metadata: authors: 0: author: Briceno-Garmendia,Cecilia M.
1: author: Pushak,Nataliya
count: Botswana
docna: 0: docna: Botswana's infrastructure : a
            continental perspective
docty: Policy Research Working Paper
subtopic: Sanitation and Sewerage,Engineering,Airports and Air Services,Water and Human Health,Hydrology,Water Supply and Sanitation Economics,Sanitary Environmental Engineering,Small Private Water Supply Providers,Environmental Engineering,Health and Sanitation,Transport Services,Intelligent Transport Systems,Town Water Supply and Sanitation
teratopic: Transport,Infrastructure Economics and Finance,Water Supply and Sanitation,Energy
abstracts: cdata!: Infrastructure made a net contribution
            of just over two percentage points to Botswana's
            improved per capita growth performance in recent years.
            Raising the countrys infrastructure endowment to that of
            the region's middle-income countries could boost annual
            growth by about 1.2 percentage points. Botswana has made
            significant infrastructure progress in recent years,
            spanning the transport, water and sanitation, power, and
            mobile telephony sectors. But the country still faces a
            number of important infrastructure challenges. The most
            pressing is in the power sector, where the country is
            economically and financially exposed to a lack of generation
            capacity and insufficient power supply, leaving the economy
            vulnerable to power price shocks and load shedding.
            Botswana's international transport connections and
            Internet connectivity also lag behind those of comparable
            countries. Botswana's overall resource envelope of $800
            million per year surpasses its $785 million needs estimate.
            Nevertheless, it loses $68 million a year to inefficiencies
            and faces a funding gap of $305 million per year, entirely
            in the power sector, traceable to the quality of spending
            decisions. Botswana will be in a good position to meet its
            infrastructure goals if it can reduce inefficiencies,
            increase public-sector receipts, and attract more public funding.
geo_reg_key: 517195,517191
repnme: repnme: Botswana's infrastructure : a
            continental perspective
display_title: Botswana's infrastructure : a
            continental perspective
listing_relative_url: /research/2011/11/15497722/botswanas-infrastructure-continental-perspective
topicv3: Air Transport m1326010 165,Sanitation m1326453 2000,Water m1326522 137,Transport m1326661 135,Traffic Management m1583399 4231
publishtoextweb_dt: 2011-11-01T00:00:00Z
historic_topic: Transport,Infrastructure Economics and Finance,Water Supply and Sanitation,Energy
no_of_pages: 48
author_keys: 0: author_key: 420925
1: author_key: 757742
model_extractions: WPS5887 Policy Research Working Paper 5887 Botswana’s Infrastructure A Continental Perspective _Cecilia Briceño-Garmendia Nataliya Pushak_ The World Bank Africa Region Sustainable Development Unit November 2011
Policy Research Working Paper 5887

# **Abstract**

Infrastructure made a net contribution of just over two percentage points to Botswana’s improved per capita growth performance in recent years. Raising the country’s infrastructure endowment to that of the region’s middleincome countries could boost annual growth by about 1.2 percentage points.

Botswana has made significant infrastructure progress in recent years, spanning the transport, water and sanitation, power, and mobile telephony sectors. But the country still faces a number of important infrastructure challenges. The most pressing is in the power sector, where the country is economically and financially exposed to a lack of generation capacity and insufficient power supply, leaving the economy vulnerable to power price shocks and load shedding. Botswana’s international transport connections and Internet connectivity also lag behind those of comparable countries.

Botswana’s overall resource envelope of $800 million per year surpasses its $785 million needs estimate. Nevertheless, it loses $68 million a year to inefficiencies and faces a funding gap of $305 million per year, entirely in the power sector, traceable to the quality of spending decisions. Botswana will be in a good position to meet its infrastructure goals if it can reduce inefficiencies, increase public-sector receipts, and attract more public funding.

This paper is a product of the Sustainable Development Unit, the Africa Region. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The author may be contacted at cbricenogarmendi@worldbank.org.

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent._ Produced by the Research Support Team
# Botswana’s Infrastructure: A Continental Perspective

**_Cecilia Briceño-Garmendia and Nataliya Pushak_**
# **Acknowledgments**

This paper draws on contributions from sector specialists from the Africa Infrastructure Country Diagnostic Team; notably Dick Bullock on railways, Mike Mundy on ports, Heinrich Bofinger on air transport, Maria Shkaratan on power, Carolina Dominguez on water and sanitation, Michael Minges and Rebecca Meyer on information and communication technologies, Alberto Nogales on roads, Nataliya Pushak on public expenditure, and Alvaro Federico Barra on spatial analysis.

The paper is based on data collected by local consultants and benefited greatly from feedback provided by colleagues in the relevant World Bank country teams; notably Ruth Kagia (country director), Juan Gaviria (sector leader), Thomas Buckley (country management team) Alex McPhail (water and sanitation), Varadarajan Atur (power), Supee Teravaninthorn, Pierre Pozzo di Borgo (roads and railways), Mark Williams (ICT), Zeinab Partow (macro), Sarwat Hussain and Mmenyane Seoposengwe (media and communications), and Nelson Mokgethi, Adam Vickers, and Afua Sarkodie (local consultants). Jemima Harlley provided invaluable administrative and logistic support.

Preliminary results and emerging messages of this paper were discussed in a workshop in Gaborone in November 2009. The team is grateful for the insightful comments and recommendations of the workshop’s participants.
# Contents

|**Contents**|**iii**|
|---|---|
|**List of figures**|**iii**|
|**List of tables**|**iv**|
|**Synopsis**|**1**|
|**The continental perspective**|**2**|
|**Why infrastructure matters**|**3**|
|**The state of Botswana’s infrastructure**|**5**|
|Transport|9|
|Roads|10|
|Rail|13|
|Air transport|15|
|Water resources|17|
|Irrigation|18|
|Water supply and sanitation|19|
|Power|23|
|Information and communication technologies|27|
|**Financing Botswana’s infrastructure**|**30**|
|Efficiency gap|34|
|Funding gap|35|
|**Bibliography and references**|**37**|
|General|37|
|Financing|37|
|Growth|37|
|Information and communication technologies|38|
|Irrigation|38|
|Power|38|
|Transport|39|
|Water supply and sanitation|39|
|Other|40|

# List of figures

Figure 1. Botswana’s economy is set for recovery 3 Figure 2. Until 2007, infrastructure’s contribution to growth high, even as power holds back the economy 4 Figure 3. Botswana’s population, income, and mineral resources are concentrated in the east 7 Figure 4. Botswana’s infrastructure networks align with population density 8 Figure 5. Trading across borders is costly for Botswana 10 Figure 6. Botswana’s share of roads in good condition is among the highest in southern Africa 11 Figure 7. Botswana’s spending is commensurate with maintenance and rehabilitation needs 12 Figure 8. Freight carried by rail has a comparatively low unit cost in Botswana 15 Figure 9. Evolution of seats and city pairs in Botswana 17 Figure 10. Botswana’s irrigation sector: Current vs. potential cultivated area 18 Figure 11. Hidden costs 22 iii
|Figure 12. Hidden costs|26|
|---|---|
|Figure 13. Hidden costs|27|
|Figure 14. Botswana’s Internet market benchmarked against its southern African peers|30|
|Figure 15. Botswana’s infrastructure spending needs are among the lowest in the region, relative to GDP|32|
|Figure 16. Botswana’s existing infrastructure spending level is adequate|33|
|Figure 17. Botswana’s pattern of capital investment in infrastructure differs from that of comparator countries|34|
|Figure 18. Many African countries capture more private investment than Botswana|34|

# List of tables

|Table 1. Achievements and challenges in Botswana’s infrastructure sectors|6|
|---|---|
|Table 2. Botswana’s road indicators benchmarked against Africa’s low- and middle-income countries|11|
|Table 3. Botswana’s governmental investments in roads|12|
|Table 4. Railway indicators for Botswana and select other countries, 2000–05|14|
|Table 5. Benchmarking air transport indicators for Botswana and select other countries|16|
|Table 6. Botswana’s irrigation potential|19|
|Table 7. Benchmarking water and sanitation indicators|20|
|Table 8. Evolution of operational indicators associated with the Botswana Water Utility Corporation|22|
|Table 9. Benchmarking power indicators|24|
|Table 10. Performance of the electricity sector in select African countries|25|
|Table 11. Evolution of hidden costs associated with the Botswana Power Corporation (BPC)|25|
|Table 12. Benchmarking ICT indicators|28|
|Table 13. Illustrative investment targets for infrastructure in Botswana|31|
|Table 14. Indicative infrastructure spending needs in Botswana, 2006–15|31|
|Table 15. Financial flows to Botswana’s infrastructure, average 2001 to 2007|33|
|Table 16. Botswana’s historical losses due to operational efficiency (as of 2008)|35|

iv
# Synopsis

Infrastructure made a net contribution of just over 2 percentage points to Botswana’s improved per capita growth performance in recent years. But there is still room for improving quantity and quality of infrastructure, as the recent investments in power demonstrate. Raising the country’s infrastructure endowment to that of the region’s infrastructure leader Mauritius could boost annual growth by another 1.2 percentage points.

Botswana made significant progress toward improving its infrastructure in recent years. Botswana has posted a strong investment record in the road and water and sanitation sectors, and has successfully increased rural access to power. The country’s power and water utility post some of the highest levels of operational efficiency to be found in Africa. Botswana has also made strides in expanding mobile telephony, with the number of cellular subscriptions exceeding the number of inhabitants for the first time in 2010.

At present, the country still faces a number of important challenges. Perhaps the most evident one is the timely completion of the critical 600 MW Morupule power generation project, which will restore supply-demand balance in the country following the 2008 power supply crisis. Other challenges include implementing the ambitious institutional reforms in the water sector, and balancing investment and maintenance spending in the transport sector.

With respect to regional integration, Botswana is doing well in maintaining its segments of international road corridors to at least a basic level. While the country has not yet achieved full regional connectivity of road, rail and networks, it had made substantial progress in connecting to the continent’s western and eastern submarine cables.

Addressing Botswana’s infrastructure challenges will require sustained expenditure of some $785 million per year over the next decade, split fairly evenly between investment and operations and maintenance. More than half of the total relates to the power sector. At just over 7 percent of gross domestic product (GDP), this level of effort is comparatively low compared to that required of other African nations to achieve comparable targets, and seems well within the reach of Botswana. To put things in perspective, Botswana’s investment would absorb around 4 percent of GDP, far less than the 15 percent China invested in infrastructure during the mid-2000s.

Until 2008, the aggregated spending for the infrastructure sectors has been about $800 million per year, broadly in line with estimated needs. Nevertheless, due to resource allocation issues, the power sector faced a funding gap of $305 million per year, or about 3 percent of GDP; reflected in the power supply crisis that erupted in 2008. However, the major investments have subsequently taken place in the Morupule power generation project, correcting historic underspending in the sector, and are helping to restore supply-demand balance for electricity.

It is striking that Botswana’s infrastructure spending is primarily funded from public resources. Despite its relatively strong economy and attractive investment climate, Botswana has not succeeded in capturing as much private finance for infrastructure (as a percentage of GDP) as many of its neighbors have done under less favorable circumstances, suggesting that this could be further explored in future.
BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE As of 2008, Botswana faced efficiency issues including under-allocation of resources to the power sector, underexecution of infrastructure budgets, and misalignment of tariffs and costs in the power and water sectors. Over the period 2009/10, the government acted decisively to address these issues, and as a result of sound policy decisions the country has been able to recoup close to $68 million a year that were previously being lost to these various inefficiencies.

As a result, Botswana is perhaps the only African country that faces neither serious efficiency nor funding gaps for infrastructure; an altogether remarkable achievement.

# The continental perspective

The Africa Infrastructure Country Diagnostic (AICD) has gathered and analyzed extensive data on infrastructure in more than 40 Sub-Saharan countries, including Botswana. The results have been presented in reports covering different areas of infrastructure—ICT, irrigation, power, transport, water and sanitation—and different policy areas, including investment needs, fiscal costs, and sector performance.

This report presents the key AICD findings for Botswana, allowing the country’s infrastructure situation to be benchmarked against that of its African peers. Given that Botswana has reached middleincome status and is a resource-dependent economy, two sets of African benchmarks will be used to evaluate Botswana’s situation: Middle-Income Countries (MICs) and resource-rich countries. Detailed comparisons will also be made with immediate regional neighbors in the Southern African Development Community (SADC) countries.

Several methodological issues should be borne in mind. First, because of the cross-country nature of data collection, a time lag is inevitable. The period covered by the AICD runs from 2001 to 2006 for countries for which data was collected in the first phase of the project. For the countries in phase two, including Botswana, data collection began later. Therefore most of the data for Botswana are from the 2004–08 period. Most technical data presented are for 2006 (or the most recent year available), while financial data are typically averaged over the available period to smooth out the effect of short-term fluctuations. Since the period post 2008 has been particularly eventful for Botswana’s infrastructure sectors, key changes are noted in the text even if they cannot be reflected directly in the data which for the sake of international comparisons must retain a consistent time period.

Second, to make comparisons across countries, we had to standardize the indicators and analysis so that everything was done on a consistent basis. This means that some of the indicators presented here may be slightly different from those that are routinely reported and discussed at the country level. In the specific case of spending needs, achievement of the Millennium Development Goals (MDGs) has been assumed as the social targets. These targets look indeed relatively modest for middle-income countries like Botswana, and therefore the spending needs of the water and sanitation sectors represent a lower bound yet a cross-country comparable spending targets for the country.

2
<!-- Start of picture text --> Selected Middle Income Countries:<br>Real GDP Growth<br>10<br>&<br>6 f —~<br>, w/z<br>-4<br>BS Botswana ——— South Afnca= Namibia ——= Maunitius<br>-6<br>2005 2006 2007 2008 2009 2010 Proj.<br>RegionalSource: IMF,Economic Afncan Outlook,DepartnertApril Database2010. andSubSataranAfica<br><!-- End of picture text -->
BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

**Figure 2. Until 2007, infrastructure’s contribution to growth high, even as power holds back the economy**

<!-- Start of picture text --> a. Infrastructure’s contribution to annual per capita economic growth in selected countries, 2003–07, in percentage points<br>2.5<br>2.0<br>1.5<br>1.0<br>0.5<br>0.0<br>-0.5<br>Telecom Electricity Roads<br>b. Potential contributions of infrastructure to annual per capita economic growth in selected countries, in percentage points<br>5<br>Main Telephone Lines<br>4 Electricity Generating Capacity<br>Length of Road Network<br>3<br>2<br>1<br>0<br>-1<br>-2<br>(2001–05 vs. 1991–95)<br>% changes in growth per capita due to changes in infrastructure<br>leader (Mauritius)<br>capita from improving<br>Potential changes in growth per infrastructure to level of African<br><!-- End of picture text --> _Source:_ Calderón 2009.

Looking ahead, the contribution of infrastructure to growth promises to increase even more as improvements in the power sector are achieved. Simulations suggest that if Botswana’s infrastructure could be improved to the level of the African leader, Mauritius, annual per capita growth rates would be 1.2 percentage points higher than they are at present. This impact would come mainly from an increase in power generating capacity (figure 2b).

4
BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

# The state of Botswana’s infrastructure

Botswana is a predominantly flat rolling tableland (figure 3c). A plateau divides the country into two topographic regions—bush country and grassland to the east and the Okavango Swamps and the Kalahari Desert to the west. The spatial distribution of Botswana’s economy follows this pattern and shows marked differences between east and west. The east is characterized by relatively high population density and low poverty rates. It is here where most of the country’s larger cities are found (figure 2a, b) as well as most of its economic activity: Botswana’s mineral resources—in particular diamonds and metals including coal, nickel, uranium, and copper—are concentrated in this area (figure 2d). Moreover, Botswana’s most fertile soil and most of its crop production are clustered around Gaborone, the capital, and Francistown, also in the east. Meanwhile, the west is sparsely populated, with a very high incidence of poverty and with a very poor natural resource endowment.

The distribution of Botswana’s infrastructure networks broadly follows the patterns of economic activity and population. A much greater density of transport, power, and ICT infrastructure is observed in the east (particularly in the southeast) than in the rest of the country (figure 4a, 4b, 4c). Nevertheless, Botswana’s infrastructure backbones—ICT, roads and rails, and the national power grid—do provide decent connectivity among populated centers within the country. The water sector is the most challenging. Water resources are very limited, and this constrains all water applications including the development of natural irrigation and water supply (figure 4d).

Since Botswana is a landlocked country, regional integration is an issue of strategic importance. Botswana has achieved better level of international bandwidth in recent year since its connection to the South Atlantic 3 (SAT-3) submarine cable skirting the west coast of Africa (figure 4c), the EASSy cable and soon in 2012, via Namibia, to WACS, another west coast cable. In the power sector, Botswana followed for years a regional approach by relying on South Africa for power supply. But the power generation crisis in South Africa in 2008 impacted Botswana as well and made evident the need to develop alternative sources of power, prompting investment in domestic coal-fired generation. In the medium term, until Morupule enters in full operation in 2012, it will be hard for Botswana to meet its power needs within the Southern Africa Power Pool (SAPP). In the longer term, and under the SAPP optimal expansion plan, Botswana is expected to become a net power exporter to its neighbors, including South Africa, with the implementation of Morupule B and the follow-up generation and transmission investments.

This report begins by reviewing the main achievements and challenges in each of Botswana’s major infrastructure sectors, with the key findings summarized in table 1. Thereafter, attention will turn to the problem of how to finance Botswana’s outstanding infrastructure needs.

5
BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

**Table 1. Achievements and challenges in Botswana’s infrastructure sectors**

||Achievements|Challenges|
|---|---|---|
|Roads|Procuring resources for road network<br>expansion and maintenance of existing<br>assets.<br>Achieving good internal connectivity among<br>main cities and population centers.|Creating institutional mechanisms to guarantee funds for<br>increasing the preservation needs of an extended (and further<br>extending) road network.<br>Increasing the competitiveness of Botswana’s segments of<br>international corridors.<br>Improving rural accessibility.<br>Improving logistics and other cross-border elements of<br>international corridors.|
|Railways|Keeping existing railway infrastructure in<br>good condition relative to regional standards.|Decreasing freight traffic levels due to increasing regional<br>competition.<br>Minimizingsubsidies to freight tariffs.|
|Air transport|Developing a clearer strategy for air transport<br>that builds on nearby air hubs.<br>Equipping Air Botswana with new and<br>modern jets to provide links to regional hubs.|Incorporating Botswana under international safety oversight<br>and standards.<br>Liberalizing, diversifying and deconcentrating the air transport<br>market.|
|Irrigation||Increasing the area with irrigation facilities.<br>Increasingwater storage availability.|
|Water and sanitation|Allocating increased and sustained resources<br>in support of the needs of the sector.<br>Significantly increasing access to and quality<br>of services.<br>Establishing an efficient water utility provider.|Overcoming the high development costs that geography<br>imposes on expanding rural area services.<br>Introducing a flexible tariff regime that better aligns costs with<br>prices and introduces periodic tariff revisions.|
|Power|Doubling electrification rates.<br>Setting in place a very efficient power<br>distribution utility.|Completing the on-going expansion power generation capacity<br>Introducing a flexible tariff regime and policy that better aligns<br>costs with prices and introduces periodic tariff revisions,<br>ensuring its implementation through an independent regulator.|
|ICT|Increasing mobile penetration to the highest<br>rate in Africa via the successful liberalization<br>of the sector.|Improving access to Internet.<br>Improving regulation<br>The regulator (BTA) should begin by leveling the payfield for<br>new comers.<br>Eliminating the BTC monopoly in fiber optics and gateways.<br>Accelerating the privatization of BTC.|

_Source:_ Authors’ own elaboration based on findings of this report.

6
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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

# Transport

Botswana is part of the north-south road corridor, the most extensive in the region, which links the country to Zimbabwe, Mozambique, Zambia, the Democratic Republic of Congo, Malawi, Tanzania, and to the country’s largest trading partner—the Republic of South Africa—with the busiest port in Africa. One of the corridor’s main legs stretches from the Port of Durban in South Africa, via Johannesburg, to Francistown on the eastern border of Botswana, and on to Lusaka in Zambia and Lubumbashi and Kolwezi in the Democratic Republic of Congo. In addition, the north-south corridor provides Botswana with links to other important corridors such as the TransKalahari, Beira, Lobito, Dar es Salaam, and Nacala corridors (Curtis 2009).

Botswana Railways’ single main line runs along the north-south corridor and currently transports only freight. It serves to provide access to the South Atlantic coast when connecting to the Trans-Kalahari railway. The total distance from key coal deposits to the port of Walvis Bay is 1,480 kilometers (km), of which 880 km is now a gap that would require new construction to be operational (Bullock 2009).

Botswana’s landlocked condition makes it particularly vulnerable to logistical inefficiencies, crossborder charges, and other bureaucratic procedures. Not surprisingly, the country experiences very high export and import costs<sup>1</sup> by comparison to the Sub-Saharan African average and its neighbors (figure 5). To put this logistical challenge and cross-border burden in perspective, we might note that Botswana still ranks very well—52 among 183 countries<sup>2</sup> in 2010—with regard to the overall ease of doing business in the country. Yet the country is ranks 151st (out of 183 countries) in the ―trading across borders‖ category. Constraints on trade imposed by transport deficiencies, bureaucracy, and other factors in effect neutralize some of the benefits of the overall ease of doing business in the country.

> 1 Includes the costs for documents, administrative fees for customs clearance and technical control, customs broker fees, terminal handling charges, and inland transport.

> 2 www.doingbusiness.org/data/exploreeconomies/botswana.

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

**Figure 5. Trading across borders is costly for Botswana**

<!-- Start of picture text --> a. Export costs b. Import costs<br>CAR CAR<br>Niger Zimbabwe<br>DRC Rwanda<br>Zimbabwe DRC<br>Rwanda Niger<br>Botswana 3.01 Botswana 3.39<br>Zambia Zambia<br>Sudan Sudan<br>SSA 1.96 SSA 2.49<br>South Africa South Africa<br>Tanzania Tanzania<br>OECD OECD<br>0 1 2 3 4 5 6 0 1 2 3 4 5 6<br>US$ thousand per container, year 2010 US$ thousand per container, year 2010<br><!-- End of picture text --> _Source:_ Doing Business Database 2010.

_Note:_ CAR = Central African Republic; SSA = Sub-Saharan Africa; OECD = Organisation for Economic Co-operation and Development; DRC = Democratic Republic of Congo.

# Roads

## **Achievements**

Overall, Botswana has made remarkable achievements in its road sector, expanding its total paved road coverage from just 12 km at independence in 1966 to about 7,892 km in 2008. Moreover Botswana has tackled the maintenance of its existing roads comparably well, even though a separate road fund has not yet been established.

The total road network length was 28,152 km as of 2008. The classified network, with about 17,735 km, consists of primary and secondary networks (about 5,000 km) and 12,700 km of tertiary roads. The public highway network, which falls under the jurisdiction of the roads department, consists of 6,116 km of paved and 2,800 km of unpaved road. District roads fall under the responsibility of the district councils. The unclassified network is estimated to be around 5,668 km and the urban network 4,749 km.

Botswana has a strong record of road network expansion, quality, andto much lesser extent maintenance. The quality of roads is comparable to that found in the African MICs and only second to South Africa and Mauritius (figure 6). Eighty percent of the main road network and (perhaps even more impressive) 73 percent of the rural network are in good or fair condition (table 2). Other indicators, such as network density and road traffic, are below the typical levels for low-income countries (LICs). The low network density is correlated to the desert geography of much of the country rather than to a lack of connectivity.

10
BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

**Figure 6. Botswana’s share of roads in good condition is among the highest in southern Africa**

<!-- Start of picture text --> South Africa<br>Mauritius<br>Swaziland<br>Malawi<br>Namibia<br>Botswana<br>Mozambique<br>Madagascar<br>Zimbabwe<br>Zambia<br>Angola<br>Lesotho<br>0% 25% 50% 75% 100%<br>Percentage Main Road Network Length<br>Good Fair Poor<br><!-- End of picture text --> _Source:_ AICD Road Sector Database on southern Sub-Saharan African countries.

**Table 2. Botswana’s road indicators benchmarked against Africa’s low- and middle-income countries**

|Indicator|Unit|Resource-<br>rich countries|**Botswana**|Middle-<br>income<br>countries|
|---|---|---|---|---|
|Classified road network density|km/1,000 km<sup>2</sup>of land area|98|**31**|278|
|Total road network density [1]|km/1,000 km<sup>2</sup>of land area|128|**43**|318|
|GIS rural accessibility|% of rural pop. within 2 km of all-season road|20|**15**|31|
|Main road network condition [2]|% in good or fair condition|68|**80**|86|
|Rural road network condition [3]|% in good or fair condition|61|**73**|65|
|Classified paved road traffic|AADT|1,408|**858**|2,451|
|Classified unpaved road traffic|AADT|54|**95**|107|
|Primary network overengineering|% of primary network paved with 300 AADT or less|15|**23**|18|
|Perceived transport quality [4]|% firms identifying transport as major business<br>constraint|27|**13**|18|

_Source:_ AICD Road Sector Database on 40 Sub-Saharan African countries. _Note:_

[1] Total network includes the classified and estimates of unclassified and urban networks.

[2] Main network for most countries is defined as result of adding the primary and secondary networks.

[3] Rural network is generally defined as the tertiary network and does not include the unclassified roads.

[4] _Source:_ World Bank—IFC Enterprise Surveys on 32 Sub-Saharan Africa countries. GIS = geographic information system; AADT = average annual daily traffic.

During its recent economic boom, the country has given priority to developing and maintaining surface connectivity. It has allocated substantial resources to expansion and rehabilitation of the existing network. Based on the physical configuration and condition of Botswana’s road network, it is possible to estimate the resources that would be needed to maintain the network in good condition and properly rehabilitate it as per the road life cycle. These maintenance and rehabilitation norms, when compared against existing spending patterns, give a sense of how Botswana has succeeded in securing resources for road preservation (figure 7). As the benchmarking shows, Botswana spends a significant amount over the 11
BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE norm on rehabilitation and higher though not significantly higher than the norm in maintenance. While the comparison suggests that maintenance spending in recent years is over the norm, the experience in the country indicates that maintenance was neglected for very loing leading to much higher spending on rehabilitation to compensate. At the same time it is important to note that since Botswana’s road network is expected to expand considerably, its needs for maintenance spending will also increase in the future. So, if the quality of the road is to be maintained a further look at allocation to road maintenance might be necessary though higher public expenditure management.

**Figure 7. Botswana’s spending is commensurate with maintenance and rehabilitation needs**

<!-- Start of picture text --> 150<br>100<br>50<br>0<br>-50<br>-100<br>Maintenance Rehabilitation<br>Spending as % of requirements<br><!-- End of picture text --> _Source_ : Gwilliam and others 2008.

Botswana has prioritized the expansion of its road network. Over the 2005–07 period, the country spent an average of 1.3 percent of GDP on capital roads investments, which is an increase in comparison to previous periods and more than the 2003–09 investment planned under the 9th National Development Plan (NDP) (table 3). The country has thus consistently increased the resources invested in road expansion.

**Table 3. Botswana’s governmental investments in roads**

|Period|Period total, current pula|Constant 2007 $US per<br>year|Constant 2007 $US per<br>year per capita|GDP %|
|---|---|---|---|---|
|1966–86 (actual)|260,000,000|15,103,940|13|0.6|
|1991–97 (actual, NDP 7)|870,746,559|63,258,385|40|1.0|
|1997–2003 (actual, NDP|||||
|8)|661,274,384|27,119,970|16|0.4|
|2003–09 (planned, NDP<br>9)|2,467,660,000|72,944,329|39|0.6|
|2004 (actual)|315,433,705|73,784,049|41|0.7|
|2005 (actual)|604,046,771|125,494,297|68|1.2|
|2006 (actual)|791,362,633|139,454,757|75|1.2|
|2007 (actual)|1,157,844,594|188,610,310|100|1.5|

_Source:_ Botswana’s Department of Roads for spending under NDP;<sup>3</sup> AICD annual data 2004–07; authors’ calculations.

> 3 www.gov.bw/en/Ministries--Authorities/Ministries/Ministry-of-Communications-Science-Technology/Departments/Department-of-Roads/Divisions/#de53b8ebc29748f6af6959fd7b5fab33.

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

## **Challenges**

The strategic challenge for Botswana in the roads sector is to fulfill the potential of its geographic location at the center of the SADC region by expanding its network and ensuring smooth and reliable regional connectivity. Botswana could become a key player in regional trade by connecting the markets of South Africa and Namibia to Zambia, Angola, and East Africa, thus boosting its low road traffic levels. This connectivity expansion would need to be balanced against the requirements of existing traffic.

Some 23 percent of the main road network appears to be overengineered, meaning that it consists of paved roads with low traffic levels (below 300 vehicles per day) not typically considered adequate to justify paving. Such a high level of overengineering suggests that the country might need to consider reallocating the resources now earmarked for the sector (for upgrading and expansion) to sectors with relatively greater needs that promise higher economic returns on the public funds invested.

The challenge moving forward is to align the allocation of resources for maintenance with current needs, once the road network expansion plans are fully materialized. In other words, the priority is to make the road network sustainable over time. To achieve this goal, Botswana needs to develop institutions that support road maintenance, such as a Road Fund and independent roads authority, streamline the logistical procedures for cross-border traffic, provide timely and sustainable road maintenance, and secure sufficient funding.

# Rail

## **Achievements**

Botswana’s railway network consists of a main line of 640 km connecting Ramatlabama on the border with South Africa to Bakaranga in the north, and two branch lines linking Francistown to the Sua Pan soda ash and salt mine (174.5 km) and Palapye to the Morupule Colliery coal mine (16 km). In 2009 the service operator Botswana Railways (BR) ceased to transport passengers. The railway carries a large proportion of nonport traffic: raw materials and products (coal, soda ash) being supplied to South Africa or being received from South Africa (cement, petroleum, and so on).

Railway network density per million people in Botswana (494 km) is the second-highest in SubSaharan Africa after Gabon (520 km), followed by South Africa (460 km). Most other Sub-Saharan countries range from 30 to 150 km per million. Relative to other railways in southern Africa, BR presents relatively high traffic levels, and good to average operational performance (table 4). For example, labor productivity is comparatively high.

Botswana’s railway is nonconcessioned; however, Rail India Technical and Economic Services (RITES) supplied senior management to Botswana Railways as early as the 1990s under a management support and consultation contract.

## **Challenges**

Botswana has seen a drop in its freight traffic, a result of the rerouting of through traffic between South Africa and the north via the new Beit Bridge Bulawayo Railway in 2009. Ironically, freight tariffs of just over $0.02 per tonne-km are significantly lower than those found elsewhere in Africa, and there is reason to believe they are subsidized (figure 8). This is reminiscent of the time when passenger traffic was 13
BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE highly subsidized, artificially boosting traffic at very high fiscal costs. The situation was not sustainable and passenger services were completely stopped in Botswana in 2009, partly because of safety concerns and primarily because the subsidy from freight could no longer be sustained (Bullock 2009).

**Table 4. Railway indicators for Botswana and select other countries, 2000–05**

||CFM (Angola)|**BR (Botswana)**|CEAR (Malawi)|Nacala Railroad<br>(Mozambique)|Beira Railroad<br>(Mozambique)|Ressano Garcia Line<br>(Mozambique)|Transnamib (Namibia)|Spoornet (South Africa)|RSZ (Zambia)|NRZ (Zimbabwe)|
|---|---|---|---|---|---|---|---|---|---|---|
|Concessioned (1)/ state run (0)|0|**0**|0|1|1|0|0|0|1|0|
|Freight density (1,000 tonne-<br>km/km)|469|**827**|90|270|663|364|475|2,427|406|902|
|Passenger density (1,000<br>passenger-km/km)|—|**—**|38|103|44|44|33|60|92|166|
|Labor productivity (1,000 traffic<br>units per employee)|580|**722**|131|710|281|—|484|3,308|502|390|
|Locomotive productivity (million<br>traffic units per locomotive)|30|**41**|3|25|13|—|25|33|25|8|
|Carriage productivity (1,000<br>passenger-km per carriage)|4,046|**2,391**|1,176|3,333|750|—|—|—|3,286|—|
|Wagon productivity (1,000 net<br>tonne-km per wagon)|950|**987**|82|260|476|—|805|913|377|195|
|Freight yield (US cents/tonne-<br>km)|—|**—**|6|5|3|3|—|—|4|—|
|Passenger yield (US<br>cents/passenger-km)|—|**—**|1|0.9|0.5|1|—|—|1|—|
|_Source:_Bullock 2009. Derived fro<br>_Note:_* With 2.5 passenger-km equ<br>— = Not available.|m AICD rail<br>ivalent to|operator d<br>1 traffic un|atabase(<br>it, 1 tonne-|www.infrastr<br>km equivale|uctureafrica<br>nt to 1 traffi|.org/aicd/too<br>c unit.|ls/data<br>).||||

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

**Figure 8. Freight carried by rail has a comparatively low unit cost in Botswana**

Unit tariff per traffic unit—average in period 2000–05 <!-- Start of picture text --> 16<br>14<br>12<br>10<br>8<br>6<br>4<br>2<br>0<br>Passenger Freight<br>Botswana Tazara<br>Gabon (Setrag) Kenya (KRC) Zambia (RSZ) Tanzania (TRC) Ghana (GRC) Madagascar ... Benin (OBN) Malawi (CEAR) DRC (SNCC) Ethiopia (CDE) DRC (CFMK) Uganda (URC)<br>Congo Brazzaville ...<br>Mozambique (CFM) Mozambique (CCFB) Senegal (Transrail) Cameroon (Camrail) Mozambique (CDN) Cote dÍvoire (Sitarail)<br><!-- End of picture text --> Source: Bullock (2009).

# Air transport

## **Achievements**

Botswana saw steady growth in its overall air passenger numbers, even during the economic crisis. Compared to neighboring Zimbabwe and Zambia, it has a relatively high per capita capacity. The aircraft fleet of Air Botswana, the main airline of the country, is one of the newest on the continent, featuring small commuter-sized turboprop aircraft (table 5). Air Botswana’s use of such efficient planes reflects the clever strategic approach to air transport services adopted by Botswana. The country is taking full advantage of its proximity to one of the most important air transport hubs in Africa: Johannesburg. Botswana does well to provide short local and regional links to South Africa, which in turn serves as the international gateway to the country.

Botswana has also spent a lot in recent years to upgrade the Gaborone and regional airports.

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

**Table 5. Benchmarking air transport indicators for Botswana and select other countries**<sup>**4**</sup>

|Country|Botswana|Namibia|Zambia|Zimbabwe|Mozambique|South Africa|
|---|---|---|---|---|---|---|
|Traffic (2007)|||||||
|Domestic seats (seats per year)|241,696|84,162|437,658|237,835|1,144,644|31,767,537|
|Seats for international travel within<br>Africa (seats per year)|435,708|877,812|1,459,766|1,109,986|582,836|6,314,557|
|Seats for intercontinental travel (seats<br>per year)|n.a.|242,736|113,217|182,585|91,637|7,707,063|
|Seats available per capita|0.357|0.574|0.168|0.118|0.087|0.954|
|Herfindahl-Hirschmann Index—air<br>transport market (%)|60.25|39.39|17.53|30.20|31.54|16.66|
|Quality|||||||
|Percent of seat-km in newer aircraft|100.0|79.0|63.8|71.4|57.0|83.8|
|Percent of seat-km in medium or<br>smaller aircraft|100.0|28.3|50.6|42.7|42.5|32.8|
|Percent of carriers passing IATA/IOSA<br>audit|0|100|0|33.3|100.0|33.3|
|FAA/IASA audit status|No audit|No audit|No audit|Failed|No audit|Passed|

_Source:_ Bofinger 2009. Derived from AICD national database (www.infrastructureafrica.org/aicd/tools/data).

_Note:_ The Herfindhal-Hirschmann Index (HHI) is a commonly accepted measure of market concentration. It is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. An HHI of 100 indicates the market is a monopoly; the lower the HHI, the more diluted the market power exerted by one company/agent.

FAA = U.S. Federal Aviation Administration; IASA = International Aviation Safety Assessment; IATA = International Air Transport Association; IOSA = IATA International Safety Audit. n.a. = Not applicable.

# **Challenges**

Since no airline in Botswana flies to Europe or the United States, it is neither audited by the U.S. Federal Aviation Administration (FAA) or ranked by the European Union (EU). But safety oversight is a challenge for Botswana. Air Botswana is not on the International Air Transport Association (IATA) registry, and a 2008 International Civil Aviation Organization (ICAO) audit of the safety oversight system found noncompliance with standard and recommended practices to be over 72 percent, compared to the global average of 30.8 percent for the year. Beyond Air Botswana, tourists flying on local charter flights may also be at risk.

The air transport market is concentrated: Air Botswana dominates, carrying over 75 percent of capacity, with an additional capacity of roughly 18 percent provided by South African Airlink Express.

> **4** All data as of 2007 are based on estimations and computations of scheduled advertised seats, as published by the Diio SRS Analyzer. This captures 98 percent of worldwide traffic, but a percentage of African traffic is not captured by these data **.**

16
BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE In fact, the lack of competition is argued to be one of the potential causes of Air Botswana domestic reputation for poor service with a very high index of delays and cancellations. This lack of reliability is commonly cited as a major obstacle to better performance in the tourism sector.

**Figure 9. Evolution of seats and city pairs in Botswana**

<!-- Start of picture text --> a. Seats b. City pairs<br>900,000 16<br>800,000 14<br>700,000<br>12<br>600,000<br>10<br>500,000<br>8<br>400,000<br>6<br>300,000<br>200,000 4<br>100,000 2<br>- 0<br>2,001 2,004 2,007 2009 (Est)<br>2,001 2,004 2,007 2009 (Est)<br>Total<br>International Total International<br>Intercontinental excluding flights between NA and SSA<br>Intercontinental Domestic<br>Domestic<br>City pairs<br>Number of seats<br><!-- End of picture text --> _Source:_ Bofinger 2009. Derived from AICD national database (www.infrastructureafrica.org/aicd/tools/data). _Note:_ As reported to international reservation systems.

# Water resources

Botswana has scarce water resources compared to countries occupying similar climatic zones. The renewable water resource per capita is estimated at about 6,819 cubic meters (m<sup>3</sup> ) per year (including cross-border flows), below the Sub-Saharan African average of 7,000 m<sup>3</sup> per year. Rainfall levels vary considerably across regions and during the course of the year, averaging a low 416 millimeters annually.

Botswana’s population growth (1.5 percent annually) has put significant pressure on its water resources. Demand for drinking water has increased over time due to the increasing rate of urbanization, and some 95 percent of the population is reported to have access to improved drinking water resources. Domestic use accounts for 34 percent of water withdrawals. Need for agricultural production adds to the stress. Irrigation and livestock account for 47 percent of water withdrawals. Industry accounts for around 20 percent of total water demand, particularly the mining sector.

Given the wide range of competing sources of demand (agriculture, water supply, and industry) and frequent droughts, it is essential to have a clearly defined basis for allocating water rights among sectors so as to enhance efficient water use and to maximize its development impact. Furthermore, water rights are also determined by international riparian rights. The most important drainage basins are the South 17
Current Irrigation (% Area) 1% @i%-5% @>5% [J<sup>Dams</sup> <!-- Start of picture text --> ee<br>Nolth West \ cimeaswe<br>_— indian 0%<br>wv. wtom<br>oun ay Ww wl = }<br>NAMIBIA U a Ow,a<br>hanzi ww w a —TMsee<br>Kwenengay Phas ee<br>w<br>~, Kgalagadi m~ ; SOUTH AFRICA<br>* oma “<br>\ os indian Ocea<br><!-- End of picture text --> <!-- Start of picture text --> DD Large scale IRR <= 6%<br>BB Large scale IRR <= 12%<br>BB Large scale IRR <= 20%<br>BD Large scale IRR<br>BB smatt seale ink <=> 20%10%<br>HB small scale RR <= 30%<br>WD small sale IRR<= 50%<br>BH Small scale IRR > 50%<br><!-- End of picture text --> <!-- Start of picture text --> —<br>_ ~ ;<br>| 7 . ~<br>\<br>i SS<br>_ r<br>. .<br>| . 4<br>we<br>, _<br>Vn =<br>\ f ~~<br><!-- End of picture text -->
BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

### IRR = internal rate of return.

The country’s current irrigated area could be increased substantially with good economic returns. Simulations suggest that with a threshold internal rate of return (IRR) of 6 percent it would already be economically viable to develop a further 25,796 ha of land for irrigation, of which 98 percent would be large-scale projects. If the threshold IRR is raised to 12 percent, the economically viable area for irrigation does not change substantially. The required investment for attaining this expansion is $52 million (table 6). The area with irrigation potential is concentrated around Gaborone and Francistown (figure 10b), where the most fertile soils are located and most of the crop production takes place.

**Table 6. Botswana’s irrigation potential**

|||Large scale|||Small scale|||Total||
|---|---|---|---|---|---|---|---|---|---|
||Investment|IRR|Area<br>increase|Investment|IRR|Area<br>increase|Investment|IRR|Area<br>increase|
|Cutoff<br>(%)|$ million|%|ha|$million|%|ha|$ million|%|ha|
|0|49|20.0|25,243|3|0.0|553|52|19.5|25,796|
|6|49|20.0|25,243|3|0.0|553|52|19.5|25,796|
|12|49|20.0|25,243|3|0.0|553|52|19.5|25,796|
|24|0|0.0|0|2|0.0|342|2|0.0|342|

_Source:_ Derived from You and others (2009).

_Note:_ Water for irrigation can be collected in two ways: through large, dam-based schemes or through small projects based on the collection of runoff from rainfall. The investment costs of large-scale irrigation development reflect only irrigation-specific infrastructure, such as distribution canals and on-farm system development. The potential for small-scale irrigation is assessed not only on the basis of agroecological conditions, but also in terms of market access, since irrigation is typically viable only if the increased yields can be readily marketed. The unit cost for large-scale projects is set at $3,000/ha and for small-scale projects at $2,000/ha.

IRR = internal rate of return; ha = hectare.

# Water supply and sanitation

## **Achievements**

Botswana has one of the highest access rates to improved water sources in Africa. About 95 percent of the total population has access to improved water sources, a level comparable to what is observed in the upper range of MICs in Sub-Saharan Africa (93 percent).

This achievement reflects a conscious policy decision. Botswana has made important progress toward moving its population up the water supply and sanitation ladder. Only 3.3 percent of the population still relies on surface water, and a major effort has been made to upgrade access to utility water from stand posts to direct piped connections (table 7). As of 2006 access to piped water, at 64.9 percent, was above the level of other MICs, at 52.1 percent. Reliance on surface water was only one-quarter of that registered in similar African peers.

In the case of sanitation, Botswana has managed to improve service options by moving people from traditional to improved latrines and by increasing access to flush toilets, therefore reducing the practice of 19
BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE open defecation. Even though these improvements are significant, access to flush toilets, at 32.2 percent, remains below the level of MICs (40.8 percent); while open defecation, at 23.2 percent, is higher than that of similar African countries.

**Table 7. Benchmarking water and sanitation indicators**

||Unit|Low-income<br>countries||**Botswana**||Middle-<br>income<br>countries|
|---|---|---|---|---|---|---|
|||Mid-2000s|1988|2000|2006|Mid-2000s|
|Access to piped water|% pop|9.3|19.5|43.1|64.9|61.1|
|Access to stand posts|% pop|17.1|68.6|48.6|26.3|22.1|
|Access to wells/boreholes|% pop|39.3|6.1|3.8|5.6|4.8|
|Access to surface water|% pop|34.2|5.8|4.6|3.3|10.9|
|Access to flush toilets|% pop|4.7|12.3|18.1|32.2|47.7|
|Access to improved latrines|% pop|18.3|23.5|30.5|26.3|33.7|
|Access to traditional latrines|% pop|38.5|23.6|30.6|18.5|6.9|
|Open defecation|% pop|38.3|40.6|20.8|23.2|11.0|
||||**2000**|**2005**|**2008**||
|Domestic water consumption|liter/capita/day|50.9|76.7|69.6|80.5|196.4|
|Revenue collection|% sales|94.1|95|95|95|99.3|
|Distribution losses|% production|34.8|21.0|12.6|10.6|28.8|
|Labor costs|connections per<br>employee|175.9|—|—|—|203.4|
|Total hidden costs as % of revenue|%|111|—|29|19|67|
|||**Bots**|**wana**|Count|ries with|Other|
|||**2005**|**2008**|scarc<br>reso|e water<br>urces|developing<br>regions|
|Residential tariff|U.S. cents per<br>cubic meter|45||45|60.26|30600|
|Nonresidential tariff|U.S. cents per<br>cubic meter|88||88|120.74|.–.|

Source: Demographic and Health Surveys and AICD water and sanitation utilities database (www.infrastructureafrica.org/aicd/tools/data). Note: Access figures from the Demographic and Health Surveys (1988 and 2006) and Multiple Indicators Survey (2000). Total cost recovery is calculated assuming a capital cost of 40 cents/m3. — = Not available.

Botswana’s progress in increasing access to improved water supply is spread across both urban and rural areas. Between 2000 and 2008 4.2 percent of the population gained access to piped water per year, while 0.2 percent stopped using surface water as their water source. In rural areas, 1.8 percent of the population gained access to piped water per year, and 0.4 percent stopped using surface water.

During the period covered by this report (2004-2008), the reform of the water sector was still under discussion. The water service came from one three entities Water Utilities Corporation (WUC), Department of Water Affairs (DWA) in the Ministry of Minerals, Energy and Water Resources or the local councils. Due to difficulties getting access to the data, the analysis of providers provided in this report only covers WUC. Since 2009, a number of important changes have taken place (box 1).

20
BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

# **Box 1. The water sector reform**

In 2009 the Government of Botswana initiated overhauling changes of the water sector and its institutions that covers, among other things: Implementation of the reform plan as presented in Option 3 of the National Water Master Plan Review (NWMPR). In this plan, the Water Utilities Corporation (WUC) has the sole authority for the provision of water supply, bulk water and sewerage services for the entire country.

Establishment of new institutions that would include a regulatory regime consisting of the WRC, Water Regulator and the restructured DWA. The Plan should also include the critical time frames and strategic actions required to move the sector from its current situation toward the future vision.

Definition of institutional arrangement and restructuring. The NWMPR has identified various institutions that need to be setup as part of the reform of the sector. The reform should achieve clear definitions of the roles, authorities and responsibilities of the various institutions. This includes restructuring and definition of mandate of of DWA, WRC, Regulator and WUC.

Development of water and wastewater policy framing a policy document on the water and wastewater strategy for submission to parliament.

Development of water and wastewater sector tariff strategy: The independent water regulator as envisaged will be responsible for the tariff setting (formal methodology, tariff levels and nature and type of subsidies) and the protection of consumers from natural monopoly such as WUC. The tariff strategy should cover the tariff for water supply, bulk water supply and wastewater.

Adapted from World Bank (2009).

The Botswana Water Utility Corporation (WUC), which at the time of collecting the data was in charge of operating the water systems of Gaborone and other five major cities, has been one of the best performers among African utilities; its performance has positively evolved over time. Distributional losses fell from 21 percent of production in 2000 to 10.6 percent in 2008, half the level of a wellperforming utility. In fact, as of 2008 the WUC’s nonrevenue water was only 40 percent of the losses reported by similar African utilities. The collection ratio has been reported at 95 percent of bills since 2000 (table 8), a ratio that financially contributes reliable, high-quality service (24/7). In 2008, 70 percent of consumers were satisfied with the service versus the 50 percent reported in 2006. But systematic adjustments of tariffs have not been carried out since 2004, and the residential tariff has remained at the same level since.

# **Box 2. The hidden costs of utilities**

A monetary value can be attributed to observable operational inefficiencies—mispricing, unaccounted-for losses, and undercollection of bills, to mention three of the most conspicuous—by using the opportunity costs of these inefficiencies: tariffs for uncollected bills and production costs for mispricing and unaccounted-for losses. These costs are considered hidden since they are not explicitly captured by the financial flows of the operator. Hidden costs are calculated by comparing a specific inefficiency against the value of that operational parameter in a well-functioning utility (or the respective engineering norm) and multiplying the difference by the opportunity costs of the operational inefficiency.

_Source:_ Briceño-Garmendia, Smits, and Foster (2009).

The sector’s overall good performance is also reflected in the very low level of hidden costs due to inefficiencies (box 2) (table 8, figure 11a). WUC fully recovers operating costs, allowing for surpluses that give WUC substantive cash flows. What is not fully clear is whether tariffs, as set up to 2008, would 21
BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE allow for full cost recovery if a premium to amortize capital is taken into account. A first approach to full recovery (operating and capital costs) is presented in table 8. Based on a first order estimation of full operating _and_ capital costs, it would appear that WUC faces significant underpricing.<sup>5</sup>

**Table 8. Evolution of operational indicators associated with the Botswana Water Utility Corporation**

||Water<br>delivered<br>(million<br>m<sup>3</sup>/year)|System<br>losses<br>(%)|Collection ratio<br>(%)|Averagetotal<br>cost<br>($/m<sup>3</sup>)|Average<br>effective tariff<br>($/m<sup>3</sup>)|Total hidden<br>costs<br>($ million/year)|Total hidden<br>costs<br>(% revenues )|
|---|---|---|---|---|---|---|---|
|2005|41|13|95|1.21|0.61|23|29|
|2006|55|12|95|1.10|0.61|19|26|
|2007|45|11|95|0.80|0.61|9|11|
|2008|48|11|95|0.91|0.61|14|19|

_Source:_ Derived from Briceño-Garmendia, Smits, and Foster (2009).

In a regional context, Botswana’s utility ranks among the most efficient utilities, with hidden costs that are one-fourth of the next-most-efficient utilities (figure 11b). In 2009 mispricing of water services and—to a lesser extent—collection inefficiencies accounted on average for 19 percent of revenues, down from 29 percent in 2005. As a result of these major performance improvements, WUC ranks as one of the most efficient utilities in the continent.

**Figure 11. Hidden costs**

<!-- Start of picture text --> a. Evolution of hidden costs in Botswana’s water sector<br>35<br>30<br>25<br>20<br>15<br>10<br>5<br>0<br>2005 2006 2007 2008<br>Collection inneficiencies Losses Under-pricing<br>Percentage of the revenues<br><!-- End of picture text -->

> 5 The AICD exercise used full cost recovery as the norm to estimate underpricing or mispricing. Here we are following that definition to allow for consistent cross-country comparison. Admittedly, this norm is out of reach for most African utilities that by design aim at achieving ONLY operating cost recovery, leaving capital cost and a transfer or subsidy from the central government.

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

- **b. Hidden costs of selected water utilities, percentage of revenues**

<!-- Start of picture text --> Zambia<br>Malawi<br>Mozambique<br>Namibia<br>Lesotho<br>South Africa<br>Madagascar<br>Botswana<br>Resource-Rich<br>LIC-Fragile<br>LIC-NoFragile<br>MIC<br>SSA<br>0 50 100 150 200 250<br>Percentage of revenues<br>Losses Under-pricing Collection inneficiencies<br><!-- End of picture text --> _Source:_ Derived from Briceño-Garmendia, Smits, and Foster (2009). _Note:_ LIC = low-income country; MIC = middle-income country; SSA = Sub-Saharan Africa.

## **Challenges**

The government has consistently allocated significant resources to the sector despite challenging conditions. In particular, the provision of rural water in Botswana is more costly than in an average SubSaharan Africa country. This is first because Botswana’s large, sparsely settled rural areas often include vast spaces between settlements, making economies of scale difficult to realize. Second, due to high evaporation rates and a deep water table the costs of water provision are relatively high. Most of the rural supply comes from boreholes that are often quite deep (in some cases, hundreds of meters, as the layer of the Kalahari Desert can be quite thick). Exploration and operation of such deep wells is difficult and expensive (World Bank 2010).

The ongoing reforms of the water sector pose a big challenge to the WUC, which will take over the water supply for the whole country. The capital investments needed to continue providing high-quality services are not negligible. Expanding access to flush toilets and improved latrines in the years to come is a major challenge, as is keeping pace with the urbanization trend and reducing the practice of open defecation.

# Power

## **Achievements**

Botswana more than doubled its electrification rate between 2006 and 2008, pushing it from 22 percent to 50 percent; a remarkable achievement (table 9). According to the National Development Plan (NDP), the target is to reach 80 percent national power access and 60 percent rural access by 2016. Between 2004 and 2007, rural access to electricity also doubled, to 44 percent; which is a major improvement even though still falling short of national targets.

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

**Table 9. Benchmarking power indicators**

||Unit|Resource-rich<br>countries|Bots|wana|Middle-income<br>countries|
|---|---|---|---|---|---|
|||Mid-2000s|2006|2008|Late-2000s|
|Installed power generation capacity|MW/mil. people|43|132|132|796.2|
|Power consumption|kWH/capita|206|1,476|1,504|4,473|
|Power outages|Day/year|14.5|1.7||5.6|
|Firms’ reliance on own generator|% consumption||||0.5|
|Firms’ value lost due to power outages|% sales|6.99|1.40||0.8|
|Access to electricity|% population|46.05|22|50|59.9|
|Urban access to electricity|% population|79.41|45|47|83.7|
|Rural access to electricity|% population|28.03|9|44|33.4|
|Growth access to electricity|% population/year|2.38|—|—||
|Revenue collection|% billings|81.07|98|100|99.9|
|Distribution losses|% production|25.80|10.0|10.2|15.7|
|Cost recovery|% total cost|53.94|96|87||
|Total hidden costs as % of revenue|%|168.29|6.4|14.6||
|||Botswana<br>Mid-2000s<br>Late|<br>p<br>2000s|Countries with<br>redominantly<br>thermal<br>generation|Other<br>developing<br>regions|
|Power tariff (residential at 75 kWh)|U.S. cents|5.2|5.2|15.71||
|Power tariff (commercial at 900 kWh)|U.S. cents|||18.83|5.0–10.0|
|Power tariff (industrial at 50,000 kWh)|U.S. cents|||14.24||

_Source:_ Eberhard and others 2008. Derived from AICD electricity database (www.infrastructureafrica.org/aicd/tools/data **).** _Note:_ kWh = kilowatt-hour; MW = megawatts. — **=** Not available.

The Botswana Power Corporation (BPC) has achieved relatively high efficiency in the power distribution sector. Botswana was able to secure for many years relatively inexpensive power purchase prices in the past importing most of its power from South Africa. While South Africa was able to provide power, Botswana’s good governance practices allowed it to build up a national power utility with full operational autonomy and the country established sound power regulation policies and incentives. This scheme of buying power to South Africa and focusing in increasing access and quality of distribution, worked well for years until the generation crisis hit South Africa and the power supply from Eskom was reduced significantly. This external shock made it evident that Botswana needed to secure its own generation capacity and could no longer postpone the needed generation and transmission investments.

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

**Table 10. Performance of the electricity sector in select African countries**

|Country|**Botswana**<br>**(2006)**|Lesotho<br>(2009)|Madagascar<br>(2009)|Malawi (2006)|Mauritius<br>(2009)|Mozambique<br>(2007)|Namibia<br>(2006)|South Africa<br>(2007)|Zambia (2007)|Average|
|---|---|---|---|---|---|---|---|---|---|---|
|Number of power outages in a typical month|**1.7**|7.2|13.7|6.4|3.6|3.1|1.7|2.2|4.2|4.9|
|Average duration outages (hours)|**2.5**|5.5|2.3|2.3|3.2|4.3|2.7|4.5|2.9|3.4|
|Lost due to outages (% of sales)|**1.4**|6.7|7.7|22.6|2.2|2.4|0.7|1.6|3.7|5.4|
|Percentage of firms owning or sharing<br>generator|**16**|31|29|49|24|13|13|18|14|23|
|Percentage of electricity from generator|**18**|—|19|3|3|11|6|11|19|11.3|
|Delay in obtaining an electrical connection<br>(days)|**25**|14|92|98|19|13|9|16|97|42.6|
|Percentage of firms identifying electricity as<br>a major constraint|**7**|44|55|60|43|25|6|21|12|30.3|

Source: Enterprise Survey Database (www.enterprisesurveys.org). _Note:_ Year of the survey is in brackets.

In this context, the BPC was able to attain high efficiency and profitability while providing low-cost service. Collection-to-billings ratio has been nearly one to one. System losses have been also quite good—barely above the 10 percent efficient power utility benchmark. Tariffs are somewhat below cost recovery levels with the gap having widened slightly in recent years (table 11).

The BPC is one of the most efficient utilities in southern Africa, as measured by the hidden costs of its inefficiencies in past years (box 2). These inefficiencies represent about 14 percent of the BPC’s revenues, just around one-seventh of those of Zambia (figure 12a).

**Table 11. Evolution of hidden costs associated with the Botswana Power Corporation (BPC)**

||Volume of<br>electricity<br>produced /<br>purchased|System<br>losses|Collection<br>ratio|Average total<br>cost|Average<br>effective tariff|Total hidden<br>costs|Total hidden<br>costs|
|---|---|---|---|---|---|---|---|
||(GWh/year)|(%)|(%)|($/kWh)|($/kWh)|($ million/year)|(% revenues)|
|2004|2,642|10.4|100|0.049|0.052|517,923|0.4|
|2005|2,731|11.5|100|0.048|0.051|1,923,289|1.5|
|2006|2,917|10.0|98|0.050|0.048|7,889,571|6.4|
|2007|3,120|11.0|100|0.053|0.048|16,530,222|12.3|
|2008|3,215|10.2|100|0.055|0.048|20,661,247|14.6|

_Source_ : Derived from Briceño-Garmendia, Smits, and Foster (2009). _Note:_ kWh = kilowatt-hour; MW = megawatts.

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

# **Figure 12. Hidden costs**

- **a. Botswana’s power utility is comparatively efficient**

<!-- Start of picture text --> DRC Congo<br>Malawi<br>Tanzania<br>Zambia<br>Mozambique<br>Botswana<br>0 100 200 300 400 500 600 700<br>Percentage of revenues<br>Losses Underpricing Collection Inefficiencies<br><!-- End of picture text --> _Source:_ Derived from Briceño-Garmendia, Smits, and Foster (2009) and Briceño-Garmendia and Shkaratan (2010). _Note:_ [*] Projection. DRC = Democratic Republic of Congo.

# **Challenges**

The power sector is key to Botswana’s sustainable development and currently its major bottleneck. Botswana’s energy demand was about 3,660 gigawatt-hours (GWh) in 2008 (with a peak load of 500 megawatts, MW), which is projected to grow at about 6 percent per year to reach 5,300 GWh by 2017 (peak load of 850 MW) and 6,890 GWh by 2026 (peak load of 1,130 MW). The mining sector accounts for about 50 percent of the demand, the commercial sector about 20 percent, and the residential sector about 25 percent. Botswana has been dependent on power exports from South Africa. In 2008 Botswana imported about 2,440 GWh (67 percent of its power requirements) from Eskom, the national electric utility of South Africa, while its own small 25-year-old coal power plant (Morupule A, 4 x 33 MW) provided about 22 percent.

Botswana’s generation capacity is set to expand with the construction of Morupule B coal plant that will add 600 MW (4 x 150 MW) by 2012. This addition to generation capacity will make Botswana selfsufficient in power and offset South African plans to stop exporting power to SAPP as early as 2013.

Despite recent network extensions, access remains low. Power supply reaches only around 50 percent of the population, while access for an average upper MIC in Africa stands at 60 percent. While this is a comparatively small percentage, however, it represents a significant improvement from previous years, particularly in the rural areas. But further extension of the network will challenge the financial position of the BPC.

In the strict economic sense, BPC has faced sustained underpricing since 2006, with tariffs that did not allow for cost-recovery (figure 14). BPC’s cost recovery capacity deteriorated due to an increase in the South African Eskom’s power supply prices. Due to other financial resources available to the BPC, 26
BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE the full impact of under-pricing was not felt on the company’s balance sheet until 2009, at which point the net financial position went into the red (figure 13)

## **Figure 13. Hidden costs**

BPC’s economic inefficiencies, driven by underpricing (hidden costs as percentage of revenues, 2004-2009) <!-- Start of picture text --> 25 2.0<br>20 1.5<br>15<br>1.0<br>10<br>0.5<br>5<br>0 0.0<br>-5 2004 2005 2006 2007 2008 2009 -0.5<br>Losses Underpricing<br>Collection Inefficiencies Net financial position per kWh<br>US cents per kWh<br>Percentage of the revenues<br><!-- End of picture text --> _Source:_ Derived from Briceño-Garmendia, Smits, and Foster (2009) and Briceño-Garmendia and Shkaratan (2010). _Note:_ [*] Projection. Opex = operating expenditure; kWh = kilowatt-hour.

Since 2009, Botswana has made bold efforts to improve the power sector. In tandem with Morupule, the country has implemented important tariff adjustments: 30 percent in 2010, another 30 percent increase in June 2011 with a third increase scheduled for 2012. These decisions are temporarily correcting the misalignment tariffs-costs and set BPC is a very strong path to solid financial viability. Yet, for a permanent solution, particularly after the debt service of Morupule kicks in, Botswana would need to adopt a new electricity tariff policy and ensure its implementation through an independent regulator.

# Information and communication technologies

## **Achievements**

Botswana has made enormous strides in providing access to information and communication technologies (ICTs), especially mobile communications. In just over a decade, the number of mobile subscriptions went from zero to exceeding the country’s population by the end of 2010. While the real level of access is lower than these numbers suggest, accounting for duplicate and inactive subscriptions and the trend towards dual-SIM card phones,<sup>6</sup> Botswana’s mobile penetration of 118 per 100 people in 2010 was the highest in Sub-Saharan Africa (table 12).

Botswana’s high mobile penetration is partly due to the early introduction of competition in 1998, when two operators were licensed, Mascom and Orange. This duopoly continued for a decade before a third mobile operator, a subsidiary of the incumbent fixed-line operator Botswana Telecommunications

> 6 According to one survey carried out between 2007 and 2008, 59.5 percent of Botswana’s population 16 years and older had a mobile phone. This corresponds to some 46 percent of total mobile subscriptions in 2008, giving some idea of the high number of duplicate and inactive subscriptions. Applying the same ratio to the 2009 mobile subscriptions results in an estimate of 87 percent of those aged 16 and older with a mobile phone. The survey data are published in Gillwald and Stork (2008).

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Corporation (BTC), was licensed in 2008. The intensified competition from the third mobile operator sustained growth, pushing penetration over 100 percent in 2010.<sup>7</sup>

**Table 12. Benchmarking ICT indicators**

||||Botswana||Botswan|a<br>Upper-middle-<br>income group|Sub-Saharan<br>African region|
|---|---|---|---|---|---|---|---|
||||2000<br>20|05||as of 2009||
|GSM coverage|% population u|nder signal|63|85||99<br>94|56|
|International bandwidth|bits/person||4|22||220<br>1,281|34|
|Internet|users/100 peop|le|1.5|2.7||6.2<br>34.6|6.5|
|Landline|subscribers/10|0 people|8.2|7.2||7.4<br>22.1|1.5|
|Mobile phone|subscribers/10|0 people|12.9|42.0||96.1<br>100.6|33.3|
|||2005||200|9||2010|
|||Botswana|Botswana|Upper-m<br>income g|iddle-<br>roup|Sub-Saharan<br>African region|Botswana|
|Price of monthly mobile ba|sket|10.2|7.5||9.9|11.8|7.2|
|Price of monthly fixed-line|basket|8.0|15.9||11.7|11.6|15.2|
|Price of monthly fixed broa|dband|—|55.5||26.3|100.1|54.7|
|Price of a call to United Sta|tes per minute|0.88|0.25||—|0.8|0.24|
|Price of an inter-Africa call|per minute|—|0.80||—|1.0|0.76|

_Source:_ Adapted from the BTC, Mascom, AICD, and World Bank ICT At-a-Glance. _Note:_ 2010 tariff data converted to $ using 2009 annual average exchange rates. — = Not available.

Botswana has taken most of the steps necessary to create a sustainable ICT sector. Prior to the introduction of mobile competition, the Botswana Telecommunications Authority (BTA) was created as a sector regulator in 1996. In 2006 wide-ranging reforms were introduced including the legalization of Voice over Internet Protocol (VoIP) and a technology-neutral licensing scheme whereby existing operators could provide any telecommunications service. Mascom and Orange launched their own international voice gateways and Internet services while the BTC entered the mobile market. One reform that remained stalled for some time was the privatization of the BTC, but plans are underway for an IPO to sell 49 per cent of its shares of the Botswana Stock Exchange.

# **Challenges**

In contrast to the performance of the mobile sector Botswana’s fixed-line sector is stagnant, and the number of subscriptions has fallen since 2008. Internet penetration is also below average considering the nation’s status as an upper-middle-income economy. Botswana’s fixed-line penetration was some three times less than the upper-middle-income average in 2008, the peak year. Growth has been stagnant, due the popularity of mobile phones as well as tariff rebalancing (raising local call charges and reducing international call tariffs). Although fixed-line competition is legal, in practice there is no strong

> 7 - See International Telecommunication Union (ITU) Mobile Cellular Statistics, available at: http://www.itu.int/ITU <u>D/ict/statistics/.</u>

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE competitor to the BTC. The privatization of the BTC had also been postponed until 2011 due to the uncertainty of the global economy.<sup>8</sup> Internet penetration is low, some six times less than the upper-middle-income average. According to the most recent survey, carried out between 2007 and 2008, Internet penetration among those aged 16 years and older was 5.8 percent (Gillwald and Stork 2008). Broadband pricing is below the Sub-Saharan Africa average but nonetheless remains high for most of Botswana. The BTC charges Internet service providers (ISPs) a fee to provide broadband service over fixed telephone lines, which is allegedly not cost based. Furthermore, since the BTC also provides retail broadband service there is a perception that it is favoring its own Internet subsidiary, Botsnet.

Despite a relatively high level of international bandwidth (figure 14), connectivity remains a challenge due to Botswana’s landlocked situation. The BTC has a national fiber backbone with connections to the SAT-3 undersea cable. Greater redundancy is planned through connections to the Eastern Africa Submarine Cable System (EASSy) and West Africa Cable System (WACS). The BTC’s control over almost all fixed Internet infrastructure has resulted in high wholesale costs, with a number of ISPs using alternative VSAT<sup>9</sup> connections (Kende and Gibb 2009). The liberalization of the sector should see mobile operators creating alternate international gateways to support their recently launched wireless broadband services. It is expected that this will inject greater wholesale and retail competition into the broadband market.

Other factors contributing to low Internet penetration are exogenous to the ICT services sector. Home computer penetration is only 7 percent (Central Statistics Office 2009), the level of digital literacy is low, and there is a lack of local content. Another problem is a lack of electricity in certain areas.

Although mobile performance has been impressive, there is still room for improvement. Mobile tariffs have not decreased substantially in local currency terms. While mobile coverage is relatively high, there are still pockets of rural areas that do not have a signal. The government’s Nteletsa project aims to remedy this by providing subsidies to mobile operators to extend coverage in rural areas.

> 8 ―The privatization effort, initiated in 2006 was postponed in 2008, due to unfavorable capital markets. Deteriorating global capital markets mean privatisation transactions can not take place at the present time‖ (BTC 2009). An IPO began in 2011 (see: <u>http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=13775542).</u>

> 9 Very small aperture terminal.

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

**Figure 14. Botswana’s Internet market benchmarked against its southern African peers**

<!-- Start of picture text --> a. Internet service trends, Botswana, 2000–08 b. Internet service trends, southern Africa<br>6.0 200 20 350<br>18<br>180 300<br>5.0 16<br>160<br>14 250<br>140<br>4.0<br>12<br>120 200<br>10<br>3.0 100 150<br>8<br>80<br>2.0 6 100<br>60<br>4<br>40 50<br>1.0 2<br>20<br>0 0<br>0.0 0<br>2000 2001 2002 2003 2004 2005 2006 2007 2008<br>Internet users (per 100 people)<br>International Internet bandwidth (bits per second per Internet users (per 100 people)<br>person)<br>Internet users<br>Internet users<br>International internet bandwidth International internet bandwidth<br>Madagascar Malawi Angola Zambia Mozambique Lesotho Zimbabwe Botswana South Africa Namibia Mauritius<br><!-- End of picture text --> _Source:_ AICD. Information and Communications for Development database

# Financing Botswana’s infrastructure

To meet its most pressing infrastructure needs and catch up with developing countries in other parts of the world, Botswana needs to expand its infrastructure assets in key areas (table 13). The targets outlined in table 13 are purely illustrative, but they represent a level of aspiration that is not unreasonable. Developed in a standardized way across African countries, they allow for cross-country comparisons of the affordability of meeting the targets, which can be modified or delayed as needed to achieve financial balance. Admittedly, for middle-income countries in Africa, the proposed targets might look relatively modest to what the country can and has assumed as policy targets. For example, achieving the Millennium Development Goal in water and sanitation looks like a modest goal for Botswana; whose access policy is to attain universal access to piped water by the end of 2016. Therefore, the spending needs proposed here can be regarded very much as a lower bound spending needs for Botswana.

Meeting these illustrative infrastructure targets in the country would cost $785 million per year over a decade. Capital expenditure would account for 55 percent of this requirement. Meeting growing demand for power—the sector with the highest spending needs—would require an estimated $462 million per year to install almost 2,141 MW of new generation capacity and expand electrification. The water and sanitation sector is the area with the second-highest spending needs: about $141 million will be needed each year to meet the MDGs, split evenly between capital and current expenditure needs. Another $107 million per year will be required by the transport sector. While less than the amounts needed for other sectors, requirements for ICT are also high in absolute terms, amounting to around $70 million a year (table 14).

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

**Table 13. Illustrative investment targets for infrastructure in Botswana**

||Economic target|Social target|
|---|---|---|
|ICT|Install fiber-optic links to neighboring capitals and<br>submarine cable.|Provide universal access to GSM signal and public<br>broadband facilities.|
|Irrigation|Develop additional 25,243 hectares of large-scale and<br>553 hectares of economically viable small-scale irrigation.|n.a.|
|Power|Develop 2,141 MW of new generation capacity and 2,120<br>MW interconnectors.|Increase electrification to 80 percent of the<br>population.|
|Transport|Achieve regional (national) connectivity with good-quality<br>2-lane (1-lane) paved road.|Provide rural road access to 79 percent of the<br>highest-value agricultural land, and urban road<br>access within 500 meters.|
|WSS|n.a.|Achieve Millennium Development Goals, clear sector<br>rehabilitation backlog.|

_Source:_ Mayer and others 2009; Rosnes and Vennemo 2009; Carruthers, Krishnamani, and Murray 2009; You and others 2009. _Note:_ WSS = water supply and sanitation; ICT = information and communication technology; GSM = global system for mobile communications. n.a. = Not applicable.

**Table 14. Indicative infrastructure spending needs in Botswana, 2006–15**

|$ million per year||||
|---|---|---|---|
|Sector|Capital expenditure|Operations and<br>maintenance|Total needs|
|ICT|38|32|70|
|Irrigation|5|—|5|
|Power|261|201|462|
|Transport|57|50|107|
|Water supply and sanitation|70|71|141|
|Total|431|354|785|

_Source_ : Mayer and others 2009; Rosnes and Vennemo 2009; Carruthers, Krishnamani, and Murray 2009; You and others, AICD 2009. Derived from models that are available online at www.infrastructureafrica.org/aicd/tools/models. _Note:_ WSS = water supply and sanitation; ICT = information and communication technology.

Botswana’s infrastructure spending needs are comparatively low in GDP terms. Botswana’s burden of needs, at 7.5 percent of GDP, is among lowest in the region (figure 15) and seems very affordable for the country. Investment would absorb around 4 percent of GDP, less than a quarter of what China invested in its infrastructure during the mid-2000s.

Botswana already spends a sizable amount ($815 million per year) to meet its infrastructure needs (table 15). About 53 percent of the total is allocated to capital expenditure and 47 percent to operating expenditures. Operating expenditures are entirely covered from budgetary resources and payments by infrastructure users. Most of capital expenditure funding—around 93 percent—comes out of state coffers. The private sector accounts for another 4 percent of capital spending. Non-OECD finance at 2 percent and ODA flows at less than 1 percent also play a smaller, but nonetheless significant, role.

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

**Figure 15. Botswana’s infrastructure spending needs are among the lowest in the region, relative to GDP**

Estimated infrastructure spending needed to meet targets, as percentage of GDP <!-- Start of picture text --> SSA<br>LIC-Fragile<br>LIC-NoFragile<br>SADC<br>Resource-Rich<br>MIC<br>Congo, Dem. Rep.<br>Ethiopia<br>Kenya<br>Sudan<br>Uganda<br>South Africa Capex O&M<br>Cape Verde<br>Botswana<br>% of GDP 0 10 20 30 40 50 60 70<br><!-- End of picture text --> Source: Foster and Briceño-Garmendia 2009.

Note: LIC = low-income country; MIC = middle-income country; SADC = Southern African Development Community; SSA = Sub-Saharan Africa; GDP = gross domestic product; O&M = operations and maintenance; CAPEX = capital expenditure.

Botswana’s existing spending amounts to around 7.8 percent of GDP (figure 17). This is close to the average for middle-income states and for the Southern African Development Community (SADC). Relative to its peer group, Botswana is more heavily reliant on the public budget for ICT, transport, and water and sanitation investments. Botswana’s spending effort on transport and water and sanitation is substantially higher than the respective average for MICs (figure 17). Consequently, the largest share of infrastructure spending goes to water and sanitation (40 percent), followed by transport (35 percent) and ICT (18 percent).

The composition of infrastructure financing in Botswana differs markedly from African peers. In particular, infrastructure is funded almost exclusively by public investment, reflecting the country’s strong public finances. Particularly striking is the low level of private participation in infrastructure; even in the ICT sector where such funding typically dominates.

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

**Table 15. Financial flows to Botswana’s infrastructure, average 2001 to 2007**

$ millions per year

||O&M<br>Public sector|Public<br>sector|Ca<br>ODA|pital expenditur<br>Non-OECD<br>financiers|e<br>PPI|Total<br>CAPEX|Total<br>spending|
|---|---|---|---|---|---|---|---|
|ICT|80|56|0|0|19|76|155|
|Irrigation|—|—|0|0|0|0|0|
|Power (*)|101|35|1|0|0|35|137|
|Transport|106|140|0|9|0|149|256|
|WSS|95|172|1|0|0|172|268|
|Total|383|402|1|9|19|433|815|

_Source:_ Derived from Foster and Briceño-Garmendia (2009). _Note:_ O&M = operations and maintenance; ODA = official development assistance; PPI = private participation in infrastructure; CAPEX = capital expenditure; OECD = Organisation for Economic Co-operation and Development; WSS = water supply and sanitation; ICT = information and communication technology.

— = Not available.

(*) Table only considers period 2001-7, therefore it excludes the recent spending on Morupule

**Figure 16. Botswana’s existing infrastructure spending level is adequate**

<!-- Start of picture text --> SSA<br>LIC-NoFragile<br>SADC<br>MIC<br>LIC-Fragile<br>Resource-Rich<br>Cape Verde<br>Ethiopia<br>Kenya<br>Uganda<br>Botswana Capex O&M<br>South Africa<br>Congo, Dem. Rep.<br>% of GDP 0 5 10 15 20 25<br><!-- End of picture text --> _Source:_ Derived from Foster and Briceño-Garmendia (2009). _Note:_ LIC = low-income country; MIC = middle-income country; SADC = Southern African Development Community; SSA = Sub-Saharan Africa; GDP = gross domestic product; O&M= operations and maintenance; CAPEX = capital expenditure.

Despite its strong economy and good investment climate, during the mid-2000s, Botswana captured private investment commitments worth around only 0.2 percent of GDP, predominantly in the ICT sector. Most of Botswana’s peers, many of them with much less favorable economic fundamentals, have done significantly better in this area. Countries such as the Democratic Republic of Congo, Liberia, Nigeria, Uganda, Kenya, and Senegal have all captured between 1.8 and 2.5 percent of GDP, while the most successful country in this regard—Guinea-Bissau—has captured in excess of 3.0 percent of GDP.

33
BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE The recent experience of the Morupule coal-fired generation project, half of which has been funded with private resources, illustrates Botswana’s considerable to raise private finance for other areas of infrastructure; such as power.

**Figure 17. Botswana’s pattern of capital investment in infrastructure differs from that of comparator countries**

<!-- Start of picture text --> Investment in infrastructure sectors as percentage of GDP, by source<br>Botswana<br>1.8<br>1.6<br>1.4 MIC<br>1.2<br>1.0<br>0.8<br>0.6<br>0.4<br>0.2<br>0.0<br>Public ODA Non-OECD Private<br>Source : Derived from Briceño-Garmendia, Smits, and Foster (2009).<br>Note: Private investment includes self-financing by households. ODA = official development assistance; OECD = Organisation for Economic<br>Co-operation and Development; ICT = information and communication technology; GDP = gross domestic product; WSS = water supply and<br>sanitation; MIC = middle-income country.<br>Figure 18. Many African countries capture more private investment than Botswana<br>3.5<br>3.0<br>2.5<br>2.0<br>1.5<br>1.0<br>0.5<br>0.0<br>Power ICT Transport Water<br>% of GDP<br>% GDP<br><!-- End of picture text --> _Source:_ Private Participation in Infrastructure Database (2009). _Note:_ GDP = gross domestic product; ICT = information and communication technology.

# Efficiency gap

As of 2008, around $68 million of additional resources were lost each year by inefficiencies of different kinds (table 16). Budget underexecution was a significant issue in the transport sector, leading to 34
BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE underspending of about $27.5 million worth of resources allocated to the sector. Lack of cost recovery via tariffs was a significant issue for Botswana’s power and water utilities; representing losses of $20.3 million in the power sector and $12.9 million in the water sector annually.

Fortunately the government took rapid action to tackle and correct most of these inefficiencies. Nowadays Botswana reports full execution of capital budgets, while tariffs schedules and levels for the power and water sectors have been aligned with costs. As a result of these sound policy decisions, the country has been able to recoup close to $68 million a year that was being lost to inefficiency in the space of just two years.

**Table 16. Botswana’s historical losses due to operational efficiency (as of 2008)**

||ICT|Irrigation|Power|Transport|WSS|Total|
|---|---|---|---|---|---|---|
|Underrecovery of costs|—|n.a.|20.3|Na.|12.9|33.2|
|Overstaffing|—|—|n.a.|—|n.a.|—|
|Distribution losses|—|—|0.4|—|0.0|0.4|
|Undercollection|—|n.a.|0.0|n.a.|1.3|1.3|
|Low budget execution|—|n.a.|0.0|27.5|5.5|33.0|
|Total|—|n.a.|20.7|27.5|19.7|67.9|

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

# Funding gap

As of 2008, no major funding gaps were found for basic infrastructure provision in Botswana. The one exception was the power sector, where spending allocations were falling short of requirements by some $305 million annually. Once again, the government has moved swiftly and decisively to address this funding shortfall for power, by raising capital for the $1.6 billion Morupule power generation project. As a result, the funding gap for that sector has now closed.

**Table 17. Funding gaps by sector (as of 2008)**

$ millions per year

||ICT|Irrigation|**Power**|Transport|WSS|Total|
|---|---|---|---|---|---|---|
|Spending needs|(70)|(5)|**(462)**|(107)|(141)|(785)|
|Existing spending|155|n.a.|**137**|256|268|816|
|Reallocation potential within sectors|0|n.a.|**0**|0|0|0|
|Efficiency gap|—|0|**21**|27|20|68|
|Funding gap||**n.a.**|**(305)**||||

_Source_ : Derived from Foster and Briceño-Garmendia (2009).

_Note:_ Potential overspending across sectors is not included in the calculation of the funding gap, because it cannot be assumed that it would be applied toward other infrastructure sectors. Figures based on annual averages for the period 2001–07. — = Not available. n.a. = not applicable.

35
BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Of course, as noted above, the spending needs defined in this study are for a standardized package of basic infrastructure. Given Botswana’s strong economy and public finances, delivering this basic package does not look to be a significant problem. The country’s aspirations, however, may legitimately go much further.

Nonetheless, Botswana stands out among its African peers, as one of the few countries that faces neither serious efficiency nor funding gaps for infrastructure; and that is in itself a remarkable achievement.

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

# Bibliography and references

This country report draws upon a wide range of papers, databases, models, and maps that were created as part of the Africa Infrastructure Country Diagnostic. All of these can be downloaded from the project website: www.infrastructureafrica.org. For papers go to the document page (www.infrastructureafrica.org/aicd/documents), for databases to the data page (www.infrastructureafrica.org/aicd/tools/data), for models go to the models page (www.infrastructureafrica.org/aicd/tools/models), and for maps to the map page (www.infrastructureafrica.org/aicd/tools/maps ). The references for the papers that were used to compile this country report are provided in the table below.

## General

- AICD (Africa Infrastructure Country Diagnostic). ―Africa’s Infrastructure: A Time for Transformation.‖ www.infrastructureafrica.org.

Foster, Vivien, and Cecilia Briceño-Garmendia, eds. 2009. _Africa’s Infrastructure: A Time for_

- _Transformation._ Paris and Washington, DC: Agence Française de Développement and World Bank.

World Bank. 2010. _Botswana Public Expenditure Review_ . Pretoria: World Bank.

## Financing

Briceño-Garmendia, Cecilia, Karlis Smits, and Vivien Foster. 2009. ―Financing Public Infrastructure in Sub-Saharan Africa: Patterns and Emerging Issues.‖ AICD Background Paper 15, Africa Region, World Bank, Washington, DC.

## Growth

- Calderón, César. 2009. ―Infrastructure and Growth in Africa.‖ Policy Research Working Paper 4914, World Bank, Washington, DC.

- Escribano, Alvaro, J. Luis Guasch, and Jorge Pena. 2010. ―Assessing the Impact of Infrastructure Quality on Firm Productivity in Africa.‖ Policy Research Working Paper 5191, World Bank, Washington, DC.

- Yepes, Tito, Justin Pierce, and Vivien Foster. 2009. ―Making Sense of Africa’s Infrastructure Endowment: A Benchmarking Approach.‖ Policy Research Working Paper 4912, World Bank, Washington, DC.

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

# Information and communication technologies

Ampah, Mavis, Daniel Camos, Cecilia Briceño-Garmendia, Michael Minges, Maria Shkaratan, and Mark Williams. 2009. ―Information and Communications Technology in Sub-Saharan Africa: A Sector Review.‖ AICD Background Paper 10, Africa Region, World Bank, Washington, DC.

BTC (Botswana Telecommunications Corporation). 2009. _Annual Report_ . Gaborone CSO (Central Statistics Office). 2009. _Botswana Demographic Survey 2006_ . Gaborone.

- Gillwald, Alison, and Christoph Stork. 2008. ―Towards Evidence-based ICT Policy and Regulation: ICT Access and Usage in Africa.‖ researchICTafrica.net.

Kende, Michael, and James Gibb. 2009. _Market Study of the Telecoms and ICT Sector in Botswana_ .

Mayer, Rebecca, Ken Figueredo, Mike Jensen, Tim Kelly, Richard Green, and Alvaro Federico Barra. 2009. ―Connecting the Continent: Costing the Needs for Spending on ICT Infrastructure in Africa.‖ AICD Background Paper 3, Africa Region, World Bank, Washington, DC.

Pheko, Thari. 2009. _Botswana Country Report to CRASA_ . www.crasa.org/countryreport09.htm.

- Williams, Mark; Mayer, Rebecca, and Minges, Michael (2011) ―Africa’s ICT Infrastructure: Building on the Mobile Revolution‖, The World Bank, available at: <u>http://siteresources.worldbank.org/INFORMATIONANDCOMMUNICATIONANDTECHNOL OGIES/Resources/AfricasICTInfrastructure_Building_on_MobileRevolution_2011.pdf.</u>

# Irrigation

FAO (Food and Agriculture Organization). 2004. ―Aquastata: Botswana Country Profile.‖ www.fao.org/nr/water/aquastat/main/index.stm.

- Svendsen, Mark, Mandy Ewing, and Siwa Msangi. 2008. ―Watermarks: Indicators of Irrigation Sector Performance in Africa.‖ AICD Background Paper 4, Africa Region, World Bank, Washington, DC.

- You, L., C. Ringler, G. Nelson, U. Wood-Sichra, R. Robertson, S. Wood, G. Zhe, T. Zhu, and Y. Sun. 2009. ―Torrents and Trickles: Irrigation Spending Needs in Africa.‖ AICD Background Paper 9, Africa Region, World Bank, Washington, DC

# Power

- Eberhard, Anton, Vivien Foster, Cecilia Briceño-Garmendia, Fatimata Ouedraogo, Daniel Camos, and Maria Shkaratan. 2008. ―Underpowered: The State of the Power Sector in Sub-Saharan Africa.‖ AICD Background Paper 6, Africa Region, World Bank, Washington, DC.

- Foster, Vivien, and Jevgenijs Steinbuks. 2009. ―Paying the Price for Unreliable Power Supplies: In-House Generation of Electricity by Firms in Africa.‖ Policy Research Working Paper 4913, World Bank, Washington, DC.

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

- Rosnes, Orvika, and Haakon Vennemo. 2009. ―Powering Up: Costing Power Infrastructure Spending Needs in Sub-Saharan Africa.‖ AICD Background Paper 5, Africa Region, World Bank, Washington, DC.

# Transport

Bofinger, Heinrich C. 2009. ―An Unsteady Course: Growth and Challenges in Africa’s Air Transport Industry.‖ AICD Background Paper 16, Africa Region, World Bank, Washington, DC.

- Bullock, Richard. 2009. ―Off Track: Sub-Saharan African Railways.‖ AICD Background Paper 17, Africa Region, World Bank, Washington, DC.

- Carruthers, Robin, Ranga Rajan Krishnamani, and Siobhan Murray. 2009. ―Improving Connectivity: Investing in Transport Infrastructure in Sub-Saharan Africa.‖ AICD Background Paper 7, Africa Region, World Bank, Washington, DC.

- Curtis, Barney. 2009. ―The Chirundu Border Post: Detailed Monitoring of Transit Times.‖ SSATP Discussion Paper No. 10, Regional Integration and Transport—RIT Series, Africa Region, World Bank, Washington, DC.

- Gwilliam, Ken, Vivien Foster, Rodrigo Archondo-Callao, Cecilia Briceño-Garmendia, Alberto Nogales, and Kavita Sethi. 2008. ―The Burden of Maintenance: Roads in Sub-Saharan Africa.‖ AICD Background Paper 14, Africa Region, World Bank, Washington, DC.

- Kumar, Ajay, and Fanny Barrett. 2008. ―Stuck in Traffic: Urban Transport in Africa.‖ AICD Background Paper 1, Africa Region, World Bank, Washington, DC.

- Ocean Shipping Consultants, Inc. 2009. ―Beyond the Bottlenecks: Ports in Africa.‖ AICD Background Paper 8, Africa Region, World Bank, Washington, DC.

# Water supply and sanitation

Banerjee, Sudeshna, Vivien Foster, Yvonne Ying, Heather Skilling, and Quentin Wodon. 2008. ―Cost Recovery, Equity, and Efficiency in Water Tariffs: Evidence from African Utilities.‖ AICD Working Paper 7, World Bank, Washington, DC.

- Banerjee, Sudeshna, Heather Skilling, Vivien Foster, Cecilia Briceño-Garmendia, Elvira Morella, and Tarik Chfadi. 2008. ―Ebbing Water, Surging Deficits: Urban Water Supply in Sub-Saharan Africa.‖ AICD Background Paper 12, Africa Region, World Bank, Washington, DC.

- Keener, Sarah, Manuel Luengo, and Sudeshna Banerjee. 2009. ―Provision of Water to the Poor in Africa: Experience with Water Standposts and the Informal Water Sector.‖ AICD Working Paper 13, World Bank, Washington, DC.

- Morella, Elvira, Vivien Foster, and Sudeshna Ghosh Banerjee. 2008. ―Climbing the Ladder: The State of Sanitation in Sub-Saharan Africa.‖ AICD Background Paper 13, Africa Region, World Bank, Washington, DC.

Water Utilities Corporation. 2008–09. _Annual Report_ . Gaborone.

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BOTSWANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

- WHO (World Health Organization) Joint Monitoring Program (JMP). 2010. ―Botswana Estimates for the Use of Improved Drinking-Water Sources.‖ www.wssinfo.org/resources/documents.html.

- ———. 2010. ―Botswana Estimates for the Use of Improved Sanitation Facilities.‖ www.wssinfo.org/resources/documents.html.

World Bank. 2009, Agreement for Advisory Services, Draft as of October 15, 2009, Washington D.C.

# Other

IMF. 2010. African Department Databse and Sub-Saharan Africa Regional Economic Outlook, April 2010.

40
# About AICD and its country reports

This study is a product of the Africa Infrastructure Country Diagnostic (AICD), a project designed to expand the world’s knowledge of physical infrastructure in Africa. The AICD provides a baseline against which future improvements in infrastructure services can be measured, making it possible to monitor the results achieved from donor support. It also offers a solid empirical foundation for prioritizing investments and designing policy reforms in Africa’s infrastructure sectors.

The AICD is based on an unprecedented effort to collect detailed economic and technical data on African infrastructure. The project has produced a series of original reports on public expenditure, spending needs, and sector performance in each of the main infrastructure sectors, including energy, information and communication technologies, irrigation, transport, and water and sanitation. _Africa’s Infrastructure— A Time for Transformation_ , published by the World Bank and the Agence Française de Développement (AFD) in November 2009, synthesized the most significant findings of those reports.

The focus of the AICD country reports is on benchmarking sector performance and quantifying the main financing and efficiency gaps at the country level. These reports are particularly relevant to national policy makers and development partners working on specific countries.

The AICD was commissioned by the Infrastructure Consortium for Africa following the 2005 G8 (Group of Eight) summit at Gleneagles, Scotland, which flagged the importance of scaling up donor finance for infrastructure in support of Africa’s development.

The first phase of the AICD focused on 24 countries that together account for 85 percent of the gross domestic product, population, and infrastructure aid flows of Sub-Saharan Africa. The countries are: Benin, Burkina Faso, Cape Verde, Cameroon, Chad, Côte d’Ivoire, the Democratic Republic of Congo, Ethiopia, Ghana, Kenya, Lesotho, Madagascar, Malawi, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, South Africa, Sudan, Tanzania, Uganda, and Zambia. Under a second phase of the project, coverage was expanded to include as many of the remaining African countries as possible.

Consistent with the genesis of the project, the main focus is on the 48 countries south of the Sahara that face the most severe infrastructure challenges. Some components of the study also cover North African countries so as to provide a broader point of reference. Unless otherwise stated, therefore, the term _Africa_ is used throughout this report as shorthand for _Sub-Saharan Africa._ The World Bank has implemented the AICD with the guidance of a steering committee that represents the African Union (AU), the New Partnership for Africa’s Development (NEPAD), Africa’s regional
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