metadata: authors: 0: author: Foster,Vivien
1: author: Pushak,Nataliya
count: Ghana
docna: 0: docna: Ghana's infrastructure : a continental perspective
docty: Policy Research Working Paper
subtopic: Sanitation and Sewerage,Engineering,Ports & Waterways,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 contributed just over one
            percentage point to Ghana's annual per capital GDP
            growth during the 2000s. Raising the countrys
            infrastructure endowment to that of the region's
            middle-income countries could boost the annual growth rate
            by more than 2.7 percentage points. Ghana has an advanced
            infrastructure platform when compared with other low-income
            countries in Africa. The countrys coverage levels for rural
            water, electricity, and GSM signals are impressive. A large
            share of the road network is in good or fair condition.
            Institutional reforms have been adopted in the ICT, ports,
            roads, and water supply sectors. Ghanas most pressing
            challenges lie in the power sector, where outmoded
            transmission and distribution assets, rapid demand growth,
            and periodic hydrological shocks leave the country reliant
            on high-cost oil-based generation. Exceptionally high losses
            in water distribution leave little to reach end customers,
            who are thus exposed to intermittent supplies. Addressing
            Ghana's infrastructure challenges will require raising
            annual expenditures to $2.3 billion. The country already
            spends about $1.2 billion per year on infrastructure,
            equivalent to about 7.5 percent of GDP. A further $1.1
            billion is lost each year to inefficiencies, notably
            underpricing of power.Ghana's annual infrastructure
            funding gap is about $0.4 billion per year, chiefly related
            to power and water. Following its recent oil discoveries,
            Ghana can raise additional public funding from increased tax
            receipts. The country has several strong areas on which to
            build and a solid economic base from which to fund
            incremental efforts.
geo_reg_key: 1927320,517191
repnme: repnme: Ghana's infrastructure : a continental perspective
display_title: Ghana's infrastructure : a
            continental perspective
listing_relative_url: /research/2011/03/13922247/ghanas-infrastructure-continental-perspective
topicv3: Sanitation m1326453 2000,Water m1326522 137,Transport m1326661 135,Ports m1327399 167,Traffic Management m1583399 4231
publishtoextweb_dt: 2010-07-01T00:00:00Z
historic_topic: Transport,Infrastructure Economics and Finance,Water Supply and Sanitation,Energy
no_of_pages: 52
author_keys: 0: author_key: 452278
1: author_key: 757742
model_extractions: WPS5600 Policy Research Working Paper 5600 Ghana’s Infrastructure A Continental Perspective _Vivien Foster Nataliya Pushak_ The World Bank Africa Region Sustainable Development Department March 2011
Policy Research Working Paper 5600

# **Abstract**

Infrastructure contributed just over one percentage point to Ghana’s annual per capital GDP growth during the 2000s. Raising the country’s infrastructure endowment to that of the region’s middle-income countries could boost the annual growth rate by more than 2.7 percentage points.

Ghana has an advanced infrastructure platform when compared with other low-income countries in Africa. The country’s coverage levels for rural water, electricity, and GSM signals are impressive. A large share of the road network is in good or fair condition. Institutional reforms have been adopted in the ICT, ports, roads, and water supply sectors.

Ghana’s most pressing challenges lie in the power sector, where outmoded transmission and distribution assets, rapid demand growth, and periodic hydrological shocks leave the country reliant on high-cost oil-based generation. Exceptionally high losses in water distribution leave little to reach end customers, who are thus exposed to intermittent supplies.

Addressing Ghana’s infrastructure challenges will require raising annual expenditures to $2.3 billion. The country already spends about $1.2 billion per year on infrastructure, equivalent to about 7.5 percent of GDP. A further $1.1 billion is lost each year to inefficiencies, notably underpricing of power.

Ghana’s annual infrastructure funding gap is about $0.4 billion per year, chiefly related to power and water. Following its recent oil discoveries, Ghana can raise additional public funding from increased tax receipts. The country has several strong areas on which to build and a solid economic base from which to fund incremental efforts.

This paper is a product of the Sustainable Development Department, 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 vfoster@worldbank.org and/or 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
# Ghana’s Infrastructure: A Continental Perspective

## **_Vivien Foster and Nataliya Pushak_**

### **Acknowledgments**

This paper draws upon a wide range of 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, Elvira Morella on water and sanitation, Michael Minges on information and communication technologies, 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 Ishac Diwan (country director), Katherine Bain (country manager), Peter Kristensen (sector leader), Ventura Bengoechea and Emmanuel Nkrumah (water and sanitation), Sunil Mathrani (power), Mavis Ampah (ICT), John Richardson (roads), and Sebastien Dessus (macro).
# Contents

|**The continental perspective**|**2**|
|---|---|
|**Why infrastructure matters**|**2**|
|**The state of Ghana’s infrastructure**|**4**|
|Roads|10|
|Rail|12|
|Ports|13|
|Air transport|14|
|Water supply and sanitation|16|
|Power|21|
|Water resources|27|
|Information and communication technologies|30|
|**Financing Ghana’s infrastructure**|**33**|
|How much more can be done within the existing resource envelope?|37|
|Annual funding gap|42|
|What else can be done?|42|
|**References**|**44**|
|General|44|
|Growth|44|
|Financing|44|
|Information and communication technologies|45|
|Irrigation|45|
|Power|45|
|Transport|45|
|Water supply and sanitation|46|
|**About AICD and its country reports**|**47**|

iii
nfrastructure contributed just over one percentage point to Ghana’s improved per capita growth performance during the 2000s, though unreliable power supplies held growth back by 0.5 percentage Ipoints. Raising the country’s infrastructure endowment to that of the region’s middle-income countries could boost annual growth by more than 2.7 percentage points.

Today, Ghana has a very advanced infrastructure platform when compared with other low-income countries in Africa. But as the country approaches the middle-income threshold, it will need to focus on upgrading its infrastructure indicators in line with this benchmark.

Ghana has succeeded in increasing household access to telephone, power, and water services by developing its national infrastructure backbones. Moreover, its success in service coverage is not confined to urban areas—rural water, electricity, and GSM coverage rates are similarly impressive. Very high shares of the country’s paved and unpaved roads are in good or fair condition. Institutional reforms have been adopted in the ICT, ports, and roads, and reforms of the water utility have substantially reduced the hidden costs of the sector.

Ghana’s most pressing challenges lie in the power sector, where rapid demand growth and periodic hydrological shocks leave the country increasingly reliant on expensive oil-based generation. Ghana’s power tariffs are based on the costs of baseload hydropower priced at $0.05 per kilowatt-hour. However, the oil-based generation used to meet incremental demand is priced at more thn $0.20. Since there is no mechanism for automatically adjusting tariffs, this situation generates annual financial losses for the Volta River Authority (VRA) of $400 million—3 percent of GDP. The solution is to diversify the generation portfolio toward gas-fired plants that can deliver backup thermal power for around $0.07 per kilowatthour. This process is underway.

Despite Ghana’s success with increasing access to infrastructure services, the quality of service remains low. Perhaps the most dramatic case is in the water sector, where exceptionally high losses divert more than half of water produced, leaving little to reach end customers, who are thus exposed to intermittent supplies. Until this issue is resolved, Ghana’s recent technical achievement of the Millennium Development Goal for water supply will remain a hollow victory. Power supply is also increasingly subject to reliability problems that stem from neglect of aging transmission and distribution assets. Even in mobile telephony, the increasing rate of dropped calls has become a concern. This overall pattern suggests that Ghana may benefit from a systematic framework for regulating the quality of public services.

With respect to regional integration, Ghana is maintaining its international road corridors but lacks power and ICT connectivity with its neighbors. The Port of Tema is becoming a transit gateway to the landlocked hinterland, but the continuing success of the Ghana Gateway program will depend on tackling capacity constraints at the port.

Addressing Ghana’s infrastructure challenges will require sustained expenditure of almost $2.3 billion per year over the next decade, split fairly evenly between investment and operations, on the one hand, and maintenance, on the other. That level of spending is equivalent to just over 20 percent of GDP, comparable to what China has spent in recent years but a significant stretch for Ghana’s economy. More than half of spending needs relate to the power sector.
GHANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Ghana already spends approximately $1.2 billion per year on infrastructure, equivalent to about 7.5 percent of GDP. A further $1.1 billion a year is lost to inefficiencies, the bulk of which are associated with the underpricing of power. Relative to the country’s African peers, subsidy-related losses in the power sector are relatively high. This need not be so. Ghana’s urban population is relatively well-off, and cost-recovering tariffs should be possible.

Ghana’s annual infrastructure funding gap is about $0.4 billion per year, most of which is associated with power and water. Following its recent oil discoveries, Ghana is in a position to raise additional public funding for infrastructure from increased fiscal receipts. It should also be possible to capture more private finance for infrastructure. Overall, Ghana’s infrastructure situation is hopeful. There are several strong areas on which to build, and the country has a solid economic base from which to fund incremental efforts.

# 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 Ghana. The results have been presented in reports covering different areas of infrastructure, including 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 Ghana and allows the country’s infrastructure situation to be benchmarked against its African peers. Given that Ghana is a relatively well-off lowincome country well on its way to reaching middle-income status, two sets of African benchmarks will be used to evaluate Ghana’s situation. Detailed comparisons will also be made with immediate regional neighbors in the Economic Community of West African States (ECOWAS).

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. 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. Where possible, data have been collected for the period 2007 to 2009 with a view to measuring progress made relative to the baseline. Second, in order 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.

# Why infrastructure matters

As on the rest of the continent, West Africa’s growth performance improved markedly in the 2000s. The overall improvement in per capita growth rates has been estimated at <u>around 2 percent, of which 1.1</u> percent is attributable to better structural policies and 0.9 percent to improved infrastructure. During the five years from 2003 to 2007, Ghana’s economy grew at an average annual rate of 5.6 percent, which 2
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GHANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Interestingly, the impact was not as large as in other neighboring West African countries such as Benin, Cote d’Ivoire, and Senegal. It is striking that this boost to growth came exclusively from the ICT revolution. By contrast, Ghana’s power sector held back the per capita growth rate by as much as 0.5 percentage points over the same period, while the road sector did not seem to have any major impact on growth performance.

Looking ahead, simulations suggest that if Ghana’s infrastructure could be improved to the level of the African leader, Mauritius, annual per capita growth rates would be 2.7 percentage points higher than they are at present. This impact would come broadly from improvements across the three main infrastructure sectors (figure 1b).

# The state of Ghana’s infrastructure

Ghana’s territory is relatively flat and dominated by the Volta River, within whose catchment the entire national territory is nested (figure 2c). The spatial distribution of Ghana’s economy shows marked differences between north and south. Most of the country’s larger cities are in the south, which has relatively high population density and low poverty rates (figures 2a and 2b). Meanwhile, the north is relatively sparsely populated but with very high incidence of poverty. This pattern also reflects underlying economic activity. Ghana’s mineral resources, mainly precious metals, are concentrated in the southwest of the country, along with more recent oil discoveries along the coast (figure 2d). Most of the country’s agricultural production takes place in the center and center-north of the country. The north has significant tracts of land with high agricultural value that are not being fully exploited.

The distribution of Ghana’s infrastructure networks generally reflects the spatial distribution of economic activity, with a greater density of transport, power, and ICT infrastructure in the south and southwest of the country than in the north (figures 3a, 3b, and 3c). Nevertheless, unlike many other African countries, Ghana’s infrastructure backbones cover the entire national territory and help to integrate the different regions. Two road corridors linking north and south, a national power grid, and an ICT backbone interconnect all major population centers. By African standards, Ghana also has extensive water resource infrastructure and some significant pockets of irrigation (figure 3d).

In terms of regional integration, the picture is mixed. Ghana is connected to the SAT3 submarine cable along the west coast of Africa but lacks fiber optic land links with its neighbors (figure 3c). Ghana is interconnected with power transmission lines to Cote d’Ivoire, and with Nigeria via Benin and Togo through the West Africa Gas Pipeline (figure 3b). Further energy interconnections are planned as part of the West Africa Power Pool. Important regional road corridors also run through Ghana, including a portion of the coastal route from Lagos to Dakar and an important north-south road route into Burkina Faso (figure 3a). Most of these routes are in good to fair condition.

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

4
GHANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

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

||Achievements|Challenges|
|---|---|---|
|Air transport|Emerging role of Accra in serving sub-region,<br>renewal of aircraft fleet.|Improving air safety and security|
|ICT|Very competitive market with high levels of<br>mobile penetration at relatively low cost|Improving the quality of mobile services<br>Harnessing market to complete universal access agenda<br>(Internet and mobile)|
|Ports|Advanced institutional reform and private<br>sector participation.|Alleviating capacity constraints that are currently holding back<br>performance|
|Power|Well endowed with generation capacity Good<br>electrification rate|Improving resilience to hydrological shocks by developing gas-<br>fired power and upgrading aging transmission network<br>Tackling huge hidden costs due to underpricing|
|Railways||Funding the rehabilitation of the network<br>Improving performance of GRC to recapture mining traffic|
|Roads|Good performer on road network, both in<br>terms of financing and road network quality|Preserving the real value of the fuel levy.<br>Improving rural connectivity.|
|Water resources|Substantial volume of water storage available<br>by Africa standards.|Strengthening capacity of new River Basin Organization<br>Developing irrigation potential|
|Water and sanitation|Reached MDG for water<br>Significant improvements in utility finances|Improving reliability of water supply<br>Reducing non-revenue water<br>Reaching the MDG for sanitation|

Source: Authors’ elaboration based on findings of this report.

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GHANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

# Roads

## **Achievements**

Ghana’s road transport indicators are strong. By almost all measures, they are well ahead of those found among low-income peers and nearing the levels expected of a middle-income country (table 2). The length of the main (primary and secondary) network is more than adequate to achieve regional and national connectivity. The record on road network quality is quite reasonable, with 75 percent of the paved network in good or fair condition and, more impressive, 74 percent of the unpaved network in good or fair condition.

Underpinning these achievements has been a serious reform of road sector institutions that has resulted in the creation of a second generation road fund and road agency. Ghana meets almost all of the best practice guidelines for road sector institutions. The country has also adopted a fuel levy ($0.06 per liter) that, as of 2006, was commensurate with road maintenance needs (figures 4 and 5). In contrast to other African countries, Ghana allocates its road fund resources much more evenly across the different road networks—rural and urban roads receive 30 and 25 percent of the total, respectively. Overall, Ghana has allocated substantial resources to the road sector in recent years; it spends on average 1.5 percent of GDP on roads, one of the highest shares in West Africa.

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

||Unit|Low-income<br>countries|**Ghana**|Middle-income<br>countries|
|---|---|---|---|---|
|Paved road density|km/1000 km<sup>2</sup>of arable land|86.6|**158.1**|507.4|
|Unpaved road density|km/1000 km<sup>2</sup>of arable land|504.7|**804.0**|1,038.3|
|GIS rural accessibility|% of rural population within 2 km of all-season road|21.7|**24.0**|59.9|
|Paved road traffic|Average annual daily traffic|1,049.6|**1,314**|2,786.0|
|Unpaved road traffic|Average annual daily traffic|62.6|**40.4**|12.0|
|Paved network condition|% in good or fair condition|80.0|**75.0**|79.0|
|Unpaved network condition|% in good or fair condition|57.6|**74.0**|58.3|
|Perceived transport quality|% firms identifying roads as major business constraint|23.0|**17.6**|10.7|

Source: Gwillliam and others 2009. Derived from AICD national database, downloadable from http://www.infrastructureafrica.org/aicd/tools/data

## **Challenges**

In recent years, the depreciation of the national currency has gradually eroded the real value of the fuel levy. Adjusting its value is essential if Ghana is to sustain its relatively good performance on road network preservation. The absolute value of the existing fuel levy is already relatively low by African standards—about half the levels found in Ethiopia, Kenya, and Tanzania—which suggests that a revision to preserve the real value of the levy should not be overly burdensome for the transportation sector.

10
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GHANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE some 6,400 kilometers would suffice for this purpose. By comparison, 13,000 kilometers would be needed to put even 50 percent of the rural population within two kilometers of an all-season road.

Beyond the issue of rural network extension, there is the question of the appropriate standards for rural roads. Spatial analysis of the network suggests that about 30 percent of the rural network may be under-engineered, meaning that it consists of earth roads with traffic levels typically considered high enough to justify gravelling(above 30 vehicles per day). By contrast, some 20 percent of the main road network appears to be over-engineered, meaning that it consists of paved roads with traffic levels not typically considered adequate to justify paving (below 300 vehicles per day).

Finally, like many other African countries, Ghana has focused on developing its road network without taking a broader multi-modal view of surface transport issues. In particular, Ghana has not yet fully explored the scope for inland navigation on the Volta River. Inland navigation has a number of advantages over road transportation for commodities that are not overly time sensitive. In particular, the capital costs associated with establishing basic navigation infrastructure are typically quite modest in relation to the cost of a road or rail network, while the operating costs of transporting goods by river tend to be significantly lower than the equivalent road or rail costs. The Volta Lake and River along the eastern side of the country connects various high value agricultural production areas and therefore should be considered as another transportation option for the country.

# Rail

## **Achievements**

Ghana Railways Company (GRC) is a purely national operation without any connections to rail service in other countries. The network forms a triangle that links Accra-Kumasi-Takoradi, though only the Kumasi-Takoradi segment has been operational in recent years. This reflects the main pattern of traffic on the railway, namely the transfer of bauxite and manganese from the mining areas around Kumasi to the Port of Takoradi.

## **Challenges**

In recent years, GRC has been increasingly unable to carry the full volume of mining traffic. A combination of lack of rolling stock, poor quality of infrastructure, and low associated speeds (as well as occasional strikes) diverted a growing share of mineral traffic to the road network, at an additional cost of $1 per tonne for the manganese ore and more for bauxite.

Relative to other railways in West Africa, GRC has modest traffic levels and operational performance that ranges from mediocre to lackluster (table 3). For example, freight wagon productivity is about half of best practice levels. Tariffs are just over $0.02 per tonne-kilometer, which is typical for West Africa, though significantly lower than those found in Central and Southern Africa.

There has been some discussion about the possibility of awarding a concession contract for GRC as a basis for financing the upgrade and possible expansion of the rail infrastructure. More than a dozen African railways are now operating under concession agreements. In the best cases, these concession arrangements have helped to improve the railway’s operational performance and to reverse the downturn in rail traffic. However, despite initial expectations, none of the rail concessions has succeeded in 12
GHANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE financing major track rehabilitation, with the limited investments made being confined to purchases of rolling stock. The basic reason for this is that the traffic volumes on almost all African railways are well below the 1 to 1.5 million net tonnes of traffic needed per year needed to generate sufficient cash flow for investment finance, particularly given that rail tariffs are constrained by intense intermodal competition from the trucking sector. As a result, track upgrades have ultimately been funded by government borrowing from international financial institutions. In the case of Ghana, traffic is not much more than 0.2 million tonnes, making it improbable that track improvements could be funded by the private sector.

**Table 3. Railway indicators for Ghana and selected other countries, 2000–05**

||**GRC (Ghana)**|OCBN (Benin)|SITARAIL (Cote d’Ivoire –<br>Burkina Faso)|NRC (Nigeria)|TRANSRAIL (Senegal - Mali)|CAMRAIL (Cameroon)|SPOORNET (South Africa)|
|---|---|---|---|---|---|---|---|
|Concessioned (1)/ state-run (0)|**1**|0|1|1|1|1|0|
|Traffic density, freight, 1,000 tonne-km/km|**242**|148|494|15|318|1,091|5,319|
|**EFFICIENCY:**||||||||
|Staff: 1000 UT per staff|**84**|40|481|37||603|3,037|
|Coaches: 1000 passenger-km per coach|**416**|900|862|737||4,738|596|
|Cars: 1000 ton-km per wagon|**458**|74|1020|59|804|868|925|
|Locomotive availability in %|**7**|3|35|13|40|26|—|
|**TARIFFS:**||||||||
|Average unit tariff, freight, US cents/tonne-km|**2.4**|2.0|3.3|—|2.2|2.2|—|
|Average unit tariff per passenger<br>US cents/passenger-km|**4.4**|5.8|5.5|—|3.3|5.2|—|

Source: Bullock 2009.

Derived from AICD rail operator database, downloadable from http://www.infrastructureafrica.org/aicd/tools/data — = data not available.

# Ports

## **Achievements**

Ghana has made significant progress in modernizing its ports sector and is committed to making further improvements. It is one of the few African countries in the process of adopting the landlord model, which has become the preferred institutional framework for the sector around the world. At the national level, stevedoring operations have been privatized. The Port of Tema awarded a container terminal concession in 2006, and dry-bulk handling operations are fully privatized. Further concessions are envisaged at the Port of Takoradi, where major new terminal developments are planned.

Ghana’s two major ports, at Tema and Takoradi, are large relative to other West African ports (table 4). Demand for both container and general cargo services has more than doubled over the period 19982006. Under the Ghana Gateway Program, the ports sector is being developed within an explicit 13
GHANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE framework of regional integration to ensure smooth transit to the landlocked hinterland countries. Due to the civil war in Côte d’Ivoire, significant traffic has been diverted from that country to Ghana. As a result, transit traffic has increased markedly in recent years to a total of over 10,000 TEUs.

## **Challenges**

As a result of burgeoning demand, ports in Ghana (and the Port of Tema in particular) have become heavily congested. The port has a container handling design capacity of around 375,000 TEUs per year but has been handling 420,000 TEUs in recent years. The congestion problem lies behind a number of shortcomings in the port’s performance, and these can be addressed only once the capacity increases.

In terms of performance, the Port of Tema exhibits relatively long delays on container dwell time and truck cycle time (table 4). Pre-berth waiting time compares reasonably well with performance elsewhere in West Africa, while cargo vessel turnaround time is no better than the average. Crane productivity in Ghana, although reasonable, falls significantly short of best practice in the region. For example, general cargo crane productivity is 13.5 moves per hour in the Port of Tema compared with 25 moves per hour in the Port of Durban. The Ghana Ports and Harbor Authority (GPHA) has set a target of 24 moves per hour, but this will be difficult to achieve until the current congestion is alleviated.

Ghana’s port handling charges fall toward the middle of the range observed in Africa (see table 4). Nonetheless, the GPHA has set the target of lowering container handling charges from $168 per move to $80 per move. Achieving this goal will require alleviating capacity constraints and strengthening competition within the port.

More broadly, West Africa lacks a clear maritime hub. Abidjan had begun to play that role, but with the advent of the political crisis in Côte d’Ivoire, major shipping lines diverted their West Africa operations to Malaga (Spain) or Tangiers (Morocco). It remains to be seen whether improvements in West Africa’s port operations – such as those underway in Ghana – will entice international shipping lines to return and which port will be best positioned to play such a role in the future.

# Air transport

## **Achievements**

Ghana’s air transport market is small in absolute terms and middle of the range in the African context; it amounts to less than 2 million seats per year across all traffic categories (table 5). The domestic market developed only recently and remains small, with five domestic routes served by a single carrier in 2007. The bulk of Ghana’s air transport market is international and about evenly divided between intra-African and inter-continental flights. By far the best served route is that connecting Ghana to Nigeria, which is also the most important route within the ECOWAS area. International service is highly competitive, with a Herfindahl index of only 6.4 percent.

14
GHANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

# **Table 4. Benchmarking port indicators: Tema and Takoradi compared with other ports**

||**Takoradi (Ghana)**|**Tema (Ghana)**|Apapa (Nigeria)|Dakar (Senegal)|Abidjan (Cote<br>d’Ivoire)|Cotonou (Benin)|Mombasa (Kenya)|Durban (South<br>Africa)|
|---|---|---|---|---|---|---|---|---|
|**CAPACITY**|||||||||
|Actual container handled (‘000sTEU/year)|**51**|**471**|336|306|500|158|437|1,899|
|Actual general cargo handled (‘000s tonnes/year)|**4,300**|**7,900**|3,400|6,109|NA|1,100|12,980|16,100|
|General cargo handling capacity (‘000s tonnes/year)|**5,500**|**8,500**|5,000|NA|NA|2,500|1,500|NA|
|**EFFICIENCY**|||||||||
|Average container dwell time in terminal (days)|**NA**|**25**|42|7|12|12|5|4|
|Average truck processing time for receipt and delivery<br>of cargo (hours)|**NA**|**8**|6|5|2.5|6|4.5|5|
|General cargo vessel pre-berth waiting time (hours)|**3**|**9.6**|NA|24|2.9|48|36|NA|
|General cargo vessel turnaround time (hours)|**52.8**|**48**|NA|60|2.2|48|48|NA|
|Average container crane productivity (containers<br>loaded/unloaded per crane hour)|**NA**|**13**|12|NA|18||10|15|
|Average general cargo crane productivity (tons<br>loaded/unloaded per crane working hour)|**10**|**13.5**|9|NA|16|15|20.82|25|
|**TARIFFS**|||||||||
|Average container handling charge, ship to gate<br>(US$/TEU)|**NA**|**168**|155|160|260|180|67.5|258|
|Average general cargo handling charge, ship to gate<br>(US$/tonne)|**7.0**|**10.0**|8.0|15.0|13.5|8.5|6.5|8.4|
|Average dry bulk handling charge, ship to gate or rail<br>(US$/tonne)|**2.5**|**3.0**|NA|5.0|5.0|5.0|5.0|1.4|
|Average liquid bulk handling charge, ship to gate or<br>rail (US$/tonne)|**1.5**|**1.5**|1.0|4.0|NA|NA|NA|NA|

Source: Mundy and Penfold 2008. Derived from AICD ports database, downloadable from http://www.infrastructureafrica.org/aicd/tools/data TEU = 20-foot equivalent units.

Across the region, there has been a tendency for aircraft fleets to be renewed and scaled down in size to facilitate consolidation of routes toward a hub and spoke system. The aircraft fleet serving Ghana has renewed rapidly in recent years, and the share of the fleet that comprises aircraft of recent manufacture rose from 52 percent in 2001 to 97 percent in 2007, which puts Ghana ahead of many of its neighbors. On the other hand, only about 16 percent of aircraft serving Ghana are in the small or medium size category, a share much lower than that of neighboring countries.

15
GHANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

**Table 5. Benchmarking air transport indicators for Ghana and other countries**

|Country|Ghana|Nigeria|Côte<br>d’Ivoire|Senegal|Kenya|Tanzania|
|---|---|---|---|---|---|---|
|**TRAFFIC (2007)**|||||||
|Domestic seats (millions per year)|0.14|9.30|0|0.13|2.09|1.87|
|Seats for international travel within Africa (millions per<br>year)|0.91|1.37|0.85|1.26|3.14|1.27|
|Seats for intercontinental travel (millions per year)|0.83|2.44|0.30|1.23|2.76|0.59|
|Seats available per capita|0.08|0.09|0.06|0.23|0.28|0.12|
|Herfindahl index – domestic market (%)|100.0|18.0|-|100.0|60.5|31.0|
|Herfindahl index – international market (%)|6.4|6.4|9.8|10.3|34.1|13.0|
|**QUALITY**|||||||
|Percentage of seat km in medium or smaller aircraft|15.7|29.6|52.3|39.3|23.3|48.6|
|Percentage of seat km in newer aircraft|96.8|71.4|90.8|98.3|80.2|79.3|
|Registered carriers on EU blacklist|0|0|0|0|0|0|
|FAA/IASA Audit Status|Fail|No audit|Fail|No audit|No audit|No audit|
|Percent of carriers passing IATA/IOSA Audit|0|28.6|0|50.0|11.1|33.3|

Source: Bofinger 2008. Derived from AICD national database, downloadable from http://www.infrastructureafrica.org/aicd/tools/data

## **Challenges**

Like many African countries, Ghana continues to face significant safety and security issues in air transport. Ghana failed the FAA/IASA Audit and none of its carriers has passed the IATA/IOSA audit.

More broadly, West Africa lacks a clear air transportation hub to play the role that airports such as Addis Ababa, Johannesburg, and Nairobi are playing on the other side of the continent. Abidjan, Accra, Dakar, and Lagos each play a significant role with respect to their immediate neighbors, but connectivity between each of these zones is much more limited and as a result connections can be much more complicated.

# Water supply and sanitation

## **Achievements**

Ghana is one of only five African countries that have already achieved the MDG target for water supply. According to DHS survey evidence, the percentage of households with access to an improved drinking water source rose from 69 percent in the 2003 survey to 84 percent in the 2008 survey, exceeding the MDG target of 76 percent.

Compared with other low-income African countries, Ghana has a relatively large share of the population relying on utility water (private or public taps). In the mid-2000s, 25 percent of Ghanaian households reported access to utility water of some kind, well ahead of the 26 percent in the low-income peer group, but still far behind the 76 percent in the middle-income peer group. By 2008, that figure had exceeded 40 percent (table 6). During the period 2003-08, coverage of stand posts in Ghana rose by 1.8 percent of the population per year and reliance on surface water declined by 1.4 percent of the population 16
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GHANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

**Table 6. Benchmarking water and sanitation indicators**

||Unit<br>Low-income<br>countries|**Gha**|**na**|Middle-income<br>countries|
|---|---|---|---|---|
||Mid 2000s<br>**Mid 2**|**000s**|**Late 2000s**|Mid 2000s|
|Access to piped water|% pop<br>10.1|**15.1**|**13.1**|56.4|
|Access to stand posts|% pop<br>16.1|**20.5**|**27.5**|20.4|
|Access to wells/boreholes|% pop<br>38.3|**42.1**|**40.1**|6.3|
|Access to surface water|% pop<br>33.8|**20.1**|**11.1**|13.9|
|Access to septic tanks|% pop<br>5.3|**10.3**|**14.1**|44.0|
|Access to latrines|% pop<br>57.2|**63.1**|**62.5**|33.9|
|Open defecation|% pop<br>37.1|**24.6**|**23.1**|15.8|
|Domestic water consumption|liter/capita/day<br>72.4|||NA|
|Urban water assets in need of rehabilitation|%<br>35.5|**42.0**||25.0|
|Revenue collection|% sales<br>96.0|**75.0**|**95.0**|99.2|
|Distribution losses|% production<br>33.0|**53.0**|**50.8**|23.1|
|Cost recovery|% total costs<br>56.0|**48.4**|**61.8**|80.6|
|Total hidden costs as % of revenue|%<br>130.0|**183.7**|**128.9**|84.9|
|U.S. cents per m<sup>3</sup>|**Ghana**<br>**Mid 2000s**<br>**Late 2000s**|Scarce<br>resour|water<br>ces<br>Ot|her developing<br>regions|
|Residential tariff|**41.7**<br>**46.2**||60.26||
|Nonresidential tariff|**219.8**<br>**142.0**||120.74|3.0 – 60.0|

Source: Banerjee and others 2009; Morella and others 2009. Derived from AICD water and sanitation utilities database downloadable from http://www.infrastructureafrica.org/aicd/tools/data The performance of Ghana Water Company (GWC) has improved somewhat in recent years following institutional reforms and the contracting of a private operator. As of 2005, the utility was recovering only 48 percent of costs and collecting only 75 percent of revenue. Since 2007, tariff increases have substantially improved cost recovery. At the same time, the private operator’s stronger commercial incentives have improved revenue collection from 75 percent to 95 percent in a short period of time. As a result, the hidden costs associated with the water sector fell from $113 million per year in 2001 to $96 million per year in 2009 (table 7), and they now absorb a much smaller share of GDP (figure 7). Relative to sector revenue, hidden costs have fallen from 190 to 129 percent over the same period. Nonetheless, Ghana remains only a middling performer on utility efficiency by regional standards (figure 8).

18
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GHANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE very high rates of growth in power demand are rapidly outstripping what the Akosombo Reservoir can supply, and as a result the country must use the expensive oil-fired plant to meet demand. Furthermore, the country remains exposed to future hydrological shocks.

To reduce its reliance on expensive oil-based generation, Ghana must diversify its generation mix to include gas. This process is already underway. Significant capacity of combined cycle gas turbine plant has already been commissioned, though it is not yet fully operational. Gas supply from Nigeria via the West African Gas Pipeline is expected to come on stream soon, and further supplies of more abundant and lower cost gas can be expected in the medium-term as Ghana develops its own hydrocarbon potential. The average total cost of gas-fired generation is estimated to be $0.06-0.08 per kilowatt-hour. Once gasfired generation is available, the cost differential between hydro and thermal plant will be much lower, making the power system (and the economy) much more resilient in periods of low rainfall. For this reason, developing substantial gas-fired generation capacity is one of the most urgent challenges facing the power sector.

**Table 8. Benchmarking power indicators**

||Unit|Low-in<br>count<br>Mid 2|come<br>ries<br>000s|**Gha**<br>**Mid 2000s**|**na**<br>**Late 2000s**|Middle-income<br>countries<br>Late 2000s|
|---|---|---|---|---|---|---|
|Installed power generation capacity|MW/mil. people||24.4|**131.7**||796.2|
|Power consumption|kWH/capita||99.5|**293.4**|**370.0**|4,473|
|Power outages|Day/year||40.6|**116.4**||5.6|
|Firms’ reliance on own generator|% consumption||17.7|**29.5**||0.5|
|Firms’ value lost due to power outages|% sales||6.1|**6.0**||0.8|
|Access to electricity|% population||15.4|**44.3**|**56.0**|59.9|
|Urban access to electricity|% population||71|**77.0**|**83.8**|83.7|
|Rural access to electricity|% population||12|**20.9**|**34.4**|33.4|
|Growth access to electricity|% population/year||1.4|**1.8**|**3.2**|1.8|
|Revenue collection|% billings||88.2|**89.6**|**89.3**|99.9|
|Distribution losses|% production||22.1|**25.4**|**25.6**|15.7|
|Cost recovery|% total cost||90.0|**80.0**|**92.0**|125.7|
|Total hidden costs as % of revenue|%||67.5|**37.3**|**118.3**|3.5|
|U.S. cents|**Mid 2000s**|**Ghana**|**Late 200**|Predom<br>ge<br>**0s**|inantly hydro<br>neration<br>|Other developing<br>regions|
|Power tariff (residential at 75 kWh)||**8.4**||**13.1**|10.27|5.0 – 10.0|
|Power tariff (commercial at 900 kWh)||**13.9**|||11.73||
|Power tariff (industrial at 50,000 kWh)||**9.1**|||11.39||

Source: Eberhard and others 2009. Derived from AICD electricity database, downloadable from http://www.infrastructureafrica.org/aicd/tools/data 22
<!-- Start of picture text --> Sierra Leone<br>Uganda<br>Madagascar<br>Ghana<br>Rwanda<br>Kenya<br>Senegal<br>Angola<br>Tanzania<br>Gabon<br>012345<br>%of GDP<br><!-- End of picture text -->
GHANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

**Table 9. Evolution of hidden costs associated with VRA**

||Hydro<br>generation|Thermal<br>generation|Average total<br>cost hydro|Average total<br>cost thermal|Average revenue|Total hidden<br>costs|Total hidden<br>costs|
|---|---|---|---|---|---|---|---|
||(GWh/year)|(GWh/year)|(US$/kWh)|(US$/kWh)|(US$/kWh)|(US$m/year)|(% revenue)|
|**VRA**||||||||
|2004|5,277|736|0.048|0.089|0.046|46.6|14.4|
|2005|5,629|1,159|0.048|0.157|0.046|148.7|42.2|
|2006|5,619|2,810|0.048|0.169|0.044|391.3|98.3|
|2007|3,727|2,939|0.049|0.191|0.051|420.5|117.0|
|2008|6,196|1,978|0.048|0.267|0.065|321.1|60.6|
|2009|6,431|2,666|0.048|0.210|0.054|411.3|87.4|

**Table 10. Evolution of hidden costs associated with ECG**

||Load<br>served|System<br>losses|Collection<br>ratio|Average total<br>cost|Average effective<br>tariff|Total hidden<br>costs|Total hidden<br>costs|
|---|---|---|---|---|---|---|---|
||(GWh/year)|(%)|(%)|(US$/kWh)|(US$/kWh)|(US$m/year)|(% revenue)|
|**ECG**||||||||
|2004|4,818|26.5|99.7|0.08|0.080|50.9|41.7|
|2005|5,045|25.4|85.8|0.08|0.080|95.0|60.4|
|2006|5,252|24.3|100.0|0.08|0.079|55.9|44.3|
|2007|5,146|24.0|85.3|0.09|0.095|110.4|46.3|
|2008|5,799|25.6|89.3|0.12|0.131|151.3|27.6|
|2009|5,949|25.0|89.3|0.14|0.096|331.3|70.4|

Ghana’s distribution utility, ECG, has historically covered its full costs of operation (including the bulk supply tariff to VRA). However, due to currency devaluation and escalating costs, the utility had opened-up a large deficit by 2009 (table 10). In addition, the operational deficiencies of the utility contribute to hidden costs. Distribution losses, which hover around 25 percent, are about twice the best practice levels. At the same time, the collection ratio has fallen and remained stagnant at around 90 percent. The financial losses associated with these operational deficiencies had climbed to $331 million by 2009.

Overall, the hidden costs associated with Ghana’s power sector were a staggering 6.3 percent of GDP in 2009 (figure 11). Underpricing was by far the most important contributor to that total at 3.2 percent of GDP. Viewed differently, hidden costs were 126 percent of sector revenue. This is one of the highest levels among West African utilities, even if it still falls short of the levels found in Nigeria and Niger (figure 12).

24
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GHANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE return on the large dam-based schemes tend to be lower than those associated with localized water collection. The results are highly sensitive to the assumptions made about the unit costs of irrigation development. More generally, the simulation exercise found that the viability of irrigation schemes depends on crops that generate more than $2,000 per hectare, which includes mainly cash crops and horticulture.

More recent work conducted nationally suggests that under some circumstances, returns on irrigation may be even higher than suggested by these first order AICD estimates. The irrigation feasibility study for the Accra Plains found that 142,000 hectares of land could be irrigated with a rate of return between 7 and 25 percent, depending on the assumptions used.

**Table 11. Sensitivity of irrigation potential to thresholds for economic return**

||Potential (‘000s<br>hectares)|Investment needs ($ millions)|Average IRR (%)||Potential (‘000s<br>hectares)|
|---|---|---|---|---|---|
||Large dam-based|Local collection|Total|Large dam-based|Local collection|
|IRR >0%|242.2|73.0|315.2|473|377|
|IRR >6%|50.8|36.8|87.6|99|190|
|IRR >12%|0.0|14.9|14.9|-|77|
|IRR >24%|0.0|6.0|6.0|-|31|

Notes: Simulations based on assumptions that large scale dam-based irrigation can be developed at a cost of $3,000 per hectare, while schemes based on localized water collection could be developed at a cost of $2,000 per hectare. Should these costs be significantly exceeded, the number of viable hectares falls sharply. Source: You and others 2009.

# Information and communication technologies

## **Achievements**

As of 2005, when the AICD baseline survey was conducted, Ghana’s ICT sector was a strong performer by regional standards (table 12). About 60 percent of Ghana’s population lived within access of a GSM voice signal. This was above the average for the peer group, although it still fell short of exceptional performers such as Kenya, Malawi, and Uganda, which had already reached about 95 percent of their population with the GSM signal at that time (figure 17). Ghana also achieved strikingly high rates of service penetration. Some 32 percent of the population already subscribed to a mobile telephone service, twice as the level in the peer group. With respect to Internet penetration, however, Ghana did not outperform the rest of the peer group.

Since 2005, an increasingly competitive environment has resulted in further impressive growth in the ICT sector. There are now six mobile operators (two of which were licensed after 2007), and the international gateway has been liberalized. As a result, the mobile footprint expanded to 82 percent in 2009—still below the performance of Kenya, Malawi and Uganda, but impressive nonetheless. Furthermore, the mobile penetration rate more than doubled, from 32 percent in 2005 to 67 percent in 2009. International bandwidth has grown substantially, and Internet subscriptions have also doubled, albeit from a very low base.

**Table 12. Benchmarking ICT indicators**

|Unit|Low-income<br>**Ghana**|
|---|---|

Middle-income 30
GHANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

|||countries<br>2005<br>**200**|**5**<br>**2009**||countries<br>2005|
|---|---|---|---|---|---|
|GSM coverage|% population|48|**59**|**82**|97|
|International bandwidth|Mbps/capita|6|**8**|**86**|30|
|Internet|subscribers/100 people|<br>0|**2**|**4**|2|
|Landline|subscribers/100 people|<br>1|**1**|**1**|9|
|Mobile phone|subscribers/100 people|<br>15|**32**|**67**|87|
|||**Ghana**<br>**2005**<br>**2009**|With submarine|cable|Other developing<br>regions|
|Price of monthly mobile basket||**7.53**<br>**6.00**|11.12||9.9|
|Price of monthly fixed-line basket||**8.56**<br>**5.00**|13.58||—|
|Price of 20-hour Internet package||**34.53**<br>**12.00**|47.00||11.0|
|Price of a call to the United States|(US$/min)|**0.39**<br>**0.33**|0.48||0.67|
|Price of inter-Africa calls, mean (U|S$/min)|**0.32**|0.57||n.a.|

Notes: Ghana 2005 data together with benchmarks are taken from the AICD Database. Ghana 2009 is compiled from a variety of World Bank sources to give a sense of the progress made during the last five years. Source: Minges and others 2009. Derived from AICD national database, downloadable from http://www.infrastructureafrica.org/aicd/tools/data — = data not available. n.a. = not applicable.

One of the key explanations for Ghana’s relatively high service coverage has been its relatively low tariffs. In 2005, the price of a standard basket of mobile services was $7.53 in Ghana compared with $11.12 in other comparable African countries. At that time, Ghana also had access to the SAT3 submarine cable through competing international gateways, which can be expected to bring down the costs of international voice and Internet services. The prices of dial-up Internet service and international phone calls in Ghana were significantly lower than in other countries in the peer group with access to a submarine cable. Due to intensifying competition both in the domestic mobile market and on the international gateway, prices have fallen significantly since 2005. The price of a mobile basket is now around $6 per month, and the price of a monthly Internet subscription has fallen substantially from $35 in 2005 to $12 in 2009. Competition in Ghana’s ICT market is set to intensify further as landing rights have been granted to two new submarine cables, and international bandwidth could increase to 2,040 bits per second.

# **Challenges**

The recent rapid expansion of Ghana’s mobile telephone networks has come at the expense of service quality. While no official statistics are available, a high incidence of dropped calls is being reported. To some extent, there is a tradeoff between investment in network expansion and investment to upgrade the service on the existing network. With the recent award of new licenses, the current focus of the operators is on securing maximum coverage. Nevertheless, the current situation suggests the importance of establishing a more explicit regulatory framework for quality of service so that these aspects of performance can be monitored and appropriate standards and incentives can be established.

31
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GHANA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE below 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.

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

||Economic target|Social target|
|---|---|---|
|ICT|Install fiber optic links to neighboring capitals and submarine cable|Provide universal access to GSM signal and<br>public broadband facilities|
|Irrigation|Develop additional 15,000 hectares of irrigation schemes with high<br>rates of return (>12% IRR)||
|Power|Develop 1,400 MW of new generation capacity|Raise electrification to 76 percent<br>(100 percent urban and 37 percent rural)|
|Transport|Achieve regional connectivity with good quality two-lane paved road<br>Achieve national connectivity with good quality one-lane road|Provide rural road access to 80 percent of the<br>highest-value agricultural land, and urban road<br>access within 500 meters|
|WSS||Maintain current access rates for water supply and<br>achieve Millennium Development Goals for<br>sanitation|

Sources: Mayer and other 2008; Rosnes and Vennemo 2009; Carruthers and others 2009; You and others 2009.

Meeting these illustrative infrastructure targets for Ghana would cost $2.3 billion per year over a decade. Capital expenditure would account for 60 percent of this requirement. Meeting growing demand for power will require an estimated $1.3 billion per year to install almost 1,400 megawatts of new generation capacity and expand electrification. The water and sanitation sector is the area with the highest spending needs: clearing the sector rehabilitation backlog, as well as sustaining the the Millennium Development Goal target for water and achieving the same target for sanitation, will require over $0.4 billion per year, of which capital expenditure accounts for 70 percent. Requirements for transport and ICT, while less than the amounts needed for power and water and sanitation, are also high in absolute terms—approximately $0.25 billion per year for each (table 14).

**Table 14. Indicative infrastructure spending needs in Ghana for 2006 to 2015**

<u>$ million per year</u>

|Sector|Capital expenditure|Operations and<br>maintenance|Total needs|
|---|---|---|---|
|ICT|162|34|196|
|Irrigation|29|30|59|
|Power|631|624|1,255|
|Transport|174|133|307|
|Water supply and sanitation|306|129|435|
|Total|1,302|950|2,252|

Sources: Mayer and others, 2008; Rosnes and Vennemo 2009; Carruthers and others 2009; You and others 2009. Derived from models that are available online at http://www.infrastructureafrica.org/aicd/tools/models.

Ghana’s infrastructure spending needs are especially high relative relative to the size of its economy—as much as 21 percent of the country’s GDP in 2006 (figure 19). Investment alone would absorb approximately 12 percent of GDP, not far from the 15 percent China invested in infrastructure 34
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