21803 September 1994 Regional Program for the Traditional Energy Sector Discussion Paper Series THE TRADITIONAL ENERGY SECTOR AND THE ECONOMY: THE CASE OF MALI, BURKINA FASO, THE GAMBIA, NIGER AND SENEGAL September, 1994 Isaac Castillo RPTES Consultant Directed by The World Bank, Africa Region Supported by Directorate General for International Cooperation The Netherlands RPTES Coordination Team Boris Utria, Program Manager Max Wilton, Senior Adviser Mathieu-C. Koumoin, Energy Economist Koffi Ekouevi, Economist Suzanne Roddis, Operations Analyst For additional information on the RPTES program or the Discussion Paper series, please contact: RPTES Program Energy Africa Region The World Bank 1818 H Street, NW Washington, DC 20433 tel: (202) 473-4488 / 473-0719 fax: (202) 473-8249 e-mail: RPTES@worldbank.org RE VIEW OF POLICIES IN THE TRADITIONAL ENERGY SECTOR RPTES THE TRADITIONAL ENERGY SECTOR AND THE ECONOMY: THE CASE OF MALI, BURKINA FASO, THE GAMBIA, NIGER AND SENEGAL September, 1994 Isaac Castillo RPTES Consultant NOTE: THIS DOCUMENT WAS PRODUCED AS PART OF A CONSULTING ASSIGNMENT BY THE AUTHOR TO THE RPTES PROGRAM. IT IS NOT AN OFFICIAL WORLD BANK DOCUMENT. THE FINDINGS, INTERPRETATIONS AND CONCLUSIONS PRESENTED HEREIN ARE ENTIRELY THE RESPONSIBILITY OF THE AUTHOR. TABLE OF CONTENTS FOREWORD ... . . . . . . . . .. 4 I. INTRODUCTION ... . . . . . . . . . . . . . . . . . . . . 6 II. METHODOLOGICAL ASPECTS . . . . . . . . . . . . . . . . . 10 II.1 The Traditional Enerav Sector . . . . . . . . 10 II.2 Information oroblems and calculation methods . 13 III. MALI ... . . . . . . . . .... . . . . . . . . . . . 27 III.1 General Considerations . . . . . . . . . . . . 28 III.2 The Enerav Situation .31 III.3 The Economic ImDortance of Traditional Eneraies . . . . . . . . . . . . . . . . . . . 32 II.5 Lona-Term Situation . . . . . . . . . . . . . 44 III.6 Conclusions . . . . . . . . . . . . . . . . . 48 IV. BURKINA FASO ... . . . . . ..... . . . . . . . . . 52 IV.1 General Considerations . . . . . . . . . 53 IV.2 The Economic Imoortance of Traditional Eneraies ... . 56 IV.3 Economic Policv and the Traditional Enerav Sector ... . . . . . . . . . . . . . . . . . 58 IV.4 Lona-term Situation . . . . . . . . . . . . . 62 IV.5 Conclusions . . . . . . . . . . . . . . . . . 66 V. THE GAMBIA ... . . . . . . . . . . . . . . . . . . . . . 69 V.1 General Considerations . . . . . . . . . . . . 70 V.2 The Economic ImoDrtance of Traditional Enerav Sources ... . . . . .... . . . . . . . . 73 V.3 Traditional Eneraies and Macroeconomic Pclicv . . . .... ............. ................... .. 75 V.4 Long-term Situation . . . . . . . . . . . . . 79 V.5 Conclusions . . . . . . . . . . . . . . . . . 82 VI. NIGER ... . . . . ....... . . . . 85 VI.1 General Considerations . . . . . . . . . . . . 86 VI.2 The Economic Imwortance of Wood Fuels . . . . 89 VI.3 Macroeconomic Policy and Traditional Eneraies ... . . . . . . . ..... . . . . 95 VI.4 Lona-Term Situation . . . . . . . . . . . . . 98 VI.5 Conclusions . . . . . . . . . . . . . . . . . 103 VII. SENEGAL ........................ . 107 VII.1 General Considerations . . . . . . . . 108 VII.2 Economic Imuortance of Traditional Enerqv Sources . 110 VII.3 Economic Value of Wood Fuels . . 113 VII.4 Traditional Enerav Sources and Macroeconomic 2 PolicY . . . . . . . . . . . . . . . . . . . . 116 V1I.5 Institutional Reform . . . . . . . . . . . . . 120 VII.6 The Lonq-term Situation . . . . . . . . . . . 122 VII.7 Conclusions . . . . . . . . . . . . . . . . . 125 VIII. REGIONAL ANALYSIS . . . . . . . . . . . . 129 VIII.1 General Economic Characteristics . . . . . . . 129 VIII.2 Recent Evolution of the Enercrv Transition . . 131 VIII.3 The effects of FCFA devaluation . . . . . . . 141 GENERAL CONCLUTIONS . . . . . . . . . . . . . . . . . . . . . 145 REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . 161 3 FOREWORD The Energy Unit of the Africa Technical Department, which is part of the Division for Private Sector Development and Economics (AFTPS), is involved in conducting a study to analyze and revise traditional energy sector policies that have been implemented in recent years in the sub-Saharan region of Africa, called "Review of Policies, Strategies and Programs in the Traditional Energy Sector (RPTES)", in order to adapt them to new international economic conditions. This wide-ranging study has the following general objectives: i. A retrospective assessment of the objectives, scope, and approaches of the policies, strategies, and programs implemented to date in the traditional energy sector by public and/or private entities, as well as technical assistance and cooperation agencies and institutions. ii. To identify the main traditional energy sector inter-relations with the rest of the economy in selected countries and to develop a conceptual framework and a sectoral strategy in a broader context. iii. To prepare a set of recommendations and new policy orientations for the traditional energy sector and to identify the priorities of national institutions and other economic agents, complemented by appropriate external assistance actions. iv. To identify projects and/or programs to achieve results in the shortest time possible. v. To disseminate the results in the donor community. Within this context, the paper presented herein is aimed at analyzing the macroeconomic and social dimension of the traditional energy sector in a sample of West African countries: Senegal, The Gambia, Mali, Burkina Faso, and Niger. It will specifically focus on the following topics: i. The traditional energy sector's linkage with the rest of the economy will be identified and reviewed. ii. On the basis of demographic forecasts and projections for the stock of natural resources, specifically forest resources, over the next 30 years in the five countries of the sample, the most likely impacts of the traditional energy sector on the main macroeconomic indicators (GDP, employment, balance of payments, etc.) will be identified and analyzed. iii. The main fiscal and monetary tools that can be effectively 4 used to manage the traditional energy sector in the above- mentioned countries will be identified and analyzed (energy prices, legal and institutional aspects, investments, etc.). iv. The major macroeconomic issues that are common to the countries of the sample and linked to the traditional energy sector will be identified and analyzed. V. The macroeconomic issues tied to traditional energy sources will be identified and analyzed by country. This study is being carried out just when the African Financial Community franc (FCFA)1 was officially devalued by 50% on January 11, 1994 with respect to the French franc, after having maintained its parity with the French franc since the independence of these countries at the beginning of the seventies. The devaluation of the CFA franc, which was over-valued, will exert an immediate impact on imports, especially crude oil and oil products. 1 This financial partnership is comprised of Benin, Burkina Faso, Cameroon, Central Africa, the Comoro Islands, Congo, C8te d'Ivoire, Gabon, Equatorial Guinea, Mali, Niger, Senegal, Chad, and Togo. 5 I. INTRODUCTION The quantification of fuelwood or charcoal consumption activities and their importance with respect to macroeconomic aggregates requires something more than a mere percentage of GDP or employment generated over the labor force. Its real dimension involves the complexity and many variables of the energy transition of developing countries toward the use of more modern energy sources within the framework of a broad-based modernization of the economy and the insertion of these countries into an international context. The common economic structure of the countries reviewed displays an energy balance dominated by the consumption of biomass as a principal source of energy and the underconsumption of modern energy sources. The total per capita consumption for countries involved in the RPTES is below the average for Africa.' The share of biomass in the total gross domestic of energy supply for the countries being reviewed fluctuates between 50% and 92%. The region has no oil (except for Senegal, which produces a marginal amount of petroleum) and identified coal resources are small and limited only to Niger3 (IEPF, 1991). In addition, the potential for developing hydropower is quite limited owing to low rainfall and unfavorable topographical conditions. According to this energy-economic outline, the use of biomass will continue to perform a decisive role in the energy future of these countries. The demographic pressure on natural resources, especially forest ecosystems, are leading these countries to an environmentally unsustainable situation over the long term (Falloux and Mukendi, 1988; Falloux and Talbolt, 1993; Anderson, 1987). The rapid growth of the urban population and the creation of an imperfect market for traditional fuels involving a very high sales volume, or turnover, with fuelwood viewed as a free good, aggravate the situation further. Fuelwood and charcoal are the most widely used energy sources in the cities, and their prices at the end-user level are the lowest (Barnes, 1990). Improper natural resources management, especially forest, and unsustainable agriculture practices are causing extensive environmental damage to soil and water resources. The exploitation of fuelwood resources has become a mining-extractive activity. 2 Per capita total energy consumption in Senegal, country with the highest figure between the 5 being analyse, is only 60% of the average for Africa as a whole. The per capita consumption of commercial energy (electricity and oil products) for the RPTS countries fluctuates between 10% and 60% of the African average. 3 In 1987 Niger's coal reserves were estimated to about 240 million tons. This represents less than 0.4% of Africa's total coal reserves. 6 Forest revenues are generally very low compared to what they could be, due to low forest fees and low collection rates. This puts a low price on the forest and encourage waste. The tax approach for fuels and the weakness of the institutions in charge of collecting stumpage fees prevent the self-sustainable development of public or private reforestation programs. Most reforestation programs are experimental and financially supported by international cooperation. It is doubtful if these programs can survive without international funding. Although there are not to many examples in developing countries, proper pricing policy supported by concession policies can finance forest management and encourage sustainable forestry (Grut, Gray and Egli, 1991). One key element for placing a fair value on forest resources is reform of the current land-holding scheme and ownership of fuelwood resources. Rapid demographic growth has provoked a crisis in the traditional ownership system, based on the free access to land and fuelwood resources, which functioned well when demographic density was low (Cleaver and Schreiber, 1992). In addition, with the State placing forest ecosystems under public ownership, the situation has become even more complicated, without however improving the general outlook for forest exploitation. A reform of the current land- holding scheme is indispensable for properly valuing forest resources. The governments seem to have implicitly adopted an energy-forest policy that in fact fosters the unsustainabLe exploitation of forest resources by granting an environmental subsidy for wood fuels, in the amount of several billion CFA francs per year, with severe environmental effects that may be irreversible over the medium term. Nevertheless, even in those countries where fuelwood consumption as a major primary energy source is substantial, the most important cause of deforestation is the agricultural and livestock overexploitation of fragile forest ecosystems' (U.S. Congress , 1992; McGranahan and Kaijser, 1993; Elaain & Cesar, 1993; DGIS, 1991; SEED, 1992) such as the Sahel. However, deforestation is a very site-especific problem and this last statement could hide severe scarcities of fuelwood in some areas ' The African Energv Proaramme: Forestry and Biomass Sector Vol. 1 says in page iii of the Executive Summary *the deforestation process itself is not linked to the biomass supply for energy or otherwise. It is more associated with the need for expansion of low input/output agriculture. Annual 108ses due to degradation process more identified with biomass supply for energy, logging and overgrazing does not exceed 0.01%0. This situation is similar in Latin America (Castillo, 1990) and in Asia (ADB, 1991). Nevertheless others authors, like Shaik and Karch (1985), mention that in the Sahel fuelwood consqmption is probably the single most important cause of deforestation. 7 within the countries (Asian Development Bank, 1991). This is particularly true around big urban centers (Monasinghe & Meier, 1993). This situation, however, is rapidly changing: as deforestation is extended and fuelwood consumption increases in the cities, the conditions for -a steady rise in the price of wood fuels are emerging. Deforestation around the cities requires the transport of fuelwood or charcoal over distances of up to 500 kilometers. The price hike will transform illegal tree-cutting and wood fuel transport to the cities into an even more highly lucrative activity unless surveillance and fiscal monitoring are augmented and forest extension services are strengthened. The substitution of wood fuels for LPG or kerosene is obstructed by the high end-user price of these fuels for the majority of the population. The poverty prevailing in the countries being analyzed leads to the conclusion that the adoption of LPG or kerosene as a substitute for fuelwood will be a slow process (Cleaver and Schreiber, 1992). Because of its price and the devices needed for its use, LPG is a fuel exclusively accessible to high-income urban population groups. As a result, the subsidies that have been granted for keeping LPG prices low and promoting its penetration have done nothing but benefit the wealthiest urban sectors, thus undermining income distribution and enhancing inequalities between countryside and city. The impacts of these subsidized pricing policies on deforestation are imperceptible and do not justify their application for environmental purposes. All this happened in a very difficult macroeconomic environment. Between 1986 and 1993 the percapita imcome in french speaking West Africa fell by 20%. It soon became clear that the main cause for this situation was the hyper-appreciation of FCFA compared with neighboring countries currencies, because of his fix exchange rate vis a vis the Frech Franc, and in the deterioration of the terms of trade (40 to 50% detween 1986 and 1993). After the failure of internal adjustment policies it was evident that the only way to re-establish economic development perspectives was the FCFA devaluation (Jeune Afrique, 1994). On January 11, 1994, the economies of the African Financial Community decided to devaluate the CFA franc by 50% with respect to its traditional reference value of 50 CFA francs per French francs. Indeed, the CFA franc was depreciated by about 100% owing to a reevaluation of its reference currency, which was equivalent to doubling the value of all imported goods. The devaluation of the CFA franc occurs at a time when economies based on tropical products, which are the main source of export earnings for these countries, are experiencing an unprecedented crisis. In addition, 5 This exchange rate has been constant since 1948. 8 the conclusion of negotiations and signature of the General Agreement on Tariffs and Trade (GATT) will mean the end of guaranteed European Union markets for Africa over the short run (Mbaye, 1994). The short term implications for the consumption of oil products is obvious, especially for those with a high price elasticity, owing to t' availability of substitution fuels such as fuelwood and charL l. The hike in LPG prices will reduce its penetration in urban markets and may even temporarily revert this trend, thus increasing the use of wood fuels in the cities. This report consists of three parts. The first tackles methodolog 1, conceptual aspects and data problems. The second analyzes e .a one of the five sample countries, emphasizing an economic value estimate for wood fuels and their share of GDP. The third part makes a comparative analysis of the sample countries and proposes a series of common economic policy recommendations. 9 II. METHODOLOGICAL ASPECTS Assessment of the macroeconomic and social importance of traditional energy sources necessarily implies tackling and defining a series of problems involved mainly in informal energy activities', which are crucially important for developing countries. The share of the informal economy in terms of income generation, employment, and consumption, food security, and environmental deterioration is so large that to ignore it would invalidate even the simplest macroeconomic analysis. The traditional sector is generally related to the subsistence economy and does not use reproducible capital or wage-earning work. It is characterized by self-employment and by low productivity; institutionally it is supported by the nuclear family or community solidarity for production, generally aimed at self-consumption; and transactions are usually made by means of barter arrangements. In the Sahel countries, the informal economy is not limited to agricultural zones where subsistence agriculture occupies between 75% and 90% of the total work force (Jazary, Alamgir and Panuccio, 1992) it also constitutes the main source of employment in the cities. The basic premise that should be used to analyze traditional energy sources and determine their outlook in developing countries is their inexorable substitution for commercial and modern energy sources. The problem is therefore how to better manage and administer this transition in all its multidimensional and multisectoral complexity. This involves planning a series of coherent actions that would lead to the substitution of traditional fuels. This transition depends first of all on the population's income level and degree of poverty. Many of the studies conducted to date have insisted only on the problem's technical dimension. II.1 The Traditional Energy Sector This study defines the traditional energy sector as all those activities involving the cutting, transport, transformation, or preparation of biomass, especially forest resources, for their use ' Fuelwood energy consumption in rural areas is mainly an informal activity (in this areas fuelwood is a free good and self- gathered). According to RPTES estimates, rural fuelwood consumptions represents: 48% in Senegal, 86% in Niger, 89% in Burkina Faso, 90% in Mali and 61% in The Gambia of total fuelwood consumption including charcoal production. Moreover fuelwood is also self gathered in an important number of small tows and have to be considered as an informal activity. Considering the 5 RPTES countries as a all, it could de said that at least 75% of the total fuelwood consumption does not go into . market. 10 as an energy source.7 Concretely, the sources referred to are fuelwood, charcoal and agricultural-forestry wastes either marketed or gathered free of charge by the final consumer. From the standpoint of final consumption, it would be worth while to differentiate between the following: Rural households: Under this item, all consumption and production of goods and services generated in the household's physical space to ensure the energy supply of homes and meet the basic needs of cooking, heating, and lighting or productive activities. In the case of rural households, this includes: i) the cutting and preparation of fuelwood or agricultural-forestry wastes for own consumption; ii) transportation; and iii) final consumption. The most important characteristic of this sector is the almost total absence of the market value of the good. The energy supply process is handled directly by the final consumer, generally women and children who pick up or cut the wood from forest formations as a freely accessible good, as part of their daily chores. The cost of fuelwood can be measured using the opportunity cost of the time used for gathering.' In view of the lack of markets, its contribution to the countries' economy, at the sectoral and global levels, is generally ignored by official statistics. Owing to the diffuse character of the rural population and the greater abundance of forest resources, fuelwood consumption in rural zones is done on a sustainable basis. The annual production of natural forests widely surpasses local demand, and supply is met generally by dead trees, branches, or forest wastes. Because of this, the impact of rural fuelwood consumption on deforestation is 7 Animal energy, which is frequently used in the agricultural activities of the semi-arid zones of sub-Saharan Africa, is not included here (see McIntire, Bouzart, and Pingali, "Crop-Livestock Interaction in Sub-Saharan Africa," The World Bank, 1992). In India, where most studies on animate energy in agricultural work have been carried out, it has been established that this energy can account for 90% of direct energy consumption in traditional agriculture. a Gathering of firewood is not the activity that requires the most time in the daily chores of women. A study conducted in three villages of the semi-arid zone of the northern part of Burkina revealed that food preparation took up to 22% of the women's daily time, water supply and fetching required 7%, and firewood gathering only 1%. This pattern is identical In other countries (see Irene Tinker, 'The Rural Energy Crisis: Women's Time," in the Energy Journal, Vol. 8, 1987, pages 125-146). McGuire and Popkin in Helping Women ImDrove Nutrition in the Developing World (World Bank Technical Paper No.114, pp. 68) present some aggregate data (fuelwood + water hauling) for Africa. 11 minimal. Urban households: The countryside-to-city migration enhances the rapid urbanization of RPTES countries with population growth rates that broadly surpass total demographic growth. Nevertheless, the urban economy offers very little possibilities for rural migrants, thus displacing poverty, which is mainly a rural phenomenon, toward the cities. The urban poor are immersed in a market economy but, because of the lack of job opportunities in the small modern sector of the urban economy, they are generally forced to carry out their 'productive activities at the margin of economic legality'. Thus, a large informal sector is created in the main cities of the countries being analyzed where it has become the major source of urban employment. Contrary to what is observed in the rural zones, the energy system in the cities is characterized by a well-organized market, even for fuelwood and charcoal supply. In order to meet its energy needs, the poor and middle-income urban population (in some countries even the high-income groups) use a mixture of fuels (mainly LPG, fuelwood, and charcoal) depending on their income availability and type of food consumed. Usually LPG is used; but fuelwood is the cheapest fuel and therefore the most popular among the urban poor. Traditional Industry: The production of lime, bricks, ceramic- ware, beer brewing, fish smoking, bakeries and other traditional products accounts for a large source of non-agricultural income for the rural population and an important complement to agricultural work. Under this item, charcoal production can also be included. Some of these industries are also located in urban zones. The so-called traditional or cottage industries are characterized by seasonal work, that is, their activities are carried out preferably in the dry season, and their production unit is usually the family or the community. Traditional industries are partially integrated into the urban market, and their pricing system often operates outside legal regulations (tax payments, ownership registration). The technology used is traditional, generally involving low productivity. From the environmental standpoint, the traditional industries exert a significant impact on the forests. Because of their seasonal character, traditional industries concentrate their fuelwood consumption during few months of the years, which, in contrast to rural household consumption, does produce deforestation. ' This refers to the fact that most informal activities do not pay taxes or social benefits, wages are not well establish and it is not rare -to find out that most of marchandises sold by street vendors and informal retailers come from smuggling or illegal activities. 12 According to the RPTES reports tradit: nal industry do no seem to be an important fuelwood consumer. In tie three _ountries for whicn data is available in the RPTES countries reports, traditional industries represent less than 2% of total fuelwood consumption, a very low figure compared with other developing regions (5 to 10% in Latin America low-income countries). This could be a data problem and traditional industry consumption are maybe being considered as part of households contumptions by the statistics. Because of the lack of enoug' lata and considering that they are not reported as an important p,. -t of the fuelwood consumption, traditianal industry is not treated in this report. II.2 Information problems and calculation methods Because of i- inherently informal nature, assessment of thf macroeconomic ?ortance of traditional energies is confronted with. a series of aethodological and technical problems that are difficult to resolve, hamper generalizations, and inevitably involve estimates that are subject to wiJe margins of error. Global simplifications or hypotheses, indispensable for conducting any macroeconomic calculation of traditional energies, may lead to mistaken conclusions and conceal very different situations between the different regions of a country. Nevertheless, existing information permits fully identifying some clear energy transition trends currently in the countries of the Sahel. National Accounting Systems The national accounting system adopted by the majority of the countries includes only those goods and services that have some market value (either regulated or free). Economists and statisticians recognize the inadequacy -f current national accounting systems, since they lead X_ distortions between production and consumption in economies with very large agricultural sectors, in which a large part of the production is for self-consumption and does not enter the market. In regions or countries such as the five participating in the RPTES, where subsistence agriculture plays a significant role in the economy, official GDP values generally turn out to be undervalued. In addition, the rapid growth of cities and the few possibilities for formal employment end up by converting rural migrants into informal urban workers. The informal sector therefore accounts for the largest source of urban employment in the countries of the Sahel (The World Bank, 1992e). Those in charge of preparing national statistics are aware of these and other fIaws in the current national accounting system. The UF- OECD System of National Accounts (SNA) explicitly establishes that the following are part of national income: i) the production of primary goods for self-consumption from agricultural, fishing, mining, forest, etc. activities, among which traditional fuels; ii) 13 processing of primary products for transformation into final- consumption goods, such as alcohol distillation, beer brewing, cheese, clothing, furniture, and others; and iii) the production of non-primary goods and/or services for self-consumption or for sale (Thomas, 1992). It is deduced that the SNA criteria clearly indicate that the gathering of fuelwood for self-consumption or charcoal production should appear in national accounts. There are no methodological reasons to not include the market value of traditional energy products in official statistics, and their inclusion or exclusion from the National Accounts depends solely on how easy it is to obtain a reasonable estimate of prices and consumption. Indeed, some of the countries being studied provide statistics on wood fuels and their contribution to GDP, but generally it is only the sales volume or turnover, from which intermediate consumption would have to be discounted to reach an estimate of the value added. The omission of household work is a particularly important element for less developed countries. In contrast to what occurs in industrialized countries, where the investments needed to ensure water and gas supply appear in the National Accounts, in most developing countries, fetching water and gathering fuelwood are part of the normal daily unpaid chores of housewives or children. In studies conducted in the United States, it is estimated that the unpaid work of housewives fluctuates between 23% and 30% of GNP, and studies carried out in developing countries show similar values 10 Calculation Methods The different energy content of fuelwood and charcoal used by the countries or their density (cubic meters or metric steres per ton), which depend not only on the wood species that is most widely used but also the wood's moisture content, may produce differences in consumption of more or less 20%, other conditions being equal." '° In his book Informal Economic Activity, J.J. Thomas 1992 reports data from several studies conducted in developing countries about household work as a percentage of national income: Bostwana(1974-75) 23% of GDP reported by Dalh(1979); Chile more than 30% of GDP in 1981 by Pardo(1983); India 49% of NDP 1970-71 reported by Mukherjee(1983); Pakistan 35% of GDP in 1975-76 by Alauddin(1980) and 37-41% of GDP in Venezuela(1982) by Valecillos et al.(1983). 11 For example, the fuewood conversion coefficient is 0.405 Tons of Oil Equivalent(TOE) per metric ton in Mali's ESMAP report (ESMAP, 1992) whereas 0.343 TOE per metric ton is used in Mali's RPTES report. The metric stere, the most commonly used in trading firewood, may also vary between 250 kg and 350 kg, depending on the 14 Higher levels if uncertainty are involved in assessing the stock and annual prc_uction of forest resources. These problems become even more complex when monetary values, costs, and market prices are applied. The wood fuel market is only a proportion, albeit generally small, of total consumption, and real prices are highly variable within each country and throughout the year. The use of average prices probably do not provide a good estimate of market prices. Translating physical units into monetary values is even more complex. Economic Cost of Fuelwood. This concept has a major implication on policy options in energy planning and therefore needs particular attention. Several methods for estimating economic cost of fuelwood are possible. The first possible method applies hypothetical valuation techniques to estimate maximum willingness to pay (WTP) for resource supply or minimum willingness-to-accept compensation for resource deprivation. People tend to express low WTP values because in rural areas fuelwood has been a free good historically. The second method bases the economic estimate on revelead Preferences. It assumes that the value people place on fuelwood must at least be equal their costs in collecting it as a free goof including travel time to collection sites and relat transportation costs. Thus travel cost is valued at its opporturity cost in terms of foregone labor. If there is extensive labor surplus due to underemployment or unemployment, as in most rural areas, labor opportunity cost may be very low. Other factor to consider in this approach is the importance of child participation in fuelwood gathering(Hufschmidt et al., 1983). The third approach, the alternatlve cost method considers the cost of the next cheapest and realistic energy substitute of fuelwood. In the case of the RPTES countries LPG and Kerosene. Considering their border prices or CIF prices as economic costs of fuel imports. Other approach could be the restitution cost method, that considers the cost of restoring or replanting the forest being cleared specifically for energy use. This will imply that only non-sustainable or destructive explotation of forest for energy production, mainly urban-fuelwood and charcoal production is considered. It is supposed that rural fuelwood consumption does not cuase deforestation. In theory each of this methods would give the same result for the value of fuelwood if the econcmy and its prices reflect economic scarcity and if consumers perceived the strue" value of fuelwood (and hence accuratly value it in a hypothetical valuation exercise). In practice the results will vary and wiil present a country. Burkina's ESMAP, 1991 report uses 250 Kg/stere whereas other countries use 300 Kg/stere (RPTES, 1994d). 15 range of values. WTP approach is hampered by unfamiliarity of consumers with valuation of nominally "free" goods. The revealed preference method is heavily dependent on good labor estimates in a extensive labor surplus environment. In this report the alternative cost and restitution methods are used. The first one because gives an estimate of substitution of fuelwood by modern fuels and the second because represents a better estimate of a natural resource value, the forest, including its other environmental benefits (soil conservation, poles, fruits, increasing crop productivity, etc.) not considered in others methods. This environmental benefits are not taken into account in this report, so afforestation costs estimates presented here should be considered as maximum figures. Data Sources Socio-economic data The main information source for economic and financial data from 1980-1990 was The African Development Indicators, edited jointly by UNDP and The World Bank in 1992 and African Economic and Financial Indicators published by The World Bank in 1990. This documents are the most realiable sources of information about macroeconomic aggregates (GDP, Debt, Aid flows, Government finance, External sector, etc.) expressed in US$; but some social indicators (illiteracy, poverty, etc.) as well as demographic data is also included. The former of this documents presents energy consumption data, in tons of oil equivalent (TOE), including fuelwood. Most recent data (1990-1993) comes from different sources, but mainly from the countries National Accounts and statistical bulletins (Annuaire Statistioue de Burkina Faso 1991-1992. Annuaire Statisticue du NiQer 1992-1993. National Accounts of The Gambia and Tableau de Bord Economioue et Financier du Mali). Most of this information is still considered as preliminary figures. It has to be mentioned that the different degree and form of disagregation adopted by each country difficulted the analysis. Most recent data is also expressed in FCFA. Social data, specially population below poverty line, refers to some specific studies conducted in recent years in some countries: L'EnQuete sur les Priorites: Resultats Preliminaires (Ministere de L'Ecomonie des Finances et du Plan du Senegal, 1993), 1992 Prioritv Survey Report: The Gambia (Ministry of Finance and Economic Affairs, The Gambia, 1993), The Gambia: An Assessment on Poverty (The World Bank Report No. 11941-GM, 1993) and Mali: Assessment on Livina Conditions (The World Bank Report No. 11842-MLI, 1993). It was also consulted The Social Indicators of DeveloDment 1993 published by The World Bank. Demographic data of 1970-1906 period is based on The Human 16 Development Report edited by UNDP and in The World Development Report 1993 published by The World Bank. In both documents social, economic and energy data are also presented. Population estimates after 1990, refer to data found in the National Accounts published by the different countries and mentioned above. Inconsistencies in demographic data between UNDP and The World Bank are negligable for Senegal, Burkina Faso, Niger and The Gambia but they are important in the case of Mali12. Demographic data in countries National Accounts are closer to estimates made by The World Bank than the ones made by UNDP. Discrepancies seems to be related to emmigration fluxes (The World Bank do consider emmigration). Data about urbanization rates for 1990 are almost the same for both agencies. Demographic proyections have been taken from The West Africa Perspective Study (WALTPS)/OECD Club de Sahel-African Development Bank. Energy Data The main information sources for energy consumption, specially traditional fuels, are the 5 RPTES country reports that have been Presented at the begining of 1994. Nevertheless data concerning LPG (consumption, prices, etc.) comes from the studies made by the Societ6 Strategie Energie, Environment et Development (SEED) within the Programme Regionale de Gaz (PRG). Data from 1970-1989 period refers to African Development Indicators published by The World Bank and mentioned above. Energy data from ESMA!P's Household Eneray Strateaies of Mali and Burkina and L'Observateur des Combustibles Domestiaues , published by the Ministere de L'Industrie, du Commerce et de L'Artisanat and the Ministere du Developpment Rural et de L'Hydraulique of Senegal were also consulted. Conversion coefficients more frecuently used are: MJ/Ka - Puelwood (for dry regions with 15% moisture content)= 16.6 - Charcoal (5% moisture content) = 29 - Liquified Petroleum Gas (LPG) = 45.7 - Kerosene a 43.1 Average carbonization coefficient is assumed to be 5.5 of fuelwood 12 UNDP estimates Mali's total population in 1990 are 9.3 millions inhabitants. The World Bank shows 8.5 millions for the same year. 17 Average carbonization coefficient is assumed to be 5.5 of fuelwood for 1 Kg of charcoal (but it can vary from 5 to 7 Kg of fuelwood per Kg of charcoal) which corresponds to a 32% energy efficiency. This figures are considered to be representative of the traditional charcoal kilns commonly used in the region. To simplify substitution coefficient between LPG and fuelwood has been taken from the senegales experience: 1 ton of LPG for 9 tons of fuelwood not matters if- it is used directly or as charcoal'3. This coefficients are also used in the SEED reports about The Programme Regional de Gaz. This simplification will lead to an over-estimate of LPG substituting charcoal (see comment No. 13) Stoves efficiencies values come from the Manuel d'Eneraie Domesticue by Leach and Gowen (document technique de la Banque Mondiale No. 76F). It is assumed that average energy efficiency are: 10% for fuelwood stoves, 20% for charcoal stoves and 45% for LPG stoves. It is well know that fuelwood stoves efficiencies can vary from 5 to 25% and for charcoal it can go up to 25%. Traditional fuels prices have been taken from the RPTES reports although ESMAP 1991, 1992 studies were also used, as well as information gathered during the consultant field work. There exist an important number of studies and reports about the forestry situation in some specific regions, with information of fuelwood and charcoal prices specially in Mali, Burkina Faso and Niger (Thera, 1993; Mehr, 1990; Mamoudou, 1991; Hamadou, 1992; Aboubakar, 1993; Rouy, 1993; Sankara, 1989; etc.). National Accounts of Mali and The Gambia contain price index (monthly and yearly averages) for different goods, including domestic fuels. Cost of standing wood, reforestation and natural forest management costs are those found in studies made, in the last ten years, by several international agencies like FAO, GTZ, USAID, CCE, etc. The numbers can vary widely, depending on the agro-ecological system, type of management, kind of especies, etc.(it is possible to find reforestation costs in the range of 12,000 to 400,000 FCFA/Hectare). This data are usually the result of experimental or demostrative projects, so the numbers intend to be indicative figures. When reforestation cost data was not available Strategie Energie, Environment, Development(SEED) estimates where used (SEED, 1993). According to SEED estimates the average economic cost of fuelwood is 25 FCFA/Kg and 100 FCFA/Kg for charcoal. According to the same source the economic cost of standing wood can vary between 1 to 25 FCFA/Kg (depending on type of management, forest productivity, 13 According to the first law of thermodynamics considering carbonization and stoves efficiencies mentioned above, the theoretical ratio is 1 Kg of LPG each 11.25 Kg of fuelwood when is used directly, and 18.75 Kg if the fuelwood is used as charcoal. 18 etc.). Finall the estimate Added Value of traditional fuels is based in the se,,egalese experience (Lanser, 1 p3). Deforestation rates, sustainable yield and growing stock Data Data on this subjects are highly controversial. Recent estimates made by Millington and others, 1994 (Millington, Critchly, Douglas & Ryan, 1994) made using remote sensing techniques, analizing satellite pictures from 1986 to 1991, are very different from previous estimates (Ninni's report, World Resources Institute and the World Bank). Forest and Woodland 103Hectares …----------------------------------------------- The World Resources Millington et al. Institute (1980) (1986) …----------------------------------------------- Mali 7,250 22,701 Burkina Faso 4,735 15,993 The Gambia 215 1,275 N-ger 2,550 637 -negal 11,045 5,991 Data used for estimating growing stock and sustainable yield for each land cover class was derived from a number of seconda * sources. Consequently, quality of the data base is extreme..,, variable. Generally the data does not take into account the extensive non forest trees and shrubs that occur in close association with villages and farmland in many ar'as. Estimates are generally concerned with the volume of wood ther than its mass, and this is particulary true for estimates in francophone Africc Growing stock and sustainable yield estimates do not mentio.. moisture content. Estimates could vary a great deal, for example: Total Growing Stock 103tons Ninnin Millington et al. 1990(Ogame 1-) 1986 (air-dry) …------------------------------------------ Mali 273,026 739,753 Burkina Faso 138,649 448,820 The Gambia 8,545 54,358 Niger 45,711 131,433 Senegal 144,655 189,516 19 Environmental Cost The scope of the present paper does not include environmental costs stemming from the use of traditional fuels. The inclusion of the direct and indirect costs of deforestation, such as the loss of the habitats of flora and fauna species of scientific or commercial interest, soil erosion due to the loss of plant cover, or the emission of carbon dioxide (C02) in project assessment or at the macroeconomic level in the National Accounts, is a highly topical issue that is also important for sustainable development as a concept. The assessment of environmental costs in developing countries is at a very incipient stage; nevertheless, there are several studies that indicate that they may involve a significant burden for the economy (Repetto, 1989). In Mali, for example, it is estimated that the erosion of productive soils accounts for 0.2% of GDP per year. The loss of biomass as a product of human activity and climatic factors may be costing the economy of Burkina Faso as much as 9% of its GDP (Pearce, 1993). It is usual to concentrate on the benefits of tree products in the appraisal of afforestation projects. In the arid zones such benefits, though not trivial, would be fairly small and promise modest rates of return to investment of around 5%. Allowing for the improvement of soil fertility and the increased availability of fodder, however, raises the net present value of benefits fourfold and the economic rate of return to over 15% (Anderson, 1989). Moreover, these calculations make highly conservative assumptions about the ecological benefits. Main environmental benefits from afforestation projects are: - Benefits of stemming future declines in soil fertility - Benefits of improving current levels of soil fertility - Benefits of increasing the availability of fodder. Numerous field experiments in more tha 20 countries during the past 30 years have shown that properly oriented and designed shelterbelts have significant effects on crop yield (Brandle and Hintz, 1988). The range of effects varies widely depending on local climate, terrain, soils, and crop conditions, but generally in the range of 10 to 30%, with measurements of 50% or more sometimes being reported. The main benefits arise from reductions in surface wind velocities, reductions in crop damAge, and especially important factor, increased crop productivity, reduced surface evaporation and increased moisture in the soil. Economic Outlook Since long-term macroeconomic forecasts for the countries participating in the RPTES are lacking, the medium-term economic 20 growth assumptions for sub-Saharan Africa presented in the World Bank document Global Economic Prospects and the Develovincj Countries published in the first quarter of 1994 (The World Bank, 1994b)were assumed to be valid. Although the present study provides estimates for some macroeconomic variables only up to the year 2003 (see table 1), they are enough to predict that the ener--y transition process will be slow, as a result of the slow economic growth that is being envisaged for the first years of the 21st century in this area of the world. If armed conflicts and social disruptions decline, economic reform efforts continue, and the prices of primary export products stabilize, the economic performance of the sub-Saharan countries over the next ten years may be classified as modest. Nevertheless, it is highly unlikely that per capita income and consumption will increase significantly. As a result, it is very probable that the number of poor people will grow in both absolute terms and as a percentage of the population. In addition, it is expected that the scourge of AIDS will spread, affecting above all the productive-age populatior Even if the prices of raw materials manage to stabilize, the region's terms of trade improve, and progress is made in reducing the external debt, the shortage of capital and the lack of infrastructure and trained human resources exclude any prospects of a substantial rise in the population's quality of living. Although it is hoped that GDP will increase, it is not expected that per capita GDP and private consumption, which is even more important, will record significant growth. The scenario, as indicated above, assumes that the countries will continue implementing the economic adjustment and stabilization programs launched in the eighties. The recent decision to devaluate the CFA franc confirms this hypothesis. This now provides the low-income countries that export raw materials with the opportunity to increase their export volumes. Nevertheless, in the short term, the exports of these countries will be affected by the signature and entry into force of the GATT, which will be substituting the preferential treatment that the region enjoyed under the Lome Convention. Moreover, the spreading of the AIDS epidemic in the region is a threat to economic growth because of its effects on productivity and savings. One simulation (The World Bank, 1993d) suggest that, if the trend observed over the last few years persists, the AIL3 epidemic could reduce GDP growth by 0.6% per year in the most severely affected countries. Another difficulty that RPTES countries will have to face in the short term is the possibility that the flow of official development assistance will not be as generous as in the past, both in terms of amount and concessional character. Although this situation was 21 taken into account in the forecasts, there is a significant risk that the net flow of capital toward the region will decline, with obvious implications for investment and economic growth. Table 1 Sub-Saharan Africa: Economic Forecast to 2004 (annual percentage) Growth Rates 1983-1993 1994-2003 1. GDP 2.2 3.9 2. Per capita consumption -1.8 0.9 3. Per capita GDP -0.8 0.9 4. Exports 4.0 4.9 Note: Excludes the Republic of South Africa Source: World Bank, 1994 Base Scenario. The international price of oil is a key variable in determining the speed whereby traditional fuels will be replaced by other energy products. The World Bank studY establishes that real oil prices will rise by 2% per year until 2003, which is equivalent to saying that, by 2003, oil will cost US$27 in terms of 1993 dollars. A moderate rise in oil prices based on medium-term market evolution is expected; this stability will be ensured by the surplus production of OPEC countries and a more efficient use of energy. Nevertheless, although international oil market conditions will provide the basis for price stability until the turn of the century, there are enough elements to forecast that, by the early 21st century, energy prices will start growing." Support for this hypothesis is based on the following arguments. The erosion of oil prices, as of 1981, does not provide incentives for using energy efficiently nor does it foster the diversification of energy sources. Most experts agree that it is highly likely that current price trends will revert around the year 2000 mainly owing to the fact that, by that year, OPEC's production capacity will be saturated. Most oil scenarios up to the year 2000 assume 14 Regarding this, the present report disagrees with the assertion of the World Bank document Global Economic Prospects and the Developinc Countries that beyond the year 2000 oil prices will decline owing to the efficient use of energy and technological breakthroughs in oil extraction techniques. 22 a growth in world oil demand of between 1% and 2% per year and a stabilization of non-OPEC supply (including exports from the former Soviet Union), a situation that will inevitably lead to the saturation of OPEC's production capacity, set at 30 million barrels per day. The variety of oftentimes diverging forces governing the world's oil market oblige analysts to be extremely cautious when forecasting future oil prices. If OPEC's base hypothesis (US$10.7 per barrel in terms of 1988 dollars for the year 2000) is difficult to justify, the high scenario (US$23.8) is even more so: it would mean US$40 pe-r barrel in current dollars, in other words, a 75% rise compared to 1988 pr_ces (Martin, 1990). In a study published in 1991, the International Energy Agency (IEA, 1993) went even further, indicating prices ranging from US$21.7 to US$35, equivalent to US$38 and US$63 in terms of current dollars, respectively. Nevertheless, more recent IEA estimates made in 1993 come up with a more optimistic scenario: oil prices will gradually increase until they reach US$27.3 in the year 2000 and US$30 in the year 2005. These values are very similar to the ones presented by the World Bank. Any oil price forecasting beyond the year 2000 is merely a qualitative exercise. Technical reasons (depletion of reserves, growing demand, etc.) and environmental factors suggest that growing energy prices will prevail over the medium term. If it is assumed that, over the medium term, the living conditions of the RPTES countries will not improve significantly and oil prices will grow steadily but moderately, it may be concluded that the most likely scenario is that the suastitution of wood fuels for LPG and kerosene in the countries being studied will generally be very slow or will probably come to a standstill in the less favored countries. The latter energy products will continue being, at least over the medium term, energy sources accessible only to the highest-income urban population. The current devaluation of the CFA franc confirms the hypothesis that this substitution process will be very slow. As of January 1994, the domestic prices of oil products will increase as a result of the devaluation, which will severely constrain the consumption of LPG, owing to the availability of lower-priced local substitutes (fuelwood and charcoal). In view of persistent poverty in the cities, it is very difficult to imagine that, in the five RPTES countries as a whole, more than 20 or 30% of the population will be 23 using LPG as its principal fuel.15 The situation, however, may fluctuate depending on the country. It is expected that higher CIF and domestic transport prices for oil products in the landlocked countries (Mali, Burkina Faso, and Niger) will reduce the share of the population capable of gaining access to LPG use. In Senegal and The Gambia, however, the situation may be quite different. In the former country, in 1989 40% of Dakar's population and 10% in other cities was consuming LPG as main fuel (Ministere de L'Industrie, du Commerce et du L'Artisanat du Senegal du Senegal, 1991). Nevertheless that year, 75% of households in the main cities of the country were equiped with at less one LPG stove (Ministere de L'Industrie, du Commerce et du L'Artisanat du Senegal, 1992). It can be expected that in Senegal by the year 2020, the urban population depending on LPG will have risen to 60% or 70%. In the case of The Gambia, however, where substantial reductions in the CIF price of LPG can be achieved and economic prospects are better than in the other countries being reviewed, a rapid growth of LPG consumption may be expected. Demographic Forecasts The demographic forecasts were taken from scenario 1 of the West Africa Long-Term Perspective Study (WALTPS) of the OECD Sahel Club. The WALTPS scenario 1 is relatively optimistic and basically-relies on two hypotheses: - The economy, especially the urban economy, will develop without any major crises. - Migration will not be obstructed. It is important to emphasize that this scenario is not an extrapolation of demographic trends over the last decades; it is rather based on several spatial distribution laws observed over the 1960-1990 period, which can be summarized in the following two hypotheses: IL This figure means that an equivalent of 20% of the population will be using only LPG to meet its energy needs for cooking purposes. In reality, this percentage is much higher since many persons will continue using LPG as a second or third fuel. 24 The speed of urbani:ation declines as a result of a drop in rural migration, stemming from relatively better living conditions in rural zones. Higher urban growth rates can be expected in those areas where urban growth was merely moderate; this especially holds true for intermediate zones between the coast and the Sudan-Sahel region. Tables 2 and 3 summarize the demographic growth scenarios and the urbanization rate to the year 2020 on the basis of the WALTPS study forecasts, compared to World Bank and United Nations figures. Apart from the fact that the WALTPS study adopted demographic growth rates that were lower than in other studies, because it took into account the impact of AIDS and migratory flows between countries, the WALTPS defines urban population as any population living in urban settlements of 5,000 or more inhabitants. This is a major reason for the higher urbanization rates, compared to the forecasts made by other agencies. Table 2 Various Population Estimates in the Year 2020 |_ UNL UNH UNM WM W.1 W.2 Senegal 15 15.9 15.2 18.1 16.9 15.3 The Gambia 1.7 1.8 1.7 1.9 2.4 2.2 Bt gina Faso 18.8 21.1 19 20.6 15.4 17.2 Mali 20.2 23.1 21. 20.7 14.5 16.2 Niger 17.4 19.9 18.5 20.7 13.6 15.6 UN: United Nations, L=low, H=high, M=medium. WB: World Bank WALTPS: Base scenario W.1: WALTPS 1 W.2: WALTPS 2 25 Table 3 Urbanization Rate Forecast in Percentage __ _ UN WB |WALTPS| W.1 W.2 SENEGAL 59.3 60.0 63.9 63.5 49.7 GAMBIA 45.6 43.0 51.9 51.5 41.7 BURKINA FASO 23.8 27.0 41.2 38.0 27.1 MALI 37.7 41.0 43.5 37.1 26.4 NIGER 42.4 41.0 36.9 28.7 20.5 UN: United Nations WB: World Bank WALTPS: Base scenario W.1: WALTPS 1 W.2: WALTPS 2 26 III. MALI III.1 General Considerations Half of the 1.2 million square kilometers of the Republic of Mali is part of the Sahara Desert, and the other half is comprised of Sahelian and Sudan-Sahelian zones. As a result of its landlocked geography, the -limited availability of arable land, the heavy dependence of its economy on agriculture, and adverse climatic variations, Mali must cope with enormous natural constraints to ensure economic development. These difficulties are aggravated by the intense exploitation of vulnerable soils, overgrazing, demographic growth, and an undeveloped private sector. The National Directorate of Statistics and Informatics (Direction Nationale de la Statistique et de l'Informatique--DNSI) calculates that the resident population amounts to 8.5 million inhabitants (1992), although the United Nations (UNDP, 1992) estimates total population in 9.2 million (1990). With an annual average demographic growth rate of 2.5% between 1980-1991, it is expected that, over the period 1990-2000, this rate will increase to 3.1% (The World Bank, 1993d), and total population with be slightly more than 12 million inhabitants. According to the same source, 48% of the population is under 15 years of age, which guarantees that this steep demographic growth will persist for decades to come. In keeping with its highly agricultural economic structure, 76% of the population is rural; nevertheless urbanization is progressing rapidly. At the beginning of the seventies, only 14% of the population lived in urban zones, and the annual average rate of urban growth remained at 4.1% between 1970 and 1985. Official statistics display a sharp rise in urban growth between 1987 and 1992, at 6.2% per year (this rate was 3.8% between 1980-91), mainly as a result of rural migration within the country. The preferred destination of this migratory flux is the country's capital, Bamako. In 1992, the primary sector contributed 48% of gross domestic product (GDP); it also provided 50% of export earnings. Subsistence agriculture alone accounts for 21% of GDP and employs 70% of the labor force. The secondary sector, by contrast, accounts for 12% of GDP and is characterized by broad State participation through the ownership of agro-industrial enterprises, which are now the target of a vast restructuring program. The private industrial sector employs only 3,000 workers, that is, less than 20% of industrial employment. The tertiary sector has been losing its importance for several years; its activities involve mostly commerce and public administration, with an estimated 42,000 government employees who, contrary to their counterparts in neighboring countries, earn rather low salaries. Nevertheless, these figures do not include the informal sector, 28 which in Mali provides jobs for 55% of the urban labor force"' (The World Bank, 1992e). It is estimated that this sector accounts for 40% of the country's real GDP(The World Bank, 1992e). Table 4 summarize the main economic indicators of Mali. In addition to difficulties stemming from its physical environment, Mali is affected by the adverse effects of a traditionally state- oriented economic policy that produced distortions in the agricultural and industrial sector and in the management of public resources. Since the early eighties, the Malian economy has been experiencing a severe financial crisis, as a result of a series of recurrent droughts and a deterioration in the terms of trade. Moreover, the external debt servicing burden has played its role in worsening this situation. To deal with this crisis, in 1982 the Government undertook a series of reforms and economic adjustments. From the very beginning of the adjustment programs, the financial imbalances and economic distortions were resolved, but the fall as of 1985 of international cotton prices, a major export product for Mali, rapidly undermined the positive economic results that had been achieved and brought economic growth to a virtual standstill around 1987. In 1988, the country once again made efforts to implement economic and financial reforms; helped by climatic conditions that were better than expected, these initiatives contributed to a recovery of economic growth in 1990. GDP recorded a real growth rate of 2.4%, whereas inflation was contained at 0.7%. After postponement of Mali's debt with the former Soviet Union and the People's Republic of China, the current account deficit, excluding official transfers, was reduced to 13.9% of GDP. The political events of 1991 were the major cause for the 0.2% drop in GDP compared to the preceding year, despite a good cotton crop and a rise in exports. The value of cotton fiber exports rose by 14.7% with respect to 1990, although the export volume had to increase by 22% to compensate for the fall of international prices. Parallel to this, gold and live animal exports grew significantly, increasing the total value of exports by 8.7% and reducing the trade deficit from 15.5% of GDP in 1990 to 13.6% in 1991. This was achieved despite the 7% increase in the value of imports, mainly due to the excessive rise in cereal imports, in response to the unexpected variations in national production as a result of the vagaries of climate. In order to limit the loss of income caused by the destruction of equipment and infrastructv-e during the pol. 'ical disturbances of "' Urban labor force is currently estimated at 500,000, out of which 20% are unemployed. Informal sector constitutes a kind of safety valve, providing employ to about 280,000 people; this represents about 55% of the urban labor force, and 70% of those employed in urban areas. 29 1991, the Government has strengthened the fiscal and customs system. Various measures have been applied to facilitate and improve tax payments, especially regarding oil products. The budget situation has improved but remains fragile, mainly because of the growing dependence on international financial donor assistance. In 1992, 22.8% of total income was in the form of budget assistance. In 1991, Mali received official development assistance equivalent to 18.5% of GDP, the highest of all the RPTES countries and second in per capita terms after Senegal. That same year, 91.9% of total external debt was accounted for by concessionary loans, leading to a ratio between interest payments as a percentage of the exports of goods and services of 2.1%, lower than that of other countries considered in the region. Table 4 Mali: Principal Macroeconomic Indicators 1989 1990 1992 Population (millions) 7.9 8.1 8.5 Gross domestic product (l10')FCFA 658.4 661.2 700.6 Primary sector/GDP (%) 47.1 45.5 47.9 Per capita GDP (103) 107.9 104.9 109.4 Oil imports (103 metric ton) 195.6 203.5 217.2 Electricity consumption (GWh) -- -- 205.9 Total imports (1O')FCFA 172.1 180.2 180.4 Oil imports (l0')FCFA 20.4 14.5 13.9 Total exports (10')FCFA 92.0 100.0 87.0 Cotton exports (10')FCFA 42.6 48.9 35.8 ____ _ _ __ -2,573 Foreign aid (10' US$) 454 467 -45 Source: Tableau de Bord Economique et Financier, Annuaire Statistique du Mali 1991. Ministere de L'Economie des Finances et du Plan de Mali. Flash Informations Stati.tiques. Minestere du Plan 1992. African Development Indicators. The World Bank. Regarding social indices, poverty is the prevailing situation in Mali. Using the calorie consumption level recommended by the World Health Organization as a reference to measure poverty, equivalent 30 to an annual per capita outlay of 89,172 CFA francs (US$275) before devaluation, 50% of urban households in Maii can be considered poor. 17 Since rural poverty is always more severe than urban poverty, it can b' inferred th- a large part of the rural population is below poverty levels. A household survey conducted in 1989 reveals that 55% of the population had a per capita consumption of less than US$1 per day, which is the standard used by the World Bank to define the poverty threshold"' (The World Bank, 1993i). I11.2 The Energy S _uation As could be expected from Its economic structure, Mali's energy balance is dominated by the consumption of biomass. Fuelwood accounts for 91% of national energy consumption in 1992 whereas the consumption of oil products and electricity are extremply low: 24 kilos of oil equivalert and 20.2 KWh per capita ,ear, r pectively. The economic crisis tnat started in the early eighties slowed down the energy transition process. The consumption of oil products, which rose 12.6% per year' ir. the period 1975-1980, fell to an average of 2.5% per year between 1980 and 1985, and then experienced a slight recovery between 1986 and 1990. Mali has no oil resources, i its oil sulplies are carried overland by truck or railway 1 -m Senegal and by highway from Cote d'Ivoire. Nevertheless, it has hydropower resources estimated at 800 MW, enough to supply electricity needs for several decades. In 1992, oil imports amounted to 217,200 tons.of ail (Ministere du Plan du Mali, 1992), a rise of 6.9% compared to the preceding year, of which 66% is being consumed by the transportation sector. The industrial sector accounts for 17.1% of consump:-on, an additional "7 Calorie consumption is a criteria used to measure the destitute population or the pulation living in a situation of extreme poverty, since it e .blishes a measurement for income availability to meet the food .eeds required for' living' 'Absolute poverty, which inclue-s the destitute population, includes other types of deficiencies such as the lack of adequate housing, education, clothing, environmental quality, and other services, which although not vital for living such as food are still part of the basic needs for developing' a healthy and decent life as required by modern living. " If it is established that the poverty line is at 89,17 CFA francs per capita, according to official statistics, per capita GNP in 1988-1989 (period when the household surveys were conducted) was between 70,000 and 83,000 CFA francs, it may be concluded that a large part of the population lives in conditions of poverty. Nevertheless, it should be kept in mind that National Accounts tend to underestimate the contribution of the informal economy and transfers from emigrants. 31 9.7% of imports is for electricity generation, and only 7.5% is consumed by the household sector, most of which is kerosene for lighting purposes. In 1992, the imports of oil products amounted to 14.6 billion CFA francs, equivalent to 8.1% of total imports and 14.6% of export value (V4nistere du Plan du Mali, 1992). The economy benefitted from the drop in oil prices, which despite the increase in consumption volume led to a 4.5% reduction in the oil bill, compared to 1991. Because of Mali's landlocked geographical location and the small size of its market, the CIF price of oil products is very high. In addition, the import and price-setting of oil products are in the hands of the State, which obtains a large part of its fiscal revenues from consumer taxes. Mali has an electric power system with a generation capacity of 97 MW, of which 62 MW are hydro. Hydropower accounts for 78% of generation, which is mainly used for supplying the city of Bamako. Only 3.08% of the population has access to electricity, which remains a expensive service, restricted to the highest-income sectors and modern industry (IEPF, 1992). Its production cost of 63.9 CFA francs is very high due to the system's inefficiency and the high level of electric power losses (IEPF, 1992). It is estimated that annually that close to 5 million" tons of fuelwood are used as cooking fuel, and 10% of this amount is converted into charcoal. The rapid growth of urban centers is producing a profound change in the use of traditional fuels, characterized by the growing trade of fuelwood and its conversion into charcoal. The development of the fuelwood market is one of the major causes of deforestation around the cities; the distances over which fuelwood has to be transported to supply the cities have now reached 200 kilometers. As in other RPTES countries, stumpage fees for fuelwood are very low and does not account for the real cost of reforestation. Fuelwood is virtually free good. III.3 The Economic Importance of Traditional Energies According to official statistics (see table 5), the silviculture sector, which includes the forest sector, provided 4.9% of gross domestic product in 1992, a share that was more substantial than electricity and water (2.4% of GDP in 1991) and slightly less than the 5.7% recorded for modern industry. In addition to fuelwood, " A recent publication (March 1994) of The World Bank, Stimating Woody Biomass in Sub-Sahara Africa by Millington, Critchley, Douglas and Ryan estimates total woodfuel consumption in Mali in 3.7 nillion air-dry tonnes. Insted RPTES report (Examen des Politiques Dtrategies et Programmes du Secteur des Energies Traditioneiles, 1994, pp. 34) mention that total fuelwood consumptiqn in Mali is little more than 5 millions tonnes/year. 32 silviculture includes the contribution of all the other uses of wood (construction, arts and crafts, etc.). official data do not provide a detailed breakdown of each of these items. Table 5 Mali: Contribution of the Primary Sector to the Economy of Mali (Billion constant CFA francs of 1987) 1989 % 1992 _ _ Primary Sector 309.9 47.1 335.6 47.9 . Subsistence agriculture 142.7 21.7 145.7 20.8 . Industrial agriculture 45.3 6.9 50.8 7.3 . Livestock 78.8 12.0 94.8 13.5 . Fishing 11.2 1.7 9.5 1.4 * Silviculture 31.9 4.8 34.8 4.9 Gross domestic product 658.4 100 700.6 100 Source: Ministere du Plan du Mali. Direction Nationale de la Statistique et de L'Informatique. Decembre 1992. Estimating the economic value of traditional fuels is extremely difficult owing to the wide range of economic values, prices, and volumes that are found in the studies conducted to date. According to the estimates that have been made, the volume of sales, or turnover, for the fuelwood and charcoal trade in 1992 was around 20 billion CFA francs"" (CTFT-SEED, 1992; RPTES, 1994), although the ESMAP study calculated that it was 10 billion CFA francs in 1990 (ESMAP, 1992). The wide gap between these estimates should not be surprising since it is a characteristic inherent to data on an informal economic sector such as fuelwood and charcoal. Prices of fuelwood may fluctuate between 5 and 18 CFA francs per kilo depending on the location, to which must be added a seasonal fluctuation of more or less 20% (CCE) . These values should be viewed only as a reference for the magnitude of the economic contribution of these fuels. As indicated above, total fuelwood and charcoal volumes are estimated in terms of per capita consumption, whose values vary widely between geographical zones, whereas the turnover, which is the sum of the total coisumption volume multiplied by the final 2* This figure does not include auto-consumption. 33 price, is a parameter that is subject to an even wider range of values, due to the high seasonal and geographical variations of the prices. For Mali, an attempt can be made to estimate the economic contribution of traditional energies using the same criteria used in this study for other RPTES. An average price of 18 CFA francs per kilo is assumed for fuelwood and 66 CFA francs for charcoal in the city of Bamako, and it is also assumed that all the charcoal is consumed in Bamako and that 50% of fuelwood consumption in small cities comes from direct gathering (self-consumption)2'. Moreover, it is established that in rural zones the price of fuelwood is 5 CFA francs per kilo, which is the lowest price found in those rural areas where fuelwood is commercially sold (Koutilia). Fuelwood price in others cities is assumed to be 13 CFA francs/kilo (weighted average according to the urban population). The potential turnover that is obtained is about 34 billion CFA francs, which is higher than the estimates referred to above.12 Actually, however, the amounts defined as self-consumption do not pass through any commercial circuits. If these amounts are excluded, the turnover comes close to 15 million CFA francs, which is much closer to ESMAP estimates. In terms of value added, a value of about 32 billion, close to the official figures for the silviculture sector, can be estimated (see Table 623). The most important conclusion to be drawn from all of this is that, even using the most optimistic hypothesis, the value added of 21 According to a CCE study (CIRAD/CTFT, 1990) in small tows in deforested areas 80% of the population have to buy fuelwood, meanwhile in woody areas this proportion decrease to about 10%. 22 The study 'Etude des filiAres d'approvisionnement des cing principales villes de Mali en produits forestiers," Tome I, establishes that the turnover for fuelwood and charcoal to supply these five cities in 1990 was 13.5 billion CFA francs, a value very close to the 15 billion that were estimated in the study for Bamako and the other cities in 1992 and which are presented in Table 6. 23 Details for calculation of table 6 are the following: In Bamako 456,300 tonnes of fuelwood x 18 FCFA/Kg. = 8,214,000 FCFA; 73,840 tonnes of charcoal s 66 FCFA/Kg. = 4,873,440 FCFA. For rural consumption is 3,511,000 tonnes x 5 FCFA = 17,555,000 FCFA. For the other cities total consumption of fuelwood is 637,000 tonnes of which 10% is sale at 12 FCFA/Kg. for a total of 764,000 FCFA. The other 90% is self-consumption and was estimated at rural price of 5 FCFA/Kg. for a figure of 2,866,000 FCFA; so the total turnover for the other cities is 3,630,900 FCFA. Assumig the same carbonization efficiency used in the Mali's RPTS report (1 Kg of charcoal each 7 Kg. of fuelwood). 34 traditional fuels is near 5% of GDP, which is important compared with the contribution of other sectors of the economy like modern industry (5.7% of GDP in 1992) or modern agriculture (7.2% of GDP in 1992). In addition, about 25,000 persons are employed in formal and informal traditional energy production, transport, -nd distribution activities. According to information provided by Mali's RPTES report (RPTES, 1994a), only about 24% of total fuelwood consumption passes through commercial circuit". In rural zones and in small cities, fuelwood supply is done by direct gathering; this situation, lowever, is changing rapidly. The studies that have been conducted (Gajo, 1991; Ministere des Ressourses Natr--elles et de L'Elevage, 1988; CTFT-SEED, 1992; Ministere des !'nes de L'Energie et de L'Hydraulique, 1993) indicate fast growth of charcoal consumption in the cities, and the wooded areas on the outskirts of the cities are rapidly disappearing and distan s to be travelled to supply fuelwood and charcoal to the city are already 200 from Bamako. Table 6 Mali: Real Contribution of Traditional Fuels to GDP in 1992 (Dl1ion CFA franc=-) - Turnover Value Added I. Fuelwood 29.400 20.971 * Bamako 8,214 2,327 * Other cities 3,631 1,089 * Self-consumption 17,555 17,555 II. Charcoal 4,895 3,622 * Bamako __ __ * Other cities __ __ * Self-consumption III. TOTAL 34,295 24,593 Economic value of fuelwood Just as in other RPTES countries, the current price of fuelwood 24 The amount of Self-gathered fuelwood per year is: 3.5 million tons of rural consumption. Assuming roughly that 50% of the about 730,000 tons consumed in small and secondary tows is self- gathered, the total consumption non marketed is about 3.9 million ton per year. That is 76% of the 5.1 million of total fuelwood consumption in Mali in 1992. 35 does not reflect the economic value of this forest resource. In Mali, until 1992, the price of fuelwood was reflected in the stumpage-fee value, equivalent to 200 CFA francs per metric stere, that is, about 0.7 CFA francs per kilo. The latter value is the price of the raw material and is far below the replacement cost or the cost of substituting fuelwood for other fuel alternatives. Table 7 summarizes the estimates for the economic cost of fuelwood using methodologies based on the reforestation cost and the cost of substituting fuelwood for LPG or kerosene. Reforestation costs are based on demonstrative projects, whose results have not been entirely satisfactory due to scant local participation and high costs. Depending on the type of forest, the value of tainding tiNeiE may fluctuate between 4 CFA francs per kilo for thF nathral 'forest management project in the area of Koulikoro to 13 CFA francs per kilo for energy plantations near Bamako25. If this latter value is taken as the reforestation cost, keeping in mind that it is basically marketed urban consumption that is causing deforestation, it may be asserted that the economic cost of 1.2 million tons of fuelwood2' (which is the total sum of commercial fuelwood plus the equivalent used for charcoal production) is close to 15.6 billion CFA francs. Using forest management costs the would be around 5 billion FCFA. 25 In his Household Energy Strategy of Mali, ESMP(1992) presents the following numbers for standing wood costs: 13 FCFA/Kg for non-irrigated industrial plantation, 11 FCFA/Kg for tree plantation if established in agricultural land and 4 FCFA/Kg for managed natural forest. Other costs found are: 73 FCFA/Kg for industrial plantations of eucalyptus and 4 FCFA/Kg for Gmelina in the Etude sur les Economies de Combustibles au Mali (PNUE, 1990). 2' The -figures on urban firewood consumption are highly contradictory. The studys made by CTFT-SEED in 1992 indicates that the consumption of the country's five largest cities, which have more than 90% of the urban population, in 1990 was about 720,000 tons of firewood (including the equivalent to produce charcoal). Another study conducted in 1988 by the Direction Nationale des Eaux et Forets asserted that the consumption of fuelwood, only in the city of Bamako, without including charcoal, would be 560,000 tons (year of estimatye is not especified. Gajo, Michel 1991 in a study of GTZ mention 230,000 tons year, excluding charcoal, only for the city of Bamako. ESMAP his Household Energy Strategy of Mali says that in 1987 Bamako plus semi-urban areas accounted for 659,000 tons consumption of fuelwood equivalent (15% of total equivalent fuelwood consumption). It is assumed in this report that commercial urban fuelwood (including charcoal production) consumption is 1.2 millions tons. 36 Substitution for LPG is based on the assumption that one ton of fuelwood will substitute 9 tons of fuelwood and 1.5 tons of charcoal (SEED, 1993)27. It is also felt that the marketed consumption of fuelwood, that is 1.2 million tons of fuelwood and this would yield of figure of about 130,000 tons of LPG, which lculated at the CIF-border prices of 275,000 CFA (before 7aluation) francs per ton would amount to 36 billion CFA francs. A..ter devaluation the border price of LPG raised to 498,000 FCFA/ton meaning that the total amount for the susbstitution is now 65 billion FCFA. Using the same criteria, at an economic cost of kerosene of 90,03O CFA francs per cubic meter (before devaluation), close to 240,000 cubic meters of kerosene would be needed at a total cost of 22 billion CFA francs. Estimates 2 and 3 only refer to fuel costs and do not include the costs of accessories such as stoves and gas cylinders, in addition to the investments needed to meet growing demand such as storage facilities, bottling plants, etc. The hypotheses on the urban fuelwood market underestimate the values displayed in Table 7, since these calculations refer to the substitution of the commercial volume of fuelwood, estimated to be 24% of total volume. This situation is changing rapidly, as the fuelwood market is broadened with rising urban population; and with deforestation around the cities, urban self-consumption will be increasingly difficult. In addition, the economic costs of substitution for LPG or kerosene are affected by the excessively high CIF prices and the small size of the domestic market, situations that could change over the medium term eventually leading to a redaction in CIF prices. In any case the economic costs of substitution for LPG are comparable to the turnover for fuel trade and slightly higher than its current value added before devaluation. In view of the FCFA devaluation and the country's current economic circumstances, it would seem socially and economically more attractive now to develop reforestation and improve the management of natural forests. III.4 Macroeconomic Policy and Traditional Energies In Mali, as in most countries participating in RPTES, fiscal policy 27 See page 39 of SEED's document "Evaluation a mi-cours du Programme Regional Gaz Butane dans les Pays du CILSS", July 1993. The "Manuel D'Energie Domestique"(document technique de la Banque Mondiale No. 67F) in page 81 presents a table with data about stoves efficiencies. According to this document an acceptable efficency for LPG stoves is 45%, meanwhile for fuelwood stoves efficency can vary from 5% to 25%. 37 has been tightly linked to the pricing policy for oil products. The heavy tax burden on energy prices is an important source of revenues for financing the State's budget. Table 7 Mali: Estimate of the Economic Cost of Fuelwood in 1992 l0'FCFA FCFA/Kg 1. Cost of reforestation -industrial plantation 15,600 13 -forest management 5,000 4 2. Substitution for LPG - before devaluation 36,000 30 - after devaluation 65,000 54 3. Substitution for kerosene 22,000 18 * Price structure betore devaluation i1 not avai able. Until quite recently, the-State held control over the import and domestic prices of oil products, whereas their distribution was in the hands of several multinational companies that operate in this part of Africa. Table 8 provides a summary of the fiscal si.tuation for imports of oil products in Mali and their share in the country's economy." Although the tax burden has declined since 1991, it still remains quite high. About 25% of all tax revenues come from the various taxes levied on the consumption of oil products, and 90% of these taxes correspond to customs duties, whereas the remaining 10% is for the Price Stabilization Fund (ORSP). Such a large share of these taxes in oil prices are used for financing public spending. Although oil price liberalization is the best option policy for the country's economy in the short term 28 It important to emphasize the high volume of contraband imports of hydrocarbons from neighboring countries, which affect not only the areas adjacent to the borders but also the greater metropolitan area of Bamako. This seems to be a growing phenomenon stemming from the liberalization of granting import permits. Kerosene seems to be one of the fuels most affected by this phenomenon. Cuneo 1992, mention for example that illegal imports of oil products coming only from Nigeria into Mali were about 24,000 tons in 1990 or equivalent to 10% of Mali's total oil consumption that same year. 38 it could cause a severe imbalance in public finances if an important reduction of the public budget is not done or if other sources of public funding are not found. The excessive dependence of the public budget on oil taxes and international donations is one the major structural weaknesses that Mali will have to surmount in order to modernize and reform its economy. The higi ast of land transport, high CIF prices, and the heavy fiscal b_^den are obstacles to the substitution of wood fuels for LPG and kerosene, and in general- are a severe constraint for the country's economic development. In addition, the wide difference of current prices between Mali and its neighboring countries fosters the illegal flux of imports, which is acknowledged by public officials themselves as substantial and which is not merely limited to border areas29. Among household fuels, kerosene is the one that is most affected. Table 8 Mali: Overvfe'w of Taxes'on Oil Products _________________1990 1991 1992 1. Oil imports (CIF)* 15.3 14.6 14.6 2. Taxes on oil* 23.1 19.4 19.6 3. Oil tax/tax revenues __ __ 25.2% 4. Oil imports/oil taxes (1/2) 150% 133% 133% *billions CFA francs. Source: Ministere des Mines de L'Energie et de L'Hydraulique. As of 1991, the Government eliminated pricing controls on agricultural products; nevertheless, it postponed the liberalization of the prices of oil products until July 1992. In addition, the following measures were applled:)' a) the Price Stabilization Fund (ORSP) was transformed into thetNational Office of Petroleum Products (ONAP) aimed at regulating the market for oil products; and b) storage and distribution installations of the state-owned company PETROSTOCK were liquidated to permit competition and private-sector initiatives. 2" Although not all illegal informal sector controls 30% of the entire petroleum products market in Mali ( 2/3 of the Kerosene market). The informal sector share of the oil market are more important in the east and the the border zones with Nigeria (Mehr, 1990). 39 Energy pricing policy The high prices of the fuels that are substituting wood fuels, in contrast with the low incomes of the population, are the variables that are conditioning the energy transition process. As a landlocked country, Mali is supplied mainly by railway from the SAR refinery in Dakar, Senegal, or by highway from the refinery belonging to the SIR in Abidjan, Cote d'Ivoire, in similar volumes and with high import costs. Domestic distribution is handled by transnational oil companies; nevertheless, since the liberalization of imports in 1984, independent importers that have penetrated above all the market for gasoline and diesel oil have appeared. LPG and Kerosene, accounted for 7.4% of total imports of oil in volume in 1992, the last year for which complete figures are available3'. Their share of final consumption has remained virtually constant since 1980; nevertheless, as of 1986, rapid growth of LPG imports has become apparent. These imports rose from 266 tons in 1985 to 1,441 tons in 1992, whereas the corresponding imports for kerosene recorded very slow growth between 1985 and 1992, 13 to 14.7 thousand tons, that is an annual average of 1.8% . which was much slower than the population growth of 2.5% during this same period. Nevertheless it has to be remembered that Kerosene is afected by smugling. LPG price LPG is only imported from the SIR in Abidjan, directly by local operators, at high costs compared to other supply outlets. The explanation for this situation is that the operators prefer the security and regularity of the supply provided by the SIR, to the detriment of lower CIF prices3L. Part of the difficulties of gaining access to other supply outlets stems from the lack of suitable infrastructure (storage capacity and good roads) available to the operators in Mali, which in turn is understandable because of the market's small size. Other reasons are lack of commercial relationships between Governments and poor information about prices and payments conditions (SEED, 1993; Cuneo, 1992). Ex-refinery prices of LPG are out of proportion with respect to international prices and incorporate high refining costs due to inefficient facilities or price distortions due to local fiscal 30 According to the Mali's RPTES report in 1992 were imported 1,444 tons of LPG and 14,687 tons of Kerosene. That same year the total oil imports of Moli were 217,200 tons. 3' Before the FCFA devaluation ex-refinery prices were 200 US$ in Ghana and 390 USS in Abidjan (PRG, 1993). 40 policy32, which is the case for most refineries that are potential sources of gas supply for Mali (Ghana andSenegal). Ex-refinery are not based for example in spot market prices of Northern europe publish by Platts. Nevertheless, there are several difficulties that have yet to be overcome. Other factor contributing to high ex-refinary costs are diseconomies of scale. Average refinary operating costs in Africa are 2 USs per barrel, compared to 0.75 US$ in the rest of the world. Very few developing country refineries can process crude for less than 1 US$. except for large scale refineries in the Far East and the Caribbean. Refinery losses which should not exceed 1% in a properly maintained and operated refinery, often exceed 2% to or even 4% in developing countries (US Congress, 1992). In the case of Ghana, the ex-refinery price per ton is US$250, compared to US$390 in Abidjan (SEED, 1992); the highway infrastructure, however, between the Tema refinery and Bamako is deficient, and a regular supply cannot be guaranteed. In addition, there is no tradition of commerce between both States, as a result of the lack of information on prices, availability, and payment conditions. Another important supply outlet is Dakar, where ex- ref inery prices are between US$250 and US$270 per ton, which are reasonably close to international prices, and railway transport costs are up to 25% lower than highway transport. Nevertheless, there are several problems, basically the lack of storage facilities in Bamako and the irregular railway service due to the bad conditions of the railroad between Dakar and Bamako. Between 1989 and 1993, the prices of fuelwood and charcoal remained virtually constant, at 18 CFA francs per kilo and 66 CFA francs per kilo"3, respectively, whereas average inflation has been 4% per year. If the cost of kitchen stoves is included, LPG is 2.3 times more expensive than fuelwood and 1.7 times more expensive than 32 CIF price distortion, due to fiscal policy in COte d'Ivoire could explain why CIF LPG prices are much more higher for a modern refinary like the one in Abidjan (390 US$) than the older refinaries in Ghana(200 US$) or in Senegal(250-270 USS). Prices are before devaluation. 33 L'Annuaire Statistique du Mali (1991) shows 77 FCFA/Kg as average annual price of charcoal in the Bamako area... in 1990 and 75/Kg in 1991. According to the same source Kerosene price decrease from 237 FCFA/lt to 225 FCFA/lt between 1988 and 1991 and LPG from 478 FCFA/bouteille to 402 FCFA/bouteille (it is not specify the size of the bottel). 41 charcoal14 (ESMAP, 1992). Nevertheless, cooking with kerosene is only 10% more economical than cooking with LPG, but there is the added disadvantage that the former fuel is very poorly accepted as a cooking fuel. Price of FuelWood As indicated before, the price of fuelwood does not reflect its economic cost. At present, the stumpage fee of this forest resource is 200 CFA francs per stere (about 250 to 350 kilos per stere) and 250 CFA francs per quintal of charcoal. In terms of units, this means that the real price paid for the resource goes between 0.6 and'O.8 CFA francs per kilo of fuelwood and 2.5 CFA francs per kilo of charcoal. If it is assumed that the economic cost of fuelwood is 13 CFA francs per kilo of standing timber (reforestation cost in urban areas), the stumpage fee should increase to about 1,000 (for natural forest management projects); 3,200 or 4,500 CFA francs per stere of fuelwood4and to about 9,000 CFA francs35 per quintal of charcoal for reforestation projects. By levying taxes on the volume of charcoal and not directly on fuelwood, the current forest taxing system is actually favoring charcoal production. Taking into account_that 6 to 8 kilos of fuelwood are needed to produce each kih- t charcoal, this means that the real tax on fuelwood that is "0nv%erted into charcoal is paid at a rate of 2.5 FCFA each 6 to..8 kilos. This would be equivalent to about 0.30 FCFA/Kg ofwood, 2ess than half the tax paid on fuelwood. This system moreo * X s the introduction of improvements in charcoal produc c iques and fosters deforestation around the cities. Table 9 summarizes the situation whereby the current tax of 200 CFA francs per stere of fuelwood and 250 CFA francs per quintal of charcoal involve a taxation of forest resources that is not higher than 7% for fuelwood and 5% for charcoal. If it is estimated that only a small part of the urban market of wood fuels pays taxes, it can be stated that the tax burden is in reality much less than what is displayed in the table 9. 34 For these calculations, it is assumed that an LPG kitchen stove has a useful life of five years for an annual cost of 2,600 CFA francs per year; whereas the useful life of a firewood stove is two years with an annual average cost of 650 CFA francs. In annualized calculations, the fuel accounts for 97% of total costs in the case of LPG and 98.4% in the case of firewood. Details are in page 93 of ESMAP: Republic of Mali Household Energy Strategy Report No. 147-92. 35 Asummig the carbonization rate of RPTS report 7:1 (fuelwood/charcoal) the true tax should be 9,100 FCFA per one quintal or charcoal. 42 In 1990, it h_S estimated that only 12,000 tons of fuelwood and 5,200 tons of charcoal, equivalent to 12% and 5% of total urban consumption, respectively, were officially recorded. Even in the city of Bamako, where road controls are more effective, these amounts reac 'nly 20% and 10% of total, respectively (PRG, 199' . The effectiv 'olume of tax collection is about 160 million C i francs, that .s, half of the Forestry Service's budget3'. Table 9 Mali: Overview of Taxes on Wood Fuels in 1990 in Four Cities (CFA francs per kilogram) Bamako Segou Mopti Gao 1 F C__. CW. C. FW. C. 7W. C. l.Sale price 15 68 11 39 16 45 20 73 - - - - - - - - - 2.Tax 0.8 2.5 0.8 2.5 O.- 2.5 0.8 2._ 3(Tax by -en 5% 3.6% 7% 6% 5% 5% 4% 3% (1/2)- - - I 7: Fuelwood C: Charcoal Consumption surveys reveal that the monthly expenditure for cooking fuel in a typical urban family (eight persons, fuelwood as the main energy source, and charcoal and kerosene as auxiliary fuei sources) amounts to 6,000 CFA francs per month in Bamako and 5,000 CFA francs in other cities (ESMAP, 1992). This is equivalent to less than 10% of monthly expenditures per household (for low-income households this share is slightly higher). According to the ESMAP, 1992 study, the annualized cost of using only LPG (including equipment) for an eight-person family is 88,600 C-'A francs per year, that is, 12.4% of the annual spending of families classified as poor.37 By contrast, however, cooking only with fuelwood for poor families accounts for only 5.3%. The poor population suffers not only from low-income conditions but also from the fact that they are subject to the irregular flux of their monetary income, which prevents any type of investment. This irregularity in family cash flow leads to a lifestyle based on "' This information was given to the consultant during his field mission in April-May 1994. 3 The survey unit was the dwelling. In order to obtain per capita results, the total budget was simply divided by the number of persons in the household, without taking into account the notion of adult-equivalent. 43 daily consumption and the purchase of small amounts of products and services, which generally involve higher unit costs (as in the case of small amounts of kerosene sales in the informal market). As a result of the above, it is evident that the general increase of income and the abatement of poverty should be part of an integral strategy to speed up the energy transition. III.5 Long-Term Situation Demographic forecasts to the year 2020, conducted in the framework of the West Africa Long-Term Prospective Study (WALTPS) of the OECD-Sahel Club and the African Development Bank (ADB), are indicated in Table 10. The fundamental difference between scenario A and B is the urbanization rate, which for the horizon year forecasts an urban population of 5.4 to 4.3 million inhabitants. Most of the population will be in or around Bamako, which if its current growth rate persists, will easily have about 1.5 million inhabitants by the year 2020.3' Other small cities such as Segou, Mopti, Koutiala, and Gao will also be growing substantially. Table 10 Mali: Demographic Forecasts to the year 2020 2020 1990 Scenario Scenario A B 1. Total population (10') 8.2 14.5 16.2 2. Urban population (%) 21.8 37.1 26.4 Source: WALTPS-OECD The WALTPS-OECD forecasts are clearly lower than the ones from the World Bank and all UN forecasts (low, medium, and high), either in terms of total population or the urbanization rate.3' The 3" This figure is not exaggerated since in 1990 Bamako accounted for 41% of the country's total urban population. If this growth pattern continues, the population of this city will easily be over 2 million inhabitants by the year 2020. The figure of 1.5 million inhabitants in 2020 should be considered a minimal hypothesis. 39 World Bank forecasts indicates that by the year 2020 total population will amount to 20.7 million, with an urbanization rate of 41%, where as the UN estimates a population of 20.2 million (low 44 population forecasts of WALTPS assume an annual growth of 1.9% against about 3% in the other cases. A decline of this magnitude implies some kind of voluntary demographic control. It is well known that urbanization and income levels are determining factors for configuring a future energy scenario. One of the most important features of urbanization in Mali, in contrast to other countries with identical urbanization levels, is the growing consumption of charcoal. According to Mali's RPTES, 1994a report , in 1992 charcoal accounted for 3% of total energy consumption in households; nevertheless at the urban level, it accounted for 12% of energy consumption for cooking food. Until one decade ago, the charcoal consumption in the cities was negligible. _n order to prepare forecasts for the use of wood fuels, the following assumptions are made: - Short-term economic outlooks will remain very modest in most countries of sub-Saharan Africa. Although progress in the implementation of economic stabilization and debt-servicing plans is envisaged, substantial increases in private consumption and improvements in general living conditions are not expected. On the basis of forecasts made by the World Bank, 1994b it is e.pected that GDP will grow by 3.9% and that per capita GDP will grow by 0.9% between 1994 and 2003. Under these circumstances, poverty will probably grow in both absolute and relatives terms (as a percentage of the population). It is also forecast that-off-icial development assistance flows and concessionary loans will decline, at least compared to the levels reached in the eighties. - The impact will be felt at the investment level and in infrastructure construction. Over the medium term, the international oil market will remain stable. It is also assumed that supply conditions will improve, leading to the reduction of CIF prices of imported oil products. It is assumed that 100% of the rural population will be using fuelwood as a cooking fuel, with the same level of efficiency as in 1990. It is not expected that important changes in cooking habits will take place; in quantitative terms this means a constant per capita consumption (in terms of 1990 values) equivalent to 0.595 ton per year. According to this hypothesis, rural consumption of charcoal and LPG will be scenario), 21.4 million (medium scenario), and 23.1 million (high scenario), with two urbanization rates, 37.7% and 43.5%. 45 negligible. In the urban sector, important changes are being forecast. The urbanization process will boost charcoal consumption in the cities, and it is assumed that, by the year 2020, 20% of the urban population will be using charcoal. This means increasing charcoal consumption from about 70,000 tons in 1990 to 270,000 by the year 2020. Nevertheless, it is assumed that charcoal production efficiency in weigth will rise from 14% to 17%. Tables 11 and 12 provide a detailed breakdown domestic of energy and fuelwood consumption. Regarding LPG consumption, it is assumed that it will cover only 10% of the urban population by the year 2020. This nevertheless implies increasing consumption to 30,000 tons, compared to only 1,400 tons in 1990. This will implied a yearly average growth of about 13% between 1990 and 2020. Table 11 Mali: Forecast for Cooking Fuel Consumption 1990 J 2020 Pob. Wood LPG Pob. Wood LPG | (10') 103ton 1O3ton (10') 103ton lO2to n Urban 2.3 1,675* 1 0.83 5.4 3,500 30 | Rural 5.9 3,511 __ 1 9.1 5,400 -- TOTAL 8.2 5,186 1.4 j14.5 8,900 30 * This figure takes into account the fuelwood equivalent to produce 73,840 tons of charcoal with a conversion efficiency of 12.5%.- Table 12 Breakdown of Wood Fuel Consumption in 2020 (103 tons) _____ 2020 Fuelwood Charcoal* Total fuelwood t___ ___ ___ ___ ___ X___ _equivalent Urban 1,890 270 3,510 Rural 5,400 -- 5,400 TOTAL _ _ j7,2t0 |270 18,960 46 * Charcoal production efficiency is 6 kilos of fuelwood for each kilo of charcoal, that is, 17%. Available information indicates that at present efficiency is 12.5%. An annual demand of 8.91 million tons in 2020 or 75% of the annual production of biomass, estimated by WALTPS-OECD to be 11.9 million tons, with a standing timber stock of 23 million tons. Nevertheless this will imply local situations of severe scarcity of fuelwood in dense populated areas. III.6 Conclusions Within the frame of the present Adjustment and Economic Stabilization Programs begun by the Republic of Mali during the decade of the eighties, a series of macroeconomy and sectorial measures tending to handle adequately the situation of energy consumption in the residential sector and its transition toward the use of energy forms more modern and less harmful for the environment may be idiantified. Given the similarity of situations, much of these conclusions are extensive to other RPTES countries. Among these more important measures, the following stand out: At Macroeconomy Level Since 1988. the Government of Mali has..-impler nlted a sustained program of adjustment which is beginning to ander its f-Uits influencing on the energy transition process. The s. rere unbalances of public finance have been controlled, the situation of the external sector has improved and the inflation has been maintained at.low acceptabl4 levels. . This has..been reflected In an average rate of real growth of the GDP of 3% per year. At the same time, the incentives were improved for the growth of the private sector reducing the restrictive regulations and amending the fiscal policy .3md foreign trade. An unpostponable task is the restructuring of public expense, mainly to reduce the percentage participation, the salaries of public servants in the public expense which until 1992 represented more than 50% of the recurring expenses. The unbalance of the public expense is an important element 'in determining the fiscal policy. and partially responsable of..the high tax burden weighing on petroleum derivates as a privileged source for the financing of the public budget. To alleviate this pressure it shall be necessary to continue with the plans of voluntary retirement and reduce oth# expenses in order to asign resources to further needed sectors s. as the social sector and the repair of the existing infrastructu: Even in the frame of a long-term moderately optimistic scenery, the penetration. of GLP. shall. be a .slow .process,. .L.the scenery analyzed the GLP consumption would have an average annual growth of 47 13% over the period 1990-2020 to increase the current consumption of 1,440 tons to 70,000 tons. However this entails that only a population equivalent to 10% of the total urban population use the GLP'°. The analysis of the actual economic situation and its perspective until the year 2003, it is recommended that the best option to guarantee an orderly energy transition is the encouragement of reforestation programs and forest management to propitiate the sustainable consumption of firewood fuel. This would imply a profund sectorial reform which should be accompanied with programs and projects of improvement of the infrastructure, specially highways favoring directly the distribution and decrease of fuel costs of domestic use. LPG Price Policy The recent price liberalization (1994) of imported petroleum products and the restructure of its price structure shall favor, at short term the economy of the country and lessen the effects of devaluation of the FCFA on the internal prices of the same. The liberalization of prices shall also mean eliminating subsidies on the GLP which increased after the devaluation. Nevertheless after the devaluation of the FCFA the price to the consumer increased only 11.4%. The efforts of initiatives as the Programme Regionale de Gaz should be reoriented to actions of technical assistance and not of financial backing to the subsidy system. However, the subsidy of the gas ranges may be justified but with a program of progressive elimination of subsidy. From the social point of view, it seems more efficient to assign resources to sustainable production of firewood fuel than to subsidize high-income strata which are the main consumers of LPG. In brief, the grade of LPG penetration should be dictated by market forces and the investment in infrastructure (bottles, filling plants, storing tanks, import of ranges, etc.). Traditional Energy and Forestry Sector The prices of firewood fuels should reflect its economic cost. A gradual program of stumpage fee, increase the present levels until reaching the economic value of firewood. Additionally, a reform of the existing Forest Code should be made and guarantee the property rights on the forests, to local communities. The deepening of the 40 In reality it deals with an equivalent population using 100% to cover its cooking needs. In practice, the population interested shall be higher, taking into account the families using LPG as secondary fuel. 48 actual process of decentralization would favor the handling of community projects and would consolidate the property right of local communities (McLain, 1992). A gradual program to increase the stumpage fee should be started with the unification of taxes in one tax to be collected only on the volume of the fuelwood volume. The present differentiated tax system favors the inefficient use of coal and hinders the introduction of more efficient techniques of carbonization. The present levels of efficiency are around 7:1 firewood/coal in weight. These can be carried to 4 or 5 Kg of firewood per Kg of charcoal. A period of transition would be, however, necesssary to give opportunity for coal producers to adequate themselves to more efficient techniques. In this period the tax on the charcoal should be taken rapidly to 500 FCFA per quintal to be equivalent to that charged for fuelwood. As established, taking into account the losses of carbonization, the firewood converted into charcoal has only one tax equivalent of only 0.35 FCFA/Kg against 0.7 FCFA/Kg of fuelwood used directly. A second phase the stumpage fee on the firewood should be raised to 1,000 FCFA for cubic stere of fuelwood and thereafter, as fuelwood demand exceeds the annual production of natural forests and reforestation is made necessary with energy purposes, the stumpage fee should reach the level of 3,000 to 5,000 FCFA per cubic stere. One possibility of supplying the northern cities of the country is with the recuperation of the reserves of dead forests" of Mopti- Tomouctou-Gao (Thera, 1993). The economic feasibility of supplying Bamako with the production of charcoal should be analyzed starting with these dead forests taking into account the advantage of its minor transportation costs per unit of energy. None of these measures may be realized without a complete restructuring of the forest agencies. It would be necessary to develop trained personnel and above all the increase of forest guards. To improve the collection of taxes on firewood should be an immediate objective of the forest agency and of the Government. The necessary investments to obtain this do not appear excessive. International Aid The international assistance should concentrate itself on technical and financial assistance programs in the forest area. The activity of training seems to have priority. This should be addressed toward strengthening the forest agency in the administrative aspects and in the increase and training of technical personnel. This should be extended also to groups of NGO. The programs of financial assistance should be oriented to financing- programs of communitary forest handling and of projects of environmental 49 protection of multiple purposes, among these the production of energy. Other priority areas for international assistance with great repercussions on the sector of traditional energies are the programs for poverty alleviation. The increase of the prices of traditional fuels derived from the above-mentioned recommendations shall have a short-term negative effect on the family income of the poor urban sectors. In this sense, food assistance programs may compensate the increase of traditional fuel prices in the family budget. 50 IV. BURKINA FASO IV.1 General Considerations With a per capita GDP of only US$329 in 1989 (The World Bank-UNDP, 1992), Burkina Faso, formerly known as Upper Volta, is considered to be one of the poorest countries of Africa. Nevertheless, over the last few years, its economy has displayed a more than satisfactory performance compared to its neighboring countries. Indeed, Burkina is one of the rare cases in sub-Saharan Africa where economic growth has surpassed demographic expansion. Between 1980 and 1987, annual average growth of GDP was 4.6%, higher than the already high population yearly average growth rate of 2.6% between 1980 and 1991 (The World Bank, 1993d). The economy of Burkina, similar to the economies of most countries of the Sahel, basically depends on agriculture and the export of a few primary products. Eighty percent of the population lives on subsistence agriculture, and about 50% of all exports rely on one single product: cotton fiber. Because of this, the economy of Burkina is vulnerable to the unfavorable climatic conditions that have affected this region over the last few decades and to the downward course of the prices of raw materials. Table 13 summarize the most important economic indicators of Burkina Faso. Table 13 Burkina Faso: Main Economic Indicators I I s 1985 1988 | 1989 1990 I 1991 1992 GDP at 1985 constant 663 754 763 752 825 848 prices (10'FCFA) Population (millions) 7.96 -- 9.19 -- Agriculture/GDP (%) 22.8 17.2 16.7 17.1 19.9 18.2 Exports- (10'FCFA) 31.1 41.9 30.3 41.3 29.9 n.a. Imports (10'FCFA) 146 135 125 146 140 n.a. Oil imports (10'FCFA) |18.7 9.8 10.8 16.3 17.4 n.a. O Official public __ __ __ __ __ 956 debt(l0'US$) _ External aid (106USS) 195 298 272 336 409 n.a | Consumer price 126 124 124 123 127 124 index(100=1981) j 1 Source: Annuaire Statistique du Burkina Faso 1991-1992 The World Bank estimates that the annual growth rate of the 52 population is going to raise to 3.0% in the 1990-2000 period (The World Bay , 1993d), even when bearing in mind the high flow of migrants rom neighboring countries. According to The Institut National de la Statistique et de la Demographie in 19c' of the 7.9 million of resident inhabitants, only 16% live in urbar. areas (UNDP and The World Bank present a figure of 9% for 1990); nevertheless, urban growth is especially high. The urban population is increasing at a pace rf 5.2% per year, that is, . times more rapidly than total pc lation. The population of the largest cities such as OuagadoLou (500,000 inhabitants) and Bobo Dioulasso (250,000 inhabitants) are growing at rates of 10% and 7%, respectively. Urban growth is an important factor because it determines the pace at which firewood will be marketed and leads ' the appearance of more urban modes of consumption, such as charcc..o I use. High population growth in an ecosystem as difficult as the Sahel remains one of the major problems that the country must immediately cope with to ensure its sustainable development. Demographic growth and high levels of poverty have been identif'.d as the two r-or causes for the deterioration of natura' resou: -, which are t bases for the country's economic growtS.. as ini&_..ated above. The need for new farmland exerts heavy pressure on poor soils, characteristic of most of the country's land, and severely jeopardizes a country where food imports in 1991 accounted for 23% of total imports (The World Bank, 1993d). The informal sector plays an important role in the economy of Burkina, as it does in many developing countries. About 75% of urban manpower is employed In the informal sector, and in terms of its contribution to GDP it is second in importance only to agriculture (The World Bank, 1992e) 41. In addition,' some estimates indicate that GDP from informal actlvities has the same order of magnitude as the GDP from the formal sector. The country's landlocked geography and the difficulty of controlling its national borders facilitate the illegal trade of goods when prices are advantageous. This especially holds true for oil products. The current style of development is unsustainable, and environmental deterioration has already extended to half of the territory. The cost of recovering and preventing the degradati of renewable natural resources such as biomass, livestock an cereal losses'has already attained values that are estimated at 5% to 20% of GDP (Lallement, 1990). If this trend is not reversed, water, land, and biomass resources will be unable to meet the " The Burkina Faso Study of the U:--an Informal Sector (Draft) Division de L'Industrie et de L'Energie, Departement du Sahel, Region Afrique March, 1992, estimate in 25% the contribution of informal activities to the GDP. 53 populations' minimum needs. In the context of an unfavorable physical environment, the financial situation is worsened by the poor performance of neighboring economies, especially that of C6te d'Ivoire, with which Burkina maintains a large volume of trade. This has also affected the financial remittances of more than 1 million Burkina workers in that country who substantially contribute to sustaining Burkina's balance of payments. In 1986, remittances from Burkina workers employed abroad accounted for 128% of export earnings; yet by 1990 these remittances had declined rapidly, accounting for only 45% (The World Bank, 1993b). In order to deal with this situation, the Government of Burkina Faso adopted, at the end of 1989, an economic reform program that led to the implementation of a structural adjustment program in 1991, with support from the International Monetary Fund and the World Bank. Despite its problems, Burkina is one of the few countries of Africa where GDP growth is higher than population growth; according to forecasts, a growth of 1.6% of per capita GDP is possible over the next 10 years. The economic and financial situation is clearly better than that of its neighbors, and the budget deficit has remained relatively low (2.7% of GDP), which precludes the need for a dramatic economic adJustment. The World Bank and the Government of Burkina agreed upon a gradual adjustment program to restore fiscal equilibrium and stabilize public spending. In keeping with its economic structure, Burkina Faso's energy scheme is characterized by underconsumption and a dependence on wood fuel. In 1991, 20 kilograms of per capita oil equivalent (KOE) of commercial energy were consumed, one of the lowest in the world, whereas traditional energies accounted for 91% of the energy balance. Firewood consumption, which involves 100% of the rural population, as well as a large part of the urban sector, amounts to 3.4 million tons per year (1992) according to RPTES, 1994 report. Millington et al., 1994 mention 4.3 millions tons (air-dry) for 1990. The rest of the energy balance in 1992 is covered by about 202,000 tons of oil equivalent (TOE) imported by land at a high cost for the national economy (RPTES, 1994b). In 1991, 60% of these imports were absorbed by land transportation, whereas electric power generation required another 20%. The consumption of oil products in the residential sector was 10.4% of total oil imports in 1991, basically comprised of kerosene for lighting and LPG for cooking (Sonabhy, 1993). Apart from biomass, the country relies on a limited but relatively important hydroelectric potential, given the market's small size. In 1988, the 14-MW hydropower station of Kompienga was 54 commissioned, followed in 1993 by the multi-purpose 16-MW project of Bagre. A total potential of 100 MW has been identified in the country, which would enable the country to meet its electricity demand for the coming ten years. Although demand is rapidly growing, electricity in Burkina Faso is a luxury service to which most of the population has no access. Electricity covered only 4.8% of the population in 1987. IV.2 The Economic Importance of Traditional Energies The presentatior of the National Accounts of Burkina does not permit an accurate determination of the forest sector's contribution. Silviculture, fishing, and hunting, which includes the forest sector, accounted for 5.4% of gross domestic product (GDP) in 1992, with a fairly constant share over the last ten years (Ministere des Finances et du Plan du Burkina Faso, 1993). About 47,000 persons are working in this sector of the economy, which includes firewood and charcoal production (RPTES, 1994b); this production is estimated on the basis of its use, namely, its final consumption in househo- ; and intermediate consumption in small industries. rn Burkina Faso, a mere 15% of total fuelwood consumption is marketed in urban zones. The bulk of firewood consumption is in the form of self-consumption in rural areas. In addition, charcoal covers only a marginal share of wood fuel consumption. Only 3% of total firewood consumption is converted into charcoal. Table 14 summarizes the estimate figures for the share of firewood in the country's economy. Table 14 Burkina Faso: Contribution of Wood Fuels to GDP (1992) (10' CFA francs) Tons Turnover Value added Fuelwood 3,371.3 22,580.5 17,110.5 - Urban 381.6 7,632.0 2,162.0 - Self-consumption 2,989.7 14,948.5 14,948.5 Charcoal 18.6 1,655.0 1,224.0 TOTAL 3,389.9 24,235.5 18,334.5 * estimated at 5 FCFA/Kg Source: RPTES, SEED. According to these estimates, this activity produces a turnover of about 24.2 billion CFA francs and a Added Value 18.3 billion FCFA of per year in 1992 and accounts for about 2% of GDP. Owing to the 55 scarce development of firewood trade and the low share of charcoal production, the value added from these activities is less than what could be expected. A study conducted by the FAO in 1987 to assign a monetary value to rural consumption established that the value added of wood fuel could be close to 35 billion CFA francs, that is, 90% of the contribution from the silviculture sector.42 In Burkina Faso, the dynamics of urbanization and the integration of the rural economic system to the national economy has not yet led to the mass marketing of fuelwood. Urban consumption modalities are still closely linked to rural life. Even in urban centers, charcoal has not thrived, and people prefer using firewood directly. A household survey undertaken in 1987 in Ouagadougou showed that 71.9% of households cooked only with firewood, whereas only 1.7% cooked exclusively with charcoal. In 1993, only about 100,000 tons of firewood, that is, 3% of total firewood consumption, were transformed into charcoal. Economic value of firewood As usual, the current price of firewood is determined by the payment of a stumpage fee or "permis de coupe", levied since 1985, in the amount of 300 CPA francs per metric stere, which is equivalent to about 1 CFA franc per kilo. This value, however, is far from representing the resource's economic cost. In the price structure, this value is equivalent to only 6% of the final consumer price. In practice, since only a proportion of the commercial consumption of firewood effectively pays the tax, the price of firewood is far below the officially set value. For all intents and purposes, firewood resources may be viewed as a free good. A study conducted by the Ministry of Environment and Tourism and the School of Economics of the University of Ouagadougou (MICM, 1991) concluded that the economic value of firewood is 41 CFA francs per kilo (Ministere des Finances et du Plan, 1991) 43, that is, 32,800 CFA francs per cubic meter. If this value were incorporated into the price of firewood, the stere which currently costs 1,610 CFA francs when sold on the roadside should increase to 18,010 CFA francs". Recent estimates mention 12,000 FCFA per hectare natural forest management, at an average yearly production 42 There was no way to confirm if the figure referred to value added or turnover. 43 This number exceeds the 25 FCFA/Kg upper limit value of economic cost for fuelwood used by SEED. 44 If the stere is supposed to weigth 300 Kg the stumpage fee should be 12,300 FCFA/stere insted of the 18,010 FCFA/stere mentioned in the study above. 56 of 0.7 tons/hectare, 45 a total of 700,00 actares should be needed to supply the urban den nd of traditiorn fuels. According to these figures, the economic cost of the commercial consumption of firewood, calculated on the basis of its replacement cost, would be about 20.196 billion CFA francs, equivalent to 2.4% of GDP in 1992, a figure that is lower than those of other previous studies (RPTES,1994b; ESMAP, 1991). This number would be reduced to 8.4 billions with natural forest management equivalent to 17 FCFA/kG. If the economic cost of commercial firewood is based on the cost of substituting f. -ewood for LPG, about 36,000 tons of LPG in addition to the 2,900 tons that are currently being imported would have to be imported at the border cost of 165,163 CFA francs per ton (which includes the CIF price in the port of Ghana plus overland transport to Burkina's border). This would yield a toti.l of 5,945,800,0%0 CFA francs, a value three times lower than the economic cost of reforestation, calcu-sted by means of the forest resource replacement method. This figure is on'y indicative, since it is a value that would imply a 34% increasf over the current oil bill, without including the cost of the in ;stments needed to meet the new demand for LPG (import of cylinders, bottling plants, kitchen stoves, etc.), The 20.196 billion CFA francs could be considered an over-estimate of the replacement cost. Assuming 25 FCFA/Kg, maximum value used by SEED as economic cost of fuelwood as reforestation cost, a new estimate would lead to number near the 12 billion CFA. This number will be reduced to 8.4 billion FCFA is natural forest management is considered. After devaluation economic cost of LPG (border price) almost doubled, so LPG imports are now higher than reforestation costs. Considering other benefits of afforestation (employ, soil protection, etc.) and knowing that almost all costs involved e local cost, after devaluation, would be difficult to justifL speeding LPG consumption against reforestation or natural forest management as policy option. It has to be remembered that cost of LPG do not include investments in infrastructure (cylinders, stoves, etc.) and oil import must be paid in hard currency. IV.3 Economic Policy and the Traditional Energy Sector After independence, the State of Burkina Faso, just as in the other countries of the CFA zone, took over control of the country's most important economic activities. In keeping with this tradition, since 1976, the state monopoly Societe Nationale d'Electricit6 du '5 Taken as an average of productivity Burkina's woodland mentioned by Millington el al..1994. 57 Burkina (SONABEL) has been handling all operations involving the production, transport, distribution, and marketing of electric power, whereas since 1985 the SociEtt Nationale Burkinab6 d'Hydrocarbures (SONABHY) controls all import and storage activities for oil products. In addition, the State is co-owner of several companies that distribute oil products. Table 15 Burkina Faso: Oil Imports and Total Exports 1985 1986 1987 1988 1989 1990 1991 1. Oil imports 18.6 15.5 9.9 9.8 10.5 16.1 17.2 (10' FCFA) 2. Total exports 31.1 28.7 46.6 41.9 30.3 41.3 29.9 (10' FCFA) _ 3. 1/2 (%) 59.8 54.0 21.2 23.3 34.6 38.9 57.5 Source: Institut National de la Statistique et de la D-mographie The import of oil products (see table 15) absorbs a large part of export earnings. The decline in the ratio between oil imports and total exports observed in 1987 and 1988 is due to the parallel occurrence of two favorable events: good crops and falling oil prices. As of 1990, oil imports have been higher than food products. Budget and Fiscal Policy The prices of oil products were set by a decree issued by the Domestic Trade Directorate (Direction du Commerce Interieur). The Equalization Fund (Caisse de Perequation) is an agency created by the State to stabilize prices and subsidize several products. Taxation of oil products has traditionally been an important source of income for the State. Customs duties and taxes on oil products account for an average of 64.1% of their import value (Martin, 1992), the highest in a sample of 11 african countries. During the period from 1986 to 1989 receipts from income taxes on goods and services each contributed around 20% of total public revenue. Revenues from taxes on international trade (of which 95% derived from import taxes) accounted for around 45% of total revenue, and a substantial part of the remainder came from levied on petroleum products (The World Bank, 1993b). As a result of the fiscal reform, indirect taxes on petroleum products declined from 2,247 million FCFA in 1989 to 98 million in 1992 (Ministere des Finances et du Plan, 1993). This loss in revenue was partially compenseted by an increase in taxes on international trade. In 1988, the General Equalization Fund retained an amount equivalent 58 to 1.5% of GDP as "profits" on the sale of oil products, although it engaged in no commercial transactions involving this products(The World Bank. 1993b) Despite these positive results, over the last few years, the level of fiscal revenues has actually declined and public spending has increased, especially those expenditures that are difficult to cut, namely, the government payroll. This remains one of the major factors in the--current precarious budgetary situation. After falling by 2% between 1982 and 1985, the salaries of public employees are absorbing 60% of public -revenues and 70% of the government's operating expenditures. The burden of these salaries on public finance is not so much due to the number of public employees.as to the high amounts of their remunerations. The average salary of a Burkina Faso public employee is 15 times the per capita GDP, compared to an average of 10 times in other countries of the West African Monetary Union (The World Bank, 1989b). The energy pricing policy has always been affected by the Government's fiscal needs. Until 1985, the import tax on LPG declined from 36,000 to 9,000 CFA francs per ton; however, as of that year, changes were introduced into the pricing structure of oil products, increasing fiscal earnings on LPG, from various origins (import tax, stabilization fund, etc.) to 71,000 CFA francs per ton, that is, the equivalent of 22% of final price. The fall of ex-refinery prices in Ghana in 1988 added another 23,000 CFA francs per ton to the Government's tax revenues, thus providing the State with a 32% share on the final price of oil products (ESMAP, 1991). With this pricing policy, despite the low growth of consumption, government revenues stemming from LPG sales increased from 107 million to 156 million CFA francs between 1987 and 1988. The pricing policy for kerosene was similar: between 1981 and 1985, the sum of all these taxes grew from 21% to 32% of final price. This experience indicates that to date the Government has used the energy pricing policy more as an instrument to increase it fiscal revenues than to promote the substitution of wood fuels. Local oil products prices differs a lot between neighboring countries. A consequence of this price differentials is widespread fraud and illegal trans-border trade of oil products, which in border areas may account for up to 20% of the market for these products. According to estimates from SONABHY, in 1991 parallel imports through the border posts of Tindangou and Kantchari amounted to 1.8 bil on CFA francs, equivalent to 7% of the sales vou me for that yea: as a result, the State lost about 900 mi11ion CFA francs .in customs duties and taxes that it was unable to collect. 59 Although there is no enough historical series on firewood prices, there is evidence that these prices doubled during the seventies. In 1985, the Government established the pricing structure, and prices of both firewood and charcoal started recording declines in current terms". The pricing structure does not provide any incentives for the wood-cutters; they therefore have no interest whatsoever in reforesting. The price of charcoal is not regulated because there is no policy that encourages its use. At the end of 1993, the price of charcoal between 90 and 100 CFA francs per kilo. wJs The few resources available to the Forestry Service are inadequate to ensure an appropriate surveillance of firewood cutting and transport to the cities, thus leading to low tax collection on these activities. In 1992, the income stemming from the various taxes on firewood trade amounted to 71.1 million CFA francs, compared to an estimated total potential revenue of 458 million CFA francs. In other words, 85% of firewood trade slips past established fiscal controls. Nevertheless, efforts by the Government since 1985, when only about 35 million CFA francs were collected, have increased the volume of tax collection twofold. Institutional capacity-building would enable the Forestry Service to improve tax collection and would completely finance the budget of the Ministry of the Environment and Tourism, whose annual allocation is about 500 million CFA francs, of which 78% is for paying salaries. It would also permit increasing the investments needed to reduce the destruction of the forests and prevent further environmental deterioration. About 80,000 hectares of forests are deforested each year between 1981 and 1985 (The World Bank, 1993d) and according to Llallement, 1990 quoted by Pearce, 1993 the resulting losses of biomass show up as forgone household energy (fuelwood) reach per year 2.1 millions m equivalent to 46.7 billion FCFA47. The Ministry's overall budget, however, in contrast to its growing needs, has been reduced by 26%, compared to 1987 levels. One of the economic policy elements that exerts the most influence on forest resource management is ownership rights. Ownership over a resource, in this case, the forest, affects the perception of the " 1980-1991 yearly average inflation rate was 3.8% (The World Bank, 1993d) meanwhile fuelwood and charcoal prices between 1985 and 1992 remain constant. '7 Other losses due to natural resources estimated by the same author are: 10 billion FCFA of reduced livestock yield due to fodder losses and 15.3 billion FCFA of forgone millet and sorghum crops valued at market prices. The study does not say how much of this damage is related directly to deforestation. 60 long-term benefits that can be obtained from this resource and therefore opens up the possibility of making investments to protect it. The lack of any ownership entitlement to a resource, however, induces the consumer of the resource to maximize short-term profits and to apply an unsustainable exploitation policy. This concept is of the utmost importance in Burkina Faso, because most forests are viewed as public property. In such a situation, in Burkina Faso, where firewood marketing has not been fully developed", the valuation of forest resources by the population depends largely on their perception of the scarcity of the resource. The first problem that emerges regarding this resource is the right to land ownership. Although there is an agrarian reform and land ownership law in force since 1983, tradition and custom prevail over ownership of land and forest resources. As the population grows, the need for new land for farming and grazing, along with firewood consumption, also grows. In this situation, the forest competes with land use. The land ownership regime is an issue that has been widely discussed in Burkina. It will take a long time for traditional societies to adopt a land ownership system based on private property. Meanwhile, community property, viewed as an intermediate step toward this goal, seems to be the most natural course to take. Regarding this, the formation of Village Land Management Committees, with legal rights on land and forest ownership, has been promoted, but this is not an easy task and the adoption of this type of proposal produces new problems. In any case, changes in the land ownership regime cannot be expected at least for the next 10 to 20 years. IV.4 Long-term Situation Table 4 provides the results of the two demographic growth scenarios suggested by the West Africa Long-Term Perspective Study (WALTPS) of OECD. They take into account migratory flows and the impact of AIDS on the demographic growth rate. The population growth rates for Burkina Faso for the period 1990-2020 under review are estimated to be 1.9% and 2.3% in Scenarios A and B, respectively. " This could be concluded from the large proportion of non- market rural consumption (86% in 1992 according to the RPTES, 1994b report). If it is supposed that some urban consumption Is also self-gathered it could said that no more than 14% of fuelwood goes into the market. 61 Table 16 Demographic Forecasts to the year 2020 Scenarios A and B 1990 2020 Scenario Scenario _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ A B Total population (millions) 8.7 15.4 17.2 % of urban population 22.1* 38.0 27.1 * The world Bank in nis Worla Development Report 1993 prese ts a very different estimate of urban population: 9% Source: WALTPS/OECD The most relevant difference between both scenarios is in the urbanization rate. In absolute terms, the urban population in scenario A is 20% higher than that of scenario B (see table 16). The rural-urban composition of the population will have a more decisive impact on the energy transformation process than the absolute population figure; nevertheless, the situation may be quite different depending on the income level and the equity of income distribution involved in these two scenarios. Greater urban population with better earnings could accelerate the use of LPG and reduce firewood consumption, whereas the same population but with lower incomes could favor the use of charcoal and therefore foster an increase in its consumption. The short- and medium-term economic growth expectations for sub- Saharan Africa are between low and modest. Although some of the region's countries may be able to maintain the momentum they have gathered over the last few years throughout the rest of the nineties, in general their future is uncertain. It is expected that growth will be modest; nevertheless, it is quite unlikely that per capita income and consumption will increase perceptibly. The number of persons living in poverty will increase in both absolute terms and as a proportion of total population. The World Bank forecasts that, as a reference scenario, between 1994 and 2003 average per capita GDP growth in this part of the world will be about 0.9%, whereas per capita consumption will grow by 0.3%. For the low-income primary producers (LIPPs), however, among which The Gambia, Mali, Niger, and Burkina Faso, economic growth forecasts during the period specified above suggest an even 62 lower figure: 0.5% per capita GDP growth". It is evident that, under the circumstances that have been predicted, the substitution of wood fuels will be a particularly slow process. There is still the possibility that LPG or kerosene penetration, as substitutes of firewood, will come to a standstill or reverse. Rapid urbanization will determine the pace of firewood marketing, and it is very likely that large-scale charcoal production will begin to meet the need of growing urban markets as firewood supply areas are farther away from urban centers. A small forecasting exercise could serve as a reference to analyze the energy transition process and its impact on the country's economy. The assumptions on which the demographic and economic forecasts are based are as follows: i. Demographic control will be relatively successful, leading to a decline in the population growth rate from 3.3% in 1970-1990 to 1.9% between 1992 and 2020. In practice, this means selecting Scenario A. Reducing demographic growth is indispensable for ensuring the sustainability of development. ii. Urbanization will accelerate. The urban population will increase at an annual rate of 5.1%, mainly as a result of rural migration, mostly to Ouagadougou. iii. Oil prices will rise moderately, and it is possible that 10% of the urban population, corresponding to the high-income urban population, will switch to LPG use. This means a 45% increase in per capita consumption for the urban population, compared to current consumption figures. The rest of the urban population will continue using firewood, with the same efficiency as the one now prevailing. iv. It is also assumed that the entire rural population will continue using firewood and that its gathering will essentially be free, without any monetary fee. In addition, it is assumed that the per capita consumption of firewood will remain constant. This implies that the improved stove program will be maintained for rural zones with the same intensity as it has been developed to date. "' This is an average estimate for the entiry group of LIPPs countries. LIPPs are a group of 35 countries, of which 5 are in Asia, 3 in Latin America, one in Middle East, and the remaining 26 in Africa. The World Bank forecast does not give details -by country. 63 Table 17 Forecast of Wood Fuel Consumption for the year 2020 1992 L 2020 - POP (I') Wood lo, LPG 1i3 POP (10') Wood 10' Tou. LPG 10' Ton. Ton. Ton. Urban 1.4 379 2.9 5.85 1422 17.5 Rural 8.1 2989 0.0 9.55 3499 0.0 TOTAL 9.5 3368 2.9 15.4 4921 17.5 The main conclusions that can be drawn from this exercise are summarized below: i. The share of the commercial volume of firewood as part of total household consumption will increase significantly, from 11% in 1992 to 29% in 2020, mainly as a result of urban population growth. This means greater plundering and wastage of forests and a constant rise in the price of firewood as the forest areas where logging and wood-cutting take place are increasingly farther away from the cities. ii. At the begining of the nineties annual productivity of forest resources (sustainable yield) in Burkina was higher than firewood consumption (Millington and others). In the scenario under analysis, the annual consumption of firewood for the horizon year is close to the annual production of forest biomass, or the so-called sustainable consumption, which according to the WALTPS scenario (Ninnin report) would come close to 5 million tons for that year. The situation is summarize in table 17. iii. Even though this escenario considers the energy transition a slow process, LPG consumption will increase substantially. Investments in infrastructure will have to be made, mainly in storage facilities and bottling plants, the import of kitchen stoves, and increasing the stock of cylinders and the transport fleet. In view of experiences accumulated in the region, it is advisable that these investments be made by the private sector in accordance with market conditions. iv. Despite the growing importance of LPG use, its share of total oil product imports will be quite limited. Assuming that total oil consumption grows by 5.1% per year, which is the growth rate recorded over the last ten years, the value of LPG imports should not amount to more than 4% or 5% of the country's oil bill. v. Some actions by the State in the realm of pricing and fiscal 64 policy, generally applicable to all RPTES countries, will nevertheless be necessary. .7mestic oil prices should come close to their economic value or CIF value; to achieve this, oil products should no longer be a privileged source of public revenues. Another action that the State should undertake is improving coordination with neighboring countries regarding pricing and controlling the illegal trade of hydrocarbons. Fiscal policy will have to be standardized and exchange of information will have to be improved. vi. Expanding the LPG market wil; help to reduce unit costs of transport and storage; it is also possible to achieve substantial reductions in CIF prices if some type of coordination is established between governments for contracting shipments and transport between ports and landlocked countries. vii. As a result of the above, it can be concluded that priority should be granted to strengthening the Forestry Service, in order to adequately manage the energy transition process in Burkina Faso. The need to improve the forestry service transcends the mere concern for wood fuel consumption; it is also indispensable to ensure sustainable agricultural development, which is a driving force behind the country's economy. viii. The recommendation from the previous paragraph is also essential so that the forest resource can assume its real economic value. Improving tax collecting and supervision not only enhances the value of firewood, but also significantly improves the financial capacity of the Forestry Service. Nevertheless, over the longer term, it will be necessary to introduce reforms in the land ownership system. It is expected that the latter process will be slow. IV.5 Conclusions The Burkinabe Government hs the intention to take a series of macroeconomic measures which shall have a direct effect on the use of the traditional fuels8. Among the strategies of the Plan 1993-95 appears as priority the improvement in the handling of natural resources by means of the implementation of the Tropical Forest Plan and the National Land Management Program which shall have a decisive impact to guarantee the sustainable production of firewood. Within this context, comunity participation shall be encouraged in the responsible handling of forests and of the land. A national handling program and environmental information shall be prepared as basis for planning and environmental monitoring. The Government is convinced that a key element for the improvement of the quality of life and for the promotion of sustainable development is the 65 demographic growth control. In this sense, it is endeavouring to broaden the contraceptive programs which hardly cover 4% of the population, to 60% by the year 2005. The low rate of urbanization of Burkina Faso has determined also low level of market development of traditional fuels. The use of charcoal, although it has increased in the last decades, it does not reach important segments in the urban consumption of energy. Yet, Burkina kept the highest index of deforestation of the 5 countries studied but it has, besides, an important percentage of its territory as a protected zone (9.7% in 1990. Senegal appears in the first place with 11.1%). Forestry Policy After the devaluation of FCFA in January, 1994 and with the almost duplication of the CIF value in Francs CFA of the petroleum derivates, the option of reforestry for energy purposes appears more attractive than the substitution with LPG if reforestation costs are obtained, under 25 FCFA/kg of standing firewood. There are experiences showing the possibility of costs of 12,000 FCFA/Hectare which is equivalent to some 5 FCFA/Kg of standing firewood. The protection of the environment is the most important argument to justify the reforestation programs. The reforestation, besides supplying firewood, protects soils and water sources. It has already been mentioned that 50% of the soils of Burkina are impoverished and unless the deterioration process is reverted water and biomass shall not be sufficient to supply the needs of the population in one or more decades (Lallement, 1990). Likewise in other countries the stumpage fee should be increased. At the present time it is equivalent to 1 FCFA/Kg. During a first phase the stumpage fee should be increased at the estimate cost of fuelwood in natural forests management projects that is, some 5 FCFA/Kg this is equivalent to some 1,500 FCFA per stere. This level may be maintained until the demand of firewood does not exceed the annual production of natural forests projects. It is evident that the strengthening of the forestry sector is necessary. The increase of its field and technical personnel and of the administrative action. In this sense, the international technical cooperation should play an important role in the preparation of forestry charts. The immediate restructuring plan of the forestry sector should improve the poor levels of collection since the illegal traffic of firewood fuels would make it more attractive upon increasing its price. LPG Price Policy At Burkina Faso, monopoly of LPG imports as well as other petroleum 66 products is in the hands of the SONABHY a state-owned company. This company is, furthermore, owner of a distributing infrastructure (bottles, filling plant and storage tanks). As of 1990 the customs fees were reduced by 75% on gas imports, however, it is still possible reductions of this item (until 1993 the custom rights on gas was of 10 FCFA/Kg equivalent to a 4% price to consumer. The prices of GLP to consumer increased after the devaluation of slightly 25% which means a significant increase in the subsidy level. Until the end of 1993 the subsidy was 13.7 FCFA/Kg. Although there is no information as to the present price structure, it is known that the CIF prices increased by 100% in its local currency equivalent. With the price level after devaluation the subsidies should be near 35 FCFA/Kg. These distortions in prices should be corrected. Likewise, the liberalization of gas distribution should be required and, at medium term, the import of petroleum product derivates. On a short-term basis, it is recommended the elimination of subsidies but, also, that of import rights. The amount of the subsidy (13.7 FCFA/Kg before devaluation) and the rights (10.7 FCFA/Kg before devaluation) shall have an almost neutral effect, however, it will simplify the price structure. At medium term better conditions in the contracts with the SIR, import reductions in the CIF Adibjan may be obtained. The international prices are inferior by 25% to the CIF prices negotiated by Burkina with the SIR. Another possibility is the search of alternative markets as Ghana. At the present time Ghana is building a hydrocarbon deposit at the river port of Buipe, on the Volta river, some 400 kilometers from Ouagadougou (Sonabhy, 1993). With the construction of this warehouse Buipe will be the nearest point of supply which will represent a significant advantage, the rapid supply and the reduction of transportation costs. 67 V. THE GAMIA V.1 General Considerations With a surface area of about 12,000 square kilometers, The Gambia occupies'a narrow stretch of a land 20 kilometers wide on both sides of the Gambia River, which extends 400 kilometers inland from its mouth. The country is surrounded by the neighboring country of Senegal and is located in an agricultural-climatic enclave that has been severely affected by a progressive decline in rainfall levels and persistent, long-lasting droughts over the last 15 years. With 30% of GNP coming from agriculture, especially peanut crops, and 80% of the population dedicated to agricultural and shepherding activities, The Gambia's economy is extremely vulnerable, to the contingencies of climate. After a period of relative economic stability between 1970 and 1986, The Gambia's economic and financial performance deteriorated rapidly as a result of external factors and inadequate economic policies. During these years, the State completely took over the country's economic management by creating state enterprises and controlling the external sector. At the same time, price distortions and market control of primary products discouraged private. investment in agricultural activities and the industrial sector. In response to this crisis, in 1985, the Government of The Gambia adopted a stabilization and adjustment program, which along with good weather conditions helped to dramatically improve the country's economic and financial performance. Between 1985 and 1990, GNP grew by 3.5% per year in real terms, thanks to private- sector recovery, especially due to growth in construction and tourism. In 1991-1992, GDP grew 4% per year, largely as a result of the impetus given to commerce and tourism. Inflation declined from 70% in 1985 to hardly 4% in 1992. On the basis of these results, The Gambia is now viewed as a relatively successful case among the sub-Saharan countries that have applied structural adjustment programs and economic reforms. Table 18 provides the most important economic indicators for The Gambia. The Economic Recovery Program set up in 1985 with support from the World Bank and the International Monetary Fund redefined the role of the State in the economy, removed subsidies and price controls on agricultural products, pegged the exchange rate to the market, and introduced reforms in public enterprises aimed at reducing public spending. The economy was diversified; the share of agriculture compared to services and industry decreased; and non- agricultural activities now account for a growing part of rural family incomes, thus reducing the vulnerability of rural incomes to the seasonality of agricultural production. 69 Table 18 The Gambia: Main Economic Indicators Main economic & social indicators 1986/7 1989/90 1991/92 1. Population (millions) 0.78 0.86 0.92 2. GDP 10'constant Dalasis 1976/77 469.9 527.0 562.2 3. Per capita Income (Dalasis) 1,517.8 2,351.3 2,792.0 4. Net-imports (l10Dalasis) 483.2 816.4 693.8 5. Net-exports (10'Dalasis) 109.8 198.8 215.0 6. Oil Imports (10Dalasis) 71.5 137.6 190.8 7. Groundnut exports (10'Dalasis) 47.3 90.9 51.9 8. Technical rioperation (10'US$) __ __ 46.7 9. Debt Service (l'Dalasis) 63.8 202.4 186.3 l0.Consumer price index 1974=100 693.3 953.3 1165.0 ll.Exchange Rate (1 US$=Dal.) 7.3 -.8 9.1 Thlis numbers were obtain trom tne official stat:istiques,peaGucting re-exports from total imports and exports figures. Because re- exports are important in the Gambia (more than 80% of exports are actually re-exports and about 40% of imports are re-exported). This seems to be a more realistic estimate of the trade balance. Source: National Accounts of The Gambia (1986/87 to 1991/92) Central Statistics Dept. Statistical Abstract of The Gambia 1992. Central Statistic Dept. Despite the progress achieved, with a per capita GDP of US$360, The Gambia is one of the ten poorest countries in the world. Close to 60% of its inhabitants are living below the line of absolute poverty, whereas 40% are below food poverty line (that is, with not even enough income to feed themselves). In addition, the economic transformations and reforms of the last few years have speeded up urbanization processes and a large flux of rural population is migrating to Banjul, the country's capital, as well as other second urban centers. This phenomenon is producing a geographical displacement of poverty from the rural areas to the Greater Metropolitan Area of Banjul and is exerting heavy pressure on an already deficient urban infrastructure. In 1990, The Gambia had a population estimated at one million 70 inhabitants; nevertheless, it has one of the highest population growth rates in the Region. The high demographic growth rate is the major cause of declining per capita GDP that has been recorded in the last 10 years and is one of the major obstacles to development. With an annual growth rate of 3.0%, the population of The Gambia will double in hardly 23 years, whereas the population of the Greater Banjul Area is increasing at a rate of 8% per year. The population structure displays an even more distressing picture: 50% of the population is under 15 years of age. In 5 to 10 years, when this population reaches the age of procreation, a rapid increase of the population is expected, thus ensuring the persistence of high demographic growth rates for still several decades in the future. In 1993, 40% of the population was living in urban centers (contrasted with 25% only a few years ago), a large part of which in Banjul, whereas this percentage amounted to only 15% in 1982 (The World Bank, 1993b). The high demographic growth rate of Greater Banjul exerts strong pressure on infrastructure and urban employment needs. One of the most visible consequences of urbanization is the growth of the informal sector and unemployment. In 1989-1990, the formal sector employed only 8% of the labor force, and of this percentage a large part was accounted for by employees working in public institutions and companies. In view of the country's socioeconomic characteristics, its energy system heavily depends on traditional energy sources, mainly fuelwood. 61% of gross energy consumption comes from fuelwood(RPTES, 1994c), nevertheless according to the African Development Indicators (The World Bank, 1992a) this percentage was 77% in 1979 (this last estimate seems more realistic) . The remaining 34% (or 23%) involves imported oil products, mainly to supply transportation, which absorbs 77% of oil product consumption. LPG and kerosene jointly account for less than 2% of oil imports. The electric power system is small and provides electricity coverage to only 40% of the population of the Greater Metropolitan Area of Banjul and smaller shares of other urban centers, on the basis of small diesel-fired plants, whose total installed capacity is no greater than 27 MW. The production of charcoal was forbidden in 1980; nevertheless, an amount estimated at about 20,000 tons per year (RPTES, 1994c) that must necessarily enter the country from Senegal as contraband is used mainly as a heat source for ironing. According to the RPTES report on The Gambia, 485,000 tons of fuelwood are used per year to supply the energy consumption of 90% of the population. 60% of total fuelwood consumption is represented by the rural subsistence sector. Only 5% of imported kerosene is used in households as a source of lighting. The bulk of Kerosene imports is actually jet fuel. 71 V.2 The Economic Importance of Traditional Energy Sources According to National Accounts, in fiscal year 1991/92, the forest sector in The Gambia accounted for only 0.5% of GDP (it should be kept in mind that this item also includes fishing and livestock raising). This share has remained almost constant over the last eight years (see table 19). The modern energy sector, which amounted to only 0.6%, also displays a low share of GDP (this sector actually involves electricity and water). Table 19 The Gambia: Contribution of the Forest and Energy Sector to GDP (at constant 1976/77 prices)* 106 Dalasis 86/87 % 89/90 %_ 91/92 % Primary Sector 121.5 25 127.6 24 124.6 22 -Forest 2.4 0.5 2.8 0.5 2.8 0.5 Electricity and water 2.2 0.5 3.1 0.6 3.2 0.6 GDP 469.9 100 527.0 100 562.2 100 * Refers to fiscal years. Source: National Accounts of The Gambia (1986/87 to 1991/92), Ministry of Finance & Economic Affairs According to data available in The Gambia's RPTES report, in 1993 traditional energies recorded a turnover estimated at i million dalasis. According to information from Table 20, the share of traditional energies in 1993 accounted for about 1.5% of(GDP. This value, which is only indicative, would be considered the maximum figure for this sector's contribution. The commercial extraction of fuelwood is estimated to be 180,730 tons per year; the country's characteristics, however, prevent us from viewing these figures as reliable. According to information from the Forestry Department (RPTES, 1994c), as much as 50% to 60% of the consumption in the Greater Area of Banjul comes illegally from Senegal, as well as the greater part of the 21,000 tons of charcoal, whose production and trade is forbidden since 1980 but which is used as a source of heat to iron clothes. The price paid to extract fuelwood does not reflect the real cost of the resource. Officially, the Forestry Department grants fuelwood extraction permits at an annual cost of 500 dalasis, to which 750 dalasis should be added for the three assistants permitted by law (250 dalasis for each one). In addition, 200 dalasis are paid for each seven-ton truck, and each license-owner is entitled to transport a maximum of five trucks per month, as 72 long as it is only deadwood. Nevertheless, none of these measures are complied with, and 10-ton trucks are the most popular for transporting fuelwood, and it is quite common to find them carrying sappy wood. Moreover, most fuelwood sales slip past governmental monitoring and control. Table 20 The Gambia: Contribution of the Forest and Energy Sector to GDP in 1993 (in million dalasis) Turnover Value added I.Fuelwood* 149.4 45.5 - Great Banjul 102.0 28.5 - Informal sector 3.0 1.0 - Small cities 39.4 11.0 - Rural consumption 5.0 5.0 II.Charcoal ** 26.2 -Non-controlled trade 26.2 4. III. TOTAL 175.6 45.5 * Was estimated at U.l1b Dalasis/Kg eqi-Va&Fent-tb-6- 5rt used for rural consumption for other countries. It is assumed 1 Dalasis/Kg in the Great Banjul area and 0.5 Dalasis/Kg in small cities. -* It is supposed that the all the charcoal is illicitly imported from Senegal, so its added value for the local economy is negligable. According to the RPTES report, the official price of standing wood is about 0.05 dalasis per kilo, that is, a derisory, purely symbolic price that is not even able to cover the expenditures of the forestry service. Considering that only 20% to 30% of fuelwood sales are actually controlled, the real price of fuelwood is far below the estimated figure. For all intents and purposes, the forest resource for energy consumption should be viewed as a free good. The economic cost of fuelwood can be estimated on the basis of the replacement cost, as long as the method of exploiting the forest is considered depredatory or wasteful, that is, causing deforestation. Another method to determine this cost would be the equivalent cost of substituting wood fuels for LPG. In the former case, according to the criterion that was set, only the commercial, basically urban consumption of fuelwood should be considered, on the assumption that self-consumption does not lead to deforestation. The calculation of the economic cost boils down to estimating the 73 costs of the sustainable production of 180,307 tons that are being marketed annually (1993). Although there are no data available on local reforestation costs, the productivity data from projects in the same ecosystem in Senegal can be used, that is, 18.8 cubic meters per hectare/year, or 14.1 tons per hectare. On the basis of this productivity, 12,787 hectares would be needed; and using the same reforestation cost that in Senegal of 16.7 FCFA or 0.5 Dalasis/Kg the total figure would amount 90 million dalasis, an amount comparable to the electricity and water sector's contribution to GDP. The difference between current fuelwood prices, that is, 0.04 dalasis per kilo, and its economic value of 0.5 Dalasis/Kg. provides the estimated ecological subsidy to fuelwood cutting. If this estimate is based of LPG substitution, then 20,000 tons in addition to current LPG consumption would be needed. Bearing in mind the cost reduction that would take place as a result of the market's expansion, the current oil bill estimated at 190.8 million dalasis would have to be augmented by about 150 million dalasis more (at an average of US$828/ton import cost from Senegal), without taking into account the import of the cylinders and kitchen stoves that would be needed to meet the growing demand for LPG. Nevertheless after FCFA devaluation LPG import cost increased and now total economic cost should be around 250 million dalasis (LPG consumer price rose 57% after FCFA devaluation). It could be possible to reduce substantially de import cost of LPG in ab'-ut 1/2 of 1992 prices, improving storage facilities and negotiating best FOB prices and-transportation cost with SAR, but even though the economic cost of substituting fuelwood by LPG is not comparable with reforestation costs. It has to be remembered that this are estimates considering only fuel cost and environmental benefits of afforestation are not considered. V.3 Traditional Energies and Macroeconomic Policy The macroeconomic information on The Gambia is quite limited and not entirely reliable. Moreover, the classification used by the Government to present National Accounts does nothing to facilitate the analysis of the figures; nevertheless, available information does permit outlining the principal relations between macroeconomic policies and the traditional energy sector. In contrast to its neighbors, The Gambia has achieved better results in applying its macroeconomic policies. The implementation of the Economic Recovery Program in 1985 not only fostered somewhat high growth but also restructured public spending patterns, granting priority to upgrading and providing maintenance to existing infrastructure, which as a whole is relatively balanced. The share of salaries in 1992 accounted for 11% of public spending, compared to 20% in 1980, whereas defense and public security only 1.7%. 74 The efforts that were deployed permitted, in 1990, a 50% reduction of the State budget deficit, excluding donations, compared to 1985. Nevertheless, the country continues to rely heavily on external assistance, which since 1985 accounts on average for almost 30% of GDP, more than US$90 per capita, the highest percentage of all the five countries being reviewed. The import of oil products has become a major burden for The Gambia's economy and an obstacle to its economic development. Oil imports, as indicated in Table 21, absorb an increasingly larger part of export earnings. Nevertheless, food imports are increasing faster than net-exports and according to the UNDP in 1986-1988. 55.4% of foods locally consumed come from imports (UNDP, 1992) and in the near future food imports could be as important of oil imports for the trade deficit50 As part of the value of current oil imports, the fuels for household use account for an insignificant share. LPG account for about 2% of total import values in 1992. About 5% of total Kerosene import goes to domestic consumption as lighting source. Table 21 The Gambia: Total Imports and Oil Imports __ _ 86/87 87/88 89/90 91/92 1. Net-exports (106 109.8 154.7 198.8 215.0 dalasis) 483.2 584.4 816.4 693.8 2. Net-imports (106) 71.5 86.2 137.6 191 of which oil 3. Oil imports/net-exports 64.8 55.7 69.2 88.8 Source: Ministry of Trade, Industry and Employment Fiscal and Pricing Policy The Gambia has maintained a more open fiscal policy. Traditionally, subsidies have been low and prices have reflected more accurately the real Costs of these goods. The State does not control the pricing of oil products, especially those fuels for '° It is importante to mention that The Central Statistics Department in his Statitstical Abstract of The Gambia of 1992 presents as food and live animals imports 636.4 million dalasis for fiscal year 1991/92 (about 31% of total imports) and for that same year 190.8 million dalasis of fuel & lubricants imports. It Is quiet possible the former figure includes re-exports. 75 household use that substitute fuelwood; these prices are set on the basis of the CIF price plus a margin for the retailer. Cust.Ims duties and other tax levies have l,een eliminated. In The Gambia, LPG prices are completely free, and the import of oil products is carried out by private operators who directly buy on the international market without State intervention. levertheless, because of the specific characteristics of the Gambian market,- the CIF prices of LPG are particularly high. Although The Gambia has a seacoast, these prices are more than twice the CIF prices in landlocked conntries, such as Niger, and Burkina Faso. In The Gambia, in 1992, the CIF price of this fut accounted for 70% of the consumer price. Nevertheless, this is an area where a reduction in costs can be achieved. Although there is no tax levied on the price of LPG, because of the high CIF price, this fuel is the most expensive among the five countries analyzed; this high price is also the major obstacle for LPG penetration in the market of energy sources for cooking. In 1992, The Gambia imported 540 tons of LPG at a cost of US$447,231, that is an average of US$828 per ton; this about twice the ex-depot prices in Senegal. In the oil sector in ger,ral, and the LPG sector in particular, where there are substantial fixed costs, economies of scale can exert a decisiv' role in reducing unit costs. With an annual market of hardly 540 tons per year, The Gambia is adversely affected by high transport and storage costs. A study conducted by the Government showed that the enlargement of port docking and storage facilities in Banjul, for an investment of US$3 million could reduce retail prices from 10 to 12 dalasis per kilo to only 3 dalasis per kilo (RPTES, 1994c). Under the current fuelwood consumption situation in The Gambia, the best short-tE m initiative by the Government would be to create conditions so that local operators can make the investments needed to expand their storage capacity in the port of Banjul and thus reduce the CIF prices of oil products. This would also contribute to halting the illegal entry of oil products from Senegal in border areas. It is reported that on the borders with Senegal, LPG cylinders can be purchased for half the official price in The Gambia (RPTES, 1994c). At present, there is an overall surplus between the annual production of biomass and the demand for fuelwood (RPTES, 1994c; Millington & others, 1994). Nevertheless, the situation is rapidly changing with the growing demographic pressure on the forests (agriculture, livestock and shepherding, wood for construction and fuel), and it is expected that the- e will be fuelwood shorta-as before the year 2000 if present trend continue and no actions --re taken. Accelerating the fuelwood substitution process will mostly depend on the possibility of generating foreign currencies to pay 76 the oil bill. In view of current difficulties being faced by the country to pay its oil imports, any increase in imports should be fully justified and used only in those economic activities where oil is difficult to substitute. Obviously this is not the case for LPG, and to continue using fuelwood may be a sound option. The investments for expanding port facilities should be in the hands of local operators, and they should be free to make them when market conditions require it. Income Distribution Policies In view of the current pricing policy and the complete freedom to import by private operators, the only instrument that the State has available to manage economic policy is the income distribution and poverty abatement policy, which the Government of The Gambia uses actively to play a major role in this area. The process of substituting wood fuels essentially depends on the relative prices of the substitution fuels and family incomes. Nationwide, 56% of the population gathers fuelwood as a free good. This proportion reaches almost 100% in rural areas, but drops down to 25% in the Banjul area where a 14-kilo bundle of logs costs 10 dalasis. Although in 1991, per capita GDP was estimated at US$360, taking into account debt-service payments, savings, and public consumption, available average household income per capita is closer to US$220. If it is estimated that a normal family of six members needs to spend about US$80 per year for LPG to meet its basic cooking needs, without including the initial expenditures of purchasing the kitchen stove for about US$30 and another US$43 to purchase the first gas cylinder, it is easy to understand why LPG in The Gambia has been distributed so sparsely. In addition, although between 1991 and 1992 the consumer price index rose by 16%, the price of fuelwood in Banjul only rose by 6%. According to the last household expenditure survey fuel & power represent 7.6% of monthly expenditure in low income households (less than 1000 Dalasis/month) in the Banjul area. For high income households (more than 20,000 Dalasis/month) this figure is only 0.7% (Ministry of Finance & Economic Affairs, 1993). Close to 60% of the Gambian population lives below the poverty line. If an income-security margin of 25% above the income level used to identify poverty is applied to these calculations, however, only 23% of the country' population may be classified as living in non-precarious conditions (The World Bank, 1993b). Although poverty is basically a rural phenomenon, the urbanization process is rapidly displacing poverty to the Greater Metropolitan Area of Banjul, which is the principal urban center attracting the flux of rural migrants. 77 At the beginning of 1992, the Government, concerned about the scarce effect that economic growth was having on the living conditions of the population, launched the Poverty Alleviation Program (PAP) in an effort to improve the situation of low-income groups. The central strategies of the PAP were administrative decentralization, support for micro-businesses, strengthening local governments, improving the local integration and coordination of programs, and enhancing community capacity to mobilize local resources. If urban fuelwood consumption is going to increase, fuelwood production in a sustainable bases could an important activity for rural population, that would increase no-agricultural income and activities less dependent on climatic variations. Regarding this, agri-silviculture activities for the combined production of fruits and vegetables that depend less on climate cycles and the sustainable production of fuelwood would be advisable. The possibility of improving food conservation in rural areas by drying fruit or smoking meat would permit combining the use of fuelwood, which is still abundant in these areas, with improving food security. Nevertheless, all these small projects should be economically justified for the investments that would be made. But more important of all environmental benefits of this projects have to be taken into account. V.4 Long-term Situation The demographic forecasts for The Gambia are summarized in Table 22. The greatest difference is apparent in the urbanization rate, which in absolute terms implies an urban population of over 30% in scenario A, which will surely affect the Greater Metropolitan Area of Banjul, with major implications for the use of traditional fuels and the energy transition process. In scenario A, the total population in the year 2020 is 2.4 million, with considerable urban growth, which according to current trends would be concentrated in the outskirts of Banjul. On the basis of these demographic forecasts, fuel consumption for cooking would follow the configuration presented in Table 23. Table 22 The Gambia: Demographic Forecasts 1990 2020 2020 Scenario A Scenario B Total population 0.9 2.4 2.2 (millions) Urban population (%) 31.8 51.5 41.7 78 Table 23 The Gambia: Fuelwood and LPG Consumption Forecast 1993 2020 Pop. Wood LPG Pop. Wood LPG lo6 103ton 103ton lo6 103ton I03ton Urban 0.3 180.7 0.5 1.23 593 16.5 Rural 0.7 281.3 -_ 1.17 470 _-- Total 1.0 462.0 0.5 2.4 1,063 16.5 This forecast is based on the following assumptions: i. Per capita consumption of fuelwood in the rural sector will remain constant. In addition, it is assumed that fuelwood will continue to be a free good in these areas. ii. It is assumed that the prohibition to produce charcoal will remain in force and the border controls to prevent illegal trade with Senegal will be tightened. This would also help to reduce the contraband of oil products. iii. Oil prices will remain stable. It is also assumed that the Government will continue applying a liberal pricing policy, with low tax burden on the consumption of hydrocarbons. iv. Better economic performance, mainly due to the growth of tourism, along with the reduction of the CIF price of LPG as a result of upgraded port facilities, will permit the rapid penetration of this fuel in the urban sectors. It is assumed that 20% of the urban population will be using LPG, which means that the per capita consumption will increase from 0.5 to 6.8 kilos per year. It is also assumed that LPG consumption in the rural sector will be negligible. v. One of the major constraints to increasing LPG consumption is the growing burden of the oil bill on the country's economy. At present, the value of exports is scarcely enough to cover oil imports. Higher imports is an indispensable condition for ensuring an adequate supply of energy to develop the country. vi. Even with the fuelwood consumption assumptions presented herein, the balance between sustainable production and fuelwood consumption yields a net deficit. According to WALPTS estimates, the urban consumption of fuelwood will 79 surp the annual production of biomass between 1995 and 2000. f the trends that have been observed persist, the annual productior, of fuelwood by the year 2020 will meet only 20% of demand for that year. Accelerating the substitution process seems unavoidable and should not be postponed. vii. Everything seems to indicate that speeding up the energy transition in The Gambia is not only possible but also imperative. It should also be emphasized that, although The Gambia has the hig._=st retail prices and provides no subsidies to LPG, consumption of LPG has expanded more rapidly than in the other RPTES countries. Between 1987 and 1990, it recorded a growth of 21%, and between 1990 and 1992 a growth of 31%. Despite its small population of about 1 million inhabitants, in 1992 total consumption of LPG was greater than in Niger and was equal to that of Mali, which have populations of over 8 million. viii. The Gambia's oil product supply policy is heavily influenced by refining policy of Senegal, its main supplier. Drawing up better supply contracts with Senegal and improving port facilities will enable CIF prices of oil imports, especially LPG, to be substantially reduced. V.5 Conclusions With an urban index of 40%, one of the highest of RPTES countries (the urban population in Senegal was 39% of the total in 1991), the market of traditional fuels in The Gambia has reached a high level of development. The bulk of firewood trade is di. acted to Gran Banjul concentrating 56% of all the urban consumption and -2% of the total consumption. The high urban index by and its situation of costal country, The Gambia has advantages over the landlocked countries for the penetration of LPG and the substitution of firewood as kitchen fuel. Even though the consumption of LPG is incipient, it grows rapidly without price subsidies. Between 1987 and 1992 the consumption of this fuel went from 450 tons to 1,368 tons. The level of consumption of the year 1992 exceeds in absolute value those registered -. Niger, country with an urban population 4 times higher and comparable to Mali who also has an urban population 4 times higher than The Gambia. GLP Policy The Gambia has practice a policy entirely liberal in the import and distribution of petroleum derivates. The internal market is in the hands of private operators who supply themselves preferably in Senegal at costs way over the international market. Until the end 80 The Gambia has practiced a policy entirely liberal in the import and distribution of petroleum derivates. The internal market is in the hands of private operators who supply themselves preferably in Senegal at costs way over the international market. Until the end of 1993 the Banjul CIF prices (8,826 Dalasis/Tn or 300,100 FCFA/Ton) widely exceeded their counterparts of the landlocked countries): 185,000 FCFA/Ton at Mali, 165,100 FCFA/Ton at Burkina and 143,200 FCFA/Ton at Niger. Apart from the investments in the improvement of port facilities it is little one can say on the role of the state in the promotion of the use of GLP as substitute of firewood. Probably, the Government to Government relationships may be improved with Senegal with the object to obtain better petroleum product supply contracts. This would allow also to coordinate the internal prices of these energetics and avoid the contraband. To keep the present policy that market forces regulate the penetration of these fuels appears to be correct. It is sufficient to observe the evolution of LPG consumption which between 1987 and 1992 kept an average annual growth above 20%. Forestry Policy After Niger, The Gambia presents the highest rate of deforestation with the disappearance of an average 1980-90 of 2.4% per year of its forestry blanket. The rapid development of the firewood market, required by urbanization above all the City of Banjul may cause short-term problems of supply and sustained increase of traditional fuel prices if a sustainable production of forests is not guaranteed. Because of the elongated shape of the country it cannot be excluded the possibility that it is more profitable the transportation of firewood or charcoal from Senegal than from the central parts of The Gambia affecting the forests of that country in the area of Banjul. A forestry policy coordinated between both countries is necessary not only for the trans-borderline consumption of firewood but because both countries share the basin of the Gambia River. The prohibition of the local production of coal should be kept, however the growth of urban consumption will place strong preassure, at short-term, on this measure. Similar to other countries, the forestry sector is weak. An immediate strengthening of the forestry service shall be required, in quantity and quality of the staff and in the improvement of cutting right tax collections. Additionally, the stumpage fee should be increased to its estimate real economic value at 0.5 Dalasis/Kg. At the present time the cost of firewood is slightly 0.05 Dalasis/Kg. Even though the handling costs df natural forests may decrease from 81 approximately 0.1 to 0.2 Dalasis/Kg, it is necessary that the stumpage fees be increade at least to 0.1 Dalasis, this is double of current value. Other recommedations, common to all the other countries, are the importance to be able to count with the international support and the need to promote projects of community participation. 82 VI. NIGER Vi.1 General Considerations The Republic of Niger is a landlocked country; four fifths of its territory is covered by the Sahara desert. As a result of these ecological and climatic conditions, only 12% of the national territory is considered fit for growing crops. A rainfall analysis indicates that, as of the eighties, net rainfall levels are displaying a clear downward trend, with a substantial displacement of rainfall toward the south of the isohyets, along with the irregular seasonal distribution of rain. Since the late sixties, a persistent drought has become apparent throughout the area; it became severe in the eighties and exerted a significant adverse impact on the country's economic performance. Agriculture and grazing are the most important economic activities and the major source of employment for a large part of the 8.5 million inhabitants of Niger (1993 population estimate). In 1991, 37.4% of gross domestic product (GDP) involved the agricultural sector, whose share has increased slightly since 1985. The high degree of dependence on agriculture and the unfavorable course displayed by climate conditions have helped to focus macroeconomic policies on the need to diversify the country's economic base and to halt the deterioration of natural resources. Rapid demographic growth, estimated at 3.3% per year between 1980- 91 (The World Bank, 1993d), is another factor in current circumstances obstructing long-term economic development. The pressure is evident in the urban zones, where demographic growth between 1977 and 1990 amounted to 6.1% per year. At this pace of growth, the urban population will account for 27% of the country's total population by the year 2000, although in 1985 it accounted for only 16%. In rural areas, the population density has increased twofold over the last 25 years and is exerting heavy pressure on the country's scarce natural resources, with destructive environmental consequences. Between 1975 and 1979, Niger experienced unprecedented growth, mainly boosted by uranium exports, but also fostered by unusually good weather conditions and international assistance. Since the commissioning of its commercial operations in 1971, uranium production in the mines of the Air massif in the northern part of the country next to the Algerian border in the very midst of the Sahara desert accounts for 75% of the country's exports and finances 12% of the State's budget. Nevertheless, the international nuclear industry crisis has severely affected Niger's uranium exports, which in 1991 declined to one 3/4 of the values of 1987 exports. Table 24 summarize the main economic indicators of Niger. Bad crops, as a result of insufficient rainfall levels, and the drop in uranium exports led to a severe setback in economic growth which, In real terms GDP in 1990 was 2% lower than the same 84 indicator in 1987. Since 1980, external imbalances were heightened and investment was severely affected. In 1983, the Government of Niger undertook a series of economic adjustment programs aimed at reducing economic imbalances and promoting a recovery of economic growth. The first phase of these programs extended from 1983 to 1988 and was basically geared to liberalizing the economy and stimulating private-sector participation. Control over the prices of agricultural products were reduced, public administration performance was strengthened, the Government's fiscal deficit was cut back, and an appropriate credit policy was maintained. Nevertheless many of the objectives that were set were only partially achieved, owing to the severe drought during those years. Nevertheless, despite the progress achieved, the country's landlocked geographical location and the agricultural and ecological constraints for developing agriculture and extensively exploiting the land are factors that, along with the rapid increase in population, have created a scenario for which it is difficult to be optimistic in terms of the country's short- and medium-term socioeconomic development. Table 24 Niger: Principal Macroeconomic Indicators 1987 1988 1989 1990 1991 I.GDP (10' CFA francs) 671 679 695 675 657 2.Real GDP growth (%) 1.8 1.2 2.4 -2.8 -2.8 3.Population (millions) 7.0 7.2 7.5 7.8 7.9 4.GDP per capita (10w FCFA) 95.7 93.7 92.8 87.3 82.0 5.Exports (10' FCFA) 93.8 85.9 77.7 76.9 87.9 6.Uranium exports (10' FCFA) 85.5 74.9 65.3 63.8 65.8 7.Imports (10' FCFA) 93.4 115 116 106 100 8.Oil Imports (10' FCFA) 5 6 7 7 10 9.0fficial Assitence for 353 371 296 391 376 Development (10' US$) - - l0.Total External Debt 340 356 402 330 337 (10' FCFA) Source: Annuaire Statistique du Niger. edition 1992-1993. Ministere des Finances et du Plan du Niger. African Development Indicators. UNDP-The World Bank, 1992. One of the most visible consequences of the economic crisis is the 85 growing informalization of economic activities. In Niger, it is estimated that the informal sector accounts for 66% of GDP (The World Bank, 1992e). The informal sector absorbs 85% of non- agriculturals' employment and 58% of urban employment. In the agricultural sector, almost all activities are informal; according to official statistics, 99.9% of the contribution from the agriculture, hunting, silviculture, and fishing sector came from informal activities, in 199152 (Ministere des Finances et du Plan, 1993). Just as in other RPTES countries, Niger's energy situation is characterized by the underconsumption of commercial energy sources and the energy balance's high dependence on biomass, which accounts for more than four fifths of the gross domestic supply of energy. The remaining energy needs are met by imports of oil products, mainly from Nigeria. In addition, this country provides 75% of the electricity consumed in Niger, excluding the electricity production for the uranium mines. As of 1981, the start of coal production enabl'ed imported diesel to be substituted for generating the electricity needed to exploit uranium mines in the northern part of the country. As already indicated, the import of oil products is done overland from the refineries of Nigeria, at a high cost for the economy. The market's small size and the high cost of land transport substantially increased the CIF price of imported oil products. Land transport from Nigeria to the storage centers in Niger accounts on average for about 15% of the border price. Until 1993, the State controlled most of the oil sector. Except for LPG, the remaining import of oil products was in the hands of the state- owned company SONIDEP, which determined the price structure and level. The consumption of oil products between 1975 and 1980 experienced an annual growth of 24%; this rate later fell to 2.6% between 1980 and 1985 and 1.6% between 1985 and 1990, accompanying the downward evolution of GDP. In 1990, 107,700 tons of oil product equivalents were imported; 60% of these imports were accounted for by diesel and gasoline used in the transportation sector. The utilization of " Non-agricultural activity refers for example to traditional industry such as lime production, brickmaking, ceramics, beer brewing, alcohol destillation between others. Non-agricultural activities in rural areas intend to define all activities non related directly to crop production. 52 According to the Annuaire Statistique 1992-1993 edition, of the 246.0 billion FCFA (preliminary estimate) of agriculture, hunting, silviculture and fishing sector contribution to the PIB, 245.9 billion FCFA!! came from what is called "secteur informel". 86 coal for generating electricity has reduced the consumption of diesel oil to half of the values recorded in the early eighties. The consumption of oil products for household use is extremely low: 500 tons of LPG and 1,900 cubic meters of kerosene per year. The electric power sector is comprised of NIGELEC, a state monopoly that produces and markets electricity, and self-producers. The self-production of the uranium mines (SONICHAR) accounts for 35% of total nationa. consumption of 350 GWh. In 1991, NIGELEC produced only 19.5% of total generation; 4.6% of generation was purchased from SONICHAR surpluses; and 75.9% imported from Niger&. With a per capita consumption of 41 KWh per year, electricity is a service exclusively reserved for the middle and upper income classes. Electrification reaches only 5% of total population. In view of still low urbanization levels, the energy transition process has not made major progress, and the conversion of fuelwood into charcoal is marginal. Of the two million tons of fuelwood consumed every year, only 16% is concentrated in the city of Niamey and other urban centers; in addition part of urban fuelwood consumption is based on direct gathering, and a large part of fuelwood is taken from the dead trees of the forest clumps affected by the droughts of the seventies. Although this situation is changing rapidly due to urbanization, the market for fuelwood is relatively undeveloped'3, and as in most countries of the Sahel, fuelwood consumption is not the major cause of deforestation. Overgraz-. .;, subsistence agriculture, and demographic pressure on the land are the major causes of the growing deterioration of soils, water sources, and forests. The Government is perfectly aware that the protection of natural resources is indispensable for ensuring sustainable development. Forest protection is a crucial issue in the fight to contain the desert's advance- and to ensure the country's main energy source. VI.2 The Economic Importance of Wood Fuels According to national statistics (see table 25), in 1991 the share of the forest and fishin- sector amounted to 4.5% of gross domestic product (GDP). Keeping in mind that, owing to its geographical location, fishing in Niger could be marginal activity (about 3,000 tons per year, of which 60% is for self-consumption), it can be " According to the RPTES report on Niger (see table in page 30) total fuelwood consumption in 1992 was 2.3 million tons, of which 86% is represented by rural consumption or self-gathered fuelwood. Additionally, according to the same report 50% of households in small cities self-gatfid'their fuelwood (roughly 56 thousand tons), so this means that 88.5% of total consumption does not go to the market. In Niger fuelwood-market system is less develop than the other 4 RPTES count+ies. 87 asserted that this percentage is a good estimate of the effective contribution of the forestry sector. Nevertheless, this value includes the contribution of construction wood and other non-energy uses of wood. A large part of the primary sector contribution comes from informal economic activities, and its quantification is based on estimates stemming from the final price of goods. In many cases, the estimates are in reality the figures for the sales volume, or turnover, of these activities. In the case of forestry sector, the most important contribution is its valuation as a fuel in urban markets. In 1990, the consumption of fuelwood was 2.26 million tons, of which only 370,000 tons passed through market circuits. According to the study Secteur Economique-Bois au Niger in 1991, the turnover figure for fuelwood marketing amounts to 6.636 billion CFA francs (Mamoudou, 1991), which basically correspond to urban trade of fuelwood, plus a small amount of wood for construction and other uses; nevertheless, if fuelwood for self-consumption in the rural areas, including non-fuel use, is included in the valuation, this figure would amount to 11.597 billion CFA francs (Mamoudou, 1991). According to the same source available for this last figure, 10.955 billion CFA francs correspond to fuelwood. Table 25 Niger: Share of Forestry Sector in GDP (10' CFA francs) 1. Primary Sector 229.2 43.7 240.1 34 246.1 37 of which: Agriculture 123.6 19 123.4 18 130.8 20 Forestry and 22.3 3 25.6 4 29.5 5 fishing 2. Mining 46.7 7 42.6 6 34.5 5 3. TOTAL GDP i-659.6 100 695.3 100 656.7 100 ource: irec ion nes e u Plan, A are statt , 1992-1993. Table 26 provides a breakdown of the turnover figure for the fuelwood contribution, on the basis of the consumer sale price in force in 1990 and assuming a fictitious price of 2.5 CFA francs per kilo, corresponding to the price paid to wood cutters on the sides of the highways (Mamoudou, 1991). According to these official estimates, overall the forestry sector (actually fishing and all forestry sector) contributed 4% of GDP in 1990, a figure that turns out to be much lower than the one that shows up in the National 88 Accounts. Nevertheless, the analysis that was conducted hear reveals that the estimates were made on the basis of turnover rather than value added. The fuelwood "sector's" contribution to GDP is really below 4%. These data should be taken as reference values, since they overestimate the real turnover, because they include self- consumption values which in reality are not part of commercial transactions. In addition, a large part of woodfuel consumption or the services of small cities does not pass through commercial circuits either. It is estimated that 50% of the families in secondary urban centers gather their own fuelwood. The figure for fuelwood consumption in Niamey and other urban centers should merely be viewed as a maximum value for the turnover figures of traditional fuels in Niger. In order to take into account the contribution of fuelwood consumption activities to GDP, intermediate consumption would have to be subtracted from the turnover figure. Table 27 provides estimates of the value added of these activities, assuming that the entire urban consumption of fuelwood passes through commercial channels. This calculation hypothesis underestimates the realcontribution of this activity. Table 26 Niger: Turnover for the Forestry Sector in 1990 according to the Environmental Direction Millions of FCFA 1. Fuel wood 10,955 1.1 Niamey 2,600 1.2 Other cities 3,750 1.3 Rural self-consumption 4,725 2. Service fuelwood 642 2.1 Niamey 277 2.2 Other cities 179 2.3 Rural self-consumption 236 3. TOTAL 11,597 Source: Ministere de l'hydraulique et de l'environnement, Direction de l'Environment, 1991. According to these figures, it can be asserted that in 1990 the 89 contribution of traditional fuel activities in Niger accounted for 1.6% of GDP, a highly significant percentage when considering that the share of the electricity, gas, and water sector amounted to 2% that same year. In addition, the State received from the wood- cutting tax 57.4 million CFA francs, which is hardly 25% of the revenues that it should be collecting from fuelwood trading. There are about 7,000 jobs stemming from fuelwood trading activities. Table 27 Turnover and Value Added of Traditional Fuels in 1990 (million CFA francs) Turnover Value Added 1. Fuelwood 1.1 Niamey 2,660 753 1.2 Other cities 3,750 1,151 1.3 Rural self- 4,725 4,725 consumption 2. TOTAL 10,955 6,629 The Economic Value of Fuelwood According to the methodology that was adopted, the economic cost of fuelwood can be calculated on the basis of the cost of restoring the forest resource, or the cost of reforesting the volume of fuelwood consumed, in order to ensure a sustainable exploitation of the resource. Another alternative method is to estimate the cost Of its substitution for an oil derivative such as LPG or kerosene. The reforestation cost method produces highly inaccurate results owing to the difficulty of having sound estimates of real reforestation costs, both for planting and managing natural forests. The estimates are based on the costs incurred by experimental or demonstrative projects, and the amounts that have been reached are highly variable. Productivity estimates are also quite variable; they fluctuate, depending on the ecosystem, between 0.5 in shrub formations and up to 7 metric steres'4 per hectare per year for irrigated systems. The costs per hectare are also quite variable, ranging from 90,000 CFA francs per hectare for unirrigated plantations to 50,000 for the community management of natural forests (Mamoudou, 1992). At present, the cost of fuelwood is accounted for by the stumpage 54 The estimates assumed that a stere of firewood weights 300 kilos. 90 fee of 350 CFA francs per stere, that is 1.16 CFA francs per kilo. If consumption in the city of Niamey is 131,400 tons (1992), the country's secondary cities consume 238,600 tons per year. Of this latter amount, only 50% is considered to be commercial and therefore is a cause of deforestation whereas the entire volume consumed in Niamey is considered commercial. According to these hypotheses, the economic cost of fuelwood consumption is the cost of reforesting the area needed to supply the urban consumption of 250,700 tons. If it is deemed that in Niger the stock of natural forests has an average of 10 steres of standing timber per hectare, about 83,000 hectares would have to be reforested at a cost that could vary between 4.2 billion and 7.5 billion CFA francs, according to reforestation costs. This would mean that the unit cost of fuelwood could fluctuate between 17 and 30 CFA francs per kilo. It is important to emphasize that these figures should be viewed as maximum values, since a large part of urban supply is based on deadwood, that is, the nondestructive gathering of forest resources. In reality, 83,000 hectr-es of deforestation due to urban fuelwood consumption does not c -espond to rep ty; it is a maximum reference value. Because of t s, we will art. rarily take the lowest value of 4.2 billion CFA francs, or 17 CFA francs per kilo. The second -aluation criterion 's the economic cost of substituting ban fuelwood consumption for oil derivative fuels, that is, LPG and kerosene. According to estimates made by the regional LPG project, 1 ton of LPG can substitute 9 tons of fuelwood. This is equivalent to saying that 250,700 tons of fuelwood could be replaced by 27,855 tons of LPG. The economic cost is equivalent to its border price (CIF Nigeria price plus transport by land to Niamey) calculated at 143,150 CFA francs per ton. The value of the LPG imports would be 3 987 billion CFA francs, or 15.9 CFA francs per kilogram of f- lwood displaced (befor- devaluation). After FCFA devaluation Cj.F prices of LPG doub' and the value of LPG imports to replace commercial fuelwood consi :ion must be over 6 billion FCFA or about 23 FCFA per Kg of fuelwood. These figures only provide the value of fuel .mports and say nothing about related costs such as the import ot kitchen stoves, LPG cylinders, and the investments needed to store the gas and other distribution ezpenses, which in Niger are very high. Indeed, at present, costs associated with LPG distribution amount to 149,400 CFA francs per ton, a value that is higher than the border price. If these costs are included, the figure rises to 292,550 CFA francs per ton of LPG, which leads to an ov:-rall cost of 7.344 billion CFA francs, most of which involved nmports in foreign currencies. Table 28 summarize the situation. 91 Table 28 Niger: Estimate of the Economic Cost of Woodfuel ___________ ___________ _ ________ _ . U--.. _ Million CFA CFA franc francs per kilo | 1. Reforestation cost 4,200 17 2. Substitution for LPG 3,987 15.9 * including other costs 7,334 29.3 3. Substitution for kerosene 2,996 11.9 * including other costs 4,887 19.5 * Refers only to distribution costs and does not include the costs associated with the import of kitchen stoves or LPG cylinders. Estimates are before FCFA devaluation. If the option of substituting fuelwood for kerosene is considered, the economic cost would be lower than that of the other two alternatives before devaluation". Keeping in mind the relative efficiency of the fuels, it is assumed that one cubic meter of kerosene can substitute 4.74 tons of fuelwood. In equivalent terms, 250,700 tons of fuelwood can be replaced by 52,890 cubic meters of kerosene. In 1990, the CIF Niamey price of kerosene was 56,650 CFA francs per cubic meter, yielding a total value of 2.996 billion CFA francs and 4.887 billion CFA francs if other distribution costs are taken into account". In short, the economic cost of fuelwood may vary between a minimum of 11.9. CFA francs per kilo to a maximum of 19.5 CFA francs per kilo, compared to 1.16 CFA francs per kilo, which is what is currently being paid. The costs of supplying oil.-products, especially those related to distribution, can be reduced drastically. Total LPG replacement costs were higher tahn reforestation costs even before devaluation. After devaluation there is no doubt that reforestation will be cheaper option compare with LPG imports. VI.3 Macroeconomic Policy and Traditional Energies - In Niger, as in most RPTES countries, the energy sector has been " It is supposed that reforestation costs were not influenced as much as LPG and kerosene by the FCFA devaluation. " This costs refer to stoves, storage and transportation facilities. 92 characterized by almost complete State control. Ownership of energy companies and control of energy prices have been the privileged tools by which Governments have managed the economy. Fiscal policy has been closely linked to energy prices, whereas the creation of subsidies, mainly among household fuels, have attempted to improve income distribution and substitute traditional energies. Except for LPG and oils and lubricants, the import of other oil products is a monopoly held by the state-owned company SONIDEP. The price structure includes a Stabilization Fund aimed at mitigating price fluctuations and granting subsidies to certain products. In addition, the price structure includes other tax charges such as the Energy Fund and the Customs Duties Fund. Traditionally, taxes levied on petroleum have been a major source of public revenues. From the standpoint of the country's external relations, the diversification of energy supply sources, as a result of the commissioning of the coal-mining operation and growing electricity imports from Nigeria, has considerably reduced the oil bill, which reached its lowest level in 1987 and then started rising steadily. The value of the imports of oil products continues to be a relatively low percentage of exports (see table 29); nevertheless, it is expected that this situation will change for the worse as uranium exports decline and domestic energy consumption increases. Table 29 Niger: International Trade and Oil Imports (billion CFA francs) 1986 1989 1991 Total imports 130.1 128.9 100.2 Total exports 116.9 120.1 87.9 Uranium exports 90.7 65.3 65.8 Oil imports 24.1 6.8 10.1 Oil imports/total exports % 20.6 5.6 11.4 Source: MinistAre des Finances et du Plan. Fiscal Policy In Niger, 34% of total indirect ta 'as come from oil products, equivalent to 6.6 billion CFA francs. In addition, gasolines pay 25% of their final price to cover customs duties, and SONIDEP pays an undetermined amount of taxes on its profits. This tax burden on 93 oil products is added to the high transport costs, and their final average price is 131% of their economic cost. CIF prices are far greater than import parity levels. The inefficiencies of the distribution system and the substantial fraud which according to SONIDEP amounts to 25% of legal imports should also be added to the price. Although some success has been achieved in controlling the fiscal deficit, excluding donations and international assistance, was still high in 1990 (9.8% of GDP), and the public revenue structure remains weak and dependent on international aid. The fall of international uranium prices, whose exports accounted for 15% of public revenues, have hampered investment financing. Moreover, the two uranium companies (SOMAIR and COMINAK) indirectly subsidize the power utility, pay road user fees, and provide social services in the mining cities. These subsidies account for 30% to 40% of uranium production costs and are the major reason for high production costs and low competitiveness of the mining industry (The World Bank, 1990). International financial assistance, in the form of donations, increased its share from 3% to 9% of the public budget between 1984 and 1991. Salaries continue to absorb a large part of public spending; despite commitments to cut back on staff, spending for salaries has risen between 1985 and 1991 from 28.5% to 48.6% as a share of public spending. Reducing salary-earning personnel and diversifying the tax base are indispensable to balance the budget. The structure of public revenues should depend less on taxes on imported oil and uranium exports; at the same time, reducing the State bureaucracy is necessary to remove the pressure on tax revenues. Oil Imports and Pricing Policy One of the obstacles to the penetration of modern fuels is the current oil supply policy. About 60% of all imports of oil products to Niger are done by highway and railway from the Port Harcourt Refinery in Nigeria, via Benin, to mainly supply the western part of the country. Consumption for the eastern and central region, which accounts for the other 40% of national consumption, is supplied from the Kaduna refinery, which is also in Nigeria. CIF prices in Niger's border in Hectoliter (Hl) coming from Kano (Nigeria), in 1989, 10% higher for gasoline, 30% higher for Kerosene than the same products coming from Parakou (Benin). But gas oil price was 22% in Parakou than in Kano. In 1990 gas oil accounted for 48% of total oil imports. Considering that 75% of electricity for consumption is imported from this country, it is not difficult to imagine the wide implications that Nigeria's energy pricing policy has for Niger. Electricity imports from Nigeria reduced local electricity production drasticly, from 152.5 Gwh in 1987 to only 53 GWh in 1991 94 with importants implications for oil imports. Apart from fiscal policy and price controls over oil products, the location of this landlocked country, along with the small size of its domestic market, produces a series of technical and administrative problems for importing these energy sources that notably increase CIF and domestic distribution prices. Significant savings could be achieved by rationalizing imports and liberalizing prices; a high percentage of these savings, however, depend on how inefficiency and high processing costs of Nigeria's refineries are resolved. A study conducted in 1990 (Cuneo, 1992) analyze the market of oil products in sub-Sahara5' revealed that it is possible to reduce up to 30% of the current average CIF Niamey price of oil imports; nevertheless, two thirds of this reduction would depend on improvements in the Nigerian refineries of Kaduna and Warri. Nevertheless, a sizable reduction can be achieved in import costs by improving supply procedures (difficulty of obtaining foreign currency, administrative inefficiency of the state agencies in chc-:-ge of purchasing the oil, excessive financial charges allowances, lack of storage capacity, and improvements in land transportation). A ding to Cuneo's report mentioned above Niger could save pc ntialyy a total of 4.5 billion FCFA (about 16 million US$) mainly by improving procurements procedures. It is said by in the report that 76% of costs (considered as potential savings) are due to high corridor transit costs, high procurements margins relised by Goverments, lack of foreign ezchange and poor credit conditions. Improvements in inland distribution could lead to other 24% of potential savings. Considering that total oil imports in 1990 were 7 billion FCFA, this potential savings (4.5 billion FCFA) could influence dramaticly the oil consumption in Niger. Likewise, the reduction of fraud and illegal imports, as well as better coordination of pricing policies between landlocked countries, would help to reduce the costs of importing oil products. The margins for the wholesalers and retailers are far higher than those found in neighboring countries. In short, rationalization of distribution operations and better financial management will produce savings of 3.465 billion CFA francs, equivalent to 33% of the oil bill in 1990. In addition , it is estimated that the illegal trading of fuels from Nigeria amounts to about 22,000 tons per year, which implies that the State's revenue service fails to charge about 1.43 billion CFA francs (Cuneo, 1992). High supply costs and the tax burden on oil products play a crucial Including Niger, Benin, Chad, Togo, and Nigeria. 95 role in the energy substitution process. The LPG market in Niger is just beginning its penetration, albeit very slowly (400 tons in 1985-1986 and 615 tons in 1991). Per capita gas consumption is the lowest among the five countries being reviewed, and the subsidy of 70 CFA francs per kilo is widely surpassed by high supply and distribution costs. The same holds true for gas cylinders and kitchen stoves. The retail price of LPG in Nigeria is only surpassed in The Gambia, and its use is restricted to the highest- income urban sectors. In 1990, 3,000 families used LPG. Kerosene is mainly used as fuel for lighting, and its retail price is not being subsidized. The liberalization of imports has brought substantial changes in distribution and has increased the involvement of the informal sector, which today accounts for 30% of the retail market. Likewise, it is estimated that illegal trade, especially in the border zones, is important (SEED, 1993; Mehr, 1990). VI.4 Long-Term Situation According to the demographic growth scenario (see table 30), the total population of Niger will amount to between 13.6 million and 15.6 million inhabitants (based on growth rates of 1.9% and 2.4%, respectively) and urbanization rates will reach 28.7% and 20.5%, respectively. This would mean an urban population of 3.9 million inhabitants in scenario A and 3.2 million in scenario B. As in the other countries, the urban population growth will remain very high; this is a variable that will exert a substantial impact on the pace of the traditional fuel substitution process. Table 30 Niger: Total and Urban Population Forecasts for 2020 1990 2020 A B Total population 7.7 13.6 15.6 Urbanization rate (%) 15.9 28.7 20.5 The outlook for economic growth over the short term depends on the success achieved by the reforms that were launched in the eighties and the recovery of uranium exports, which over the short and medium term seem to be the country's major source of foreign currency. It is widely believed that Niger will need, for still some time to come, international technical and financial support, preferably under concessional terms or donations. According to per capita GDP forecasts, major progress is not expected in the medium term, and domestic consumption levels will continue to be depressed for still a long time. The difficulties besetting the civilian 96 nuclear industry, which is experiencing the severest crisis since its inception, should also be taken into account. Although the country has its own energy sources such as uranium and coal, in practice the decisions that will be taken in the energy sector will be heavily influenced by external factors. In terms of electricity, its dependence on Nigerian supplies will remain substantial"'. Regarding the import of oil products and the possibility of reducing supply costs, it is also expected that they will largely depend on decisions adopted by Nigeria for its refineries and improving its infrastructure for distributing finished products. With the uranium export boom between 1975 and 1980, oil consumption reached an annual average record growth of 24.5%, after which it dropped drastically to 2.6% between 1980 and 1985 with the economic crisis of the eighties and the start of the fall in uranium exports. Later, during the more recent period 1985-1990, oil consumption grew even more slowly, to 1.5% per year. On the basis of medium-term economic growth assumptions, it is very likely that this low growth rate for oil consumption will continue to prevail even in the first decades of the 21st century. Most possibilities for increasing oil consumption will depend, over tk. short and medium term, on upgrading facilities and reducing import costs; these investments and administrative management improvements will depend on the market and local operators. It is assumed that the cost of importing oil products can be reduced but. Over the longer term and as a result of slow consumption growth in the landlocked countries, it might be possible to justify other means of transport, such as distribution by oil pipelines, which brings down the transport cost. All the elements indicate that a low economic growth scenario should be expected; with characteristics that may be summarized as follows: i. Current demographic growth rates can be reduced to 1.9% between 1990 and 2020. At present, population growth is at 3.1% per year. This implies large efforts on the part of national and international organizations for birth control and family planning strategies. " Although benefical in the current situation, 75% rate of dependency from only one source of electricity supply seems high. It should be better for Niger an interconected grid with other African countries and a more balanced electricity supply policy. This will take care of eventual political troubles in neighboring countries. 97 ii. The urban Population will continue to increase at 4.0% per year until 2020, a moderate rate in view of the fact that between 1980 and 1985 the annual average urban growth rate was 7.9% and 6.5% in the period 1985-1990. iii. In terms of household fuel consumption, it is assumed that 100% of the rural population will be using fuelwood, with a per capita consumption identical to the levels of 1990, that is, 0.8 kilo per inhabitant per day. In addition. fuelwood will continue to be an essentially free good in 2020. This is an optimistic hypothesis, considering the growing deterioration of natural forests. iv. It is assumed that the urban consumption of fuelwood will continue at the same per capita level of 1990, that is, 0.6 kilo per inhabitant per day. In addition, the charcoal production for urban or rural consumption is negligible. v. In economic terms, per capita GDP will grow slightly above population growth, just as private consumption. Uranium exports, the major source of foreign currency for the countries, will display very slow growth. The international price of oil will maintain its moderate growth so that the oil bill as a proportion of GDP will remain constant. vi. It has been established that in the year 2020 an equivalent of 10% of the urban population will use LPG to meet its cooking needs, that is, a population of about 390,000 inhabitants. At present, about 3,000 families in the city of Niamey and about 7,000 families throughout the country own gas stoves (3% of the urban population in 1990), but they only use LPG sporadically as a fuel to complement fuelwood use. The hypothesis forecasts a consumption of 9,000 tons by the year 2020, almost 20 times current consumption, which is definitely Significant growth for LPG consumption. Forecast is summarize in table 31. Table 31 Niger: Forecasts for the Consumption of Cooking Fuels 1990 2020 Pop. Wood | LPG Pop. | Wood LPG 10'1 10 lo ll 10' lo"03 lo Urban |1.2 |370 |0.5 3.9 |768 |9i.O 0 |Rural 5.5 1,890 0.0 9.7 2,830 n0n TOTAL 77 12,260 .5 3.6 598 9. vii. Finally, according to the WALTPS-OECD simulation, it is 98 estimated that, in the year 2020, the annual production of biomas will amount to 2.45 million tons per year, with a standing timber stock of 40.5 million tons. Despite the simplicity of this long-term forecasting exercise and its high degree of uncertainty, several conclusions can be reached and certain magnitudes of the energy transition currently occurring in Nigeria can be established: - Although it transcends the domain of energy, any long-term macroeconomic policy measure in Niger, as in all the other countries of the Sahel, should include an important family planning component to control the birth rate and reduce demographic growth The demographic variable and its distribution among the rural and urban population is a key element in the energy transition process and to ensure sustainable development. Even with steady LPG consumption growth of 9.6% per year between 1990 and 20.V, a forecast based on the growth rate for the period 1990-19S.. obtained from the Regional Gas Program (Programme regional -e gaz--PRG), the consumption of this fuel will -ontinue to bf ;arginal in domestic energy consumption. Ins4- d, a penetra...on of 30% among the urban population of 1.2 illion inhabitants, that is three times the amount considered in the rresent hypothesis, could also be assumed. - This last hypothesis, which could be viewed as a 'limit," would moreover imply a signif -ant improvement in the consumption level of the population and for economic situation as a whole, as well as the outlay of investments needed to meet an annual demf.nd of almost 30,000 tons in 2020 (it should be recalled that In 1990 LPG consumption amounted to 556 tons). This, howLer, is unlikely, at least in the medium term. - If it is assumed that only urban consumption of fuelwood, which amounts to about 770,000 tons, is the major cause of deforestation, the conclusion is that in 2020 this consumption will be far be_ow the annual production of forest biomass, estimated at 2.4 million tons. The sustainable production of biomass is more than enough to supply the urban consumption of fuelwood. This general conclusion, however,, is deceptive since local fuelwood shortages may emerge in areas under heavy demographic pressure. - In Niger, between 70,000 and 100,000 hectares are deforested every year (RPTES, 1994d; The World Bank, 1993d), but-of this amount only a small proportion is attributable to fuelwood consumption. There is a consensus that subsistence agriculture and overgrazing are the major causes of forest 99 destruction. Although the marketing of fuelwood is constantly growing due to the increase in urban population, efforts to halt deforestation should concentrate on better management of agricultural and livestock production. The situation described above explains the lack of success that the attempts to halt deforestation by introducing improved wood stoves and other substitution fuels such as LPG have had. The Regional Gas Program acknowledges that the efforts that were made enabled only 2% of fuelwood consumption to be substituted in Niamey. Recent experience has indicated that, at least in the country's current socio-economic conditions, subsidies will have no perceptible effect on LPG consumption and that these subsidies provide benefits to the highest-income population, which has the economic capacity to pay the real prices of fuels. Everything indicates that in Niger fuelwood substitution for LPG or kerosene is not a priority issue. On the contrary, better management of the small forest area is an immediate problem of the utmost importance for the country's long-term viability. Although fuelwood consumption is not the major cause of deforestation, the pressure exerted by subsistence agriculture and overgrazing on the forests is the principal cause of fuelwood scarcity. Strengthening private organizations and public institutions involved in agricultural development and the conservation of natural resources is indispensable to ensure the country's sustainable development. One of the elements to be resolved is the land ownership regime. It is well known that a large part of the forests are public lands governed by the people's entitlement to freely use natural resources in an economic system that is shifting from a traditional economy to a free-market system. The system currently in force is based on tradition, and its customs worked well when demographic density was low and the reproductive capacity of ecosystems was sufficient to meet the needs of the population. At present, however, this is not the case. During the transition period, there is a dual system whereby certain goods such as fuelwood have acquired a market sale value but its extraction is almost completely free. Land ownership reform and private or community ownership seem to offer a better system for valuing and preserving natural resources. It may be concluded that, in the short term, the elimination of subsidies for LPG would be a sound social and economic measure. In the medium term, the search for supply alternatives and negotiating more suitable contracts indexed on international prices are necessary. The recommendation would be that market forces should govern the demand and supply of LPG. Better coordination among the bordering States 100 could lead to substantial reductions in the cost of supplying oil products, especially LPG. Better coordination would also imply curtailing the illegal trade of goods and improving the collection of taxes. VI.5 Conclusions The limited availability of arable land and the vulnerability of its agriculture and livestock of periodical climatic variations are important obstacles for the development of Niger. Additionally, its situation of landlock country, the small size of its internal market are added to an increasing deterioration of the environment. The rapid demographical growth has provoked an intense exploitation of the already fragile soils, at the same time the progress achieved in the development of the rainfed agriculture are not satisfactory. In view of the unfavorable perspectives of recuperation of world market of uranium, main product of export of the country, a strategy of development has been established based on the diversification and intensification of the agricultural production. As basis of this development strategy, the Government is conscious that it is indispensable to press for an environmental and conservation policy of natural resources. Among other measures (the fight against wasteland, a new rural code, property rights, soil conservation etc.) it is contemplated the increase in the availability of sustainable firewood, incentivating the individual, family and collective production of firewood. The forestry sector inducement, in the context of an environmental policy, shall have a decisive role in the energy policy of Niger. The prospect exercise made, on the basis of optimistic hypothesis of LPG consumption, whose data were presented previously allows to infer that the substitution of firewood will be a slow process, perhaps slower than in other countries. This means that the forestry policy should be oriented to supply the firewood urban market and guarantee an adequate supply to rural population. Forestry Policy Niger in spite of having an urbanization level comparable to that of Mali and higher than Burkina Faso has a firewood market scarcely developed. Only slightly more than 12 or 14% of the total firewood consumed in the country enters the commercial circuits and the consumption and the production of C/w*i5 insignificant. According to The World Resources Institute during the period 1980-90 the rate of deforestation reached 2.6% per year. The highest of the 5 countries analyzed. However, Niger registers, analogous, the lowest per capita consumption of growing stock. This fact shows certain rationality in the consumption of firewood and demonstrates that the consumer begins to perceive the shortage, something which also reflects a greater taxation weight on the firewood than in the 101 other countries of RPTES. Even though as of 1992 the stumpage fee increase to 600 FCFA stere of firewood in the controlled exploitations and 350 FCFA/stere of fuelwood originating from controlled exploitations the price of fuelwood resource does not reflect its real value. The average price to producer of the firewood is of 2,08 and in the best of cases is of 2.4 FCFA/Kg (1.4 FCFA/cubic meter in the controlled exploitations) compared to 17 FCFA/Kg of minimal cost of reforestation. It is important to emphasize that in spite of its low price, the stumpage fee on average, is the highest of the countries of the RPTES, at least until the end of 1993. An increase of stumpage fee, at least of firewood from not controlled exploitations is made necessary. However, a first step before the increase would be to raise the low level of stumpage fee collections. Analogous, it is necessary that the structure of the prices of the firewood favors the producer (presently the cost of the fuelwood represents only 10% of its final price). Given the scarce or non-existent development of charcoal production would be convenient to discourage its possible growth, in favor of a direct use of firewood. An increase of the taxation measures on firewood it is only possible with a complete restructuring of the forestry sector which, in spite of its importance is very weak institutionally. The training and the increase of field staff is indispensable to direct a forestry and enviromental policy in an effective manner. Policy for the Promotion of LPG The consumption of LPG is the less developed and the evolution much slower of RPTES countries, in spite of efforts made by the Programme Regional de Gaz (PRG). With the exception of The Gambia the prices to consumer of LPG in Niger are the highest of the region. Until the end of 1993, the final price of LPG enjoyed a subsidy equivalent to 22% of its final price, while in The Gambia the price is not subsidized. The LPG in Niger is concentrated in higher income strata of the population, public officers and is generally used as secondary fuel. The gas imports were liberated since 1986. However, the prices are controlled by the Ministry of Commerce. According to PRG, a scale economy is being procured after reaching consumption levels of more than 3,000 tons per year. According to growth registered between 1987 and 1992 of 7% per year this amount would reach in the year 2115, without taking into account the possible regressive effect on consumption of LPG which the recent devaluation of the FCFA may have had. However, this pesimistic scenery may improve if important costs reductions which may be obtain with the rationalization of supply from petroleum derivates are considered. 102 According to the study of Cureo, 1992, there is a potential saving of US%141 per ton of imported petroleum products, equivalent to a total of 16 million of USS in 1990. This would amount to a slightly more than 60% of the petroleum bill of the country that year. A significant amount, no doubt. A great share of high costs of supply are due to excessive financial charges, allowances of SONIDEP. The costs associated to distribution are e.;essive for the regional average (more than double than in the rest of the countries analyzed). Niger would be the country more benefitted with the improvement of the storage infrastructure and transportation of petroleum derivates in the neighboring countries. Likewise, in Burkina Faso, the beginning of operation at the port of Buipe at Ghana would facilitate the supply of Niger through Burkina, with ad-antages for both countries. it would be necessary also the establishment of a concerted policy of petroleum supply among the landlocked countries to gain scale economies in the costs of transportation and storage. Until complete liberalization of prices is not attained, it is necessary the coordination of the actual internal price policy of derivates in order to avoid the illegal trade which according to the study of Cureo, only from Nigeria, 22,000 tons of petroleum derivates entered Niger illegally. Likewise, according to the sAme source, that same year 24,000 tons entered illegally from Nigeria to Mali. This is equivalent to approximately 10% of tota_ petroleum imports of both countries during that year. The price structure of LPG is not available after the devaluation of FCFA but if the sAme pattern is followed as that in other countries, the level of subsidy on the price of gas should have increased. The policy of subsidy is socially and environmentally difficult to justify upon judging the type of consumers using LPG and for the insignificant results attained on the saving of firewood evaluated by the PRG in the 2% of total consumption of firewood of the city of Niamey (SEED, 199'). Probably, the policy of subsidies should be concentrated o- kitchen equipment. At medium term, the price of LPG should rei zt its economic cost (at frontier price) and the control on the prices should be eliminated gradually. 103 VII. SENEGAL VII.1 General Considerations The Republic of Senegal, with an estimated per capita income of US$720 in 1990, is classified among the last middle-low income countries. Most of its territory is characterized by semi-arid climate; the country has few natural resources; and its economy is based on several primary products, with broad involvement of traditional agriculture. The modern sector of the Senegal's economy is concentrated in the city of Dakar, its capital, and focuses on peanut processing and its products, the export of phosphates, and fishing products. Senegal's major economic indicators are indicated in Table 32. Table 32 Senegal: Major Economic Indicators 1985 1988 1991 GDP at constant prices 1158.1 1483.3 1629.0 (1987) (10' FCFA) Primary sector/GDP (%) 18.7 18.4 19.6 | Tertiary sector/GDP (%) 63.6 59.1 61.5 Exports (10' FC 4 . Y Imports (10' FCFA) 406.2 323.5 380.1 Oil imports(1O'FCFA) 77.5 49.3 41.8 I_Total stock of Debt 2562.8 3896.5 3522.3 (10' FCFA) Fiscal deficit/GDP (%) -4.0 -4.4 -1.6 I Exchange rate per lUS$ __ 297.9 275.0 Consumer price index 490.5 490.1 485.1 average senegalese family (1967=100)._ _ * excluding banking sector and departure program Sources: Senegal Macroeconomic Update Report, The World Bank, 1993. Despite efforts to diversify its economy, 47% of the total value of Senegal's exports relies on three primary products: peanuts, phosphates, and fishing. The export of these products experienced a boom in the second half of the sixties; nevertheless, the downward trend of most prices of tropical raw materials has 105 considerably affected the country's terms of trade. In addition, Senegal's external sector is highly vulnerable to conditions and the difficult agri-ecological conditions of the sub-Saharan area. Over the last two decades, rainfall has declined, the period of rains is shorter, and the randomness of rainfall is increasingly apparent. The severe droughts of 1973 and 1981-1983 substantially reduced the production of Senegal's major export products. Although the population of Senegal is largely rural, over the last few decades, the country has undergone rapid but chaotic urbanization. In 1991, 40% of the population lived in urban centers, mainly Dakar, which now has 1.5 million inhabitants, that is, 20% of the country's entire population (about 7.6 million in 1990). Fifty-three percent of the population is under 25 years of age, which ensures that its high demographic sate, estimated at 2.9% per year (UNDP, 1992), will continue for still many decades in the future. If- this growth rate- persistsi the country will duplicate its total population in only 23 years from now". There is no doubt that the demographic variable will be a key element in any development strategy that Senegal might adopt. The country's economic structure and prevaili,ng development model after independence have fostered an energy system characterized by underconsumption and the coexistence of a modern sector of the economy entirely dependent on imported oil with a traditional sector relying essentially on biomass for its energy supply. Nevertheless, the thrust of urbanization processes, mainly as a result of rural migration, on the one hand, and the inability of the urban economy to increase the population's incomes,, on the other hand, are promoting the growing consumption of fuelwood, especially as charcoal, in the cities. - Charcoal is fully integrated into the urban economy, in the hands of a quasi-monopolistic market. The pricing system is controlled by the State, in keeping with a complex production quota allocation system that facilitates -taz fraud and benefits the wholesalers from Dakar to the detriment of rural producers. The persistence of a charcoal and fuelwood pricing system that does nothing- to value forest resources, which are currently viewed as a "free good," has promoted deforestation around towns and villages. At present, charcoal is being transported to Dakar over distances of 400 kilometers at a pace of 152,000 tons per year, equivalent to about 900,000 tons of fuelwood per year. In 28 years, the stumpage fee has increased threefold, and until 1992 the tax on fuelwood for producing charcoal was officially 250 CFA francs per sac (before devaluation), that is, 12.5% of the 2,000 FCFA/sac final price for " This is well below the world average of 40 years. The average of developing countries is 35 years and 138 years for the industrialized world. 106 charcoal. Another policy that has directly affected the price of charcoal and substitution fuels has been the fiscal policy. As other countries, Senegal relies heavily on revenues stemming from the consumption of oil products for financing its state budget. The high cost of energy, as a result of the tax burden, has not only slowed down the process of fuelwood substitution but also obstructed the country's industrial development. Nevertheless, in contrast to what has been observed in the hydrocarbons sector, the State has preferred to be lax regarding fuelwood and charcoal consumption, to the detriment of the country's forest assets. The role of traditional energy sources in the economies of developing countries should be reviewed within the broader context of modernization of the productive infrastructure and society as a whole, that is, within the framework of their transition from a traditional agricultural society to an industrial urban society. There is no doubt that the target scenario would involve the widespread substitution of wood fuels for more modern and efficient forms of energy, such as oil products or electricity. The idea, therefore, is to find the most suitable way to handle this transition. Although strategies may vary depending on the specific conditions of each country, the central objective should be the same: substitute fuelwood as a cooking fuel. The economic, social, ecological, and political situation of each country will merely determine the speed of this transition. The majority of household energy programs have achieved only limited results in terms of their original objectives (savings of fuelwood, increased consumption of LPG, etc.) because they were viewed as an end in themselves and not as part of a strategy for substituting fuelwood (McGranahan and Kaijsewr, 1993; Barnes et al., 1993). Above all, they were implemented regardless of the macroeconomic policies (pricing, fiscal, employment, etc.) in which they were being developed. In most cases, they insisted on the need for subsidies for substituting energy sources or equipment (stoves) in adverse macroeconomic environments (for example, low prices of fuelwood or charcoal and high prices of LPG, as in the case of Senegal), thus creating artificial markets that will disappear when the project, as well as international aid, disappears. The macroeconomic importance of traditional energy sources should be analyzed, keeping in mind at least two approaches. The first approach should evaluate the real or economic cost of using these traditional fuels for the country's economy and environment, whereas the second should analyze the effects of macroeconomic policies on the above-mentioned energy transition process. VII.2 Economic Importance of Traditional Energy Sources 107 The share of wood fuel in GDP is generally included under the forest sector and oftentimes along with other primary activities such as fishing and forestry. In Senegal, according to national accounts, the contribution of the forest sector to GDP is marginal, about 1%" (see Table 33). Nevertheless, there is a general consensus that this percentage does not really reflect the importance that this sector has for the national economy. It is estimated that about 90% of the country's total population depends either partially or entirely on fuelwood to meet its energy needs for cooking. Table 33 Senegal: Contribution of Forest and Energy Sector to GDP (constant 1987 prices) 109 FCFA 1988 % 1990__% 1992 % Primary energy 328.2 22.6 317.9 21.2 313.2 20.2 . Forestry 14.4 1.0 12.8 0.9 13.6 0.9 Secondary energy* 267.0 18.4 . Energy 25.4 1.7 28.8 1.9 32.4 2.1 GDP 425.4 100 1496.2 100 552.6 100 Only electricity is being dealt with here. Source: Direction de la Prevision et de la Statistique (DPS), Senegal. The monetary quantification of wood fuel consumption entails several methodological and practical problems, due to the basically informal character of the majority of production, transport"', and marketing activities for these fuels. Estimation of the value added to market prices, obtained from the sum of unit prices multiplied by the volume of consumption from which the value of intermediate consumption is subtracted, presents the following problems for wood fuels: i. ConsumDtion volume: It is well known that charcoal and fuelwood consumption volumes are widely underestimated in official statistics. National Accounts only consider the so- called controlled production, that is, production effectively recorded in forest control stations. Irregularities in this ' This includes other uses of wood, different from fuel. " Fuelwood and charcoal transportation in Senegal are formal economic activities but rural self-gathered fuelwood is an informal activity 108 control, fraud, underbilling, and illegal exploitation are widespread. The historical series 1987-1992 records variations of ±40% from one year to the next; for consumption of this nature, the only explanation is the incorrectness of the official figures. The Water and Forest Directorate (Direction des eaux et des for4ts) estimates that in 1992 the officially recorded charcoal figures only accounted for 45% of real consumption. ii. Prices: Real prices at end-user level are always higher than prices officially set by ministerial decree. Whereas the official price used to calculate the monetary values in the national accounts is 40 CFA francs (before devaluation) per kilo of charcoal, consumption surveys conducted by various technical cooperation agencies and NGOs indicate that the real average price is at about 60 CFA francs per kilo, that is 45% higher than the official value. iii. Intermediate inputs: It has been observed that the data provided by the Forecasting and Statistical Directorate (Direction de la prevision et de la statistique--DPS) in the National Accounts are really sales volume data or turnover" (chiffre d'affaires), which do not take into consideration either intermediate consumption or transport costs. This tends to overestimate the sector's contribution to GDP. Likewise, it cannot be discarded that these costs are already being included in transportation sector contributions, thus leading to double accounting. The same can be said for jobs. iv. Methodologies: Under current conditions, market prices do not reflect the real value of forest resources (economic cost). Since wood fuels are a non-tradable good at the international level, the value that would come closest to its economic value is the cost of renewing the resources, or the cost of reforestation. Another element to consider would be the current cost of environmental damage caused by deforestation (erosion, loss of soil, loss of habitats, etc.). The latter, however, will not be considered in the present report, although estimates conducted in neighboring countries indicate that these costs could entail significant percentages of GDP.'3 In 1992, Forestry Service statistics estimated that the forest sector contributed 13 billion CFA francs to GDP. This includes an estimate of noncommercial wood and self-consumption, which accounts for rural consumption. In addition, the share of wood for sawing, *2 This is being corrected by the DPS. '" See for example estimates presented by Pearce for Burkina Faso and Mali mentioned behind. 109 construction, and uses other than energy is included. VII.3 Economic Value of Wood Fuels Table 3 displays the figures from the Water and Forest Directorate aia the estimates made by a mission of the Netherlands Economic Institute (NEI) in 1989 on the forest sector's contribution to GDP. As indicated, wood fuel in both estimates accounts for the largest part of the sector's contribution (89% according to DPS and 86% according to NEI's estimate). Table 34 Senegal: Contribution of the Forest Sector to GDP in 1989 according to DPS and NEI (10' FCFA) DPS NEI Ttrziover Value Added I. Charcoal 6,288.7 18,:00 13,690.0 . Controlled trade 6,117.7 6,660 4,928.4 . Uncontrolled trade 0.0 11,840 8,761.6 . Self-consumption 151.0 0.^ 0.0 II. Fuelwood 8,888.4 9 i0.0 7,700.8 . Controlled trade 441.9 00 255.0 . Uncontrolled trade 0.0 2 00 645.0 . Self consumption 8,446.5 6,800 6,800 III. Other uses 1,859.9 3,923.0 3,360 IV. TOTAL 17,037 32,223 24,751.4 Source: DPS, NEI, 1989. Even in the best of cases, the forest sector's contribution may amount to 1.7% of GDP (1989), or about 1.5% if only the contribution of wood fuels is considered, which is nevertheless comparable to the contribution from the electric power sector (see Table 34). Its contribution, however, remains marginal. The reason for this disparity is that the price set by the markets fails to reflect the real value of forest resources. Under the imperfect conditions prevailing in the markets for wood fuels (State control over the price of fuelwood and a quasi-monopolistic marketing conditions), the current price of fuelwood and charcoal (stumpage fee) does not reflects the economic cc- of the resource. The forest plays an important role in the- daily life of the rurz, population. In addition to being a principal source of energy for the majority of the Senegalese,population, it is also a source of 110 food (fruits and fodder), raw material (wood), and medicines and has an environmental value (tourism, soil protection, maintaining agricultural productivity, etc.) that has direct economic implications for agricultural production and livestock raising (the latter items account for about 18% of GDP and 56% of export values). Nevertheless, as stated earlier, fuelwood is virtually a "free good" (the official value of fuelwood is 1 CFA franc per kilo of if carbonization is taken into account, which is a purely symbolic value, in view of the fact that only part of this value is actually paid). At present, there is no regulation that binds producers to reforest, and tree-cutting for fuel is becoming one of the major causes of deforestation in Senegal". This is confirmed by the fact that 80% of charcoal production comes from the forests of the Tambacounda region located 400 kilometers from the city of Dakar. Among the different methodologies used to estimate the economic value of wood fuels there is the one that assimilates its economic cost to the cost needed for renewing the fuel, or the cost of reforestation." This estimate is based on the following assumptions: i. Only the commercial volume of the resource is considered, since it is deemed that only this component of total consumption is the one that effectively leads to deforestation. Therefore, only the consumption of charcoal and fuelwood in urban zones is considered. In 1992, a total of 333,876 tons of charcoal and 228,847 tons of commercial fuelwood (urban sector) were consumed. The sum total of these two items is equivalent to 61% of the total volume of forest resources used as fuel in this year. ;' Senegal is in fact the exception between RPTES countries and fuelwood consumption could be a single more important cause of deforestation. According to RPTES country report (Etude du Secteur des Energies Traditionnelles, 1994) in page 20 it is mentioned that charcoal production cause 30,000 hectare/year of deforestation. If the same rate of biomass production is used (0.1 Ha per each ton of charcoal) urban fuelwood consumption add another 4,000 Ha./year. This means that unsustainable fuelwood consumption (urban + charcoal) deforests yearly about 35,000 Ha. Compare this with the 80,000 Ha./year destroy by fires mentioned in the same report. It is also mentioned that in the past 10 years fires have damage yearly about 190,000 Ha. Rural fuelwood consumption, which represents 48% of total consumption, does not cause deforestation. *" Other methods used are the substitution for LPG or kerosene. It could be used the value of the forgone benefits of agricultural production. 111 ii. For converting charcoal into its fuelwood equivalent, it is assumed that the traditional kiln is used, with a yield of 15 to 20% in terms of weight. This amounts to 5 tons of fuelwood per ton of charcoal. iii. The costs of reforestation per hectare are quite variable, and the data are based on experimental projects. According to ESMAP (1987), these costs amount to 150,000 CFA francs per hectare. The figures of the PREMINA" forest project indicate a cost range of between 215,000 and 515,000 CFA francs per hectare, whereas data from the PRECOBA project mention a reforestation cost of 244,000 CFA francs per hectare. According to forestry specialists, the latter estimate seems to be the most accurate since it is also the most complete (it includes investment costs, payment for material and equipment, operating expenditures, and a correction factor to take into account tree mortality). iv. An effective production per hectare of 437 trees'7 was assumed, with a wood volume of 0.043 cubic meters per hectare per year, with a density of 750 kilos per cubic meter. According to this hypothesis, fuelwood production in a sustainable basis per hectare/year would be 18.8 cubic meters, or 14.1 tons. According to these hypotheses, the annual cost of supplying 2 million tons of fuelwood (only the commercial volume) in a sustainable basis would involve reforesting about 144,000 hectares at a cost of 35 billion CFA francs, which is similar to the electric power sector's contribution to GDP. It should be emphasized that the total public revenues from the wood-cutting tax and other charges (transport, etc.) collected by the State amount to 538.4 million CFA francs, that is, about 1.5% of their real value. Production of this amount of biomass on a sustainable basis amounts to only 75% of the 80,000 hectares per year that are estimated to be destroyed in the country for various reasons (agriculture, fires, fuelwood consumption, etc.). Nevertheless, this would imply an unprecedented effort in the country, since to date only 30,000 hectares have been successfully reforested during the entire period that reforestation programs of different types have been implemented. For LPG substitution, it would be nedded about 200,000 more tons of " The PREMINA project began execution in 1988 but available information is from 1990. The costs estimates are based in 5 years period data of 704 hectares. "1 This number is considering that 70% rate of survival. 112 LPG at a total cost 20 billion FCFA. After devaluation this costs are near doubled. Taken into account that a great deal of reforestation costs are local it could be said that at the present moment is more atractive to invest in reforestation programs than import LPG. This statement is also supported by the fact that LPG costs do not include stoves and investments in infrastructure and equipment (cylinders, etc) nedded for distribution and transportation of LPG. But more important again are the environemntal benefits (soil protection, anti-desertification protection, etc.), very difficult to evaluate in monetary terms, coming from reforestation programs. VII.4 Traditional Energy Sources and Macroeconomic Policy In Senegal, there are four macroeconomic policies that play a major role in the evolution of consumption of traditional energy sources: 1) the budget and tax policy; 2) the pricing policy; 3) the institutional reform process; and 4) income policy. l.Budget and Fiscal Policy: The energy sector, especially the oil sector, plays a decisive role in financing public spending and therefore in establishing public revenue policies. Over the last few years, tax income from the oil sector accounted for 25% of the State budget's total income. The high tax burden applied to oil products led to very high consumer prices, which has not only slowed down the fuelwood substitution process in cities but also obstructed industrial development and kept the cost of living high. In analyses conducted by the World Bank and the IMF to evaluate the country Lt esconomic stabilization and restructuring programs,. the high costs of energy have been underscored as one of the major obstacles to improving Senegal's international competitiveness. Although in 1990-1991, it was possible to balance the state budget, compared to deficit values that amounted to,12.5% of GDP in 1981- 1982, the income structure remains a vulnerable element of the public budget. Indeed, a large part of the income stemming from the consumption of oil products comes from extraordinary tax revenues due to the appropriation of cumulative benefits thanks to the fall of international oil prices without affecting domestic consumer prices (something similar also occurs with domestic prices of rice). If the fall of international oil prices had exerted its full impact on consumers, public revenues would have amounted to 15% per year over the last five years with respect to the figures that were actually recorded, and the budget deficit would have amounted to 2.5% of GDP. Table 35 summarizes the amount of financial flows between the State and energy sector enterprises: the SAR (private), which holds a monopoly over oil products, and SENELEC (state), in charge of producing, distributing, and marketing electricity. 113 Table 35 Senegal: Financial Flows Between the State, SAR, and SENELEC (109 CFA francs) 1988 1989 1990 I. SAR Amount received by the 61.9 52.0 49.8 State Value-added tax 15.7 15.1 7.5 Import duties 4.3 Excess profits 41.9 33.1 31.7 II. SENELEC Amount received by the 2.97 13.35 10.11 State Value-added tax 2.97 2.86 30.5 Import duties 0 0 2.80 Debt serx ce 0 10.49 4.26 Amount received by SENELEC 1.65 5.34 7.05 TOTAL received by the 63.22 60.01 52.86 State Over the period 1988-1990, the 58.7 billion FCFA average cash flow received by the Government coming from this two agencies was nearly 25% of total central budget revenues and was more than either scheduled amortization of external debt or total expenditure on materials and supplies durin3tha; period. This spells out one of the more dramatic dilemmas- in public finance management of the eighties in 3enegal: a developing structural dependence on high energy taxation and its negative effect on domestic competitiveness, which in turn reduces the buoy.x y of taxes from other potential sources (The World Bank, 1993h). This fiscal policy has impaired the wood fuel substitution process and has contributed, as indicated before, to the rising cost of living, with its possible effects on wages. Attempts to diversify tax revenues have had very little success. Increasing the tax base just led to greater "informality" in economic activities (under- billing and contraband), which in turn requires broadening the tax base to compensate for losses. The compensatory measures created by the State to cope with high 114 energy prices involved the creation of the Energy Fund (Fonds de l1'nergie--FE), which should have been supported by the surpluses of the "excess profits"" coming from the consumption of hydrocarbons to promote renewable sources, extend rural electrification, subsidize the phosphate-producing company in order to compensate for the high cost of energy, and foster rational use of energy measures and the penetration of other energy sources to substitute fuelwood consumption. In practice, however, during the Energy Fund's three years of operations (1988-1990), out of the 126.6 billion CFA francs received, 14.6 billion (about 11.6%) were used to subsidize the phosphate company, and another 8.1 billion (6.4%) to subsidize other companies. Regarding renewable energy sources, rural electrification, etc., only 1.7 billion CFA francs were disbursed, that is less than 1.5% of total. Recently, the FE's Managing Committee decided that no less than 80% of these funds would be allocated to cover the general budget of the State. 2. Pricing policy: The most significant outcome of the tax burden on oil products is the high level of final prices. Table 36 displays the taxes levied on hydrocarbons. It indicates that the average price fluctuated between two and three times the international price. The price of electricity, mostly produced with oil, is three times greater than in France. Energy-intensive industries, such as cement production and services like transportation, are severely affected, and the high costs of energy are identified as one of the main obstacles to industrial development. As in other African countries, the Government of Senegal has traditionally maintained a tight control over the prices of certain articles deemed to be strategic. Nevertheless, since the early eighties, this situation has been changing rapidly. As of 1989, most agricultural subsidies were eliminated and some prices were liberalized. The office in charge of controlling prices was eliminated in 1990; nevertheless, the Government continues to control 16 basic products, among which oil derivatives, electricity, and wood fuels. S" "Excess profit' is used to express the difference between the ex-refinary price and the refining margin, including, until recently, benefits from a return from petroleum products distributors arising from the difference between actual costs for transporting such products to different parts of the country and the transport allowance used to, determine selling prices at different localities. 115 Table 36 Senegal: Tax Burden on Oil Products (10' CFA francs) 1988 1990 A. Value of net imports of oil 35.3 41.6 products B. Total taxes on oil products 61.9 49.8 . VAT 15.7 7.5 , Import duties 4.3 10.6 _Surplus benefits 41.9 31.7 C. Tax burden (%) (B/A) 175 120 Regarding the energy sector, as of 1991, the Government established a more transparent pricing system for oil derivatives. This system is based on the ex-refinery price, which is negotiated between the Government and the SAR, bearing in mind the import price plus an amount to cover refining costs and margins. Distribution prices (bulk) are based on the ex-refinery price plus corresponding margins and taxes. For the first time since 1986, the domestic prices of oil products were reduced in July 1992 by an average of 15%. The largest reductions were aimed at fuel oil for industrial use. A. Prices of fuelwood : In contrast to what has been observed for oil products, the Government of Senegal has maintained a policy of low prices for wood fuels, to the detriment of the country's forest assets. The prices of charcoal and fuelwood are set by ministerial decree, but in reality real prices are higher than official ones (by about 30%). Charcoal and fuelwood are the only products of the basic basket whose prices have not kept pace with the cost of living. Studies conducted by ESKAP indicated that, between 1984 and 1986, while the price of charcoal was rising by 18%, the cost of living rose 26%. Between 1986 and 1992, the price of charcoal declined in real terms as in other urban centers of the CFA area. The decline, in real terms, of the price of charcoal and fuelwood has been possible thanks to the implicit devaluation of forest resources. Stumpage fees, which are t- real prices of fuelwood for the producer, were adjusted in 1987 for the first time in nine years (over the past 23 years, they have been adjusted only three times, in 1964, 1973, and 1978) to 500 CFA francs per quintal of 116 charcoal (previously it was 150 CFA francs per quintal); forest studies, however, indicate that this tax should be 6,000 CFA francs per quintal in order to cover reforestation costs. B. Price of butane gas: This major substitution source also has a pricing system controlled by the State. Its structure is revised on a quarterly basis by ministerial decree. Since 1974, when the butanization campaign was initiated, its price increased substantially: 40% over the inflation rate. While the price of gas has increased substantially in real terms since 1980, the real prices of charcoal have declined. As of 1987, the Government agreed to reduce by 40% the consumer price of the so-called popular cylinders (2.5 and 6 kilos), leading to a high increase in consumption (a price elasticity of 7 between 1987 and 1992). Between 1987 and 1992, the consumption of butane increased threefold. Even in rural zones, there was a high increase in consumption. LPG prices decreased, partially because gas is being subsidized but mainly because the decline in international market prices was transferred to the consumer. Indeed, the price reduction (stabilization) functions on ex-SAR prices, which are much higher than CIF-Dakar import values. For example, in 1987, one CIF-Dakar ton cost between 70,000 and 75,000 CFA francs, where ex-SAR prices were 162,250 CFA francs per ton; afterwards, in 1992, import prices were 102,757 CFA francs per ton. Finally, it is interesting to emphasize that the substitution of all urban traditional energy consumption for butane would imply increasing about 200,000 additional tons (1992) to the only 42,000 that are currently being consumed. In economic terms, this would mean about an additional 20 billion CFA francs, before devaluation, and about 40 billion after FCFA devaluation (this estimates does not include infraestructure investments, distribution costs and appliances). Equivalent reforestation costs were estimated in 35 million. Costs involved in LPG substitution are more accuratly known (CIF LPG and stoves prices, etc) and having said that the 40 billion FCFA (after devaluation) of additional LPG imports do not include the other costs above mentioned (all of which must be paid in hard currencies), so this estimate have to be considered as a minimun figure. On the contrary, reforestation are expected to decrease p so reforestation figures should be taken as over-estimates. There are two other benefits on reforestation i) almost all are local costs, specially labor and most important of all ii) the environmental benefits. VII.5 Institutional Reform There are two institutions that are crucial for Senegal's traditional energies: a) the SAR and b) the Forestry Service. 117 a. The African Refinery Company (La Societe africaine de raffinerie--SAR): This is a joint stock company with private capital, set up by the country's main distributors of oil products, which hold a monopoly over the import and refining of petroleum for both domestic consumption and export. The SAR operates a small primary refinery with facilities and equipment that have reached the end of their useful life. Local refining costs are not competitive with CIF-Dakar prices for the same imported products. Owing to Senegal's domestic consumption structure (5% LPG, 11.6% gasolines, 25.2% gas oil, 15.6% kerosene, and 42.5% fuel oil), the SAR is obliged to import finished products to complement national production or for re-export to other neighboring countries (Niger, Mali, etc.). Deficit products are mainly LPG, gasoline, and gas oil. The agreement drawn up between the government and the SAR provides that ex-refinery import prices for oil products will be established on par with the costs of the same locally refined products. To calculate the latter, the government negotiates with SAR to determine a guaranteed refining margin, which somehow takes into account the high costs of local production and the government's fiscal needs. In turn, the SAR reimburses the surplus benefit earned on the oil imports to the State. As a result of this price system, the higher the local refining costs, the greater the profits on imported products, which prevents costs from being rationalized and facilities from being upgraded. It is not hard to see that resolving this problem, which would entail seriously considering the possibility of decommissioning the refinery, is highly complex as a result of the many vested interests that are at stake. Although this alternative may not necessarily reduce the tax burden on oil products, it will benefit the national economy as a whole, since energy prices will drop. b. Forestry Service: The degree of complexity and the difficulties of managing forest resources for the sustainable production of energy are enormous. The irrational exploitation currently practiced in Senegal's forests stems from a wide range of causes: from the land ownership system to the economic leverage of certain vested interests and players, as well as the State's political will to halt the destruction of the forests, which up to now has been rather rhetorical. Nevertheless, several actions could substantially improve this situation. There are basically two measures that could be applied over the short term. The first is to enhance the Forestry Service's monitoring staff, both technically and in terms of numbers. In 1992, revenues for exploiting fuels amounted to 583 million CFA francs from taxes and royalties on tree-cutting; nevertheless, this figure is less than half of the potential figure that could be collected, mainly because of the illegal entry of fuel wood into 118 the cities, especially Dakar. Probably a greater autonomy for the Forestry Service would enable it to exercise its duties more efficiently, with respect to collecting taxes, if part of these revenues were allocated directly to the Service. A more flexible policy for hiring staff could also lead to more effective tax collection (short-term contracts during high-traffic periods, etc.). Another action that could be carried out over the short term, but which would entail complications, is levying the tax on fuelwood cutting rather than charcoal volume. Current forestry regulations foster wastage; to counteract this, producers would have to use technologies that are 20% more efficient than traditional kilns. This would imply, however, a greater degree of control by the Forestry Service. Finally, on the basis of the real situation of Senegal's traditional energy products, it seems that, despite its considerable flaws, the system of State quotas and control would be better suited to resolving current problems than the liberalization of production. Under present conditions, until the land ownership problem is resolved, the liberalization of charcoal production would have a disastrous impact on the forests and the economy as a whole, especially agriculture (erosion, loss of soil humidity); in addition it would obstruct the process of substitution for other forms of energy. The best short-term option is to strengthen the current control system, increasing the stumpage fee and strengthening tax surveillance and collection. VII.6 The Long-term Situation" Demographic forecast are based on the study conducted by the West Africa Lon-term Perspective Study (WALTPS) of OCDE and the Sahel Club. Table 37 provides a summary of these forecast based on two demographic growth scenarios. According to these estimates, scenario A envisage a total population of 1.6 million more inhabitants than scenario B. Nevertheless, the most significant differences between these two scenarios is in the varing shares of urban and rural population, with their important implications for the use fuelwood and LPG. With an urbanization rate of 63.5% in scenario A, the urban population would amount to 10.7 million inhabitants, whereas in scenario B it would amonut to 7.6 million Senegal's situation is clearly different from that of its neighbors. In addition to significant urban development, the country has an important LPG market due to an energy transition process taht began with the butanization campaign more than 20 " Economic growth rate assumptions as well as petroleum price scenario are the same to that considered for the other RPTES countries. 119 years ago and which is now being extended to the rural sector as well. In 1990, Senegal accounted for 87% of LPG consumption in the RPTES countries. In the last five years, gas consumption accelereted at a rate of 12% per year. Nevertheless, as a result of the devaluation of CFA franc, in the short term and on a basis of the economic outlook fot the medium term, it is reasonable to expect that the growth rate of LPG consumption will decline considerably. Tamle 37 Demographic Forecasting to the year 2020 2020 1990 Scenario Scenario A B 1. Total population (millions) 7.3 16.9 15.3 2. Urban population (%) 42.9 63.5 | 49.7 Source: WALTPS/OECD-Sahel Club. The ow ership of gas stoves is quite widespread: more than 70% of urban nouseholds (85% in Dakar, 74% in Thies, and 60% in other cities) and 25% in rural areas. At the national level, 45% of total households have a gas stove. The price of gas is beginning to be more competitive with respect to charcoal. In Dakar, cooking with charcoal is 35% more expensive than cooking with gas (Ministere de L'Energie, des Mines et de L'Industrie, 1993), whereas in secondary cities that are closer to forest areas, charcoal is still cheaper than gas. With increasing distances between production sites and consumer centers charcoal and fuelwood, higher transportation costs (including not only fuels but, costs of trucks, etc.), specially after the FCFA devaluation, will be an element which will pull up traditonal energy sources. The high degree of urbanization has also favored fuelwood substitution by charcoal, which today dominat-s the urban market as the most important energy sources for cooki-- food. For the urban consumer, the use of charcoal is an inte:-mediate step between fuelwood consumption and LPG. From the strictly energy standpoint, carbonization for charcoal production is an inefficient way to tap forest resources for energy. Despite this, its ease of use and low cost, compared to Kerosene and LPG, have transformed it into the fuel most preferred by the urban population of Senegal. It may be assumed that, in the year 2020, LPG will be the primary fuel for 70% of the urban population (in 1992, it was the primary fuel for 41% of the urban population) and that the remaining 30% will continue using charcoal. It may also be assumed that 10% of 120 the rural population will adopt LPG as their main fuel (in 1992 only 3% of the rural population used LPG as a principal fuel). On the basis of these assumptions, keeping in mind the climate conditions and culinary habits of Sahel, the energy needs of the urban population for cooking food will be met with about 32.8 Kg per inhabitant per year. Tables 38 and 39 summarize the energy consumption situation for cooking for the year 2020 in Senegal. The most important outcome of this simulation is that fuelwood consumption of the urban sector will decline by 10% compared to 1992, which may be viewed as a modest result. Nevertheless, this will exert a significant impact on deforestation. As a whole, forest biomass consumption will increase 70% between 1992 and 2020 (less than the demographic growth) and per capita consumption will decline 25%. Alongside this, although the LPG consumption growth rate will decrease to 7% per year, annual consumption will amount 260,000 tons in 2020, thus increasing per capita consumption to 15.7 kilos per inhabitant per year'0. This amount is not exaggerated, considering that in 1990 per capita LPG consumption in Cape Verde, a neighboring country of Senegal, was 14.2 kilos. The per capita consumption of fuelwood for the rural population will increase as a result of wider use of charcoal. In the year 2020, 36% of charcoal will consumed in the rural sector (this percentage was 19% in 1992). Table 38 Senegal: Forecasts for the consumption of cooking fuels. 1992 2020 Pop.* Wood LPG Pop. Wood LPG U (10') (lOs) (103) (106) (103) (103) Urban______M 14 - A 1-77n M6 10.7 1,560 245 Rural 3.7 1,630 5. Total 7.3 3,350 40.5_16.9 5,748 265 * corresponds o the ;population !TI'u 70 The per capita consumption of LPG in 1990 in Senegal was 4.32 kilos. 121 Table 39 Details of traditional energy consumption forecast 2020 Total wood Wood Charcoal equivalent (103ton) (103ton) (103ton) Urban 260 1,560 Rural 3,300 148 4,188 Total 3,300 408 5,748 VII.7 Conclusions Senegal is, together with The Gambia, the country of c -eater urba- development of the region. Additionally, its greater degree c relative deve -pment, measured by a higher GDP per capita: 720 US$ in 1991, more tnan double of the other 4 RPTES countries and by the greater degreu of diversification and modernization of its economy, Senegal is in the process of a more advanced energy transition than the remaining countries which have been analyzed. The LPG market eached in 1992 the 42,500 tons (among the countries analyzed, Burkina Faso with 2,886 tons follows after Senegal in importance). The LPG is penetrating, including rural zones of the cc iritry and in Dakar 2/3 of families own'gas cooking equipments and a evel of 40% of the urban homes have gas ranges. However, the persisting economic difficulties originating from the decade of the eighties and the low prices of firewood are causing an "urbanization" phenomenon in the use of traditional fuels. !ndeed, more than 80% of coal consumption is directed to the cities cX Dakar, Thies, Kaolack, Saint-Louis et Ziguinchor. Between 1987 the growth of coal consumption has been second only to LPG. If the equivalent in firewood of the coal production is considered, it can be -tated that in Senegal more than '50% of firewood consumed is ad"ressed to urban centers. If it is added thereto the trade of Aqtoal in rural areas, it can be concluded that in Senegal, approximately 60% of the total firewood consumed enters the market. Policy of Tradicional Fuels Because of the market development of firewood fuels and the lack of a forestry policy encouraging the sustainable production of firewood, the firewood consumption may be in Senegal and contrary to the remaining countries of the region, the most important cause 122 of deforestation. In spite of the existance of an organized market in its production, transportation and sale, the price of standing firewood does not reflect its economic value. Until the beginning of 1994 250 FCFA were officially paid per charcoal bag of 50 Kg. This is equivalent to a price of 1 FCFA/Kg (if one takes into account that 5.5 Kg of firewood per. 1 Kg of coal are necessary) for firewood, way under the cost of reforestation. Even considering the costs of natural forests management, estimated in some 4 FCFA/Kg, which should be the value of stumpage fee while the annual productivity of natural forests exceeds the annual consumption of firewood. This would entail to increase the actual tax of 750 FCFA/bag of charcoal after the devaluation to 1,100 FCFA/bag. If one takes as reference 17 FCFA/Kg of firewood as cost of reforestation in plantations, the stumpage fee on the charcoal bag should be increased to some 4,600 FCFA/bag. Likewise, as it is occurring in the other countries a stumpage fee is collected on coal favoring deficiency and hurting the producer of firewood. A first measure would be to collect the tax on the amount of firewood and not on the coal produced. This meassure would favor the introduction of more efficient ovens. To reach these objects it is necessary a vigorous strengthening of the forestry sector, a constant for all the RPTES countries. Here it will be necessary also to have the technical and financial international support. The training and the financing of projects of reforestation of multiple purposes (energy, protection of soils, fight against wasteland, etc.) community level, they should be able to have external financing. The process of LPG penetration has been consolidated, it was stated. If the process continues it is to be expected that in the cities the LPG replaces coal in the urban areas. However it is expected that the coal penetrates the rural consumption as an intermediate step toward gas consumption. If this process of substitution is projected in the future with an average rate of consumption of LPG OF 6.7 per year, a reasonable growth believed to be between 1987 and 1992 grew 16% annual average, it may be expected that in the year 2020 the consumption of firewood is concentrated in the rural areas and be detained in the growth of coal urban consumption. This does not seem to be an exaggerated hypothesis. Policy toward the LPG The LPG price to consumer is the lowest among the countries analyzed, but analogous it is the most subsidized. Until the end of 1993 the subsidy was of 87 FCFA/Kg. This difference was emphasized prominently as of the devaluation as it may be observed in the Table No. 42. In spite of the fact that the ex-SAR prices went from 66,147 ton to 140,825, the final price went from 120.0 to 157.5 FCFA/Kg that is, an increase of 30%. Which means an increase in the subsidy level. In the effects of the price structure it is observed that the subsidies for containers of 2.7 and 6Kg, the most popular, increase to 137,6 FCFA/Kg. One of the price policy characteristics of petroleum derivates is that it has been a tool of fiscal policy of the Government. In spite of the fact that the fuels of domestic use are subsidized, the bulk of all oil products are heavily taxed. The Government, which is a co-owner of SAR, controls the prices and establishes ex- refinery prices which are way above the international prices CIF Dakar. This price difference takes into account the deficiency of the SAR, but also finances partially the public budget. The ex-SAR price of LPG until the end of 1993 was of 106,100 FCFA ton while in the international market ranged between 75,000 and 80,000 CIF Dakar. The best option would be to liberate the GLP prices, which would provoke a moderate increase in the final prices since the adjustment of the CIF prices with the international prices and the elimination of the import taxes would partially compensate the elimination of subsidy. The liberalization of the prices of GLP should be preceded a decrease of the tax burden on the remaining petroleum derivates. A more liberal petroleum policy would favor the neighboring countries, specially The Gambia which supplies itself mainly from Senegal. Additionally, Mali could be favored, which has facilities for the transportation of petroleum derivates by railroad. At medium term the technical efficiency of the SAR refinery should be analyzed and compare their costs of production with the direct import of the petroleum derivates. 124 VIII. REGIONAL ANALYSIS 125 VIII.1 General Economic Characteristics The estimates made for obtaining macroeconomic aggregates involve various degrees of reliability, and their values differ substantially depending on the calculation method used, owing to monetary fluctuations and inflationary distortions. Nevertheless, available information displays a series of long-term processes and trends that will exert a significant impact on the energy transition process that is occurring in the five countries under study. Except for Senegal, which has a per capita GDP of US$720, in the rest of the countries of the study, this indicator is not more than US$350. According to the classification used by the World Bank, these countries are among the low-income and middle-low-income countries. Despite their current situation, these countries made considerable progress in the areas of health and education over the last 30 years. Between 1960 and 1990, life expectancy at birth increased by more than 10 years in the five countries of the study, owing to a more than 30% reduction in the infant mortality rate. The number of inhabitants per physician dropped by more than 40%, the population with clean water supply service, and literacy rose steadily. Nevertheless, many of these indicators still remain below the average of sub-Saharan Africa. Despite differences in economic and social development, these countries as a whole share common elements, of which the most important are specified below: - High rate of demographic growth: The fall of the crude mortality rate as a result of improvements in basic health conditions has substantially increased the population. The annual average demographic growth rate in the five countries between 1960 and 1990 was over 2.6%, which is equivalent to saying that the population increases twofold every 25 years. World Bank population forecasts estimate that, except for Senegal, the natural demographic growth rate will rise over the period 1990-2000 in the other countries to more than 3% per year. In addition the high demographic dependence rate" in the five countries remains higher than 46%, thus guaranteeing that population growth will continue for several decades to come. - Rapid and and non-planned urbanization: Although the urban population varies between 9% and 40% of total population, the demographic growth of cities between 1980 and 1991 was more than 4% in all five countries (7.4% in Niger and 8% in The 71 This is defined as the percentage of population under 15 and over 64 years of over total population. 126 Gambia). It is estimated that by the year 2020 the urban population of the all region will amount to 40% of total population. Most of these population iiicreases will be concentrated in the capitals, with significant impacts on the current energy substitution process. In 1990 Dakar concentrated 20% of total population compered with 13% in 1965 (The World Bak, 1993d). Although urbanization will eventually lead, over the long term, to the substitution of wood fuels, in the short and medium term firewood consumption may accelerate, as a result of the marked preference for charcoal displayed by urban consumers. Heavy dependence on agriculture: Except for Senegal, agriculture, which in most cases involves subsistence agriculture, accounts for more than 40% of GDP. In 1991, the primary sector gene- ated more than 50% of export earnings (93% in Mali and 88% in Burkina Faso). A large part of agricultural exports are concentrated in one single product (generally cotton or peanuts). Agriculture is also the main source of employment: more than 85% of the labor force of all five countries is employed in agriculture and shepherding, generally as subsistence activities. - Rapid environmental deterioration: For two decades now, the Sahel region has been experiencing below normal precipitation levels. Agricultural activities and shepherding are applying increasingly heavy pressure on natural resources, and this is mainly affecting natural forests and soils. Although deforestation rates are not the highest in Africa, the growing need for firewood, especially to meet the urban population's demand, and for new lands for agriculture are leading to critical firewood shortage situations. The irregularity of rainfall and the prolonged droughts are the major causes for the drop in agricultural production and GDP"2 in the last few decades. Rural poverty is another widespread element in these countriLes. Although there are no complete data available, the most recent statistics (1988) estimate that in four of the five countries the n. -l population living below the poverty line is over 60%. For two countries for which information is available, 50% of household income in rural zones is aimed at buying food. The five countries are classified by the FAO as having food deficits; although the situation has improved over the last decades, the percentage of food aid as a proportion of imports is increasing steeply. In Senegal and The Gambia, food imports are even larger than the oil bill. 72 Although it is true that informal activities may have counterbalance GDP drops, but informal economy has to be considered a survival strategy and not a development strategy. 127 - The informal sector is important and constantly growing. According to the West Africa Long-Term Perspective Study (WALTPS) of 1989, in sub-Saharan Africa, the informal sector employs close to 59% of the urban labor force and contributes an average of 20% to GDP in 17 African countries. In the Sahel, according to 1989 estimates73, it was established that the informal sector in Burkina Faso employed 74% of the country's total labor force. In Mali, Senegal. and Niger its contribution to providing jobs to the urban labor force in 1989 amounted to 54%, 70%, and 58%, respectively. The informal sector also provides 40% of GDP in Mali, 58% in Senegal, and 66% in Niger. VIII.2 Recent Evolution of the Energy Transition The 5 countries participating in the RPTES are included in the group of countries of lowest consumption of energy per capita, even by African standards. Senegal, which registered the highest level of energy consumption in 1989, this indicator reached 60% of African average. In the countries with less consumption per capita (Mali and Niger) this indicator above hardly reached 35% of the African average (See table 40). The differences are even more emphasized upon analyzing the consumptions of commercial energy, represented, mainly, by products derived from petroleum. Senegal where the highest grades of real estate development has favored greater use of these, the consumption per capita was 58% of Africa's average; while the countries with lesser consumption, in this case Mali and Burkina Faso, the consumption of commercial energy represented only the 8.3% of Africa's average. The population with electricity service is extremely low. In 1987 the electrification was 4.85 in burkina, 3.1% in Mali, 4.3% in Niger and 19.5% in Senegal. It deals mainly with an urban population of the great cities. This situation has impact in very low per capita consumptions which go from 17 Kwh/person/year in Burkina up to a maximum of 98 Kwh/person/year in Senegal. The average for Africa is of 97 Kwh/person/year. During the decade of the eighties, the increase in energy consumption did not exceed, in the majority of the RPTES countries, the demographical growth. In 1989, the total consumption of energy decreased in respect to the values of 1979 of 1% in Burkina Faso, 23% in The Gambia and of 13% in Senegal, while the per capita consumption of commercial sources fell at 1% in Burkina, 11% in The Gambia, 17% in Mali, 16% in Senegal. The sole exception was Niger where both indicators decreased. 73 Working Paper on the Urban Informal Sector in the Sahel, February 1989, Leslie Pan. 128 Table 40. Total and commercial energy per capita consumption in RPTES countries Total Per Capita Commercial energy energy cons. cons. (boe) (boe) MALI 1.144 0.163 BURKINA FASO 1.634 0.163 THE GAMBIA 2.124 0.489 NIGER 1.144 0.327 SENEGAL 1.961 1.144 AFRICA 3.268 1.961 boe = standara UN barrel o± o- i equiva-en (1 boe = b.12 Uj) Source: The World Resources (1992-93) The reduction of the rates of the GDP growth, provoked by the fall of exports (partially caused by adverse climatic factors) and the loss of the exchange relationship, the fall of investments and the financial difficulties to face the obligations of the external debt are at the base of the slow growth of energy consumption, specially of modern forms of energy as electricity and petroleum derivates. During the decade of the seventies, in spite of being considered a period of high prices of energy, the consumption growth of commercial energy registered a significant growth rate, accompanied by good performance of the economy, measured through the growth of GDP at a rate very superior to the growth of the population. At the beginning of the eighties a systematic and significant reduction was produced on the growth rates of the GDP, generating at the end of the decade, a fall of the GDP per capitain respect of the levels of 1980 in Mali and Niger, while at Senegal the growth of this indicator during the period mentioned was slightly of 0.1% annual average. The exception was Burkina Faso where the GDP per capita increased from 1.2% annual average between 1980 and 1991 (see Table 41). The rates of growth of commercial fuels followed the same evolution of GDP. During the period 1980-90 the growth of these energies was reduced at less than 10% of the registered value in the previous decade. the private consumption which had experienced between 1970-80 a sustained growth above the demographical growth fell further in a prominent fashion affecting the consumption of energy, 129 specially in the residencial sector. Table 41. GDP and Commercial Energy Consumption Growth Period 1970-1980 1980-1991 GDP Energy GDP Energy Yearly Yearly Yearly Yearly average average average average growth growth growth growth .__________________ (%) (%) (%) (%) - MALI 3.49 7.8 -0.1 |2.1 BURKINA FASO 3.48 12.0 1.2 1.1 I THE GAMBIA 5.57 __ 0.15 1.7 NIGER 3.72 11.8 -4.1 2.4 SENEGAL 2.74 -2.9 0.1 -1.6 Sources: Data for GDP growth 1980-90 and commercial energy growth for both periods, except for The Gambia, are based on The World Development Report 1993, of The World Bank. GDP growth rates between 1970-80 were taken from West African Long-Term Perspectives: Population, Land and Development, ADB-OECD. For The Gambia was used data from The African Development Indicators. The process of energy transition which had gained strength during the period 1970-80, was paralyzed or suffered a setback the following decade. The table 42 presents the evolution followed by the participation of the tradilional energies in the total consumption of energy between 1979 and 1989. It is observed that only in Niger an important reduction of this indicator was noted and in lesser measure in The Gambia. In Mali and Senegal this process appears to have suffered a setback while at Burkina no appreciable changes were produced in the participation of traditional fuels in the total consumption of energy. The deceleration or regression, in some cases, of the energy transition process is registered in the frame of a marked urban growth with annual average growth rates which go from 3.8% at Mali to 7.4% at Niger. A phenomenon which could be explained only by the increase use of traditional fuels by urban population. It may be inferred that this phenomenon should be further emphasized in countries where increases in the urban indexes were registered and ; no changes were registered in the composition from among traditional and commercial energies. 130 Table 42. Share of Traditional Energy Fuels as percentage of Total Energy Requirements. 1979 1789 MALI 85 87 BURKINA FASO 92 92 THE GAMBIA 80 77 NIGER 81 73 SENEGAL 49 51 AFRICA 39 37 Source: World Resources 1992-93. A Guide to the Global Environment with data of United National Statistical Office and the World Bank. Even though it is a circumstantial situation dictated by the economic recession of the eighties, an increase use of the traditional energies by the urban population appears to be occurring in Mali, Burkina Faso and, above all, in Senegal (see table 43) Between 1970 and 1980 the increase in the rates of commercial energy consumption, with the exception of Senegal, were much higher to those of the growth of the urban population. This situation is inverted in the following decade where the rates of urban demographical growth outnumbered those corresponding to commercial energies such as it-is shown in the Table 44. It is true that the growth of consumption from petroleum derivates is determined mainly by the behavior of the transportation sector", while those of the traditional energies are of principal use in the residential sector and therefore are two independent phenomena. However, if the consumption of the transportation " Even from series of energy balances sufficiently long (more than 15 years) necessary to analyze the historical tendencies of energy consumption, it may be stated that the consumptions of the transportation sector in the 5 countries analyzed dominate the imports of petroleum. Pursuant to balances of energy more recent, published in the RPTES reports, the consumption of the transportation sector represents the following percentages on the consumption of petroleum derivates: The 66% in Mali (1992); 90% in The Gambia (1991/92); 70% in Niger (1992) and 61% in Burkina Faso (1991). 131 sector, which is a hydrocarbon captive consumer, was affected in the manner indicated, more so would have been the consumption of GLP or kerosene which are fuels having local substitutes. Table 43. Urbanization and Traditional Energy Consumption 1980 1990 Urban Trad.* Urban Trad.** Pop. energy Pop. energy (%) (%) (%) (%) MALI 17.3 85 19.2 87 BURKINA 92 9.0 92 FASO__ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ THE GAMBIA 18.1 80 22.5 77 NIGER 13.2 81 19.5 73 SENEGAL 34.9 49 38.4 51 * refers to data from 1979 ** refers to data from 1989 Sources: The African Development Indicators for urbanization data and World Resources 1992-93 for energy information. While the aggregate amounts indicate that between 1980 and 1990 a standstill process of the energy transition was registered, it cannot be stated that this standstill was constant along all the period nor that it was registered with the same intensity in all the sectors. The conclusion one reaches is that these should be relative when the residential sector is analyzed, however, if one can state that at least during the first five-year period of the eighties the rate of growth of the GLP was depressed and that only from 1985-87, thanks to the intervention of Governments and the international cooperation, a substantial increase in the consumption of this domestic fuel was obtained. Indeed the market of GLP held depressed at Burkina, Mali and Niger. In this last country the consumption of GLP was reduced and maintained until 1985 to be recovered thereafter and reach in 1992 the levels of 1980. At Mali and Burkina the market of this fuel registered a slow growth, compared with high rates of growth typical of the first stages of market development. In more sophisticated markets and in similar climatic conditions is to be 132 Table 44 Urban Population Growth and Commercial Energy Growth. 1970 - 1980 1980 - 1990 Average Average Average Average urban comm. urban comm. growth energy growth energy (%) growth (%) growth MALI 1 7.8 3.8 2.1 BURKINA 4.3 12.0 5.2 1.i FASO THE GAMBIA ___ li.O _ _.a NIGER 4.5 11.8 7.4 2.3 SENEGAL 3.4 -2.9 4.0 -.6. ,ource: Tne world Development Report hg 9. the World Bank, 1993. expected that consumption growth rates of GLP are reduced progressively until reaching tendentiously values near the rate of growth of urban population'5 The rates of consumption growth of the countries of RPTES is presented in the table 45. The consumption growth of GLP reached its maximum between 1985 and 1990 after surpassing rates of grow h under those which could be expected in cases as this one. As _f 1990 a standstill is noted in the dynamism of GLP consumption, probably because of the saturation reached between the high income sectors. It is to be expected that the devaluation of the F ' reduces even more the consumption growth rates of GLP at levels . y " Such is the case of other regions of the world. In Central America and the Caribbean where the market of GLP has reached a higher penetration that in the countries of RPTES, but of lesser relative growth than the remaining regions of Latin America, the rates of GLP consumption are superior to regional average (from 10% to 8% in the period 1970-80) but are maintained and decreased tendentiously until reaching values near 5% per year in the period 1985-90. The rates of consumption growth from 8 to 10%nper year may be considered as minimal for the actual state vdu market development of GLP in the countries of RPTES. 133 under of those registered between 1990 and 1992. Table 45. LPG growth rates in RPTES countries. 1980-85 1985-90 1990-92 MALI 6.0 31.5 31.0 BURKINA FASO 5.9 22.4 16.0 THE GAMBIA __ __ 31.0 NIGE -_______ _ __6._2 8_.510._O SENEGAL 8.2 17.0 12.0 Source: SEED. Programme Regional de Gaz. Etude Regionale Prix et Transport du Gaz Butane, Vol I, 1992. Other of the recent characteristics of the evolution of energy consumption in the residential sector in the countries of RPTES is the sustained growth of charcoal. The situation is, however, very different between Senegal and the rest of the countries studied. Pursuant to information of the RPTES reports on the countries in Senegal the 68% of firewood in 1992 is transformed into charcoal mainly for urban consumption (this percentage reached 61% in 1987). In 1992 in Mali this proportion reached 10% in 1992 and 3% in Burkina. In Niger and The Gambia the consumption of charcoal is insignificant. Firewood and charcoal prices rise steadily as the supply centers, that is, the natural forests, shift increasingly farther away from the cities. Since the wood itself is virtually cost-free to commercial suppliers, cost of trucking woodfuels to urban markets is begining to be an important component of final cost. In Senegal, charcoal is already being transported from 400 kilometers away from the city of Dakar. Even though official prices do not reflect scarcity. In Bamako, between 1978 and 1983, current firewood prices remain constant between 1988 and 1992 (Ministere du Plan du Mali, 1992), similar to what occurred in Ouagadougou between 1985 and 1992 (Ministere des Finances et du Plan, 1993). Nevertheless, in real terms the prices have actually declined. The reason for this is that, although control systems have improved, firewood in wood-cutting sites is basically a free good. As a result of this situation, lower-income urban families must channel up to 20% of their monetary income to purchase firewood. This proportion hardly reaches 5% to 8% for the wealthiest families (Fallox and Mukendi, 1988). 134 It has been observed that, in Burkina Faso, for example, mainly women and children have to walk between 3 and 22 kilometers 1 to 7 times a week to gather wood, implying working days of between 3 and 13 hours(deLucia, 1990). Around Bamako the time involve in fuelwood gathering could vary between 30 minutes to 2 hours a day for one woman and 1 hour and 40 minutes in Sofara (Gajo, 1991). Nevertheless gathering firewood does not seem to be the activity that requires the most time for women. According to a study conducted in five villages of Burkina Faso, the time dedicated by women to gather firewood is considerably lower than the time spent to prepare food and fetch water, but three times greater than the time spent by men in this activity (Tinker, 1987). Regarding the progress of the energy transition process, four different situations can be identified (Table 46 summarizes the evolution of LPG consumption in the ptudy's five countries): - In Senegal, which has a higher degree of urbanization (39% in 1991), the energy transition process reached the highest level of progress among all the RPTES countries. In 1990, 88% of total LPG sales in RPTES countries were recorded in Senegal, with the other countries trailing far behind. Charcoal has displaced firewood as the main fuel for urban households; because of this, 54% of the country's total fuelwood demand comes from the urban sector. The market of wood fuels is well organized and accounts for a turnover of 17 to 32 billions CFA francs per year and provides employment for more than 10,000 persons. The price of LPG at the useful energy level is already lower than the price for charcoal before FCFA devaluation (1990). After devaluation retail prices of LPG increased 30% and charcoal 130%, (40 to 95 FCFA/Kg) so today charcoal should be even more expensive than LPG. = In second place, there is The Gambia, with an urban population of 40% of the country's total population in 1992, a percentage comparable with Senegal and higher than in Niger and Mali. Although its urban population in 1990 was scarcely 250,000 inhabitants, compared to 1.6 million in Mali, 1.4 million in Niger, and 850,000 in Burkina Faso, LPG consumption is higher than in Niger and comparable to that of Mali. In terms of per capita LPG consumption (0.91 kilo per inhabitant per year), The Gambia is only second to Senegal, with values far above those of Burkina Faso (0.23 kilo per Inhabitant per year) Mali (0-12), and Niger (0.07). The Gambia is the only country in the region that forbids the production of charcoal, a prohibition that has been in force since 1982 and applied effectively. The studies that have been conducted have concluded that LPG prices can be substar -ially reduced (by about 40 to 50% of current values) by investing in storage facilities and finding better supply sources. A third situation, different from the previous two, can be 135 identified in Mali and Burkina Faso. Despite the wide difference in their respective urbanization rates in 1990 (20% in Mali, compared to only 9% in Burkina Faso), both countries seem to be in a very similar phase in their transition process. Although in Mali increased charcoal consumption has been observed in urban sectors, levels remain very low. In Burkina, charcoal consumption is much lower than in Mali, and in both countries firewood is the main energy source in households. By contrast, the per capita LPG consumption in Burkina is twice that of Mali. LPG and charcoal prices are very similar.7 Table 46 Evolution of LPG Consumption and Forecasts for the year 2000 According to Etude R&gionale de Prix et Transport du Gaz Butane 1980 1990 2000 SENEGAL 9880 32111 90000 GAMBIA -- 800 2000 MALI 199 1047 12000 BURKINA FASO 571 2085 5900 NIGER 510 556 4500 TOTAL 11160 36599 114400 Source: taken from table 1 in page 2 of the Etude Regionale Prix et Transport du Gaz Butane, Vol I: Prix; SEED, 1992. Lagging behind the other countries, there is Niger. Although its urbanization level is comparable to that of Mali and higher than that of Burkina Faso, the penetration of modern fuels for household consumption is very limited, even though final consumer prices are the same as those in the other countries referred to above. LPG consumption in Niger, in absolute terms, is the lowest of all RPTES countries: 556 76 In 1991, the prices of firewood and LPG were, respectively, 20 and 250 CFA francs per kilo in Burkina and 15 and 240 CFA francs per kilo in Mali. 136 tons in 1990 compared to 800 tons in The Gambia. 77 Charcoal consumption is negligible, and firewood i., the most widely used fuel, even in urban zones. These different situations in the energy transition and fuelwood substitution process also suggest the need to establish priorities for the different strategies identified in countless studies conducted on household energy in the present country overview, some of which will- require the joint cooperation of all five governments. Even though, medium-term economic perspective, would indicate that the energy transition toward use of LPG will be a slow process, especially for landlocked countries, and fuelwood will be the main energy source for households. One of the first actions that could be shared by the five countries, on the basis of the present analysis, is immediate steps to ensure the conservation of their natural forests. The first step to achieve this objective is strengthen_ng the forestry sector. This can be justified not only to maintain an adequate supply of wood fuels but also to consolidate the role of the forests in conserving other natural resources such as water and soil. The importance of this task transcends the mere concern for fuelwood st-ply; it is a national and regional priority, geared to ensuring tiAe very sustainability of these countries' development. In the case of Senegal, where there is a proven market for LPG and where the substitution process has made considerable progress, subsidies or price controls over LPG and kerosene are not justifiable. Due to the broad penetration achieved by LPG, the soundest approach for the national economy would be to allow market forces to determine the speed of the wood fuel substitution process. This does not necessarily exclude involvement by the State.. The State's first priority should be to strengthen the forestry sector and control the prices of standing wood. The latter prices should reflect the economic cost of reforestation. The investments needed to enhance supervision and upgrade the forestry sector's technical skills do not entail large outlays, nor do they imply any increase in staffing. They will, however, require political will on the part of the Government to resolve a complex and well-known problem, namely, the urban marketing and trade of wood fuels. Another priority task to be performed by the State is a thorough review of its oil policy, especially regarding fuels for household use. The costs of the refinery operated by the SAR are not competitive with the direct import of finished products. The first - 77 It should be underscored here that the total population of Niger is 7.6 million inhabitants, whereas that of The Gambia is hardly 900,000 inhabitants. 137 option that should be considered is liberalizing the import of certain products, such as LPG; over the longer term, the advisability of decommissioning the refinery should be studied in Senegal. VII.3 The effects of FCFA devaluation Since 1948 the CFA Franc maintained a constant conversion rate with the French Franc of 1 FCFA=0.02 FF. Beginning in the 1980s, it became apparent that local measures, such as an increase in prices for producers --farmers in particular--, a decrease in non- essential investments and expenditures in the public budget, or the decrease in the nominal value of salaries, were not enough to achieve the objectives of the adjustment and economic stabilization programs. Internal adjustment measures were not capable of reducing the hypervaluation of FCFA with respect to currencies of other countries competing in the same export market. While adopting the above mentioned measures, the nominal FCFA appraisals worsen and with them came the deterioration of the exchange terms (from 40% to 50% between 1986 and 1993). In this context the internal corrective measures, instead of provoking the return of trust and equilibrium, had a significant recessive effect to which it is blamed a decrease in production. Not only this corrective measures failed to produce the desired effect, but also aggravated the recession. The adoPtion of a realistic exchange rate appeared as a necessary measure, together with the already adopted measures, to straighten the economies and to establish conditions suitable for increase income per capita. It is still early to be able to measure the effects caused by the FCFA devaluation, officially announced on January 11, 1994, on basic need goods consumption and the loss of the consumer's purchasing capacity. However,, as it was expected, the FCFA devaluation had an immediate double negative effect on consumption of domestic use fuels, derived from petroleum i) with the increase in fuel prices and ii) with the increase in prices of supplies and devices necessary for its use (stoves, containers, parts, etc.). It would be reasonable to think that in a moderate period of time the increase in price of GLP and Kerosene would produce a return to the use of wood and charcoal and to an increase of their prices as an answer to the increase in the demand. Even though specific studies have not been carried out, some of the consumer's reactions to the energy price increase provoked by the FCFA may be foreseen. The GLP and Kerosene price elasticity is normally high, due to the substitution possibility available with traditional fuels. However, because of its specific use in the household, it is important to differentiate the consumer's reaction between an increase in prices and the demand for GLP and that of Kerosene. 138 GLP In RPTES countries, GLP, wood and charcoal are fuels exclusively dedicated for cooking. This activity takes the weight in energy consumption in the household. In urban areas, families use the three fuels equally, according to income availability, prices or type of food. Under these circumstances, urban communities are still used to traditional fuels and it would be easy to imagine that a substantial increase in GLP prices would provoke the return of many consumers to use charcoal or wood, especially among low income population". High price-elasticity must be expected, at least in the short run, from the GLP demand. The price-elasticity should be high, particularly in countries such as The Gambia, Burkina Faso, Niger and Mali, where the GLP market is embryonic. It would not be an overstatement to anticipate a return, at least in the short run, of a demand for gas in these countries. In general, it must be waited for the poor population, to whom the weekly GLP expenditure means a higher proportion of the family income (higher income elasticity of the demand), to quickly react to the GLP price increases. Table 47 Average GLP price elasticity Elasticities Mali -2.092 (1987-90) -15.35(1990-92) Niger -0.91 (1988-92) Senegal -3.16 (1988-92) Source: ESMAP Es- ,ates of GLP demand price elasticity are presented in Table 47 fo. determined periods for some RPTES countries. With the exception of Niger, GLP demand appears to be very elastic to the prices. Since the 1989 Gaz Regional Program (GRP) was put into effect, decreases in GLP prices for the consumer took place, where 7 In countries where the gas market is well developed, such as in Senegal, the use of GLP is rooted among the high income population and public employees who have been using this fuel for more than a generation. It is difficult to think that the price increase caused by the devaluation could produce a retur:. to the use of wood ori6Wal. However, this may not be the case among-the high income population of countries with scarce GLP penetration, such as Niger and Mali. 139 in most countries this favored gas consumption. It is therefore expected that in those countries with higher price elasticity the GLP consumption will increasingly be reduced (or reversed). Table 48 GLP price comparison before and after the FCFA devaluation December After % 1993 devaluation Increase Mali 251.3 FCFA/Kg 280 FCFA/Kg 11.4 Burkina Faso 250 FCFA/Kg 312.5 FCFA/Kg 25 The Gambia 413 FCFA/Kg 649 FCFA/Kg* 57 Senegal 120.8 FCFA/Kg 157.5 FCFA/Kg 30 * The average final price for the consumer is 11 Dalasis/Kg, but it fluctuates between 10 and 12 Dalasis in Great Banjul. The exchange rate used here is 1 Dalasi=59 FCFA (April 1994). With the exception of- The Gambia, the rest of the countries seem to have acceded to the GLP price increase. Subsidies have significantly increased. Officially devaluated from 50%, the FCA Franc was actually depreciated from 100%, according to a parallel revaluation with the French Franc. According to the available information (see Table 48), in three of the five RPTES countries the consumer's price increase not even compensates for the monetary devaluation. However, subsidies increased above the necessary value to compensate for the official devaluation. Presented in Table 49 are the official subsidies for the GLP prices for consumers in Mali and Senegal, countries where the new price structure was available following the -devaluation. - It can be observed that- subsidies *in Senegal increased from 100% and over 4 times in Mali's case. In Senegal, where the 12.5 Kg gas container subsidy was insignificant (only 0.021 FCFA/Kg) before the devaluation, it was increased, in the first quarter of 1994, to 36.8 FCFA Kg. Table 49 Consumer's subsidy levels over GLP prices FCFA/Kg 3' Quarter 1993 la Quarter 1994 Senegal 76.85 137.0 Mali 50.0 218.1 140 In Senegal (Dakar), imported burners previously valued at 2,150 FCFA suffered a price increase of approximately 100%, while pot supporter prices, locally manufactured, did not have a significant increase. The complete gas cooking wear, that prior to the devaluation was valued at 6,000 FCFA, had a price increase to about 13,000 FCFA. Traditional Fuels Devaluation also provoked the review of charcoal's official price in Senegal7'. The forestry tax was increased from 250 FCFA to 700 FCFA for each 42 Kilogram sack, while the official final price per Kilogram in Dakar increased to 95 FCFA (see Table 50). With this increase of more than 100% of the final charcoal price, GLP strengthen its position as the cheapest fuel for cooking in Senegal's urban areas'°. In the remaining RPTES countries, the FCFA devaluation. has not yet produced any .reaction regarding charcoal or coal. Table 50 Comparison of the official price structure of the charcoal sack (42 Kg) in Senegal, before and after devaluation FCFA/sac 1993 1994 Forestry tax 250 700 Price on site 650 2025 'Irasportation 700 1000 Wholesale price 885 3375 Dakar Retail price 2000 4025 Price/Kg 40 95 79 Actually, the need to increase prices and its price structure review was a recommendation that was made some time ago by a variety of technical and financial. assistance organisms, such as the World Bank (ESMAP). ' It is remained that according to ESMAP estimates, ..in Dakar, prior to devaluation, cooking with GLP was 35% cheaper than cooking with charcoal. 141 GENERAL CONCLUTIONS Because traditional energy are confined to providing energy for specific household activities, basically for cooking food in the case of the Sahel countries, their macroeconomic importance is quiet limited. This holds true, however, for more modern energy products such as LPG or other energy sources used in households even in industrialized countries"'. The so called traditional energy sector in the Sahel countries nevertheless accounts for a GDP share that is least comparable to the share of some modern sectors of the economy, such as electricity and LPG. At the macroeconomic level, the importance of traditional fuels is essential for meeting the basic energy needs of the rural population as a whole and low-income urban sectors (although in many RPTES countries, fuelwood or charcoal are commonly used, even in wealthiest urban sectors). Although the purchase of fuels in urban zones of the countries under study does not, on average, account for 10% of the family budget"2 (DPS, 1993; ESMAP, 1992; The World Bank, 1988) it may reach up to 20% among the poorest strata of the urban population. As indicated, fuelwood is considered free good among rural population and charcoal is cheaper, in most cases, than modern fuels in urban zones. Prices of wood fuels benefit from an "environmental subsidy", which keeps them artificially low. Contribution of the Traditional Energy Sector to GDP. - As indicated in table 51, the sector that appears in the National Accounts as silviculture, fishing and hunting, which includes the contribution of traditional energies, in four of the five countries displays values that are higher than those of the water, electricity and public works sector.. It should be kept in mind that, in the former sector, other items different from fuelwood- energy are included; neverhteless this one is the most important item. It can be asserted that, on the basis of real value added estimates, the contribution of traditional energy is at least comparable to that of the electric power sector. This is due to the limited development of electricity service in these countries. - Forest resources, in addition to supplying energy to the "' In industrialized countries energy for cooking food is only 4 to 5% of total household energy consumption. *2 According to the Enquete sur le Priorite du Senegal, Direction de Prevision et de la Statistique (DPS), 1992 fuel expenses represent only 6% of non-food household monthly expenses. In Mali fuel expenses represents a little less than 10% of total monthly household expenditures (DNSI, 1987). In Niger the average figures are 5 to 8%. 142 population, provide other benefits such as construction materials, medical products, a habitat for animal species that have a commercial value, and above all environmental benefits that are hard to appraise (soil protection, conservation of water and soil sources, etc.). According to the estimates that were made with available information, the "environmental subsidy" that these countries pay to keep the price of traditional fuels low is in most cases comparable to their contribution to GDP. Table 52 provides the results of the costs of the reforestation, based in previous estimates, needed to cope with the deforestation caused by the urban consumption of fuelwood and charcoal compared with equivalent LPG imports costs. It seems clear from this preliminary analysis that reforestation or forest management to supply local energy needs would be more convinient than LPG substi'ution. Extensive reforestation programs will provide countries, no,. only sustainable energy production, but with -nvaluable environmental benefits that arte critical to manta-.. soil productivity and agricultural production. Table 51 Comparisson between GDP share of Selected Economic Sectors and the Contribution of Traditional Fuels in 1992. Water, Public Silviculture, Real estimated Works and Fishing and value added Electricity Hunting (%) fuelwood & (%) charcoal (%) Mali 3.7 4.9 5.0 Burkina Faso 1 5.4 2.0 Gambia 0.86 1 1.5 Niger 2.3 4.5 1.6 Senegal 2.1 0.9 1.5 Source: Annuaire Statistique du Mali. Tableau de Bord Economique et Financier, Burkina Faso. Annuaire Statistique du Niger. Statistical Abstract of the Gambia, 1992. Netherland Economic Institute, 1993. Employment In terms of employment, the activity of cutting, transporting, and urban marketing traditional energies accounts for an important urban employment item for these countries. Most of the rural 143 population gathers its own fuelwood; nevertheless, as mentioned above, the gathering of fuelwood is not the activity that requires the most time for the rural resident'3. If only permanent employment in these activities is considered, the contribution to total employment that these activities generate is negligable (see table 53), in comparison with the total labor force. Nevertheless, owing to the high unemployment rate and very small formal employment market, these activities do paly a role that is more important than the figures indicate. Table 52 Reforestation Cost Stemming from Energy Consumption vs. minimum LPG Substitution Cost after devaluation. Total reforestation LPG minimum cost substitution J-o-.-cost after devaluation Mali 5 to 15.6 billion 65 billion FCFA FCFA Burkina Faso 8.1 to 20.2 billion 12 billion FCFA FCFA The Gambia 90 million 250 million Dalasis Dalasis Niger 4.2 to 7.5 billion 6 billion FCFA FCFA Senegal 35 billion FCFA 40 billion FCFA Sources: National Accounts of The Gambia (1993). Tableau de Bord Economique et Financier du Mali. Annuaire Statistique du Niger (1992-1993). Le Comptes Economiques de la Nation de Burkina Faso (1993). 3 According to the Manuel D'Energie Domestique (Document Technique de la Banque Mondiale No.67F in pp. 45), the time involve in developing countries per family-week for fuelwood collection can vary from 0.14 hours to 22 hours. The average is near to 7 hours per week/family. In rural areas average family size is about 7 members, but only 5 are able to work (excluding small children and older people) equivalent to a 250 hours per family/week, taking into account that survival activities such as fuelwood gathering, water fetching, etc., must be carried out also during weekends. According to this figures, fuelwood gathering varies between less from 1% to 8.8% of the family working week. 144 Since most employment figures are estimated and the information is generally incomplete, the figures presented here should be viewed with caution. It should be realizaed that much of this employment is actually seasonal, carried out by agricultural workers outside planting and harvesting seasons to supplement their usual earnings. In addition, much of the employment generated by these activities is incorporated into the formal job sector, probably leading to double accounting errors. Nevertheless, owing to the magnitud of the figures involved, it can be asserted that the employment generated by activitites in the traditional energy sector is not significant at the global level. Table 53 Comparative Table of Employment by T- iditional Energy Sector Activities in 1992. Labor Force Permanent employment (millions) in trad. energy/labor force. - Mali 2.7 n.a. Burkina Faso 4.7 1.3% The Gambia 0.36 n.a. Niger 4.0 0.2% Senegal 2.5 0.8% Investment and Financing The available information on investment and financing procedures in the energy sector is incomplete and many times non existent. Also, due to the multidimensional nature of traditional energy, the segregation of investments and financing over the total is a difficult task. Many investments that are cataloged as such are actually directed to activities purely related to forestry or where energy is just one component of a whole project. On the contrary, most of the environmental protection programs or land management, which are not cataloged within the traditional energy sector, have a direct impact on the woody fuels supply. Due to its capital-intensive nature, the modern energy sectors (electricity and hydrocarbons) constitute an important item of the total investments in developing countries. Additionally, due to the public property of these services, mainly electricity, the modern energy sector has an important weight c-i public investments. Most of these investments involve an elevated imported goods and 145 services component (between 40% and 60% in most developing countries) and, as a result, have a higher negative effect on the balance of payments. Following this premise, investments on the electricity and energy sectors in general, constitute a significative percentage of the public foreign debt and carry an elevated incremental capital output ratio (ICOR)64. The extreme foreign capital demand required by the modern energy sector competes with the scarce resources destined for social, health and education infrastructure investments and also have a small impact on employment. However, since there is a slow development on electricity and hydrocarbon consumption in the RPTES countries, the above mentioned standards do not occur -in every country and of ten vary, according to the time period. According to the available information on Mali about the execution of the 1981-1985 Plan, the electricity sector showed only a 3% of the total public investments carried out in the secondary sector (Mines, Water, Energy, Industry and Tourism). However, in the 1985-1992 period, the investments on the electricity sector increased substantially. During that same time period the investments in the traditional energies sector represented 12% of the total investments in the energy sector. In Burkina Faso, between 1988 and 1992, annual investments in the electricity sector fluctuated between 0.6% and 8.3% of the financed budgeted fulfillments. In Niger, out of the 78.4 billion FCFA invested in the energy sector between 1986 and 1991, 48% was assigned to household energy projects. On the other hand, in The Gambia, 80% of the public investments in the energy sector between 1988 and 1992 went to the electricity sector. In countries such as Burkina Faso, investments in the forestry sector were as important as the investments in the electricity sector (see Table 54). As the presented figures show, the situation varies from country to country, but in many cases the investments in traditional energies seems important. Given the small development of the modern energy sector and the economy scale of the analyzed countries, it should not be surprising to find significative annual variations of investments in this sector, where the total amount depends on the investment flow irregularities of the projects being carried out. The low participation of the electricity sector in the total investments is probably a product of the availability of information only from low investment years. S4 The ICOR is the macroeconomic equivalent of the investment/benefit ratio in the project analysis. According to international experience, ICOR in developing countries may reach values of 15% to 60%, while in the agriculture sector this may vary between 2% and 4%. 146 Table 54 Burkina Faso: Investment Budget Realization (in billions FCFA) 1988 % 1990 % 1992 % Forestry 859 1.6 2,116 3.2 1,740 5.7 Energy* 344 0.6 4,106 6.2 1,482 4.9 TOTAL 53,490 100 65,701 100 30,344 100 *It ref ers to heTlTtric7ity"""" Source: Direction de Financements des Investissements, Ministere du Plan de Burkina Faso. On the other hand, a common element found in the investments of RPTES countries is a high participation of foreign financing. In Mali, for example, the electricity sector foreign financing in the 1980-1985 represented 91.6% of the total. In Burkina Faso, State contributions to public investments did not exceed 10% of the total. Additionally, many of these investments are donations or concessional' loans, especially those directed to rural development and environmental protection, where traditional energy projects are included. Even though investment levels in the traditional energy sectors is commonly considered to be insufficient, it is a mistake to consider that they should maintain a degree of proportionality according to their participation in the energy balance. The different nature of the sectors under analysis make these kind of comparisons pointless. The adoption of new consumption habits, the projected cycles (such as reforestation) and the existence of traditional institutions deeply rooted in the people (such-as the property system) provide natural limitations to the velocity of the energy transition, that can not be exceeded simply by an " Even though there are no recent details and figures available, in 1989 the donation percentage over total foreign financing was: 46% in Burkina Faso, 474 in The Gambia, 58% in Mali and 52% in Senegal. Additionally, the debt renegotiation allowed to increase the foreign debt percentage provided under concessionaire conditions in all RPTES countries- 147 increase in investments6. Nevertheless, in contrast with the modern energy sectors investments, the traditional energy sectors investments have an underestimated macroeconomic importance because: i) these are multi-purpose investments, normally linked to long range projects, such as the protection of natural resources (reforestation, soil protection and the struggle against desertification, etc.). ii) most costs are local and the need for importing goods and services is very limited. iii) when having a low ICOR investments in agro-forestry are more efficient from the economic and socio-environmental point of view, than the electricity and petroleum sectors investments. iv) they supply the energy necessities of poor populations, which amounts to the majority in RPTES countries. Finally, it must be concluded that, even though the current investment levels in the traditional energy sectors is inadequate, this is a situation derived mainly from the general low investment levels, than from a deficient consideration of its economic importance. In some countries of the area, the investments in different reforestation projects is comparable with the investments in the modern energy sector. Investments in the forestry-energy sector, if low compared to others, have a more ample macroeconomic effect than the indicated in its participation in total investments. Foreign Trade As rule, fuelwood or charcoal are not part of international trade, although some flows can be detected in border areas betrween those countries where these fuels are important such as the RPTES countries. There is evidence of charcoal exports from Guinea-Bissau to Senegal and from Senegal to Gambia, where charcoal production and trade are forbidden; nevertheless this trade does not seem to be substantial and is not recorded in the National Accounts. The most important impact of traditional energies on foreign trade is their incidence on imports aimed at substituting wood fuels for LPG and Kerosene. Although only a short historical series of the value of LPG and Kerosene imports values for household use were available, these imports affect the country's *6 See, for example, the Gaz Regional Program (GRP) results. 148 oil bill only slightly. In Mali, Kerosene imports plus those of LPG accounted for only 10% of total oil imports in 1990; 6.5% in Senegal (the country with the highest consumption of LPG); less than 1% in the Gambia (1992); 10% in Burkina Faso (1991); and 7% in Niger. It is assumed that as the fuelwood and charcoal substitution process gathers momentum as a result of better living conditions and modernizatton of the economy, the consumption of oil products for productionrsectors (gasoline, fuel oil, anf diesel) will in ease at thersame pace. Although the curren_. substitution pr, ess would normally lead to the growth in LPG consumption that is higher than total growth of oil products, it should not be expected that the share of oil product imports over total imports will account for values that are much higher that current values. It is estimated that this share could runt to between 5% and 10%'7. Using the projected LPG consump.-on for the year 2020 and assuming a modest oil consumption growth of 5% per year" in the 5 countries, LPG will share no more than 6% of total oil consumption that year (see table 55). Fina'y, it cannot be asserted that the substitution of fuelwood and cnarcoal for oil products will significantly affect the oil bill of RPTES countries. Even though theoretical economic cost of substitution with LPG was, in some countries, lower than the cost of reforestation it can not be concluded that LPG substitution is more convenient. It has to be remembered that after FCFA devaluation oil import prices increased ".7 a factor of 2 and contrary to oil imports, that have to be *aid in hard currency, reforestation costs are mostly local. Aaditionally reforestation will increase enviromental benefits and create jobs. After devaluation, countries like Senegal, Nige.: and The Gambia" in which reforestation costs were between 57% and 8- higher than the equivalent LPG imports before devaluation, " In Latin America where the enerr-- '-ransition process is well ahead that in the Sahel region total -i'G consumption (including hosehold, commercial and other uses), in a sample of 11 low income countries with tropical weather, vary between 0.9% (Guyana) to 9.88% (Ecuador) of total oil consumption. The average is 4.3% (OLADE, 1993). of In better economic conditions like b :ween 1975-80 oil consumption grew a yearly average of 30.2% in Burkina, 25.5% in The Gambia, 12.% in Mali, 24.3% in Niger and 1.6% in Senegal (UNDP, 1992) -unt9 Acooding to the estimates presented in this document reforestation in Mali, before devaluation, was already a cheaper option than LPG substitution. 149 reforestation programs seem to be the best policy option for this countries to deal with the energy transition. Even in the case of Burkina, where LPG imports were three times cheaper than reforestation previous estimates have revised. It has to be remember that were made using 41 FCFA/Kg as economic cost of fuelwood but this figure could be reduced to 4 to 8 FCFA/Kg for natural forest management. Table 55 Projected total oil consumption vs. LPG in the year 2020 (1) *(2) Projected Projected LPG total oil consumption (2)/(1) consumption 5% 2020 in percentage per year 2020 (103toe) (103toe) MALI 650 32.7 5.0 BURKINA FASO 820 19 2.3 THE GAMBIA 290 18 6.2 NIGER 900 9.8 1.0 SENEGAL 4500 288.8 6.4 * projected using 1989 as reference year with data of African Development Indicators, 1992, UNDP-The World Bank. The evolution of the consumption of traditional fuels permits identifying, among RPTES countries, different situations depending on the progress achieved in the energy transition process, which also determines the adoption of different strategies. Nevertheless, despite the diversity of situations among the countries, there is a number of common global strategies and economic policies emerging from the similar economic, social, and environmental circumstances shared by all the Sahel countries. 150 LPG supply policy LPG supply options for RPTES countries depend on some structural characteristics of the oil industry, the small market and poor transportation infraestructure. Petroleum is a capital-intensive industry and fixed costs are very high. Scale economies are very important, especially for LPG transportation and investments costs. For example investments and operational costs for tankers are not a linear function of his size or transportation capacity. A rate for a 500 tons standard tanker is about USS 6,000 per day, meanwhile a 3,500 tons tanker could cost USS 14,000 per day. According to the "Etude Regionale Prix et Transport du Gaz Butane" (SEED, 1992), a CIF price West-Africa of LPG for a small market of 4,000 year could as high as USS 546/ton, but this price (same FOB prices and ports) would decrease to about USS 282/ton for 30,000 tons/year market'°. Senegal is the only market over 30,000 ton/year, reached in 1988, all other RPTES countries are far away from that level of consumption. But this fact does not explain why CIF prices-Ghana for Burkina (109,706 FCFA/Ton), CIF-Abidjan prices for Mali (122,090 FCFA/Ton) and 76,362 FCFA/Ton CIF-Nigeria for Niger were comparable or even lower than ex-refinary price in Senegal (106,094 FCFA/Ton). Imported LPG CIF price Dakar from northern europe are between 20 to 35% cheaper than ex-refinary prices. Countries like The Gambia and Mali which are supplied by Senegal are afected by this price policy. Scale economies are also important for storage facilities and distribution costs. Based in investment and operational costs, storage costs could vary from US$ 118/Ton for size 7,000 Tons depo to US$ 256/Ton for a small one of 1,000/Ton. This amount could represent 30% of total ez-depo cost. The country with the biggest storage is Senegal with 3,120 Ton all the other RPTES countries are below 200 Tons. Current LPG storage capacity, in all RPTES countries, is insufficient to deal even with today's demand and increasing xe storage capacity must be a short term objective to reduce import costs and improve supply reliability. Supply sources depend not only upon CIF prices but on source reliability and road conditions. The bulk of LPG transportation to landlocked countries is made by road with small trucks. Nevertheless supplies by train from Dakar remain an interesting posibility for Mali and for Burkina from Abidjan but several problems have to be overcome due to the poor railroad conditions and lack of good schedules. Pipelines could be only justifiable '° This would imply z 300 ton tanker each 6 weeks for the small market and a 3500 ton tanker for a 30,000 market each 6 weeks. It is also supposed 30 days duration trips (including time in docks). 151 with markets over 700,000 tons/year". For small markets truck remain the best option (Masseron, 1975). The medium-term economic outlook (year 2003) predicts that the energy transition in the countries of the study will be generally slow. It is expected that the recent devaluation of the CFA franc will lead, at least in the short term, to a standstill in the wood fuel substitution process in the urban centers of countries such as Senegal, where considerable progress has been achieved, or in those countries in which the consumption of fuels replacing firewood and charcoal is small but rapidly growing, such as The Gambia, Mali, and Burkina Faso. In the short term, a reversal of this process can be expected in those countries where the LPG market is quite undeveloped, such as Niger. Most global policies transcend the realm of energy, but exert a crucial impact on the evolution of the energy transition process of the countries being studied herein. Most of the socio- economic variables that determine the energy transition process, common to all RPTES countries, are characterized by a huge historical inertia and therefore will evolve only slowly over time. Common policies of a general nature that will have to be implemented to appropriately manage the energy transition process may be summarized as follows: 1. Demographic control In any economic development policy in the Sahel countries and in general for sub-Saharan Africa, demographic control is an essential element. The economic conditions and environmental constraints in these countries prevent us from envisaging significant improvements in the living conditions of the population without a reduction in population growth. The demographic growth rates in the five countries under study are forecast to be between 2.8% and 3.5% per year (1991-2000), thus ensuring that the total population will have risen twofold by the year 2020. This has direct implications for the consumption of wood fuels and LPG. The degree of urbanization or the rural-urban composition of the population are another determining element in the energy transition and wood fuel substitution process. Urban population were growing, in the period 1980 to 1991, at a rate between 3.8% and 7.4% per year in the five countries under analysis. Under the current economic conditions of the RPTES countries, the degree of urbanization does not necessarily mean a reduction in the consumption of wood fuels replaced by LPG or kerosene. Experience indicates that, if the urban population's incomes do " Total LPG consumption of landlocked countries in 1992 was about 5,000 tons. 152 not increase steadily, there will be a greater demand for charcoal, which would rapidly substitute firewood as an urban fuel, whereas LPG and kerosene would be used at first only as complementary fuels. Under these circumstances, a rise in the urban consumption of firewood is to be expected. The high demographic dependence'2 of the population's structure guarantees that population growth rates will be deeply affected by inertia. Nevertheless, well-planned birth control programs may achieve significant reductions in demographic growth rates (for example, as in the case of China and several regions of India). Regarding this, the role of nongovernmental organizations-tor the development of women are important, although the State should have primary responsibility for planning and coordinating demographic control programs. 2. Environmental protection and management The implementation of environmental conservation and management programs, along with demographic control, is another key policy in any global strategy to ensure sustainable development, especially in the Sahel region. The protection and management of natural resources, especially forest resources, will exert a crucial influence on the evolution of wood fuel consumption and their substitution for LPG or kerosene. The conservation of forest assets transcends purely energy concerns and, in the long run, the protection of soils and agricultural production, the major activity of the countries being reviewed, will depend on this conservation strategy. The forest, in addition to being a source of cheap fuels, provides a wide range of goods and services that are indispensable for life (construction materials, medicinal products, habitat for animal species that have a commercial value, etc.). A few decades ago, the low demographic density in most RPTES countries permitted the country to strike a balance between human activities and the environment. With the declining mortality rate and the consequent rise in population, traditional agricultural and shepherding activities that still prevail throughout the. region exert heavy pressures on land and forest resources. Although the expansion of the agricultural frontier is the main cause of deforestation, as the urban population grows, firewood and charcoal consumption will become one of the principal factors in forest destruction. The preservation and environmental management of forests is also 92 Demographic dependence is defined as the percentage of the population under 15 and over 64 years of age. In the countries of the study, the demographic dependence is 60%. 153 the only way to ensure the sustainable supply of wood fuels throughout the energy transition. In addition, forest management and protection is a means to value wood fuels and ensure that the price of standing wood really reflects its economic value. 3. Poverty alleviation Higher income and consumption levels, as well as elimination of poverty, are indispensable for speeding up the energy transition process. LPG and kerosene prices, as well as the accessories and equipment associated with these products, are beyond the reach of most of the population. Even in countries where LPG penetration has become relatively widespread, such as in Senegal, its use is accessible only to the highest-income urban strata. Even among the urban middle class, LPG is used only very little, only as a fuel to complement charcoal for very specific purposes. In other countries such as Niger, because of its high consumer price, the use of LPG is reserved for only the wealthiest urban families. Economic forecasts indicate that, in the medium term, in sub- Saharan Africa, the number of poor people will increase in both absolute and relative terms. Under these conditions, the priority for the fight against poverty will have to focus on the most critical aspect of the problem: food security. If there is a range of fuel alternatives for cooking food (LPG, kerosene, firewood, and charcoal), the efforts of governments and international financial and technical assistance agencies should be aimed at guaranteeing the sustainable supply of wood fuels to improve the energy supplies of the poorest groups, at least over the short term. Although the State can and should undertake actions to improve the supply of modern fuels for household purposes (LPG and kerosene), their use should be promoted mainly through market forces. Experience shows that the programs that have granted subsidies to foster LPG consumption have obtained very scant results and have basically favored the wealthiest strata of the population. It is precisely in those countries where LPG prices have not been subsidized that consumption has progressed most rapidly, as in The Gambia. The poverty abatement strategy is indispensable for protecting the environment. Rural poverty and high population density have converted traditional agricultural and livestock activities in one of the main causes of environmental deterioration. Moreover, the demand for firewood by the urban poor is becoming a major source of deforestation around the cities. 4. Reform of the land ownership system Another global reform needed to modernize the economy and protect the environment is the land ownership system. While there was 154 little demographic pressure on the land, the traditional system for handling natural resources, based on free access and without private or community property, could function adequately; nevertheless, population growth is provoking a crisis in the ownership system, which is exerting a major impact on environmental deterioration. The parallel e-istence of a market economy in the cities and a traditional e- womy in rural zones means that there is a considerable insfer of resources viewed as free goods, due to the land owne .ip system in these areas. The wood fuel supply system in the cities is typical of this phenomenon. Firewood extraction is carried out on public property, where the traditional land ownership system based on free access predominates. As a result, the price paid for standing timber does not in the least correspond to the economic cost of the resource and therefore does not reflect the shortage of firewood. Although according to current circumstances, strengthening forest control and management institutions will enhance the value of wood resources, over the long term, reform of the land ownership system will become an important element for protecting the environment. levertheless, the State as a regulatory agency in charge of prep---ring and applying standards and laws will play a fundamental role in protecting the environment, as in industrialized countries where the market economy and the private property ownership scheme are fully developed. 5. International aid It is difficult to envisage the implementation of the above- mentioned policies without international assistance. Official development assistance (ODA)" will continue performing an important role in the economic and social development of sub- Saharan Africa. International aid should mainly be aimed at protecting the environment, supporting demographic control programs, improving basic health and primary schooling, providing food assistance, and reducing poverty. Environmental protection programs will obviously exert a considerable impact on the traditional energy sector. One of the most important components of environmental conservation programs is forest development and management programs, which because of their very nature transcend the mere concern for enhancing the value of wood fuel production and also involve soil conservation and the fight against desertification. 93 In 1991, official development assistance (ODA) in the RPTS cc :ries as a percentage of GDP was 10% for Senegal, 18.5% for Mali, 16.5% for Niger, and 14.8% for Burkina Faso. Average ODA for low-income countries this same year was 3% of GDP. 155 Regarding macroeconomic and sectoral policy, above all pricing policy and institutional capacity-building, other conclusions and recommendations need to be underscored. 6. Pricing policy In terms of prices, except for The Gambia, in the other four countries of the sample, the State has traditionally maintained broad control over imports and prices of oil products, especially those for household consumption. For some countries, such as Senegal, Burkina Faso, and Mali, taxes levied on the import and consumption of oil products are one of the major sources of public revenues. In addition, oil companies, and therefore the imports of most oil products, are in the hands of the State. Regarding the pricing of oil products for household use, the best economic policy option is the liberalization of imports and distribution. Nevertheless, the State could play an important role in providing impetus to the markets by simplifying, for example, the pricing structure, coordinating and exchanging information with neighboring countries, and controlling illegal trade. The subsidies granted to the final consumer prices of LPG and kerosene are unjustifiable'4 and should be gradually eliminated; they could be kept, however, to encourage the purchase of a household's first gas stove. The studies that have been conducted indicate that significant reductions in CIF prices of LPG and other oil products are feasible. In order to achieve this, local operators will have to augment their storage capacity and negotiate more advantageous supply contracts with coastal countries. Likewise, coordination among the operators to jointly launch international bidding processes for prices and to diversify supply sources will be needed. This is especially important for countries without coasts. The landlocked countries of RPTES and The Gambia are supplied by the refineries of Senegal, Ghana, Cote d'Ivoire, and Nigeria, most of which because of their size, obsolescent facilities, and lack of maintenance operate inefficiently, with ex-refinery prices that are far above international standards. Ex-refinery prices for landlocked countries are much higher than the import parity price on international markets. 9 The experience of the Regional Gas Program, which was set up in 1988 in nine sub-Saharan countries, indicates that subsidies had a very limited effect on those countries in which they were applied and provided benefits for the highest-income strata of the population. Moreover, the effects of the Program on wood fuel substitution processes and, as a result, deforestation were insignificant. 156 In all of these activities, the role of the State will be crucial to support the negotiat in of contracts with the coastal countries, standardize . ices among neiaciboring countries, reduce contraband, follow-up on consumption, ai.i analyze its trends and patterns. Likewise, international cooperation should provide technical assistance t_ the ministries and specialized agencies involved in negotiating supply contracts and establishing the pricing structure, by funding the studies needed to find new sources of financial supply and support for investing in new cylinders and increasing storage capacity. 7. Institutional aspects In institutional terms, the most important efforts should be geared to strengthening the Forestry Sector. The central objective of strengthening the forestry sector is to enhance the value of forest resources and conserve the environment. In practice, this means that the price of standing for firewood should be rapidly adjusted to the reforestation cost (economic cost). For now, however, it would already be quite an achievement if the current legislation were enforced and if fiscal revenues for wood-cutting were collected. The adequate valuation of wood fuels would enable investments in forest plantations for energy purposes to make profits. Therefore, a sustainable supply of wood fuels would be ensured in those countries in which the domestic situation (either in terms of forest or economy) pe-mits or requires a slower substitution of firewood for LPG or rosene, such as in Niger and Burkina. In addition, the increaLe in the final price of wood fuels, as El result of placing the prices of standing timber on par with their economic cost, would render the substitution if wood fuels more attractive, as would be the case in Senegal, The Gambia, and to a lesser extent Mali. The experience shows that reforestation only for energy purposes cannot be justified economically. Most of the programs of this type in the region are experimental and demonstrative and exert no impact whatsoever on the wood fuel supplies in the countries under review. Technically and economically, it is more attractive to produce firewood along with other associated products, as part of an agro-forestry development program or of environmental protection programs. Nevertheless, in order to ensure success, proposals of this type should rely on the support from the locJ population. The problem is more institutional than technic .. New Directions Between 1980-1990 internationals -gencies allocated more than US$ 200 million to different traditior;al energy related projects in - Africa (Gaafar & Cesar, 1993). In general a high proportion of 157 these programmes achieved very little. In fact, they left neither significant impact on the development of the biomass energy nor their achievements are commensurate with their designed objectives. Of course there are important exceptions. Most of this projects fail because focused only in the energy dimension of the problem but recent trends in economic development as well as new issues, such as the increasing environmental deterioration, have put the traditional energy sector in its real perspective. The first lesson to be learned is that more significant household energy problems are so bound up with other problems that stand- alone energy initiatives are inappropiate. Indeed many of the more serious household energy problems are in part the result of policies and processes originating in non-energy sectors and this is particularly for RPTES countries. Property rigths and traditional property on natural resources, agricultural policies, prices policy, income distribution and poverty alleviation strategies play a crucial role in determining the success of a improve cookstove program or the speed of penetration of LPG in urban areas. A second lesson to be learned is that traditional energy problems are very site specific. This mean that projects are likely to be descentralized and in small scale and targeted to especific areas. There are basically three categories of actions to deal with traditional energy problems: (i) to increase supply of fuelwood, (ii) to improve biomass use or transformation efficiency and (iii) to promote fuel substitution. All three have been apply to the RPTES countries with different degree of success and are currently part of household energy strategy. As was alredy shown the energy transition will be a very low process for the RPTES countries and traditional fuels will, be for the next two or three decades, the most important household energy source in these countries, especially for the poorest. But meanwhile fuelwood consumption does not seem to be the major deforestation cause, deforestation is the cause fuelwood scarcity, high prices of traditional fuels and environmental deterioration. Two common directions should dominate countries and international agencies priorities in line with the current economic situation and future perspectives for economic development: 1. Fuelwood Resource Pricing Fuelwood resource pricing is an important factor both for the realization of the development and management of woody resources and for the implantation of efficient fuelwood use or substitution. Pricing policy ia a pre-requisite for producing economic and financial returns as an incentive for investments in forestry programs. In all countries distribution and marketing 158 makes good margin of profits to atract investors. Producers and governments on the other hand do not make sufficient margin if all. As was shown stumpage fees are about 1/10 what they should be. Moreover administratives difficulties make tax collection coverage low providing very little revenues to develop and manage forest resources. There is an inmediate risk that FCFA devaluation will worsen the situation in the short term and goverments would prefer to continue the "environmental subsidy" to fuelwood or charcoal consumers, freezing prices below its economic value, to protect urban population buying capacity. In today's situation when still natural forest growing capacity is higher than fuelwood demand, stuml,.;ge fee should calculated as the costs of natural forest management developments. If afforestation is necessary to supply energy needs, li&aause local demand is above natural forest growing capacity, stumpage fees must reflect the cost of this projects. Afforestation cost, including natural forest management, must be considered the main reference point for calculating stumpage fees, because better reflects the real cost of the natural resource, including costs of other environmentals goods not included in conventional project evaluation procedures. Put it in another way, afforestation cost is the nearest estimate to the cost society must bear, to restore natural resource all those environmental goods (soil conservation, habitat for flora and fauna, recreational values, etc) considered by economists externalities and common goods, but not reflected in the markets forces. Price system acts as a self-regulating way, and that higher fuelwood prices should, in principle, increases incentives to augment supply, and induce conservation on the part of consumers. Moreover, at some point, the cost of fuelwood will exceed that of petroleum substitutes and speeds the energy transition. This pricing policy for fuelwood, would be consistent with LPG and improved cookstoves promotion programs, and should provide Forestry Services with enough financial resources to improve its administrative and technical capacity and at the same time will attract investors. 2. Natural Forest Management In the past large scale fuelwood plantations with exotic species dominated the scene. Most of this were demostration or experimental projects with a generally very low degree of success. Costs were so high that wood produced was not competit-:ve so the strategy gradually canged to smaller plantations with7 a broader market for the produce wood. Agroforestry, so±ial forestry and community forestry were some of the variations taht were initially developed for a much wider 159 purpose than fuelwood alone. Improved forest management and conservation have generally been overlooked in previuos initiative. In fact was only after the failure of large plantations that attention started to be directed towards this option. Although there is a limited experiences in the region (FAO in Burkina Faso), was soon clear that benefits and advantages of implementing such interventions were quite evident in terms of environmental protection of natural resources, job creation, income distribution and rural development. But as was stated earlier, the objectives of this kinds of programs are much broader tahn just fuelwood production and energy is only a component and depending on the local situation, it can be the least important. The natural forest management is providing to be more superior option in economic terms than forest plantation. While return on investments can reach 16,5%, plantations offer only returns in the range of 8.5 % to 11%. 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