Presentation is loading. Please wait.

Presentation is loading. Please wait.

FORECASTING INVESTMENT NEEDS IN SOUTH AFRICA’S ELECTRICITY AND TELECOMMUNICATIONS UNDER ALTERNATIVE GROWTH SCENARIOS Johann Fedderke & Zeljko Bogetic Infrastructure.

Similar presentations


Presentation on theme: "FORECASTING INVESTMENT NEEDS IN SOUTH AFRICA’S ELECTRICITY AND TELECOMMUNICATIONS UNDER ALTERNATIVE GROWTH SCENARIOS Johann Fedderke & Zeljko Bogetic Infrastructure."— Presentation transcript:

1 FORECASTING INVESTMENT NEEDS IN SOUTH AFRICA’S ELECTRICITY AND TELECOMMUNICATIONS UNDER ALTERNATIVE GROWTH SCENARIOS Johann Fedderke & Zeljko Bogetic Infrastructure and Growth Workshop Economic Research South Africa May 29-31, 2006 Cape Town, South Africa

2 OUTLINE OF THE PRESENTATION PART I: Why Worry About Infrastructure and Growth in SA? Highlights of international Benchmarking of South Africa’s Infrastructure Performance for Electricity and Telecom PART II Forecasting Demand for Infrastructure in South Africa: Electricity and Telecom Investment Requirements in Electricity generation and Telecom Under Alternative Growth Scenarios

3 PART I. Why Worry About Infrastructure and Growth in SA? International Evidence Evidence from South Africa Decline in Infrastructure Investments in South Africa Since the 1970s South Africa’s Growth Accelerating ASGI-SA’s Emphasis on Infrastructure

4 International Evidence

5 Evidence from South Africa Aggregate time series growth model (Fedderke, Perkins, Luiz, 2005): Output elasticity w.r.t. electricity: 0.1 – 0.2 range under robustness checks 0.5 once control for institutions (Property Rights)

6 Decline in Infrastructure Investments in South Africa

7 South Africa’s Growth Accelerating In 2004-05, growth was 4.5 and 5% In 1994-2003, it averaged 2.9% Infrastructure Requirements of Accelerated Growth: Will Infrastructure Constrain Accelerated Growth? ASGI-SA’s Emphasis on Infrastructure Scale Up Planned infrastructure spending plan of ~R372- billion (about US$60 billion, or 24% of 2005 dollar GDP) over the next three years

8 International Benchmarking of South Africa’s Infrastructure Performance Bogetic and Fedderke (2005, 2006b) use an international research database (Eustache & Goicoehea, World Bank, 2005) to benchmark infrastructure pefrormance of SA in electricity, telecom, water and sanitation, and transport Indicators: Access, Pricing/Affordability, Technical and Perceived Quality Comparators: All world geographical groups and main income groups; Upper Middle-Income Group (Main benchmark for South Africa) Conclusion: Despite impressive gains on the electrification front, SA still lags behind its benchmark income group on several indicators of performance

9 Highlights of Benchmarking South Africa’s Infrastructure Performance: ELECTRICITY: ACCESS (% of population)

10 Highlights of Benchmarking South Africa’s Infrastructure Performance: Electricity Transmission & distribution losses (% of total output)

11 Highlights of Benchmarking South Africa’s Infrastructure Performance: TELECOM: TELEDENSITY (total telephone subscribers per 1,000 population)

12 Highlights of Benchmarking South Africa’s Infrastructure Performance: TELECOM: PHONE FAULTS (Reported faults per 1,000 mainlines)

13

14 PART II: Forecasting Demand for Electricity and Telecommunications Earlier Studies by Fay (2001), Fay et al (2003), Heffley et al. (1996), Bogetic and Fedderke (2005, 2006a) Estimation by Fay (2001) and Fay et al (2003): (I/P) = F( Y/L, Ag/Y, Man/Y, Z )

15 Underlying Estimation:

16 Quantity Forecast:

17 Cost Forecast Under Current Growth Scenario:

18 Forecast under the “current growth scenario” (3.6% pa): 2005 - 2010 South Africa – Annual Infrastructure Investment Needs Forecast, The Current Growth Scenario*, 2003-2010 Average Annual Investment Flows In billions of US$In billions of randIn % of GDP Power: Lower Bound: Upper Bound: Telecom: 0.29 0.52 1.98 1.87 3.37 12.90 0.11 0.20 0.75 Total(upper bound):2.5016.270.95 *Average annual growth projection (in %): 3.6%. Source: IMF and World Bank medium-term projection. Source: The authors’ estimates.

19 Forecast under the ASGI-SA like, “accelerated growth scenario” (6% pa) until 2010 Table 4: South Africa – Annual Infrastructure Investment Needs Forecast, The Accelerated Growth Scenario*, 2003-2010 Average Annual Investment Flows In billions of US$In billions of randIn % of GDP Power: Lower Bound: Upper Bound: Telecom: 0.96 4.28 6.23 27.83 0.40 2.00 Total(upper bound):5.2434.062.40 *Average annual growth projection (in %): 3.6%. Source: IMF and World Bank medium-term projection. Source: The authors’ estimates.

20 CONCLUSION 1: We estimated a robust model of demand for electricity and telecom using panel data on 52 countries for the period 1980-2002 The model performs well in characterizing historical demand We use the model to forecast future demand for electricity and telecom under two growth scenarios: “current” and “accelerated” growth, covering the range of likely growth scenarios for South Africa

21 CONCLUSION 2: Significant new investments in electricity and telecom required To support economic growth: Under the current growth scenario: Rand 16 billion (3.5 billion in electricity generation and 13 billion in telephone mainlines) Under the accelerated growth scenario: Rand 34 billion (6 in electricity generation and 28 in telephone mainlines) In electricity, these investments may exceed those currently planned by ESKOM

22 Further research needed: Our paper establishes investment requirements of growth in electricity generation and telephony; it does not say anything how those requirements will be met (public vs private sector, financing options etc). Further useful research to assist the operationalization of ASFI-SA could focus on: Policy assessments of alternative ownership, operating, efficiency, and financing scenarios


Download ppt "FORECASTING INVESTMENT NEEDS IN SOUTH AFRICA’S ELECTRICITY AND TELECOMMUNICATIONS UNDER ALTERNATIVE GROWTH SCENARIOS Johann Fedderke & Zeljko Bogetic Infrastructure."

Similar presentations


Ads by Google