comparatively less strong than would be expected, though more in-depth analysis of comparative performance of transport may be warranted to develop a more nuanced picture, especially across different modes of transport. The main policy implication is 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. In a separate paper, we provide panel-data based estimates of South Africa’s investment needs in electricity and telecommunications sectors (Bogetić and Fedderke 2006).

More specifically, compared to the benchmark and other country groupings, South Africa’s utilities provide solid service at reasonable quality and, in some cases, very competitive prices. But there remain significant shortfalls relative to benchmarks in all infrastructure sectors, largely related to limited access and less than expected quality, especially in rural areas, where large numbers of South Africa’s poor live with limited or no access to service. To _catch up_ with its income group in terms of these indicators, South Africa will need to improve access to and quality of electricity, and water and sanitation services in presently unserved areas. Indicators of transport performance, while less definitive, potentially also point in the same direction. Even in telecom, the most globalized and “modern” infrastructure sector, access in rural areas can be improved and pricing of local services remains uncompetitive. Moreover, to put it simply, if South Africa is to strengthen its overall infrastructure performance, it will need to improve these dimensions’ performance in the sectors _faster_ than the average country in the upper middle-income group while maintaining or improving its position in the already strong areas of performance. This will not be easy in competition within a group of countries all aspiring to move to much higher levels of income and with ambitious poverty reduction targets. But catching up with these _relative_ shortfalls may also help South Africa reduce its economic inequities and poverty rates and, therefore, meet the infrastructure related Millennium Development Goals (MDGs). It could also help address some of the concerns about South Africa’s external and industrial competitiveness and service delivery that in good part depends on the efficiency and capacity of network utilities to deliver basic services to population and businesses alike.

# **References**

Aschauer, David.A. (1989). “Is public expenditure productive?” _Journal of Monetary Economics_ , 23:177-200.

Bogetić, Željko and Johannes W. Fedderke (2006). “Forecasting Investment Needs in South Africa’s Electricity and Telecommunications Sectors,” World Bank Policy Research Paper Series (January), forthcoming.

Bogetić, Željko and Johannes W. Fedderke (2005). “Infrastructure and Growth in South Africa: Benchmarking, Productivity and Investment Needs,” paper presented at the bi-annual conference of the Economic Society of South Africa (ESSA), Durban, September 7-9, 2005.

Easterly, W. and Servén, L. (2002). _The Limits of Stabilization: Infrastructure, Public Deficits and Growth in Latin America_ , Stanford University Press and the World Bank.

Esfahni, H.S., and Ramirez, M.T., 2003, Institutions, infrastructure and economic growth, _Journal of Development Economics_ , 70, 443-477.

18