Infrastructure Challenges and Potential for Africa South of the Sahara

1. Infrastructure Challenges
and Potential for Africa
South of the Sahara
Maximo Torero
m.torero@cgiar.org
IFPRI

2. Key points
 What we know on infrastructure in SSA
 Estimated effects on costs
 Estimated infrastructure gaps
 Why is central for increasing income and
reducing income inequality – example of energy
 Importance of complementarities
 How we move forward Page 2

3. Key points
 What we know on infrastructure in SSA
 Estimated effects on costs
 Estimated infrastructure gaps
 Why is central for increasing income and
reducing income inequality – example of energy
 Importance of complementarities
 How we move forward Page 3

4. Page 4
Infrastructure Coverage is Low
World Low Income SSA
Rural Urb. Total Rural Urb. Total Rural Urb. Total
% Population with electricity 72 97 85 12 59 25 15 72 35
% Population with access to safe
water
82 96 89 55 87 63 52 85 64
% Population with improved
sanitation
46 79 64 22 39 27 23 41 30
Telephone subscriber / 1000
people
160 8 11
Cellular subscribers / 1000 people 931 507 659
Paved roads (% of total) 57 20.6 15.6

5. Page 5
Unequal Access to Infrastructure in Africa
Quintiles
1st 2nd 3rd 4th 5th
Safe water 34% 49% 54% 67% 85%
Network electricity 0% 4% 12% 28% 71%
Transport to school
(% in less than 30mn)
62% 65% 66% 68% 72%
Transport to Health
(% in less than 30mn)
56% 60% 70% 73% 79%
 Very large access disparities across income categories
 Electricity is the most unequal

6. Page 6
Source: http://trendvee.com/africa-at-night-from-space/

7. Page 7
High Transportation costs
Notes: The extent of agriculture includes areas with at least 10 percent irrigated, cultivated or grazing
lands, net of areas with a growing season of zero days.
Source: Nelson (2006) and Sebastian (2007b).

8. Page 8
Access to roads

9. Page 9
Access to roads

10. Page 10
Cellular Phone subscription and Population
0
1
2
3
4
5
6
7
8
Billions
Population Cellular phones
Source: Mobile phone subscriptions are from the International Telecommunication Union (ITU) and country categories are
from the World Bank.

11. Page 11
Ratio of Mobile Phone subscriptions to
Population in Developing Countries, by Region *
* EAP = East Asia and Pacific; ECA = Europe and Central Asia; LAC = Latin America and the Caribbean; MENA= Middle East and North Africa; SA = South Asia; and SSA =
Sub-Saharan Africa. High-Income (OECD and non-OECD) are excluded from the sample.
Source: Mobile phone subscriptions are from the International Telecommunication Union (ITU) and country categories are from the WorldBank.
Source: Nakasone, Torero and Minten (2013). “The Power of Information: The ICT Revolution in Agricultural Development”.
IFPRI.
0
0.2
0.4
0.6
0.8
1
1.2
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
SA
OECD
SSA
LAC
ECA
MENA
EAP

12. Page 12
% Urban % Rural % All
Bolivia (2007) a/. 77.6% 18.7% 57.0%
Brazil (2009) a/. 83.3% 53.2% 78.8%
Colombia (2010) a/. 90.2% 71.7% 86.0%
Ecuador (2010) a/. 82.9% 59.7% 75.5%
Mexico (2007) a/. 66.6% 45.0% 55.2%
Peru (2010) a/. 82.2% 47.1% 70.4%
India (2011) b/. 76.0% 51.2% 59.2%
Bangladesh (2010) c/. 82.7% 56.8% 63.7%
Tanzania (2010) d/. 77.5% 34.2% 45.4%
Kenya (2010) e/. 71.9% 55.0% 59.8%
South Africa (2008 / 09) f/. 87.5% 82.0% 85.7%
Liberia (2009) g/. 69.0% 20.7% 43.2%
Malawi (2010) h/. 72.7% 32.3% 39.0%
Ghana (2010) i/. 63.4% 29.6% 47.7%
Nigeria (2009) j/. 88.3% 60.3% 70.6%
Egypt (2008) k/. 54.1% 27.8% 40.5%
Ehtiopia (2011) l/. 65.2% 12.8% 24.7%
Uganda (2011) m/. 86.8% 53.1% 59.4%
Senegal (2011) n/. 95.4% 81.7% 88.4%
Mozambique (2011) o/. 66.8% 20.0% 34.1%
Nepal (2011) p/. 91.6% 71.9% 74.7%
Zimbabwe (2011) q/. 90.1% 48.0% 62.2%
Rwanda (2010) r/. 71.8% 35.1% 40.3%
Cambodia (2010) s/. 90.1% 56.2% 61.9%
China (2010) t/. 76.3% 60.7% 67.9%
Percentage of Households that Own a Mobile Phone,
by Residence Area
Source: Nakasone,
Torero and Minten
(2013). “The Power of
Information: The ICT
Revolution in
Agricultural
Development”. IFPRI.

13. Ratio Land Lines to Population
Page 14Source: Nakasone, Torero and Minten (2013). “The Power of Information: The ICT Revolution in Agricultural Development”.
IFPRI.
0
0.05
0.1
0.15
0.2
0.25 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
SA
SSA
LAC
ECA
MENA
EAP

14. Ratio of Broadband Subscriptions to
Population
Page 15Source: Nakasone, Torero and Minten (2013). “The Power of Information: The ICT Revolution in Agricultural Development”.
IFPRI.
0
0.02
0.04
0.06
0.08
0.1
0.12
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
SA
SSA
LAC
ECA
MENA
EAP

16. On Irrigation
Source FAO : Latest data for 2012.
Page 17
Sub-
Saharan
Africa
South
Asia
All
Developing
Countries
Middle
Income
High
Income World
Agricultural land (as % of
land Area) 50% 55% 40% 46% 34% 39%
Irrigated land (as % of
cropland) 3% 46% 23% 28% 14% 21%

17. Page 18
On Ports
 Location constraint for the sustainability of certain ports
 Port capacity usually results from inadequate maintenance
 Impact of port efficiency on port productivity and costs (dwell
time may vary between a reported average of 7 days in
Abidjan and 17 days in Douala)
 Importance of a legal setting: the institutional framework of a
port in WCA has depended primarily on its inheritance of
either the French or the British models.
 Cumbersome procedures and poor links to the hinterland
reduce port efficiency
 In addition, there are the traditional “non-infrastructure” and
“non-official” barriers

18. Key points
 What we know on infrastructure in SSA
 Estimated effects on costs
 Estimated infrastructure gaps
 Why is central for increasing income and
reducing income inequality – example of energy
 Importance of complementarities
 How we move forward Page 19

19. Africa’s infrastructure services several times
more expensive than elsewhere

20. International comparison of the costs of a basic plan of mobile telephony
(prepaid) in 2009 US $ PPP
Source: Hernan Galperin, Broadband Prices in Latin America and the Caribbean, Working Paper #15 (Buenos Aires, Argentina: Universidad de San Andrés, 2013).
Notes: PPP = purchasing power parity. Prices include taxes. Equipment and connection costs are not included. The low-volume basket includes 30 outgoing calls and 33 SMSs per month. The following structure of calls is
assumed: local to fixed phones (15%), national (7%), mobile in-network (48%), mobile out-of-network (22%), and voice mail (8%). The estimations assume that 48% of calls take place during peak times, 25% in off-peak
times, and 27% during the weekends. The following duration of calls is assumed (in minutes): 1.5 for local and national, 1.6 for mobile on-net, 1.4 for mobile off-net, and 0.8 for voice box. The tariffs are prorated
according to the market shares of each operating company.

21. Disposable income for telecommunications in Brazil (5% of income) per
income decile
Source: H. Galperin, Tarifas y Brecha de Asequibilidad de los Servicios de Telefonía Móvil en América Latina y el Caribe (Lima, Peru: Diálogo Regional sobre
Sociedad de la Información, 2009), 22.
Note: R$ = Brazilian real.

22. Key points
 What we know on infrastructure in SSA
 Estimated effects on costs
 Estimated infrastructure gaps
 Why is central for increasing income and
reducing income inequality – example of energy
 Importance of complementarities
 How we move forward Page 23

23. 100%
80%
60%
40%
20%
Efficiency gap $17
Existing spending $45
0%
Spending needs $93
All figures in US$ billion a year
Infrastructure will require an additional US$31
billion a year and huge efficiency gains

24. 100%
80%
60%
40%
20%
Efficiency gap $17
Existing spending $45
0%
Spending needs $93
All figures in US$ billion a year

25. 100%
80%
60%
40%
20%
Efficiency gap $17
Improving operational
efficiency $7.5
Existing spending $45
0%
Spending needs $93
All figures in US$ billion a year

26. 100%
80%
60%
40%
20%
Efficiency gap $17
Increasing
cost recovery $4.7Improving operational
efficiency $7.5
Existing spending $45
0%
Spending needs $93
All figures in US$ billion a year

27. 100%
80%
60%
40%
20%
Efficiency gap $17
Increasing
cost recovery $4.7Improving operational
efficiency $7.5
Prioritizing
public spending $3.3
Existing spending $45
0%
Spending needs $93
All figures in US$ billion a year

28. 100%
80%
60%
40%
20%
Efficiency gap $17
Increasing
cost recovery $4.7Improving operational
efficiency $7.5
Spending budgeted
resources $1.9
Prioritizing
public spending $3.3
Existing spending $45
0%
Spending needs $93
All figures in US$ billion a year

29. 100%
80%
60%
40%
20%
Funding gap $31
Efficiency gap $17
Increasing
cost recovery $4.7Improving operational
efficiency $7.5
Spending budgeted
resources $1.9
Prioritizing
public spending $3.3
Existing spending $45
0%
Spending needs $93
All figures in US$ billion a year

30. Key points
 What we know on infrastructure in SSA
 Estimated effects on costs
 Estimated infrastructure gaps
 Why is central for increasing income and
reducing income inequality – example of energy
 Importance of complementarities
 How we move forward Page 31

31. Impact path ways of rural electrification

32. El Salvador – Measuring Reduction of Indoor
Pollution
Cuelgue el cable de un
clavo o protuberancia en la
pared, columna, o techo
(marco de foto)
detector
1 metro
más de 1.50 metros de la
ventana o puertas operables
1.50 metros de
altura

33. Page 34
How does infrastructure affect
welfare?
Change in the
proportion of time
for activity “i”
Change in the total
number of hours
worked by the
household
Interaction
effect
Δ𝑌𝑖 ≈ 𝐿
𝑗
Δ𝑆𝑙𝑖𝑗
𝑦𝑖𝑗
𝑙𝑖𝑗
+ Δ𝐿
𝑗
𝑆𝑙𝑖𝑗
𝑦𝑖𝑗
𝑙𝑖𝑗
+ 𝐿
𝑗
𝑆𝑙𝑖𝑗Δ
𝑦𝑖𝑗
𝑙𝑖𝑗
+ Δ𝐿
𝑗
Δ𝑆𝑙𝑖𝑗
𝑦𝑖𝑗
𝑙𝑖𝑗
Change in
returns to labor

34. Expected Results of Rural Electrification
Term Theme Indicator Expected Impact Gender heterogeneity
Immediate
Coverage and
Access
 Percentage of households connected to the grid Positive No differentiated effect
 Cost of electricity Negative No differentiated effect
 Reliability of electric services Positive No differentiated effect
Short term
Coping costs
 Number of sources used Negative No differentiated effect
 Consumption of electricity Positive No differentiated effect
 Energy input collection time use Negative Larger effect for females
 Coping expenses in other energy sources Negative No differentiated effect
Health
 Indoor pollution Negative No differentiated effect
 Incidence of acute respiratory disease among
vulnerable groups Negative No differentiated effect
Education,
Leisure, and
Information
 Hours in education or studying in the home Positive No differentiated effect
 Hours spent in childcare No change No differentiated effect
 Hours spent in entertainment and other leisure
activities Positive Larger effect for females
Productivity
 Total hours of work Positive Larger effect for females
 Percentage of hours of agricultural Negative Larger effect for females
 Percentage of hours of non-agricultural work Positive Larger effect for females
 In home business productivity/revenue Positive Larger effect for females
Long term Economic Growth
 Change in total income and expenditure Positive Larger effect for females
 Percentage of poor households Negative Larger effect for females

35. Results of Rural Electrification
Term Theme Ethiopia El Salvador
Immediate
Coverage and
Access
15% points more likely to connect 11% to 19% more likely to connect
Spillover effects: 2% from baseline
of 41% connection rate
25% of the effect of the voucher
Short term
Coping costs
Changes in use of kerosene for
lighting
Changes in use of kerosene for
lighting
No changes in cooking practices No changes in cooking practices
Health
N.A
65% reduction in overnight air
pollutants
N.A
Reduction of 37-44% on acute
respiratory infections incidence
among children < 6
Education,
Leisure, and
Information
No effect Increase hours of studying in 7%
No effect More appliance ownership
No effect
Leisure reduced in average by 0.7
hours per day
Productivity No changes
Non agricultural independent
activities increased by 13%
Long term
Economic
Growth
N.A
Annual per capita income increased
in $ 186 (34% of baseline income)
N.A Positive distributional effects

36. Key points
 What we know on infrastructure in SSA
 Estimated effects on costs
 Estimated infrastructure gaps
 Why is central for increasing income and
reducing income inequality – example of energy
 Importance of complementarities
 How we move forward Page 37

37. Page 38
Complementarities of infrastructure
Peru, 2002
Pipeline water
0%
10%
20%
30%
40%
50%
60%
%changeofPCHHIncome
Water +
electricity
Water + elect +
phone
Water + elect +
phone + road
Source: Escobal and Torero, 2004.
 Infrastructure
does seem to
have an impact
on household’s
welfare
 There exists
complementariti
es in the
provision of
different types
of infrastructure
Bangladesh, 2000-2004
Electricity
0%
10%
20%
30%
40%
50%
60%
%changeofPCHHExp
Elec + phone Elec + road Elec + road +
phone
Source: Chowdhury and Torero, 2006

38. Page 39
How does infrastructure affect welfare?
PERU, 2002
PSM (kernel); control group: HH with no assets
A) Households work more hours B) Households increase non-agricultural hours
of work
2 infrastruct 3+ infrastruct1 infrastruct
0
0.5
1
1.5
2
2.5
3
3.5
4
additionalweeklyhoursofwork
-25
-20
-15
-10
-5
0
5
10
15
%changeintimeallocation
Ag salaried Non-ag salaried
Ag self-empl Non-ag self empl
1 infrastr
2 infrastr
3+ infrastr
Source: Escobal and Torero, 2004.

39. Page 40
Infrastructure seems to have different
impacts on men and women
Bangladesh, 2004: ATT effects of infrastructure among men and women
(PSM among men and women)
ATT
Treatment: 1 infrastructure
Control: No infrastructure
0
2
4
6
8
10
12
14
16
-0.1 0 0.1 0.2 0.3 0.4
density
Male
Female
Diff =
0.02
Treatment: 2 infrastructures
Control: No infrastructure
0
2
4
6
8
10
12
14
16
-0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5
ATT
density
Male
Female
Diff =
0.04
Treatment: 3 infrastructures
Control: No infrastructure
-1
0
1
2
3
4
5
6
-0.4 -0.2 0 0.2 0.4 0.6 0.8
ATT
density
Male
Female
Diff =
-0.08
Treatment: More than one infrastructure
Control: No infrastructure
0
5
10
15
20
-0.2 -0.1 0 0.1 0.2 0.3 0.4
ATT
density
Male
Female
Diff =
0.02

40. Key points
 What we know on infrastructure in SSA
 Estimated effects on costs
 Estimated infrastructure gaps
 Why is central for increasing income and
reducing income inequality – example of energy
 Importance of complementarities
 How we move forward Page 41

41. Page 42
1. Regional coordination to boost supply
capacities- corridor concept
 Africa’s economic geography is a serious
challenge infrastructure is inherently
regional
• 20+ countries with populations of <5
million
• 20+ countries with economies of <US$5
billion
• 60 international river basins
• 15 landlocked countries

42. Page 43

43. Page 44
2. Prioritization
 Need of evaluation and prioritization based on
ERR and PRR (result of wealth creation)
 Prioritized infrastructure corridors with Economic
development corridors (potentially use a typology
of development domains).
 Need to learn from existing information by
systematizing it and developing concrete plans to
implement it.

44. Page 45
Modeling Isoprofits

45. Page 46
A
B
Modeling Isoprofits
Graphic representation of a stochastic production
frontier in the single-output, single-input case

46. Page 47
A
B
Modeling
Isoprofits
Agricultural
typology areas
Mozambique

47. http://amazinglytimedphotos.com/soldier-yawning/#.U7Zny7HfpD8
We need to be out of synchrony

48. 3. Financing
 Multilaterals HAVE to play a crucial role
but they need to think regionally – Need to
change their way of operation
 Public – Private partnership for
infrastructure development
 Innovations to broaden and deepen
markets including niche and preferential
markets

49. 4. Complementarities
 Significant evidence of importance of
complementarities
 Need to think on a value chain approach
 Need to learn from experience with compacts
on infrastructure
• In Africa roads and electricity are
extremely costly for users
• One of the major restrictions to trade
underachievement is infrastructure

50. 5. On regulation
 Recommend regulatory changes to enable the
market to work better
 increased competition
 open to new technologies
 open to new business models
 Outline an approach to subsidies to extend services
beyond the market
 using market forces
 minimal regulation

51. Page 52
5. On regulation (cont)
 Distinguish two types of service shortfalls:
 market efficiency gap
 real access gap
 For the market efficiency gap:
 identify current regulatory problems and issues that
regulatory agency can address (example EU remedies for
regulation)
 examine new technologies that could help to reduce costs
 For the real access gap:
 draw on best practices developed in rural areas
 complement and extend these for application in rural and
peri-urban areas.

52. 6. Governance and Accountability
 Resources are needed from ODA, private
sector, and governments, but nothing will
work if the appropriate governance and
accountability is not in place
 First is the need to reduce corruption and
allow incentives for proper work.
 Second, monitoring systems and institutional
designs for basic accounting and regulation
are all needed

53. Page 54

54. Page 55

55. Page 56
INVESTMENT HOURS HOURS NET GAIN
GAIN LOST
MALI 20,560,940 2.1 6.50 -4.40
BURKINA DE FASO 20,560,940 2.1 3.60 -1.50
GHANA 20,744,700 1.9 3.60 -1.70
TOGO 22,256,140 2.6 3.00 -0.40
Source: USAID: Report on the First Results of the improved road
transport Governance (IRTG) initiative on interstate highways

57. 7. Leapfrogging
 Not need to repeat what happen in the past
and what was done in developed countries –
clear example is the cellular industry
 Use best technologies
 Use green infrastructure – this could be an
advantage in SSA

58. Page 59
Thanks!