Information and communication Achievements

All parts of Sudan have made impressive progress in the ICT sector since the early 2000s

, placing access and service penetration rates on par with African peers. In the early 2000s, only around 60 percent of the population was covered by a GSM7 signal. As of 2010, over 80 percent of the population is covered by a GSM signal. Mobile subscription rates have risen from less than 1 percent in 2000 to 33 percent in 2009.
Growth in mobile telephony has been impressive and Sudan’s is among the most rapidly growing in Africa. Until recently, most of the development in the sector was in the northern part of Sudan .Only a few other countries in East Africa—Kenya, Tanzania, and Uganda—have achieved mobile penetration of around 20 percent or more. Internet penetration has also grown significantly but slightly lags behind resource-rich and middle-income African countries. International bandwidth in all parts of Sudan has grown exponentially and exceeds all benchmarks except middle-income countries.
The landline sector has not demonstrated much growth, meanwhile, in part because of an overwhelming preference for mobile phones. This trend is broadly consistent across Africa as a whole.

Analysis of 2006 data for all parts of Sudan suggests that almost 98 percent of the population could access mobile telephony on a commercially viable basis. This result is based on the assumption that 4 percent of local income in each area could be captured as revenue for voice telephony services. The gap in universal access to telephony can be closed relatively easily for Sudan on a commercial basis. A small subsidy could aid in reaching the uncovered 2 percent of the population.
For broadband infrastructure, simulations present an optimistic picture. Around 96 percent of all parts of Sudan’s population could gain access to limited performance A gap of 3 to 4 percent exists in the northwest region of all parts of Sudan.

The advent of undersea fiber-optic cables has enabled Sudan to develop a strong ICT infrastructure backbone. Three undersea cable systems land in Port Sudan. In addition, there are terrestrial links to Egypt and Ethiopia and a 10,000 km domestic fiber backbone. Significant private investment has facilitated Sudan’s fiber-optic connectivity. Sudan needs to establish overland connections to the cable to complete the national ICT backbone
The emergence of competition in gateways as a result of connectivity to the undersea cable has facilitated very attractive prices for ICT services in Sudan—among the most attractive in Sub-Saharan Africa. Sudan pays a third of what resource-rich countries pay and a fourth of what low-income countries pay for the mobile basket. Landline telephony, which has not experienced any growth, has also seen its prices slashed. But prices for fixed broadband are the most striking. In 2005 all parts of Sudan paid 10 percent of what resource-rich countries paid for their ICT services and 8 percent of what low-income countries paid

Evidence from Sub-Saharan Africa suggests that access to the submarine cable has generally reduced costs of ICT services when international gateways are present. Sudan has established competition in its international data gateways and partial competition in its international long-distance gateway. The pricing of ICT services, particularly Internet-access prices, reflects the emergence of competitive gateways. Prices to call within the region are consistent with those of other countries that have established competition in international long distance, and are half what resource-rich and low-income countries pay in general.

Sudan has made impressive strides in liberalizing its ICT markets and now boasts one of the most liberalized markets in Africa. The original National Telecommunication Authority has been dissected into two core competencies.
The National Telecommunication Corporation (NTC), the industry regulator, was established in 2001 and took on the function of regulation and supervision. The provision of ICT services was licensed to private operators. One operator, Sudatel, was established in 1994 as a public company and subsequently floated on the regional stock market. The government owns around 21 percent of the company and the rest is owned by other private entities.
By establishing a universal service fund, Sudan is garnering funds to expand service coverage to economically unviable rural areas. Effective from 2009, mobile network operators pay 2 percent of their gross revenues into a universal access fund, plus $0.87 per customer per year. Proceeds from the fund are expected to be used to subsidize rollouts in otherwise economically unfeasible rural areas

Financing infrastructure

To meet its most pressing needs, Sudan has to significantly improve infrastructure in key areas. For the purpose of this report, illustrative targets have been set using standardized criteria and assuming a time horizon of 10 years to meet the targets. For example, it is reasonable to assume that the water and sanitation Millennium Development Goals (MDGs) can be attained using a mix of technological options.
Similarly, targets for increasing electrification assume, at least, doubling the current access rates, which in one case implies reaching 55 percent of the population on average. In the case of transport, national connectivity involves connecting centers with populations larger than 25,000 people. This translates into a need for 5,372 km of road in good condition in the north Sudan would need to spend $4.2 billion a year—or 20 percent of its GDP—over the next decade to meet infrastructure targets.
As explained earlier, the massive needs are driven by the initial starting conditions and are based on reasonable assumptions regarding what outputs are attainable. The estimates are conspicuously large (i) because the land area of the country is massive, with large pockets of uninhabited terrain, and (ii) because of the low starting point, particularly in the water and transport sectors.
The transport and the water and sanitation sectors have the highest financing needs. About $1.8 billion would be needed to provide minimum surface connectivity and around $1.7 billion would be needed each year to meet the MDGs for water and sanitation. Particularly in the water network, decades of war have created an enormous rehabilitation backlog. For example, 40 percent of rural water assets and 42 percent of urban water assets need rehabilitation for Sudan as a whole. Transport needs are largely driven by the need to maintain regional corridors and upgrade existing rural tracks to make them usable.
A distant second are the needs for power, at $424 million. The spending needs estimates assume that only the power infrastructure needed to meet domestic demand is developed. The estimates would be substantially higher if the development of power export potential were also considered—that is, if Sudan were also to fully develop its 3,000 MW of hydropower export potential, a further $1.1 billion would be needed annually to develop additional capacity and interconnectors.
Needs estimates for ICT, at $310 million a year, are the lowest among the sectors. This is because of the recent ICT boom, which has largely been financed by the private sector. While an undersea cable is accessible via Port Sudan, overland connections to the cable need to be financed to complete the national ICT backbone.
At 20 percent of GDP, Sudan’s needs are twice as high as other resource-rich economies in Africa and broadly comparable to those of low-income countries such as Kenya, Senegal, and Madagascar. These needs in terms of the economy’s size are strikingly high given the recent oil influx and revamping of infrastructure investments. New investments account for over three-quarters of total needs.
Sudan already spends a sizable amount—$1.5 billion per year, or 7 percent of GDP—to meet its infrastructure needs (table 19). In terms of the economy’s size, the aggregates are comparable to what middle-income countries spend and perhaps slightly higher than what other resource-rich countries spend out 60 percent of the total infrastructure spending is allocated to capital expenses and 40 percent to operating expenditures. Operating expenditure is entirely covered from budgetary resources and payments by infrastructure users.
The composition of financiers indicates that Sudan has been able to capitalize on the interest of non–Organization for Economic Co-operation and Development (OECD) investors and the private sector.
 
The largest single financier of infrastructure investment is China, followed by Indian and Arab investors. Together they account for 40 percent of total annual investments, almost entirely allocated to the power sector. China’s partnership with Sudan in infrastructure development dates back to 2001, with cumulative total financing commitments on the order of $2 billion in 2010. Sudan benefits from a $3 billion framework agreement signed in December 2007, one of the largest to have been accorded to any African country to date.
Sudanese federal and state governments and state-owned enterprises (SOEs) account for an additional third of Sudan infrastructure investments, and have focused on transport and to some extent power. The remaining capital funding comes from the private sector, which, as in most of the rest of Africa, supports the ICT boom. ODA flows have played a very small role in capital infrastructure financing.
Capital investments in Sudan are heavily skewed toward the power sector, much of this funded by China. Investment levels in ICT and transport are comparable in magnitude, with the former sourced largely from the private sector and the latter from the public sector. Investments in water and sanitation are absent.

How much more can be done within the existing resource envelope?
Even without increasing spending, additional resources could be directed toward infrastructure by eliminating inefficiencies. This report quantifies some operational inefficiencies based on measurable and observable performance indicators. These are (i) under recovery of costs: comparing effective tariffs and user fees against actual unit costs of providing the service; (ii) overstaffing: assessing the difference between average labor cost per connection of the utility evaluated against a well-functioning utility; (iii) distribution losses: assessing the difference between distribution of losses of the evaluated system against engineering norms for a system of similar age and characteristics; and (iv) under collection: assessing the ability of the operator to collect bills within the year against a standard of full revenue collection.
The analysis suggests that Sudan can recover $584 million each year by reducing inefficiencies in the system. Most of the efficiency gains are associated with aligning tariffs to cost-recovery levels and reducing distribution losses in both the water and power systems. Increasing tariffs to cost-recovery levels could save $378 million in power and $15 million in water sectors annually. Distributional losses in power cost $106 million per year, and another $27 million in the water sector. Under collection of bills for water services could save a significant $35 million. Finally, budget under-execution is a significant issue in the transport sector, leading to underspending of about $20 million of available funds annually.

The power sector offers the largest potential savings—up to $584 million per year—if the operational inefficiencies of its utility were tackled. Undercharging for power costs Sudan about $380 million each year, or around 1.8 percent of the country’s GDP. If compared with the rest of Africa, where underpricing of power is commonplace, the National Power Corporation of Sudan (NEC) is doing better than utilities in other resource-rich countries on average, but is nevertheless a poor performer. 

The NEC’s 2004 distributional losses of 33.4 percent are three times the best-practice 10 percent benchmark, resulting in a staggering $106 million cost of inefficiencies.
In the water sector, average tariffs stand at $0.6 per cubic meter versus an estimated $0.69 per cubic meter average cost-recovery tariff. The macroeconomic burden of 0.007 percent of GDP is much lower than that for power, but is comparatively higher than that of other resource-rich countries.
Operational inefficiencies are also plaguing the water sector, and cost Sudan about $62 million a year, water services and reducing nonrevenue water.. This cost could be avoided by increasing the collection efficiency for water services and reducing nonrevenue water.


Annual funding gap


Sudan’s annual infrastructure funding gap amounts to $2.9 billion per year, or roughly 14 percent of GDP. The largest funding gap is in the water and sanitation sector, followed closely by transport. Given strong private investment, only a small funding gap remains in ICT. In the case of power, existing spending is sufficient. But if power tariffs could be raised to cost-recovery levels, much more of this expenditure could be funded internally, freeing up external finance for other critically needed areas. 

What can be done?

Sudan’s funding gap is large relative to the size of its economy, and enormous with respect to its current level of spending. Nevertheless, there are a number of options that could make it more manageable, including raising additional finance, taking additional cost-cutting measures, and lengthening the period of time allotted for meeting the illustrative infrastructure targets. In any case, given the magnitude of the gap, difficult decisions will have to be taken regarding the prioritization of the different investments.
There are realistic prospects for increasing the flow of resources to infrastructure. Although not all components of the required infrastructure platform are suitable for private finance (particularly roads, water, and sanitation), other components may be (for example, ICT, power generation, and ports).
Challenges for attracting private investors are conspicuous particularly due to the country risks linked to the instability of the country, repeated violations of the rule of law, and the very poor ranking of Sudan’s governance compared to its peers in Africa.
Sudan has captured private investment commitments worth around 1 percent of its GDP, predominantly in the ICT sector. Many other African countries 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.

Adopting lower-cost technologies could substantially reduce the cost of meeting the posited infrastructure targets, and help make the funding gap manageable. Meeting the MDGs for water supply and sanitation with lower-cost technologies than previously used (such as stand posts, boreholes, and improved latrines), could reduce the associated price tag from $1,701 million to $889 million each year.
Similarly, meeting transport connectivity standards using lower-cost road-surfacing technologies (such as single-surface treatment) together with a rural policy that narrows its focus exclusively to provide 100 percent accessibility currently active (as opposed to potential) agricultural land postponing, could reduce the associated price tag from $1,785 million to $771 million. The overall savings from these measures would amount to $2 billion for Sudan.   If Sudan were unable to raise additional financing or reduce infrastructure costs, the only way to meet the targets identified here would be to take longer than ten years to do so. If the country were able to instantly realize all potential efficiency gains while holding spending at current levels, it could meet the identified infrastructure targets within 30 years. These simulations underscore the importance of making progress on the efficiency agenda, which could propel the country forward toward meeting its infrastructure targets.