ANGOLA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

# How much more can be done within the existing resource envelope?

As much as $1.3 billion of additional resources—equivalent to almost 5 percent of Angola’s GDP— could be recovered each year by improving efficiency (table 19). The largest source of inefficiency is low capital budget execution, leaving $573 million allocated to infrastructure unspent each year. Given the magnitude of the road-sector investment program currently under way in Angola, which amounts to an average of $2.9 billion annually, it makes sense that budget execution would be an issue. The second serious source of inefficiency is underrecovery of costs in the power sector, which drains a further $475 million a year. Distribution losses and collection inefficiencies across both the power and water sectors are also substantial, together absorbing $252 million each year.

**Table 19. Angola’s potential gains from greater operational efficiency**

||ICT|Irrigation|Power<br>T|ransport|WSS|Total|
|---|---|---|---|---|---|---|
|Underrecovery of costs|—|n.a.|475|n.a.|16|491|
|Overstaffing|n.a.|—|n.a.|—|n.a.|n.a.|
|Distribution losses|—|—|65|—|57|122|
|Undercollection|—|n.a.|78|n.a.|53|131|
|Low budget execution|78|0|92|401|3|573|
|Total|78|0|709|401|128|1,317|

_Source_ : Derived from Foster and Briceño-Garmendia (2009). _Note:_ WSS = water supply and sanitation; ICT = information and communication technology. — = Not available. n.a. = Not applicable.

Underpricing of power and water in Angola is less burdensome than in other low-income, fragile countries in GDP terms. Nevertheless, it is very high in absolute terms and remains a huge problem for Angola. Both power utilities, ENE and EDEL, charge tariffs of $0.042/kWh, recovering barely a quarter of the full costs of power production estimated at $0.16/kWh. Furthermore, there is a huge subsidy implicit in the bulk-supply tariff at which ENE sells power to EDEL. Overall, the hidden costs due to undercharging in Angola’s power sectors amount to 0.7 percent of GDP. In the water sector, as of 2009, EPAL’s average tariffs stood at $2.3/m<sup>3</sup> versus the estimated $2.7/m<sup>3</sup> average cost-recovery tariff. But given the relatively small reach of the water utility, the macroeconomic burden, at 0.02 percent of GDP, is relatively small (figure 24).

Cost-recovery tariffs for power look to be affordable to a majority of the population. With a tariff of $0.16/kWh and a monthly subsistence consumption of 50 kWh, the associated utility bill comes to $8 per month in Angola. Detailed information on the income distribution of Angolan households was not available. But based on the distribution of household budgets in other Sub-Saharan low-income countries (LICs), one can conclude that monthly power utility bills at these levels would likely be affordable to around 60 percent of the population (figure 25). A more limited level of subsistence power consumption of 25 kWh/month—enough to meet only the most basic needs—would cost $4 per month and would be affordable to 80 percent of the population. Given that only 30 percent of the population has access to electricity, it would appear that Angola has scope to increase electricity coverage at cost-recovery prices before affordability becomes a serious impediment.

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