Article on Malawi Power sector

By Nawa Mutumweno – The Millenium Challenge Account – Malawi (MCA – M), a government agency established to develop and implement projects financed by the US Millenium Challenge Account, is close to finalizing a feasibility  study of a multi-million dollar project to rehabilitate the country’s power sector.

The project is part of a broad government effort to upgrade the country’s eroding infrastructure and improve the overall business environment.

According to Susan Banda, MCA-M spokesperson, the project involves rehabilitation and modernization of the existing electricity generation infrastructure; strengthening transmission grids, and expansion of the transmission and distribution networks. The project also calls for rural electrification under a public-private partnership.

Negotiations are also underway between the Millenium Challenge Corporation and the Government of Malawi to finance reforms relating to vertical integration of the energy sector and the financial viability of the state-owned Electricity Supply Commission (ESCOM).

Inadequate electricity infrastructure has been repeatedly identified by development experts as one of the main constraints to economic development and doing business in Malawi. In 2009 alone, Malawi had 63 days of power outages, reportedly the most out of 24 sub-Saharan African countries.

Unreliable power supply is costing the country about $215 million per annum, which amounts to 4.4% of the total GDP, Alex Gomati, chief economist at the MCA-M, told the press in March.

The country needs to dramatically increase the generation capacity to meet current demand.

Nearly 95% of the country’s electricity supply is provided by hydropower from four hydroelectric stations on the Shire River. But low water flow due to drought, high siltation levels and weed blockages have hindered their operation. And because of the low price charged by ESCOM, revenues generated by the power stations are not sufficient to finance new investment in expanding power generation capacity.