Cecilia Briceño-Garmendia and Nataliya Pushak

Republic of Congo’s Infrastructure: A Continental Perspective

Africa Infrastructure Country Diagnostic: a multi-stakeholder effort

Methodology and approach  Methodology  Data collection by local/international consultants and Bank staff based on standardized methodology  Baseline year for data is 2006, does not reflect subsequent evolution  Approach  Focus on benchmarking Republic of Congo’s infrastructure against African neighbors  Benchmarking group includes Resource rich countries, DRC, Benin, Nigeria and Cameroon

Why infrastructure matters

Headlines  Historic contribution of infrastructure to growth lower than in other SSA countries  Most of that contribution to growth comes to increased access to ICT. In contrast, ICT quality acts like a constraint  Quantity and quality of power supply has set a break to the economy

Quantity and quality of power supply has set a break to the economy Changes in growth per capita due to changes in infrastructure ( vs )

Congo still has a lot to gain from improving its infrastructure Potential changes in growth per capita from improving infrastructure to level of African leader (Mauritius)

Headlines  If Congo’s infrastructure platform could be improved to the level of the African leader – Mauritius – per capita growth rates could increase by 3.7 percent per annum.  Substantial share of this impact would come from improvements in the power sector.  Quantity and quality roads would also have significant contributions

The State of Congo’s Infrastructure

Republic of Congo’s power network

 Highly under-developed power sector in terms of generation capacity, power consumption, access and reliability.  Installed capacity. National power system very small and dependant on imports from DRC.  Reliability. Outages are quite frequent forcing firms to accumulate a stock of self-generation capacity.  Access. Electrification rates very low particularly for rural areas. Current investment program aims to create a national electricity grid.  Quality of Network. Close to half of the energy produced is lost in transmission and distribution. Key findings for the power sector

Benchmarking indicates very poor reliability of power provision, low capacity and high prices Source: Preliminary results AICD 2008 UnitRep. of Congo Resource- Rich Installed power generation capacityMW/mil. people Power generationkWH/capita Power outages# in a typical month Firms’ value lost due to power outages% sales Access to electricity% population Urban access to electricity% population Rural access to electricity% population Revenue collection% billings System losses% production Cost recovery of tariffs% total cost Total hidden costs as % of revenue% Effective Power Tariff (US cents/kWh) Rep. of Congo Predominantly Hydro Generation Other Developing Regions Residential at 100 kWh – 10.0 Commercial at 900 kWh Industrial at 50,000 kWh

While costs of power utility inefficiencies are relatively low, distribution losses are significant

Congo’s power prices among the highest in Africa Power tariffs in other developing countries: lower bound Power tariffs in other developing countries: upper bound

Congo’s transport network

 Trunk road network. Low density, quality and road condition major concern  Rural road network. Poor coverage. No effective network of rural roads  Institutional framework. Second generation road fund recently created but not fully functional.  User charges. Fund replenished by collecting 50% of taxes on forestry activity, 40% of VAT on fuel products, and other taxes.  Financing trends:  Maintenance funding steadily increasing : doubled between , and added additional 50% in 2008  Investment program represents huge effort with strong focus on multimodality Key findings for the road sector

Benchmarking indicates low density and very poor quality of roads UnitCongoResource Rich SSA Paved road density km/1000 km2 of arable land Unpaved road density km/1000 km2 of arable land GIS Rural accessibility % of rural pop within 2 km from regional and national roads Paved road traffic Average Annual Daily Traffic, cars per day 850 1, Unpaved road traffic Average Annual Daily Traffic, cars per day Paved network condition % in good or fair condition Unpaved network condition % in good or fair condition Over-engineering % of total network

Roads funding aligned with maintenance and rehab needs, however actual transfers of resources flawed

Recent spike on roads fund spending sufficient to fund maintenance and even rehabilitation

 Rail Network. Operating below potential. One third of the 885-km network out of operation  Institutional Framework. Publicly owned and administered concession failed.  Traffic and Usage. From 1987 to 1996 traffic reduced by two thirds. Stop functioning due to conflict. Rail never resumed to work at full capacity  Tariffs. At 0.16 $/ton-km among the highest of the region (up to 3 times as high as in southern Africa)  Reliability. Very slow service and bad safety condition. Among the worst in Africa in both accounts. Key findings for the rail sector

Benchmarking indicates poor unreliable service and high cost for users RailwayOCBNCAMRAILCFCOCFMKSNCCSETRAGGRCNRC Country Benin- NigerCameroonCongoDRC GabonGhanaNigeria Traffic Density, Freight, 1000 ton-km/km1491, , Performance Staff: 1000 UT per Staff , Coaches: 1000 passenger-km per coach1,0154,7182, , ,684 Cars: 1000 ton-km per wagon , Locomotive Availability in %40nav nav Speed Passenger Traffic (km/h) Fatalities per Km Travelled (%) Pricing Average Unit Tariff, Freight, US cents/ton-km nav Average Unit Tariff, Passenger, US cents/passenger-km nav

 Physical Infrastructure. One of the best natural deepwater ports in SSA in good operational conditions  Institutional Framework. Service port under a 27-year concession with a target to expand port to receive large vessels (up to 6,000 TEU)  Modernization plan: extend container terminal, rehabilitate wharfs and warehouses, drainage and electricity supply networks, construct a timber yard.  Performance. Productivity could be increased by improving custom and logistics procedures (particularly in Pointe Noire) Key findings for the ports sector

Benchmarking underscores port’s good performance and competitive tariffs Port LuandaBomaMatadi Pointe NoirApapaCotonouTema Country AngolaDRC CongoNigeriaBeninGhana Traffic Containers handled (TEU/year) 377,20810,000200,000150,000430,000158,201420,000 General cargo capacity (tons/year) 4,000,000500,0001,700,0005,000,000 2,500,0008,500,000 TARIFFS: handling charge (USD/ton) General cargo Dry bulk 5NA82.8NA53 EFFICIENCY: Container dwell time (days) 12NA Truck processing time (hours) 14NA Crane productivity (containers/hour) NA39 Crane productivity (tons/hour)

 Access. Domestic market is medium size and international market small, with a declining trend in traffic  Service. Seat capacity high for route served  Connectivity. Significant loss of connectivity as measured in city pairs between 2004 and 2007  Safety concerns. recent ICAO audit found Congo well below international standards in safety oversight Key findings for the air transport sector

Benchmarking suggest the market is well served though poor connectivity, safety a source of concern Country AngolaDRCCongoNigeriaBeninGhana Traffic (2007) Domestic Seats 11,990,16327,988443,6339,304,568N/A144,183 Seats for international travel within Africa 484,178468,216351,8821,373,745323,132909,819 Seats for intercontinental travel 588,978193,414117,9622,437,70299,268832,895 Seats available per capita Quality: Percent of seat km in older aircraft Percent of seat km in newer aircraft Percent of seat km in aircraft- unknown age Note: All data based on estimations and computations of scheduled advertised seats, as published by the Seabury Aviation Data Group. This captures 98% of world-wide traffic, but a higher percentage of African traffic is not captured by the data.

Republic of Congo’s ICT network

 Access.  Two-thirds of the population under GSM coverage  Competition in mobile market (3 operators)  Fixed line market is monopolized by the incumbent SOTELCO (la Société des Télécommunications du Congo)  Access is decreasing in fixed lines due to malfunctioning incumbent  Pricing.  Telecom prices are high, particularly for broadband services Key findings for the ICT sector

Benchmarking indicates high coverage, high mobile subscription and high prices Source: Preliminary results AICD 2008 UnitRep. of Congo Resource- Rich GSM coverage% population International bandwidthbps/capita Internetsubscribers/100 people Landlinesubscribers/100 people Mobile phonesubscribers/100 people Rep. of Congo With Submarine Cable Other Developing Regions Price of monthly mobile basket Price of monthly fixed line basketnav16.7nav Price of 20-hour Internet package Price of a 3-min call to US

High international call charges driven both by technology and market power US$Percent cases Call within SSA Call to USA Internet dial-up Internet ADSL Without submarine cable 67% With submarine cable 33%  monopoly on international gateway 16%  competitive international gateway 16%

 Important infrastructure projects  WACS - Project West Africa System Cable  financed and initiated as a partnership of 5 South-African operators (MTN, Neotel, Telkom s.a., Infraco et Vodacom) to connect RoC to the West Africa System  CAB2 -Central African Backbone  The aim of the project is to improve transparency, governance and fair competition  PCN - Project de couverture national  The purpose of the project is to extend access to remote areas and increase affordability  Pricing.  Telecom prices are high, particularly for broadband services Key projects in the ICT sector

 Water.  High proportion of people using piped water sharply contrast with one third of the population using surface water, overall  Coverage by improved water sources in rural areas a huge problem. Two thirds of rural population use surface water  Costs due to utility inefficiencies amount to 150% of the utility turnover, mostly driven by under-pricing  Sanitation.  High reliance in traditional latrines but excellent progress in reducing open defecation Key findings for the water and sanitation sectors

Year 2005RoCResource- RichSSA Access to Water Supply (% pop) Piped water Stand posts Wells/boreholes Surface water Access to Sanitation (% pop) Flush toilets Improved latrines Traditional latrines Open defecation Domestic water consumption (liter/capita/day) per pop. served Performance Revenue collection (%sales) Distribution losses (%prod.) Cost recovery of Tariffs % on costs) US cents per m3 RoC Scarce water resources Other Developing Regions Residential tariff (at 30 m3) – 60.0 Non-residential tariff (at 100m3/mo) Benchmarks indicates relatively high population share still uses poorest water quality while tariffs are set low

Access to piped water skewed to urban areas, while rural relies on surface water

Traditional latrine main source of sanitation across the board

Water utility losses due to inefficiencies more than double revenues, driven by huge under-pricing

Financing Republic of Congo’s Infrastructure

Key findings on infrastructure finance  Spending needs of US$780 mln for infrastructure are skewed towards capital expenditure and transport and power sectors  Burden of 13% of GDP is not as daunting relative to Republic of Congo’s economy  Existing infrastructure spending of US$365 mln mainly on roads and power  Effort on infrastructure spending relatively high  Public financing accounts for a lion share in both O&M and capital funding  Infrastructure financing gap of US$302* mln or 6% of GDP, mainly in power investment * assuming complete fungibility of funds across sectors

Economic targetSocial target ICT Fiber optic links to neighboring capitals and submarine cables Universal access to GSM signal and public broadband facilities Power 1,689 MW new generation 498 MW inter-connectors Electricity coverage of 53% (83% for urban zones) Transport National and regional connectivityGIS Rural Accessibility Index 80% for land with highest agricultural value already in production WSS n.a.MDG for water and sanitation Possible infrastructure targets over next ten years

$ mln/ yearCapitalO&M Total ICT Power Transport WSS 46nav46 Irrigation nav77 Total To meet these targets, Republic of Congo would need to spend US$780 mln per year for next decade

Burden of financing needs not daunting relatively to Congo’s economy

Existing infrastructure spending in addressing needs is already substantial

Existing financing flows to Republic of Congo, (average over period US$ million per year) O&MInvestmentTotal Public ODANon-OECDPPITotal Investment ICT Power Transport WSS Irrigation 710nav 1017 Total Most of the existing spending directed to transport and power

Existing budgetary flows to Republic of Congo, US$ million per year RoadsNon-Roads yearCapex O&M Central Gov O&M Road Fund TotalCapex O&M Central Gov Total Average Road public spending dramatically increased in recent years

Budget expenditures plummeted in 2006 but increased dramatically in recent years, notably in Roads

O&M is predominantly financed by SOEs and the Road Fund in the case of transport, while investments by central government

 Potential gains from inefficiencies amount to $US 113 million per year or 1.9% of GDP  Substantial scope for improving cost recovery in water and improving operational efficiency and budget execution in the power sector  Scope for reallocation of public funds across sectors of 1.7% of GDP  Over manning amounts to $US 20 annually, chiefly in power sector How much more can be done with existing resources? Potential efficiency gains:

Potential efficiency gains: Composition and details ICTPowerTransportWSSIrrigationTotal Over manning nav17nav3 20 Losses nav20nav2 23 Under-collection nav701 7 Under-maintenance nav 0 0 Budget Execution Tariff Cost Recovery nav0517nav22 Total

The funding math US$m paICTPowerTransportWSSIrrigationTotal Needs (84)(482)(160)(46)(7)(780) Spending Potential Efficiency Gains (GAP) or surplus (52)(328)---(302)* * assuming complete fungibility of funds across sectors

Overall financing gap of only US$302 mln or around 6% of GDP, mainly in power investment

Absent any spending increase, efficiency gains can accelerate progress by over 50 years

The funding math using levels of public spending US$m paICTPowerTransportWSSIrrigationTotal Needs (84)(482)(160)(46)(7)(780) Spending Potential Efficiency Gains (GAP) or surplus (60)(342)(71)--(350)* * assuming complete fungibility of funds across sectors

The funding math using levels of public spending US$m paICTPowerTransportWSSIrrigationTotal Needs (84)(482)(160)(46)(7)(780) Spending Potential Efficiency Gains (GAP) or surplus (28)(211)---(33)* * assuming complete fungibility of funds across sectors

Main achievements and challenges AchievementsChallenges Power Rapid expansion of generation capacity Accomplish institutional reform for efficient regional integration and power costs reduction Transport Pointe-Noire concession on track, CFCO concession planned Establishment of second- generation road fund Rehabilitate the national road network Improve rural connectivity ICTGood GSM coverage Reduce the service costs via increased competition, especially when connected to submarine cable Water Reasonably good coverage in urban areas Reform water tariffs to achieve financial viability

Summary Bad news The state of RoC infrastructure is well below the benchmark for other Resource rich countries in SSA. Power and road infrastructures put the major contraints on the economy. Good news The country has the means to rectify the bottlenecs The funding gap that persisted for several years is greatly reduced by recent budget increases

The way forward Sustain the level of recent spending during the next decade Improve sector effectiveness: –Budget execution for roads ($33m pa) –Distibution losses in power ($20m pa) –Over-manning in power ($17m pa) –Increase water tariffs to cost-recovery level ($17m pa). Tackle other sectoral challenges –Finish the rehabilitation of PN-CFCO corridor –Seek better regional integration in transport and power (in the context of CAPP) –Link the strategy of rural infrastructure with the agriculture sector development plan