.0 167.5

Effective Power Tariff (US cents/kWh) Rep. of CongoPredominantly Hydro

GenerationOther Developing

RegionsResidential 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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0

5

10

15

20

25

30

35

US c

ents

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 79Unpaved 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 fro

m 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 Seats

11,990,16 327,988 443,633 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 9.9Price of monthly fixed line basket nav 16.7 navPrice 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 SSAAccess 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

RegionsResidential 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 84Power 438 44 482Transport 92 69 160WSS 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


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


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


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 202007 208 1 35 245 91 8 99

Average 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

Irrigation

TotalICT

Power

TransportWSS

Irrigation

Total0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Central GovOff-budget

O&M CAPEX

% o

f GDP

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)*


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 GDP

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

iatio

n in

res

ourc

es n

eede

d (%

dev

iatio

n fr

om c

urre

nt e

nvel

ope)

The funding math using 2004-2005 levels of public spending


Needs (84) (482) (160) (46) (7) (780)


(GAP) or surplus (60) (342) (71) - - (350)*


The funding math using 2008-2009 levels of public spending


Needs (84) (482) (160) (46) (7) (780)


(GAP) or surplus (28) (211) - - - (33)*


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

cecilia briceño-garmendia and nataliya pushak

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