Transcript International Benchmarking of Infrastructure Performance

International Benchmarking of
South Africa’s Infrastructure
Performance
Zeljko Bogetic &
Johann Fedderke
Infrastructure and Growth Workshop
Economic Research South Africa
May 29-31, 2006
Cape Town, South Africa
Outline

Why Benchmark Infrastructure Performance?

Infrastructure Benchmarking Database (Estache et al., WB
2005)

First Benchmarking Applications: South Africa (Bogetic &
Fedderke 2005, 2006a), Lesotho (Bogetic 2006), SACU (Bogetic
2006)
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o
o
o
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Energy
Telecom
Water and Sanitation
Transport
Large Deviations from the Benchmarks
The Rural-Urban Divide

Conclusion and Policy Implications

Possible Extensions
Why Benchmark Infrastructure
Performance?
 Strong Association
Between
Infrastructure and real output (as well
as child health, human capital
accumulation and MGDs)
 Evidence from South Africa
 Decline in Inf. Invest. in South Africa
 The Quest for Accelerated and Shared
Growth in South Africa—ASGI-SA
 The Need to Identify Sectoral and
Comparative Gaps in Infrastructure
Performance
International Evidence:
Infrastructure and Growth
Figure 1: Inrastructure Accumulation and Growth
G
(1960-97 country averages, percent)
6%
4%
2%
0%
Others
-2%
lac
y = 0.4224x + 0.0007
R
2
eap7
= 0.3487
-4%
-2%
0%
2%
4%
Growth in infrastructure stocks per worker
6%
8%
10%
12%
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)
DECLINE IN INFRASTRUCTURE
INVESTMENTS IN SOUTH AFRICA
Index (1960 = 100) (all values per capita)
Real GDP and public-sector economic infrastructural investment
(gross) and fixed capital stock (indices, all measured per capita)
260
220
180
140
100
60
1960
1970
Infrastructural investment
1980
1990
Infrastructural fixed capital stock
2000
GDP
The Quest for Accelerated and
Shared Growth



Accelerated and Shared Growth Strategy (ASGISA)
Scaling up infrastructure—key element of ASGISA
Massive scale up plans underway


R372-billion (about US$60 billion, or 24% of 2005 dollar GDP) spending
plan over the next three years (from the central and local governments
and state enterprises combined).
Of which:
• 50% by the central, provincial and local governments
• 40% by state enterprises (ESKOM, Transnet, 2010 World Cup)
• 3-5% by development financial institutions (largely domestic, state owned)
• 5% is to be financed by Public Private Partnerships (PPP).

South African economy accelerated to robust 5% growth in 2005,
from the 3% average of the past decade

=> Question of infrastructure requirements of accelerated growth
(Bogetic & Fedderke 2006 “Forecasting Investment Needs in SA’s
Electricity and Telecommunications Sectors” WB WPS 3929
(February)
Infrastructure Benchmarking Database

International research database (Eustache & Goicoehea, World
Bank, 2005)

Coverage: 207 countries

Sectors: Power, Water & Sanitation, Telecom, Transport

Performance dimensions: Access, Pricing/Affordability,
Technical and Perceived Quality

Indicators: Energy (7), W & S (4), Telecom (14), Transport (12);
some indicators available for rural and urban areas.

Comparators: Upper Middle-Income Group (Main benchmark
for South Africa), other income groups, OECD, Sub-Saharan
Africa, Latin America & the Caribbean, South Asia, East Asia &
Pacific, Middle East & North Africa
BENCHMARKING
SOUTH AFRICA
Benchmarking South Africa - Energy

Energy: Compared to the upper-middle income country benchmark—despite
major, recent gains, relatively weak performance in access, but favorable in
terms of technical efficiency (i.e., percentage of losses), pricing, and
perceptions of service.
Access to Electricity Network
(% of population)
100
87
85
80
66
60
60
40
20
15
0
South Africa
Upper Middle Income
SSA
Middle Income
World
Electric Power Transmission and Distribution
Losses (% of total output)
20
19
15
15
14
14
10
8
6
5
0
South Africa
Upper Middle
Income
SSA
Middle Income
High Income OECD
World
Benchmarking South Africa – Water and
Sanitation

Access to water and, especially, sanitation lags behind its
benchmark upper middle-income group, essentially because of the
much lower access in rural areas. Notable in rural sanitation.
Access to Improved Water Sources
(% of population)
110
99
100
93
90
89
87
80
80
70
64
60
50
South Africa
Upper Middle
Income
SSA
Middle Income
High Income OECD
World
Households Using Piped or Well Water as
Main Sources of Drinking Water
(% of households)
90
85
85
81
80
80
79
78
75
70
South Africa
Upper Middle Income
SSA
Middle Income
World
Benchmarking South Africa – ICT
Overall access seems good, but other indicators suggest less than
expected quality and major gaps in service delivery, quality and even
access in rural areas.
Benchmarking South Africa – ICT
Teledensity (total telephone subscribers/1000 people)
1600
1393
1200
800
635
468
501
408
400
99
0
South Africa
Upper Middle
SSA
Middle IncomeHigh Income OECD
World
Phone Faults
(reported faults/100 mainlines)
60
57
48
40
37
25
20
18
11
0
South Africa
Upper Middle
Income
SSA
Middle Income
High Income OECD
World
Benchmarking South Africa – Transport
Overall performance behind comparators. Caution: (1) idiosyncratic territorial
distribution of population and economic activity and (2) peculiarities in the type of
road network that is appropriate for a country with semi-arid climate, and (3) with a
large proportion of its land surface carrying low population densities.
Benchmarking South Africa - Transport

Road density in terms of population (road km/1000 pop)
17.3
9.2
7
6.1
6.7
3.3
South Africa
Upper Middle
SSA
Middle Income High Income OECD
World
Paved Roads
(% of total roads)
100
82
80
57
60
52
50
40
25
21
20
0
South Africa
Upper Middle
Income
SSA
Middle Income
High Income OECD
World
South Africa - Large Deviations from the
Benchmarks—Areas of
Underperformance

In electricity, Access major issue, despite gains in recent years, while
technical efficiency for the served population is relatively high.

In sanitation, Access major issue, especially in rural areas. Quality
indicators also indicate relative shortfalls. Water also, but less dramatic
than in sanitation.

In information and communications technology, pricing of
services catering the wealthier segments of the population and the large,
internationally oriented enterprise sector—cellular calls and some
international calls (to the U.S., for example)—reflect generally good and
competitively provided services, but problems in teledensity, broad band
access, internet access in schools, and low efficiency of the postal
system.

In transport--road and rail--worse performance than the benchmark
upper middle-income countries; caveats.
South Africa - Large Deviations from the
Benchmarks
The rural-urban divide: Urban Bias

In electricity, access in urban areas is lower (84%) than in
upper middle-income countries (90%), while in rural (37%)
areas access is above the benchmark (30%).

In access to improved water, however, rural areas of South
Africa (73%) lag significantly behind their upper middle-income
benchmark (85%).

In access to improved sanitation, in rural areas of South
Africa (44%) lag significantly behind their upper middle-income
benchmark (76%).

Telephone ownership is South Africa appears to be better in
both rural and rural areas than in the upper middle-income
countries. Caution: other aggregate indicators of telecom
service performance (especially in local services) suggest
considerable scope for improvement
South Africa - conclusion

Access remains a major issue in sanitation, electricity (despite recent gains)
and, water (particularly in rural areas), and so does performance in local
telecom services.

Even transport performance appears comparatively less strong than would be
expected, though more in-depth analysis of comparative performance of
transport may be warranted

Policy implications:



That there remain significant needs to scale up infrastructure investments––
especially in the yet unserved areas––and improve efficiency in all four major
infrastructure sectors if South Africa’s infrastructure performance is to catch up with
its group of upper middle-income countries.
Areas of significant shortfalls below benchmarks should be scrutinized by
policymakers for possible targeting in the ongoing scaling up and efficiency
strengthening efforts in the context of ASGI-SA
A similar exercise for SACU countries (Bogetic 2006b) provides some guide on the
regional opportunities for infrastructure cooperation and scaling up of infrastructure
beyond South Africa’s borders
Possible Extensions
Using benchmarking as an element in broader analyses of
sector performance (e.g., electricity sector review for
South Africa)
Extending the exercises to other countries in Africa (e.g.,
Lesotho, individual SACU country exercises (completed)
Use of benchmarking in regional analyses (e.g., SACU
(completed), SADC)
Combining the benchmarking of indicators of performance
with reform indicators