WPS5599 Policy Research Working Paper 5599 Zambia's Infrastructure A Continental Perspective Vivien Foster Carolina Dominguez The World Bank Africa Region Sustainable Development Department March 2011 Policy Research Working Paper 5599 Abstract Infrastructure improvements contributed 0.6 percentage In power as in just about every other aspect of points to Zambia's annual per capital GDP growth over infrastructure, rural Zambians lag well behind their the past decade, mostly because of exponential growth African peers. In a country where 70 percent of the in information and communication services. The power population depends on agriculture for its livelihood, this sector, by contrast, pulled the growth rate down by represents a huge drag on the economy. more than 0.1 percentage points. Improving Zambia's Zambia would need to spend an average of $1.6 infrastructure endowment could boost growth by up to 2 billion a year over the decade 2006­15 to develop the percentage points per year. infrastructure found in the rest of the developing world. Zambia's relatively high generation capacity and power This is equivalent to 20 percent of Zambia's GDP and consumption are accompanied by fewer power outages about double the country's rate of investment in recent than elsewhere in the region. But Zambia's power years. sector emphasizes the mining industry, while household Closing the country's annual infrastructure funding gap electrification is about half that in other resource-rich of $500 million requires raising more funds, looking for countries. Zambia's power tariffs, among the lowest in more cost-effective ways to meet infrastructure targets, Africa, are less than half the level needed to accelerate and eliminating the inefficiencies that cause the loss of electrification and keep pace with mining sector $300 million annually. demands. This paper is a product of the Sustainable Development Department, Africa Region. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The author may be contacted at vfoster@worldbank.org and/or cbricenogarmendi@worldbank.org. The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. Produced by the Research Support Team Zambia's Infrastructure: A Continental Perspective Vivien Foster and Carolina Dominguez Acknowledgments This paper draws upon a wide range of contributions from sector specialists from the Africa Infrastructure Country Diagnostic Team; notably, Dick Bullock on railways, Mike Mundy on ports, Heinrich Bofinger on air transport, Maria Shkaratan on power, Elvira Morella on water and sanitation, Michael Minges on information and communication technologies, Nataliya Pushak on public expenditure, and Alvaro Federico Barra on spatial analysis. The paper is based on data collected by local consultants and benefited greatly from feedback provided by colleagues in the relevant World Bank country teams; notably, Kapil Kapoor (country manager), Boris Enrique Utria (Sector Leader), Gael Raballand (roads), Pierre Pozzo di Borgo and Lucien Andre Aegerter (railways), Diep Nguyen-Van Houtte (power), Midori Makino and Elisabeth Sherwood (water), and Gareth Locksley (ICT). Contents The continental perspective 2 Why infrastructure matters 2 The state of Zambia's infrastructure 5 Roads 8 Rail 10 Air transport 11 Water supply and sanitation 12 Power 16 Water resources 19 Information and communication technology 20 Financing Zambia's infrastructure 23 How much more can be done within the existing resource envelope? 26 Annual funding gap 31 What else can be done? 32 Bibliography 34 General 34 Growth 34 Financing 34 Information and communication technologies 34 Irrigation 35 Power 35 Transport 35 Water resources 36 Water supply and sanitation 36 About AICD and its country reports 37 iii I nfrastructure improvements contributed 0.6 percentage points to the annual per capita growth of Zambia's gross domestic product (GDP) over the past decade, mostly because of the exponential growth of information and communication technology (ICT) services. Poor performance of the power sector reduced the per capita growth rate by 0.1 percentage point. Simulations suggest that if Zambia's infrastructure platform could be improved to the level of the African leader--Mauritius--per capita growth rates could increase by 2 percentage points per year. Zambia's high generation capacity and relatively high power consumption are accompanied by fewer power outages than its neighbors. But Zambia's power sector is primarily oriented toward the mining industry, while household electrification, at 20 percent, is about half that in other resource-rich countries. Zambia's power tariffs are among the lowest in Africa and are less than half the level needed to accelerate electrification and keep pace with mining sector demands. Meeting future power demands and raising electrification rates will be difficult without increasing power tariffs. Improving Zambia's infrastructure requires reform of its administrative and regulatory processes (for example, to remove obstacles to regional trade), as well as substantial physical investments. Because of border delays along the north-south corridor (now being tackled by the government) road and rail freight crawls along at a pace of little more than 10 kilometers per hour. Lack of effective regulation also allows Zambia's rail operator to charge exorbitant tariffs while providing lackluster service. On just about every aspect of infrastructure, rural Zambians lag well behind their African peers. In a country where 70 percent of the population depends on agriculture for its livelihood, this represents a huge drag on the economy. Zambia would need to spend an average of $1.6 billion a year over the decade 2006­15 to develop the infrastructure found in the rest of the developing world. This is equivalent to 20 percent of Zambia's GDP (similar to what China invested in infrastructure in the mid-2000s), and is about double the country's rate of investment in recent years. The power sector alone accounts for 32 percent of these spending needs. Inefficiencies cause the loss of $300 million (or 4.3 percent of GDP) a year that could be recouped by suitable policy and institutional reforms. Underpricing of power and related subsidies cost the economy $152 million a year, even though Zambia's relatively low-cost power could be afforded by most of the population at cost-recovery prices. Distribution losses and low rates of collection by water utilities represent a further $52 million, while low rates of execution of capital budgets in the road transport sector mean that $39 million of budgeted resources are not spent within the financial year. Zambia's infrastructure funding gap of $500 million a year (6.5 percent of GDP) could be largely offset by strategic policy choices. Closing the gap requires raising more funds and looking for more cost- effective ways to meet infrastructure targets. Adopting lower-cost solutions (such as standposts, boreholes, improved latrines) to meet the Millennium Development Goals for water supply and sanitation could save $218 million a year. Participation in the regional power market could save $160 million. And eliminating overengineering in the road sector could save $60 million. Reallocation of disbursements that exceed requirements could make an additional $90 million available for more productive uses each year. If current levels of inefficiency are allowed to persist, and in the absence of additional funding, it will take at least 30 years to meet Zambia's infrastructure targets at today's spending levels. With efficiency gains, Zambia could reach the targets within 15 years. ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Zambia's infrastructure situation is more hopeful than that of many other African countries. Infrastructure spending needs--though large--are not beyond the realm of possibility, and Zambia's resource wealth and relatively well-off population provide a more solid financing basis than is available to many other countries. Zambia's infrastructure funding gap--though substantial--can be dramatically reduced through measures to stem inefficiencies and lower costs. The continental perspective The Africa Infrastructure Country Diagnostic (AICD) has gathered and analyzed extensive data on infrastructure in some 40 Sub-Saharan countries, including Zambia. The results have been presented in reports covering different areas of infrastructure--ICT, irrigation, power, transport, and WSS--and different policy areas, including investment needs, fiscal costs, and sector performance. This report presents the key AICD findings for Zambia, allowing the country's infrastructure situation to be benchmarked against that of its African peers. Given that Zambia's economy is dependent on mining, it will be benchmarked against other resource-rich economies in Africa, as well as against other African low-income countries. Detailed comparisons will also be made with immediate regional neighbors in the Southern Africa Development Community (SADC). Several methodological issues should be borne in mind. First, because of the cross-country nature of data collection, a time lag is inevitable. The period covered by the AICD runs from 2001 to 2006. Most technical data presented are for 2006 (or the most recent year available), while financial data are typically averaged over the available period to smooth out the effect of short-term fluctuations. Second, in order to make comparisons across countries, we had to standardize the indicators and analysis so that everything was done on a consistent basis. This means that some of the indicators presented here may be slightly different from those that are routinely reported and discussed at the country level. Why infrastructure matters During the five years 2003­07, Zambia's economic performance was relatively strong; by 2007 it had neared the 7 percent growth rate needed to make a significant impact on poverty reduction. The overall contribution of infrastructure to improved growth in Zambia in the early 2000s was 0.6 percentage points, substantially less than for other countries in the region (figure 1). Zambia's ICT sector was responsible for most of this growth as it added 0.47 percentage points to the per capita growth rate, while the power sector reduced per capita growth by 0.13 percentage points. If Zambia could improve its infrastructure to the level of middle-income countries in the region, performance could grow by as much as 2.6 percent per capita. 2 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Figure 1. Historic and potential future links between infrastructure and growth a. Historic changes in growth per capita b. Potential improvements in growth per capita Source: Calderon, 2009. Evidence from enterprise surveys suggests that infrastructure constraints are responsible for about 50 percent of the productivity handicap faced by Zambian firms, with the remainder being due to poor governance, red tape, and financing constraints (figure 2). Power is the infrastructure constraint that weighs most heavily on Zambian firms, followed by ICT and transport. 3 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Figure 2. Infrastructure's contribution to firms' productivity handicap a. Overall contribution of infrastructure b. Contribution of infrastructure by sector Source: Escribano and others, 2009 4 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE The state of Zambia's infrastructure Zambia's economic activity and population are heavily concentrated along the central copper belt running from Lusaka in the south up to Ndola in the north on the Congolese border. Zambia's poverty rates show poverty incidence of less than 40 percent around the main population centers of the copper belt, rising to greater than 70 percent for all other regions of the country. Zambia's power and ICT networks mirror this economic geography, with clear north-south backbones and very limited east-west spurs (figures 3b and 3c). The road network provides a broader coverage of the country, but the outlying segments in the far east and west of the country tend to be those in the poorest condition (figure 3a), with traffic flows heavily concentrated on the north-south axis. Zambia is one of the more urbanized countries in Sub-Saharan Africa, with an urbanization rate of over 50 percent. This report begins by reviewing the main achievements and challenges in each of Zambia's major infrastructure sectors, with the key findings summarized in table 1. Thereafter, attention will turn to the problem of how to finance Zambia's outstanding infrastructure needs. Table 1. Achievements and challenges in Zambia's infrastructure sectors Achievements Challenges Air transport Lusaka plays a significant role in regional air transportation ICT Increase GSM coverage by addressing regulatory hurdles responsible for market-efficiency gap Secure competitive access to new East African submarine cables Power Substantial and reliable power-generation Raise tariffs to allow for longer-term sustainability of the sector capacity relative to peers Railways Rail network built to serve needs of mining Address underperforming rail concession and major border sector delays for transit traffic Roads Trunk network in good condition and Shift resources away from overengineered trunk roads toward maintenance adequately funded neglected rural networks Address major delays at border crossings by embracing trade facilitation agenda Water resources Expand irrigated area to cover land with high economic potential WSS Relatively high access to piped water and Reduce hidden costs of water utilities flush toilets Reverse increased reliance on surface water and practice of open defecation Source: Own elaboration based on findings of the report 5 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Figure 3. Zambia's infrastructure networks follow natural resources a. Roads b. Power 6 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE c. ICT d. Irrigation Source: AICD Interactive Infrastructure Atlas for Zambia downloadable from http://www.infrastructureafrica.org/aicd/system/files/zmb_new_ALL.pdf 7 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Roads Achievements Zambia has made major progress with its main trunk road network. Despite relatively low road densities, analysis suggests Zambia's primary and secondary networks provide basic regional and national connectivity, linking the provincial capitals to Lusaka, and Lusaka to the main international border crossings. More than 80 percent of Zambia's paved road networks are in good or fair condition, on par with its middle-income neighbors and well ahead of the typical performance of resource-rich countries in Africa (table 2). The establishment of a second-generation road fund in the country resulted in a stable allocation of resources to the sector. Zambia is one of the few countries in the region with a road sector budget in excess of what is needed to maintain the main road network, and adequate to address the rehabilitation backlog (figure 4). During the early 2000s, Zambia spent 3 percent of GDP on the roads sector on average--a relatively high allocation. Table 2. Zambia's road indicators benchmarked against Africa's low- and middle-income countries Middle-income Unit Resource rich Zambia countries Paved road density km/1,000 km2 97.6 56.3 146.8 of arable land Unpaved road density km/1,000 km2 128.2 95.0 257.8 of arable land GIS rural accessibility % of rural pop within 2 km from all-season 19.7 16.8 22.9 road Overengineering of network % of main road network paved despite low 15.0 65.0 20.0 traffic volumes Paved road traffic Average annual 1,408.2 736.6 2,558.3 daily traffic Unpaved road traffic Average annual 54.2 45.2 14.9 daily traffic Paved network condition % in good or fair condition 67.9 83.0 82.0 Unpaved network condition % in good or fair condition 61.4 25.0 57.6 Perceived transport quality % firms identifying as major business 27.4 10.6 4.8 constraint Source: Gwilliam and others 2008, derived from AICD national database downloadable from http://www.infrastructureafrica/aicd/tools/data Note: GIS = geographic information system. 8 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Figure 4. Provision for maintenance and rehabilitation Source: Gwilliam and others 2008 Challenges There is evidence of overinvestment in Zambia's main road network. About three-quarters of the primary and secondary road network is paved, one of the highest ratios among Africa's low-income countries. Traffic density on Zambia's paved roads is comparatively low--at 736 vehicles per day it is about half of the average for resource-rich countries. Indeed, analysis suggests that 65 percent of the main road network does not have the traffic levels that warrant paving (meaning fewer than 300 vehicles use it per day). The rural road networks appear to be neglected. Zambia's rural road accessibility is poor compared to it peers. While 70 percent of Zambians depend on agriculture for their livelihood, only 17 percent of this population lives within 2 km of an all-season road--about half the African average. The condition of the existing rural networks is exceptionally poor, with only 21 percent in good or fair condition, compared with around 60 percent in the relevant peer groups. There may thus be a case for shifting attention and resources to the rural networks in the future. Zambia has a significant trade facilitation agenda to improve the flow of goods along the north-south corridor. Zambia's strategic location on the north-south corridor makes it an important transit country for goods traveling to and from Central Africa and the Port of Durban. The Chirundu border post in the south between Zambia and Zimbabwe has been the cause of notorious delays of transit traffic and has contributed to keeping transit speeds along the corridor at a pace of not much more than 10 km per hour. The government began to address this issue only recently and will open southern Africa's first one-stop border post at Chirundu to help improve the situation. 9 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Rail Achievements Zambia's rail sector is critical to its mineral-based economy. Rail transport continues to be the most competitive for large bulk, time-insensitive commodities, such as Zambia's copper production. The country's rail network has two operators: (i) the Railway Systems of Zambia (RSZ) serves the north-south corridor and connects with the Zimbabwean rail operator for onward service to the Port of Durban; (ii) the Tanzania and Zambia Railway Authority (TAZARA) operates an eastward route from the copper belt into Tanzania and on to Dar es Salaam. The first of these is an awarded concession, while the second continues to be operated directly by the state. Table 3. Railway indicators for Zambia and select countries, 2000­05 Spoornet (South Africa) TransNamib (Namibia) TAZARA (Tanzania- NRZ (Zimbabwe) BRC (Botswana) CEAR (Malawi) RSZ (Zambia) CFM (Angola) Zambia) Concessioned (1)/ state run (0) 0 0 1 1 0 0 0 0 Traffic density, freight, 1,000 tonne- km/km 469.0 827.0 90.1 406.1 2,426.9 461.3 475.3 901.8 Passenger density, 1,000 passenger- kms/km 38.0 91.9 60.3 147.0 32.7 165.6 Efficiency Labor productivity (1,000 traffic units per employee) 121.0 722.1 502.0 3,308.1 Carriage productivity (1,000 passenger- km per carriage) 1,176.5 3,285.7 Locomotive productivity (million traffic units per locomotive) 25.1 Wagon productivity (1,000 net tonne-km per wagon) 376.5 Tariffs Average unit tariff (UT), freight, U.S. cents/tonne-km 3.0 5.8 3.9 Average UT, passenger, U.S. cents/passenger-km 1.0 1.0 0.8 Source: Bullock 2009, derived from AICD railways database downloadable at http://www.infrastructureafrica.org/aicd/tools/data Empty cells denote that data not available. Challenges Zambian railways' low traffic densities are well below the viability threshold of at least 2 million tons per kilometer for railways of this kind, making it difficult to capture the revenues needed to maintain assets. Also, performance for the RSZ is mixed, while TAZARA performance data is largely unavailable (table 3). 10 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Low traffic volumes complicate the financial viability of any concession arrangement. In the case of the RSZ, the lack of a clear regulatory framework or administrative capacity to supervise the contract has made it difficult for the government to provide clear oversight. For example, the RSZ practices discriminatory pricing against transit traffic from the Democratic Republic of Congo (DRC) to Dar es Salaam, charging $2.00 per tonne-km versus the normal tariff of around $0.05 per tonne-km. These tariffs reflect an abuse of monopoly power aimed at diverting trade flows from the DRC away from Dar es Salaam and toward Durban, with the same concessionaire operating the Zambian rail network and the Beit Bridge border crossing from Zimbabwe into South Africa. The high level of these tariffs has a distortionary effect on traffic flows and investment decisions along the entire corridor. For example, copper exports from the DRC are currently going by road in order to avoid these charges, even though they are more suited to rail transportation. Resolving this situation is not simple, and would probably require a major renegotiation of the rail concession contract, combined with careful tariff regulation thereafter. The lack of reciprocal access rights delays rail transit through Zambia and along the entire north- south corridor. A rail freight journey of 3,000 km from Kolwezi on the DRC border to the port of Durban takes 38 days to complete--9 days of travel time and 29 days associated with customs clearance and loading and interchange. Freight moves no more than 4 km per hour on average, and the aggregate costs of delays along the corridor have been estimated at $120 million per year. The Zambian rail network contributes to these delays. Access from one rail system to another is restricted for technical reasons or connecting rail operators simply do not have the necessary traction capacity to service existing traffic. Poor traffic planning causes undue delays, and operators are not incentivized to provide reliable interconnection services. Reducing these delays requires revision of the contractual relationships and access rights linking these railways to ensure transparency and fairness in reciprocal track access rights. Air transport Achievements Zambia's overall air traffic doubled between 2001 and 2007. By the standards of its neighbors, Zambia is handling a relatively high volume of such traffic, at 1.46 million seats per year. Its domestic air transport sector remains modest and is a fraction of that found in Angola, Mozambique, and Tanzania. This may reflect the fact that the most economically significant cities are relatively close together and well connected by road and rail. Challenges Even as overall traffic has increased, connectivity (measured by the number of city pairs served) has declined from 35 to 25 in recent years, typical across Africa over this period. Lusaka has relatively good intra-African connectivity compared to many other capitals in the region. But the aging aircraft fleet in Zambia presents another challenge, and its renewal is slower than in neighboring countries. The recent collapse of Zambian Airways puts the future of the domestic market in question. Experience from neighboring Tanzania may be relevant in this respect. Following the demise of Air Tanzania, a joint venture was set up to form the private airline Precision Air, with 51 percent ownership by Tanzanian interests and 49 percent by Kenyan Airways. The airline has grown substantially, and 11 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Tanzania now has one of the most vibrant domestic air transport markets in Africa, offering competing services on all routes. Table 4. Air transport Mozam- Country Angola Zambia Tanzania Botswana Namibia Zimbabwe bique TRAFFIC (2007) Domestic seats 1.20 0.44 1.87 0.24 0.08 0.24 1.14 (millions per year) Seats for international travel within Africa 0.48 1.46 1.27 -- -- 1.11 0.58 (millions per year) Seats for intercontinental travel (millions 0.59 0.11 0.59 -- 0.24 0.18 0.09 per year) Seats available per capita 0.13 0.17 0.9 -- -- 0.11 0.09 QUALITY % of seat-km in older aircraft 0.1 19.8 17.1 0 1.1 15.5 16.3 % of seat-km in newer aircraft 59.6 63.8 79.3 100 79 71.4 57.0 % of seat-km in aircraft of unknown age 40.2 16.4 3.6 0 19.9 13.0 26.7 Source: Bofinger, 2009. Derived from AICD air transport database downloadable from http://www.infrastructureafrica.org/aicd/tools/data -- = data not available. Water supply and sanitation Achievements Zambia already has relatively good access to high-end water and sanitation solutions (table 5). About 34 percent of Zambia's population has access to utility water, whether from private taps or standposts; compared with only 24 percent in other resource-rich countries of Africa. Access to septic tanks, at 18 percent, is far ahead of peer countries. As for trends in recent years, Zambia ­ along with other African countries ­ is moving fastest with intermediate options (figures 5 and 6). The real action in WSS has been in expanding access to wells or boreholes and traditional latrines, for an additional 1 percent of the population each year. By contrast, coverage of high-end solutions such as piped water and flush toilets has declined slightly in Zambia, while growth in standposts and improved latrines has been modest. This pattern is consistent with elsewhere in Sub-Saharan Africa. 12 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Table 5. Benchmarking water and sanitation indicators Resource Middle-income Unit rich Zambia countries Access to piped water % pop 12.0 18.3 52.1 Access to standposts % pop 12.6 15.6 18.9 Access to wells/boreholes % pop 49.0 46.9 6.0 Access to surface water % pop 23.7 19.0 13.0 Access to septic tanks % pop 1.6 18.1 40.8 Access to improved latrines % pop 6.4 1.6 1.4 Access to traditional latrines % pop 54.8 53.1 30.4 Open defecation % pop 27.6 27.0 14.3 Domestic water consumption liter/capita/day 90.3 80.7 187.6 Urban water assets in need of rehabilitation % 42.0 42.0 25.0 Revenue collection % sales 69.7 68* 100 Distribution losses % production 43.6 44.9 27.4 Cost recovery % total costs 55.6 65.4 80.6 Total hidden costs as % of revenue % 270.4 236.4 855.2 US cents per m3 Zambia Scarce water resources Other developing regions Residential tariff 48 60 3.0­60.0 Nonresidential tariff 59 120 Source: Banerjee and others 2008. Derived from AICD water and sanitation utilities database downloadable from http://www.infrastructureafrica.org/aicd/tools/data Note: *Average of three largest utilities. Challenges The share of the population without access to safe solutions is increasing over time (figures 5 and 6). Despite doing well at the high end of the coverage spectrum, Zambia does not fare much better than its peers when it comes to the percentage of the population relying on surface water or practicing open defecation. A full 19 percent of Zambia's population continues to rely on surface water and as much as 27 percent of the population continues to practice open defecation. Moreover, trends in household access to WSS services from successive household surveys show that the share of the population living in these insanitary conditions continues to increase. An additional 0.8 percent of the population each year relies on surface water and an additional 0.4 percent of the population practices open defecation. The high health risk associated with these practices makes this a very troubling finding. Zambia's water utilities have relatively high levels of hidden costs due to inefficiencies (figure 7). First, utilities recover only about two-thirds of the total cost of service provision (when full capital costs are taken into account). Second, utilities are collecting only about 70 percent of the revenues owed by their customers. Third, about 45 percent of water produced is lost in distribution due to technical and nontechnical factors. This poor performance is not atypical of water utilities in other resource-rich countries in Africa, even if it lags far behind the performance of middle-income countries in the region. 13 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE The financial value of all these losses, expressed as a percentage of utility revenues, indicates that losses are more than twice as high as current sector revenues (236 percent of revenues). Figure 5. Growing reliance on surface water Source: Banerjee and others 2008. 14 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Figure 6. Progress in traditional latrines, but an increase in open defecation Source: Morella and others, 2008 Figure 7. Hidden costs of water utilities Source: Banerjee and others, 2008 15 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Power Achievements Zambia is endowed with a relatively large amount of cost-effective hydropower. In terms of electricity supply, Zambia enjoys a much more favorable position than many of its neighbors (table 6). Due to the demands of its large-scale mining sector, Zambia has a relatively large generation capacity and power consumption per capita, several times higher than that of other resource-rich countries in Africa. Abundant hydro resources allow Zambia to produce electricity at around $0.08 per kilowatt-hour (kWh), about half the average cost of electricity production in Africa. The national utility Zambian Electricity Supply Company Ltd. (ZESCO) also performs relatively well in terms of operational efficiency. In the two key indicators of operational performance, revenue collection and distribution losses, ZESCO performs well relative to the resource-rich peer group and near the level of the middle-income peer group (table 6). Table 6. Benchmarking power indicators Resource Middle-income Unit rich Zambia countries Installed power-generation capacity MW/mill. people 43.2 154.9 798.6 Power consumption kWh/capita 205.7 771.0 4,479.3 Power outages Day/year 14.5 49.8 5.9 Firms' reliance on own generator % consumption 44.9 19.5 10.9 Firms' value lost due to power outages % sales 7.0 3.7 1.6 Access to electricity % population 46.1 20.1 59.9 Urban access to electricity % population 79.4 50.0 85.2 Rural access to electricity % population 28.0 3.5 31.8 Growth access to electricity % population/year 2.4 0.3 1.5 Revenue collection % billings 81.1 96.5 100.0 Distribution losses % production 25.8 12.0 10.1 Cost recovery % total cost 53.9 39.1 100.0 Total hidden costs as % of revenue % 168.3 93.3 0.1 Predominantly hydro U.S. cents Zambia generation Other developing regions Power tariff (residential at 75 kWh) 2.9 10.3 5.0­10.0 Power tariff (commercial at 900 kWh) 4.4 11.7 Power tariff (industrial at 50,000 kWh) 2.9 11.4 Source: Eberhard and others, 2008 Derived from data downloadable at AICD on-line power utilities database http://www.infrastructureafrica.org/aicd/tools/data Note: MW = megawatt. 16 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Challenges Access to electricity is only 20 percent in Zambia, less than half of what is found among the relevant African peer groups. Power access lags behind in both urban and rural areas, but the gap for rural electrification is particularly large--more than 3 percent in Zambia versus 30 percent in the peer groups. Not only is access low, but it has also been stagnant over time. Only 0.5 percent of the Zambian population is newly electrified each year, compared with 2 percent in the peer groups. While power is relatively abundant in Zambia, much of that power is going to the mining sector, leaving relatively little for domestic consumption. Low power tariffs undermine the sustainability of the power sector. At $0.03­$0.04 per kWh, Zambia has some of the lowest power tariffs in Africa (figure 8). Looking across the developing world, Zambia's power tariffs fall below the typical price range of $0.05­$0.10 per kWh. While Zambia's power production costs are low, tariffs are lower. Both historic and long-run marginal costs are close to the mark of $0.08 per kWh (figure 9). Tariffs are capturing only about 40 percent of historic costs, and the power sector today is living on the investments of the past without making provision for the future. South Africa's recent power shortages demonstrate the dangers of putting off change for too long. Underpricing of power creates hidden costs that are as large as the overall level of revenues (figure 10). Given the relatively low costs of power in absolute terms, it should be feasible for Zambian consumers to pay full- cost recovery tariffs. A stronger cash flow for the ZESCO would help to finance the needed expansions in generation capacity to keep pace with growing demand and to accelerate the pace of electrification. Zambia's long-term power supply options could be affected by the evolution of regional power trade in the framework of the Southern African Power Pool (SAPP). Zambia already imports a relatively small amount of power from neighboring DRC. Plans to further develop the Inga hydropower site in the DRC could lead to a large expansion in low-cost hydropower for the DRC, available for export to countries such as Zambia. While Zambia has attractive hydropower resources of its own, the long-run marginal cost of hydropower generation in the DRC, at around $0.014 per kWh, is about half the equivalent cost in Zambia. In the medium term, therefore, Zambia will face a strategic choice between developing more domestic hydropower resources versus strengthening its cross-border interconnectors with the DRC. Adopting a regional approach could save Zambia $160 million a year in power-supply costs in the long term. 17 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Figure 8. Comparison of electricity tariffs across Africa Source: Eberhard and others, 2008. Figure 9. Comparison of Zambia's power tariffs against various cost benchmarks Source: Eberhard and others, 2008; Rosnes and Vennemo, 2008 18 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Figure 10. Hidden costs of power utilities Source: Eberhard and others, 2008 Water resources1 Achievements By African standards Zambia is relatively well endowed with water and water storage. The renewable water resource per capita is estimated at about 8,700 m3 per year, well above the Sub-Saharan African average of 7,000 m3 per year. Zambia already has extensive water storage capacity amounting to 9,600 m3 per hectare, compared with an average for Sub-Saharan Africa of only 800 m3 per capita. Challenges Nevertheless, the country's water resources are largely underdeveloped. Available freshwater supplies are 60 times larger than the current levels of withdrawal for economic consumption. Only 27 percent of the country's 6,000 MW of hydropower potential have been tapped. Only 155,000 hectares (3 percent) of agricultural land are irrigated, and access to safe water remains low. Zambia's current irrigated area could be increased substantially with good economic returns. Simulations suggest that with a threshold internal rate of return (IRR) of 6 percent it would already be economically viable to develop a further 110,000 hectares of land for irrigation. If the threshold IRR is raised to 12 percent the economically viable area for irrigation shrinks to 23,000 hectares. The area with irrigation potential is concentrated in the copper belt area and on the shores of Lake Kariba in the southwest of the country (figure 11). A high degree of spatial and intertemporal variability of water resources creates local scarcity. The uneven distribution of water resources across the country, high climatic variability leading to frequent floods and droughts, and degradation of water quality from mining discharges on the strategic Kafue catchment, result in localized issues of scarcity. From 1997 to 2007, floods and droughts are estimated to 1 This section draws heavily on the recently completed World Bank report: Managing Water for Sustainable Growth and Poverty Reduction--A Country Water Resources Assistance Strategy for Zambia. 19 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE have cost Zambia a total of $13.8 billion in damages and lost outputs, a 0.4 percent loss of growth annually. Rainfall variability lowers agricultural growth by 1 percentage point, and regularly leads to crop failures and food shortages. Water scarcity also has serious consequences for Zambia's unique environmental resources, on which the country's significant tourist sector depend. Given the wide range of conflicting uses (hydropower, water supply, irrigation, environment), it is essential to have a clearly defined basis for allocating water rights among sectors to maximize their development impact. To move ahead with important investments in water storage, Zambia needs to make further progress in integrated river-basin planning and investment. Beyond large-scale storage investments, the development of small-scale storage (as noted above) would do much to alleviate rural poverty and enhance the resilience of rural livelihoods. Figure 11. Economic potential for irrigation in the Zambia Source You and others 2009 Information and communication technology Challenges Zambia's GSM coverage is comparatively low by regional standards and well below what the market can deliver. Only 53 percent of Zambia's population lives within range of a GSM signal, compared with 67 percent among Africa's resource-rich states and 85 percent of the middle-income countries. Not only is the percentage low, but the architecture of the network (recall figure 2c) is very tightly clustered along the main economic arteries and almost nonexistent elsewhere. Simulations suggest more than 95 percent of 20 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Zambia's population could be reached by a GSM signal on a commercially viable basis if measures were taken to dismantle regulatory barriers and promote competition to increase the market (figure 12). The state-owned telecommunications incumbent, Zambia Telecommunications Company Ltd. (ZAMTEL), is characterized by inefficiency and an inability to compete with private mobile operators. The operator has become increasingly dependent on state financial support. The ZAMTEL monopoly is responsible for the exceptionally high prices of international voice communication that are observed in Zambia. In response, the government initiated a privatization process that aims to introduce private investment and management practices into the fixed-line sector. Table 7. Benchmarking ICT indicators Unit Resource rich Zambia Middle-income countries GSM coverage % population 66.9 53.0 85.1 International bandwidth Mbps/capita 4.0 4.4 104.0 Internet Subscribers/100 people 0.1 0.2 3.0 Landline Subscribers/100 people 19.3 8.5 34.8 Mobile phone Subscribers/100 people 11.4 20.9 30.0 Labor productivity Subscribers/employee 405.1 505.8 756.8 Quality of service Faults/100 main lines 82.4 90.8 50.8 Zambia Without submarine cable Other developing regions Price of monthly mobile basket 14.6 11.12 9.9 Price of monthly fixed-line basket 8.9 13.58 -- Price of 20-hour Internet package 81.5 67.95 11.0 Price of a 3-minute call to the United States 5.5 2.59 2.0 Price of intra-Africa calls, mean 1.2 0.72 n.a. Source: Minges and others, 2009 Note: -- = data not available; n.a. = not applicable. 21 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Figure 12. Potential for commercially viable expansion of GSM coverage Source: Mayer and others 2009 Connecting to new East African submarine cables could slash international communication costs with competitive access. As with other African countries that lack access to submarine cables, Zambia faces even higher costs for Internet and international telecommunications than elsewhere. With the planned submarine cables along the east coast of Africa, and the extension of backbone connectivity inland for landlocked countries, there is the prospect of a 50 percent reduction in these charges based on experience elsewhere (table 8). These reductions will occur if there is competition on the international gateway to the submarine infrastructure, otherwise they will feed higher monopoly profits. 22 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Table 8. High international call charges driven both by technology and market power Percent Call within Sub- Call to the Internet US$ cases Saharan Africa United States Internet dial-up ADSL Without submarine cable 67 1.34 0.86 68 283 With submarine cable 33 0.57 0.48 47 111 Monopoly on international gateway 16 0.70 0.72 37 120 Competitive international gateway 16 0.48 0.23 37 98 Source: Minges and others, 2009 Financing Zambia's infrastructure Zambia needs to implement an ambitious infrastructure investment agenda over the next decade. In order to meet its most pressing infrastructure needs and catch up with developing countries in other parts of the world, Zambia needs to expand its infrastructure assets in a number of key areas. The targets outlined in table 9 are purely illustrative in nature, but they represent reasonable aspirations. Developed in a way that is standardized across African countries, they allow for cross-country comparisons of the affordability of meeting the targets, which can be modified or delayed as needed to achieve financial balance. Table 9. Illustrative investment targets for infrastructure in Zambia Economic target Social target ICT Fiber-optic links to neighboring capitals and submarine cable Universal access to GSM signal and public broadband facilities Irrigation Develop 23,000 hectares that are economically viable for n.a. irrigation Power Refurbish 1,700 MW of generation and develop 1,700 MW of Raise electrification to 24% new generation (50% urban and 15% rural) Transport Achieve regional (national) connectivity with good quality 2- Provide rural road access to 80% highest value lane (1-lane) paved road agricultural land, and urban road access within 500 meters WSS Achieve MDGs Source: Derived from Foster and Briceño-Garmendia 2009 n.a. = not applicable. Meeting these illustrative infrastructure targets for Zambia would cost $1.6 billion per year over the next decade. Capital expenditure would account for 70 percent of this requirement. The country's power needs represent the single largest item and are estimated to be $0.6 billion per year to refurbish 1,700 MW of generation capacity and develop a further 1,700 MW of new capacity. The second-largest item is the expenditure of $0.5 billion a year for the WSS sector, needed to meet the MDGs. Both transport and ICT spending needs are somewhat lower (table 10). 23 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Table 10. Indicative infrastructure spending needs in Zambia, 2006­15 $ million per year Sector CAPEX O&M Total needs ICT 132 86 218 Power (trade stagnation) 532 99 631 Transport (basic) 145 144 289 WSS 317 154 471 Irrigation 5 0 5 Total 1,131 483 1,614 Source: Briceño-Garmendia, Smits, and Foster 2008. Note: Figures refer to investment except public sector that also includes recurrent spending. Public sector covers general government and nonfinancial enterprises. O&M = operations and maintenance; CAPEX = capital expenditure. This total spending requirement would absorb 19.2 percent of Zambia's GDP for a decade, with about 13.2 percent going to investment and 6.6 percent to operations and maintenance (O&M, figure 13). This would be a substantial burden for the economy, but is within the scope of what other countries around the world have spent on infrastructure during periods of intensive development. As a point of reference, China dedicated 15 percent of its GDP just to infrastructure investment during the mid-2000s. So while spending at these levels would certainly be very challenging, it is not entirely inconceivable. Figure 13. The burden of infrastructure needs Source: Briceño-Garmendia, Smits, and Foster 2008. 24 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Zambia already spends a sizeable $0.7 billion per year to meet infrastructure needs (table 11). (Due to the nonavailability of financial statements from the ZAMTEL, the state-owned telecommunications incumbent, these figures represent a lower limit for the level of infrastructure spending in the country.) About 65 percent of the recorded total is allocated toward capital expenditure and 35 percent toward operating expenditures. Two-thirds of total spending is domestically financed, coming from the pockets of Zambian taxpayers and users of utility services. Focusing on infrastructure investment alone, about half is funded by the public budget and the remaining half by a range of external financiers--primarily private investors and official development assistance (ODA) partners. Zambia receives relatively little infrastructure investment from countries outside the Organisation for Economic Co-operation and Development (OECD). Private finance goes almost entirely to the ICT sector, while ODA is evenly split between the transport and WSS sectors. Table 11. Existing financing flows for infrastructure, average, 2001­06 Sector $m per year O&M Capital expenditure Total spending Non-OECD Public sector Public sector ODA financiers PPI Total CAPEX ICT n.a. n.a. 1 0 89 90 >90 Power 99 70 2 8 0 81 180 Transport 99 85 52 6 3 145 245 WSS 35 67 47 1 9 123 158 Total 233 224 99 15 101 439 >673 Source: Briceño-Garmendia, Smits, and Foster 2008. Note: Due to nonavailability of ZAMTEL financial statements the data represent a lower bound on total spending. PPI = private participation in infrastructure; OECD = Organisation for Economic Co-operation and Development; n.a. = not applicable. 25 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Figure 14. Burden of infrastructure spending Source: Briceño-Garmendia, Smits, and Foster 2008. In terms of GDP, Zambia's existing infrastructure spending is typical of other resource-rich countries in Africa. During the early 2000s, Zambia was spending an average of around 6 percent of GDP on infrastructure (figure 14). This is close to the average for resource-rich countries, but well below the average of 10 percent for low-income countries in Africa. Thus, relative to African peers, Zambia's existing spending on infrastructure does not look that high. How much more can be done within the existing resource envelope? There is evidence that some $315 million of additional resources each year could be recovered by improving efficiency (table 12). The three largest potential sources of efficiency gains are improving cost- recovery (particularly in the power sector), improving capital budget execution (particularly in the transport sector), and improving various aspects of operational efficiency (particularly in the water sector). 26 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Table 12. The efficiency gap ICT Power Transport WSS Total Overstaffing -- -- -- 2 2 Distribution losses -- 6 -- 22 27 Undercollection -- 0 0 30 30 Undermaintenance -- -- 0 -- 0 Low budget execution 0 2 39 17 57 Underrecovery of costs -- 152 20 25 198 Total 0 160 59 96 315 Source: Briceño-Garmendia, Smits, and Foster 2008. -- = data not available. Undercharging for power services costs Zambia about $152 million per year (more than 2 percent of GDP). As noted above, Zambia's power tariffs of $0.03­$0.04 per kWh barely cover half of the full economic costs of power production. Overall, the national power utility, ZESCO, covers barely 40 percent of its costs. The associated financial burden is substantial at the macroeconomic level, amounting to more than 2 percent of GDP, and is also several times larger than that found in other resource-rich countries in Africa (figure 15). Underpricing of water services, though significant in absolute terms and substantially higher in Zambia than in other resource-rich countries in Africa, remains less of a macroeconomic issue due to the relatively low turnover of the sector, amounting to 0.4 percent of GDP. Zambia's inequitable access to power and water makes subsidized tariffs a highly regressive policy. Zambian power consumers are having the full capital costs of their service (implicitly or explicitly) subsidized by the state. Given that 84 percent of households with access to power belong to the top quintile of the budget distribution--and indeed 99 percent of those with access belong to the top two quintiles of the distribution--this amounts to a highly regressive subsidy (figure 16). Though less significant in absolute magnitude, subsidies to the water sector are equally regressive in nature since the pattern of access to piped water mimics that of access to power. 27 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Figure 15. Underpricing in the power and water sectors Source: Briceño-Garmendia, Smits, and Foster 2008. Figure 16. Infrastructure and income a. Water supply b. Power 28 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Source: Banerjee and others, 2008. Interestingly enough, in Zambia those with access to electricity and power (and many of those without access) do not face major affordability problems. To evaluate the social feasibility of raising power tariffs to cost-recovery levels, an affordability threshold of 5 percent of the household budget is used. On this basis, and using data on the magnitude of family budgets, figure 17 illustrates the percentage of Zambian households able to afford monthly utility bills at various levels. Thus, a monthly utility bill of $2 would be affordable for essentially all Zambians, whereas a monthly utility bill of $12 would be affordable for only the richest 20 percent of Zambia's households. Purchasing a subsistence consumption bundle at cost-recovery prices would be affordable for the vast majority of Zambian households. Taking a cost-recovery tariff of $0.08 per kWh for power and a subsistence consumption of 50 kWh per month--which is enough to power four 100-watt light bulbs for four hours per day--the monthly power bill would amount to $4.00, which would be affordable for almost 100 percent of the Zambian population (figure 17). Even taking a more generous consumption allowance of 75­100 kWh per month, a monthly bill based on a cost-recovery tariff would still amount to around $7.00, which would be affordable for 70 percent of the population. Given that, as of today, only the more affluent 20 percent of the Zambian population have access to electricity, it is clear from the analysis that cost-recovery tariffs would be perfectly affordable for this segment of the population. Moreover, even if electrification rates were rapidly expanded to reach the middle tranches of income distribution, power would remain affordable. Thanks to Zambia's relatively low-cost energy resources, and a population that is relatively well-off by the standards of low-income countries in Africa, power tariffs are likely to remain affordable. 29 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Figure 17. Those with access (and many of those without access) do not face major affordability problems 100% than 5% of their monthly budget % of households spending less 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1 2 3 4 5 6 7 8 9 10 11 12 USD/month Lower/Upper bound cost of household consumption of electricity Zambia LIC Source: Banerjee and others, 2008. Distribution losses and low collection rates of water utilities are costing the country $52 million a year. While Zambia's power utilities are relatively efficient by the standards of its peers, Zambia's water utilities are relatively inefficient when judged by the same standard (figure 18). Whereas water utilities in other resource-rich African countries typically face operational inefficiencies that amount to 0.14 percent of GDP, the operational inefficiencies of Zambian water utilities are wasting 0.7 percent of GDP. Just under half of this waste derives from unaccounted water, and just over half from undercollection of revenues. 30 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Figure 18. Hidden costs of the power and water sectors due to inefficiencies a. Power b. Water Source: Briceño-Garmendia, Smits, and Foster 2008. Annual funding gap Zambia's infrastructure funding gap amounts to $0.5 billion per year (or about 6.5 percent of GDP) and is mainly associated with spending needs in the power and water sectors (table 13). Almost 60 percent of the infrastructure funding gap is for power, representing a shortfall of almost $0.3 billion. The rest of the gap is largely related to the WSS sector, where an additional $0.2 billion is needed to meet the MDGs. No significant funding gap is found for transport, once efficiency gains are taken into account. In the case of ICT, the magnitude of the funding gap cannot be assessed due to the absence of 31 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE comprehensive information on existing spending; however, based on the experience of other African countries, it is safe to assume that a funding gap for this sector is small or nonexistent. Table 13. Funding gaps by sector ICT Power Transport WSS Total Spending needs (218) (631) (289) (471) (1,609) Existing spending 90+ 180 245 158 673 Efficiency gains n.a. 160 59 96 315 Funding gap n.a. (291) 15 (217) (493) Potential for reallocation 0 30 65 0 95 Source: Briceño-Garmendia, Smits, and Foster 2008. n.a. = not applicable. Every year about $95 million more is spent than needed to meet Zambia's estimated infrastructure requirements (recall table 9). Most of this overspending is on the transport sector ($65 million), which in recent years is being funded at rates apparently over and above long-term requirements. There is also evidence of overspending on O&M in the power sector, due to utility inefficiencies and an overextended distribution network. Since there is a large funding gap in this sector, these resources would be better diverted to finance power investments. What else can be done? There are a number of ways of addressing the infrastructure funding gap; filling it with money is not the only relevant approach. A number of policy choices relating to technology selection and regional approaches to infrastructure development could reduce the gap by lowering the costs of meeting infrastructure targets. Alternatively, there is the possibility of taking a longer period of time to meet defined goals. Adopting lower-cost technologies for meeting the MDG targets for WSS could reduce Zambia's infrastructure funding gap by $0.2 billion. The estimated cost of reaching the MDG targets is based on Zambia maintaining its current mix of WSS technologies, which as noted tends to be skewed toward higher-end solutions such as private taps. If, instead, the service expansion needed to meet the MDG targets was undertaken entirely through lower-end solutions, such as standposts and boreholes, the associated cost could fall substantially, by $218 million or almost one-half. Eventually, importing power from the DRC through an enhanced SAPP could reduce the funding gap by $0.2 billion. Although not feasible at present, in the medium to long term (as the DRC develops the hydropower at Inga), a larger volume of low-cost power would become available through the SAPP. Since the DRC's hydropower resources are more cost-effective than those of Zambia, the latter could reduce its power-sector development costs substantially in the longer term by moving toward increased reliance on power trade, with potential cost savings of $160 million per year. Adopting more appropriate standards for paved roads could shave a further $0.1 billion from the funding gap. The spending needs for the transport sector assume that regional and national connectivity standards will be met by standard asphalt paved roads. But, in practice, it may be possible to reduce costs 32 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE by adopting more appropriate paving technologies. For example, use of single-surface treatment instead of asphalt surfacing would reduce road sector development costs by $60 million per year. If it were possible to adopt all of the above policy measures at once, Zambia's infrastructure funding gap would all but disappear. The combined value of these cost-saving policy measures is $453 million, which is very close to the funding gap of $493 million. While it may not necessarily be possible to reap all of these cost savings in the medium term, this calculation serves to illustrate the power of strategic policy choices in ensuring the feasibility of meeting the country's infrastructure needs. Holding spending at current levels but going after efficiency gains would allow Zambia to meet identified infrastructure targets in 15 years instead of the notional 10 years from 2006-2015 assumed for this exercise. Assuming that Zambia had no means of raising additional infrastructure finance and was not able to implement the cost-saving policies described above, the only way to meet the infrastructure targets would be to take a longer period of time than the decade that was contemplated at the outset of this exercise. If Zambia were able to redress the various inefficiencies identified above, and preserve overall spending at current levels, the targets would take 15 years to reach, which is to say they would be achievable by the year 2020. Without tackling inefficiencies, the country would take another 15 years, or until 2035. Zambia's infrastructure situation is more hopeful than that of many other African countries. For a start, infrastructure spending needs--though large--are not beyond the realms of possibility. Second, Zambia's resource wealth and relatively well-off population provide a more solid financing basis than is available to many other countries. Third, Zambia's funding gap--though substantial--can be dramatically reduced through a range of policy measures aimed at stemming inefficiencies and lowering costs. In sum, notwithstanding the numerous infrastructure challenges that Zambia faces, their resolution looks much more tractable than in the case of many African peers. 33 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Bibliography This country report draws upon a wide range of papers, databases, models, and maps that were created as part of the Africa Infrastructure Country Diagnostic. All of these can be downloaded from the project website: www.infrastructureafrica.org. For papers go to the document page (http://www.infrastructureafrica.org/aicd/documents), for databases to the data page (http://www.infrastructureafrica.org/aicd/tools/data), for models go to the models page (http://www.infrastructureafrica.org/aicd/tools/models) and for maps to the map page (http://www.infrastructureafrica.org/aicd/tools/maps ). The references for the papers that were used to compile this country report are provided in the table below. General Africa's Infrastructure: A Time for Transformation (AICD Web site), http://www.infrastructureafrica.org Foster, Vivien, and Cecilia Briceño-Garmendia, eds. 2009. Africa's Infrastructure: A Time for Transformation. Paris and Washington, DC: Agence Française de Développement and World Bank. Growth Calderón, César. 2009. Infrastructure and Growth in Africa, Policy Research Working Paper 4914, World Bank, Washington, DC. Escribano, Alvaro, J. Luis Guasch, and Jorge Pena. 2010. Assessing the Impact of Infrastructure Quality on Firm Productivity in Africa. Policy Research Working Paper 5191, World Bank, Washington, DC. Yepes, Tito, Justin Pierce, and Vivien Foster. 2009. Making Sense of Africa's Infrastructure Endowment: A Benchmarking Approach. Policy Research Working Paper 4912, World Bank, Washington, DC. Financing Briceño-Garmendia, Cecilia, Karlis Smits, and Vivien Foster. 2009. Financing Public Infrastructure in Sub-Saharan Africa: Patterns and Emerging Issues. AICD Background Paper 15, Africa Region, World Bank, Washington, DC. Information and communication technologies Michael Minges, Mavis Ampah, Daniel Camos, Cecilia Briceño-Garmendia, Maria Shkratan, and Mark Williams. 2009. Information and Communications Technology in Sub-Saharan Africa: A Sector Review. AICD Background Paper 10, Africa Region, World Bank, Washington, DC. 34 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Mayer, Rebecca, Ken Figueredo, Mike Jensen, Tim Kelly, Richard Green, and Alvaro Federico Barra. 2009. Connecting the Continent: Costing the Needs for Spending on ICT Infrastructure in Africa. AICD Background Paper 3, Africa Region, World Bank, Washington, DC. Irrigation Svendsen, Mark, Mandy Ewing, and Siwa Msangi. 2008. Watermarks: Indicators of Irrigation Sector Performance in Africa. AICD Background Paper 4, Africa Region, World Bank, Washington, DC. You, L., C. Ringler, G. Nelson, U. Wood-Sichra, R. Robertson, S. Wood, G. Zhe, T. Zhu, and Y. Sun. 2009. Torrents and Trickles: Irrigation Spending Needs in Africa. AICD Background Paper 9, Africa Region, World Bank, Washington, DC. Power Eberhard, Anton, Vivien Foster, Cecilia Briceño-Garmendia, Fatimata Ouedraogo, Daniel Camos, and Maria Shkaratan. 2008. Underpowered: The State of the Power Sector in Sub-Saharan Africa. AICD Background Paper 6, Africa Region, World Bank, Washington, DC. Foster, Vivien, and Jevgenijs Steinbuks. 2009. Paying the Price for Unreliable Power Supplies: In-House Generation of Electricity by Firms in Africa. Policy Research Working Paper 4913, World Bank, Washington, DC. Rosnes, Orvika, and Haakon Vennemo. 2009. Powering Up: Costing Power Infrastructure Spending Needs in Sub-Saharan Africa. AICD Background Paper 5, Africa Region, World Bank, Washington, DC. Transport Bullock, Richard. 2009. Off Track: Sub-Saharan African Railways. AICD Background Paper 17, Africa Region, World Bank, Washington, DC. Carruthers, Robin, Ranga Rajan Krishnamani, and Siobhan Murray. 2009. Improving Connectivity: Investing in Transport Infrastructure in Sub-Saharan Africa. AICD Background Paper 7, Africa Region, World Bank, Washington, DC. Gwilliam, Ken, Vivien Foster, Rodrigo Archondo-Callao, Cecilia Briceño-Garmendia, Alberto Nogales, and Kavita Sethi. 2008. The Burden of Maintenance: Roads in Sub-Saharan Africa. AICD Background Paper 14, Africa Region, World Bank, Washington, DC. Heinrich C. Bofinger. 2009. An Unsteady Course: Growth and Challenges in Africa's Air Transport Industry. AICD Background Paper 16, Africa Region, World Bank, Washington, DC. Kumar, Ajay, and Fanny Barrett. 2008. Stuck in Traffic: Urban Transport in Africa. AICD Background Paper 1, Africa Region, World Bank, Washington, DC. 35 ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Ocean Shipping Consultants, Inc. 2009. Beyond the Bottlenecks: Ports in Africa. AICD Background Paper 8, Africa Region, World Bank, Washington, DC. Water resources World Bank. 2009. Zambia Managing Water for Sustainable Growth and Poverty Reduction: A Country Water Resources Assistance Strategy for Zambia. Water Resources Management, Africa Region. August 2009. Water supply and sanitation Banerjee, Sudeshna, Vivien Foster, Yvonne Ying, Heather Skilling, and Quentin Wodon. Cost Recovery, Equity, and Efficiency in Water Tariffs: Evidence from African Utilities. AICD Working Paper 7, World Bank, Washington, DC. Banerjee, Sudeshna, Heather Skilling, Vivien Foster, Cecilia Briceño-Garmendia, Elvira Morella, and Tarik Chfadi. 2008. Ebbing Water, Surging Deficits: Urban Water Supply in Sub-Saharan Africa. AICD Background Paper 12, Africa Region, World Bank, Washington, DC. Gulyani, Sumila, Debabrata Talukdar, and Darby Jack. 2009. Poverty, Living Conditions, and Infrastructure Access: A Comparison of Slums in Dakar, Johannesburg, and Nairobi. AICD Working Paper 10, World Bank, Washington, DC. Keener, Sarah, Manuel Luengo, and Sudeshna Banerjee. 2009. Provision of Water to the Poor in Africa: Experience with Water Standposts and the Informal Water Sector. AICD Working Paper 13, World Bank, Washington, DC. Morella, Elvira, Vivien Foster, and Sudeshna Ghosh Banerjee. 2008. Climbing the Ladder: The State of Sanitation in Sub-Saharan Africa. AICD Background Paper 13, Africa Region, World Bank, Washington, DC. 36 About AICD and its country reports This study is a product of the Africa Infrastructure Country Diagnostic (AICD), a project designed to expand the world's knowledge of physical infrastructure in Africa. The AICD provides a baseline against which future improvements in infrastructure services can be measured, making it possible to monitor the results achieved from donor support. It also offers a solid empirical foundation for prioritizing investments and designing policy reforms in Africa's infrastructure sectors. The AICD is based on an unprecedented effort to collect detailed economic and technical data on African infrastructure. The project has produced a series of original reports on public expenditure, spending needs, and sector performance in each of the main infrastructure sectors, including energy, information and communication technologies, irrigation, transport, and water and sanitation. Africa's Infrastructure-- A Time for Transformation, published by the World Bank and the Agence Française de Développement in November 2009, synthesized the most significant findings of those reports. The focus of the AICD country reports is on benchmarking sector performance and quantifying the main financing and efficiency gaps at the country level. These reports are particularly relevant to national policy makers and development partners working on specific countries. The AICD was commissioned by the Infrastructure Consortium for Africa following the 2005 G8 (Group of Eight) summit at Gleneagles, Scotland, which flagged the importance of scaling up donor finance for infrastructure in support of Africa's development. The first phase of the AICD focused on 24 countries that together account for 85 percent of the gross domestic product, population, and infrastructure aid flows of Sub-Saharan Africa. The countries are: Benin, Burkina Faso, Cape Verde, Cameroon, Chad, Côte d'Ivoire, the Democratic Republic of Congo, Ethiopia, Ghana, Kenya, Lesotho, Madagascar, Malawi, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, South Africa, Sudan, Tanzania, Uganda, and Zambia. Under a second phase of the project, coverage was expanded to include as many as possible of the additional African countries. Consistent with the genesis of the project, the main focus is on the 48 countries south of the Sahara that face the most severe infrastructure challenges. Some components of the study also cover North African countries so as to provide a broader point of reference. Unless otherwise stated, therefore, the term Africa is used throughout this report as a shorthand for Sub-Saharan Africa. The World Bank has implemented the AICD with the guidance of a steering committee that represents the African Union, the New Partnership for Africa's Development (NEPAD), Africa's regional economic communities, the African Development Bank (AfDB), the Development Bank of Southern Africa (DBSA), and major infrastructure donors. ZAMBIA'S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Financing for the AICD is provided by a multidonor trust fund to which the main contributors are the United Kingdom's Department for International Development (DFID), the Public Private Infrastructure Advisory Facility (PPIAF), Agence Française de Développement (AFD), the European Commission, and Germany's Entwicklungsbank (KfW). A group of distinguished peer reviewers from policy-making and academic circles in Africa and beyond reviewed all of the major outputs of the study to ensure the technical quality of the work. The Sub-Saharan Africa Transport Policy Program and the Water and Sanitation Program provided technical support on data collection and analysis pertaining to their respective sectors. The data underlying AICD's reports, as well as the reports themselves, are available to the public through an interactive Web site, www.infrastructureafrica.org, that allows users to download customized data reports and perform various simulations. Many AICD outputs will appear in the World Bank's Policy Research Working Papers series. Inquiries concerning the availability of data sets should be directed to the volume editors at the World Bank in Washington, DC. 38