Investing in Electricity Infrastructure
A Catalyst for Sustainable Development in Malawi
Millennium Challenge Corporation Grant
On 5 January 2011, the Millennium Challenge Corporation (MCC), a U.S. Government agency designed to work with developing countries, awarded a major grant to the Government of Malawi. The grant, totalling US$350.7 million will be used to improve the country’s electric power system. This grant is not only timely but also very significant considering that other recipients of similar grants in 2011 will be Governments of Ghana and Georgia.
The Drivers of Success
The MCC is based on the principle that aid is most effective when it reinforces sound political, economic, and social policies that promote poverty reduction through economic growth. For this reason, I believe there are four main drivers that convinced the MCC to award such a grant to the Government of Malawi.
Firstly, the need to invest more resources in electricity infrastructure is enormous and critical, particularly at this stage in the development path of the country whereby there is rapid growth in the country’s population, estimated at 14million which has led to increased demand for energy. At the same time the existing electricity infrastructure cannot meet the increased demand – demand is exceeding supply by a very wide margin. Yet, by investing in energy particularly electricity infrastructure now, the potential and opportunities to make significant gains in poverty reduction efforts are at their highest due to complementary favourable policies outlined below.
Secondly, the country is being recognised for the significant progress in better macro-economic management policies. This is reflected in the drop in inflation rate to 6.4%, which is the lowest since 1996.
Thirdly, major strides have been made in improving food security in the country. This has been achieved through the countrywide promotion of the agricultural subsidy programme which has supported small scale farmers to access cheaper farm inputs such as inorganic fertilisers and improved seed varieties.
Fourthly, there is greater commitment to good governance, accountability and transparency.
Way Forward
The MCC grant will go a long way in contributing to socio-economic development of the country. However, the following suggestions should be considered in the application or implementation of the grant funds:
(a)The funds should be applied to the improvement of electricity generation capacity by building new and upgrading existing power generation plants;
(b)The funds should help in the installation of new and upgrading of existing electricity transmission infrastructure such as grid lines to cater for strategic urban and rural development centres;
(c)The funds should help speed up the rural electrification programme in order to make electricity more accessible to people, the majority of who live in rural areas.
Expected Impact
Investment in electricity generation and distribution in both urban and rural areas is going to be a major catalyst for the country’s socio-economic development efforts. Some immediate gains from such investments will include the promotion of small to medium scale industries in such sectors as: agriculture (agro processing), mining and tourism.
Increased supply and access to affordable electricity will also have a positive impact on environmental protection and climate change adaptation. Affordable electricity will provide an alternative to fuel-wood as a source of energy. The use of fuel- wood by the majority of Malawians as a source of energy has been singled out as a major contributing factor to environmental degradation through deforestation. If trees are conserved, Malawi will stand to benefit climatically through carbon sequestration and potentially benefit from the carbon trading and financing facilities that will be more effective with the agreements reached at the Cancun COP 16 – United Nations Global Climate Change Negotiations held from 29 November to 11 December 2010.
Overall, providing access to affordable electricity just like water, food and shelter should be an integral part of any government policy agenda which is aimed reducing poverty and improving the people’s well being.
Kennedy Bisani Lweya, PhD
6 Junuary 2011
Johannesburg, South Africa
Millennium Challenge Corporation Grant
On 5 January 2011, the Millennium Challenge Corporation (MCC), a U.S. Government agency designed to work with developing countries, awarded a major grant to the Government of Malawi. The grant, totalling US$350.7 million will be used to improve the country’s electric power system. This grant is not only timely but also very significant considering that other recipients of similar grants in 2011 will be Governments of Ghana and Georgia.
The Drivers of Success
The MCC is based on the principle that aid is most effective when it reinforces sound political, economic, and social policies that promote poverty reduction through economic growth. For this reason, I believe there are four main drivers that convinced the MCC to award such a grant to the Government of Malawi.
Firstly, the need to invest more resources in electricity infrastructure is enormous and critical, particularly at this stage in the development path of the country whereby there is rapid growth in the country’s population, estimated at 14million which has led to increased demand for energy. At the same time the existing electricity infrastructure cannot meet the increased demand – demand is exceeding supply by a very wide margin. Yet, by investing in energy particularly electricity infrastructure now, the potential and opportunities to make significant gains in poverty reduction efforts are at their highest due to complementary favourable policies outlined below.
Secondly, the country is being recognised for the significant progress in better macro-economic management policies. This is reflected in the drop in inflation rate to 6.4%, which is the lowest since 1996.
Thirdly, major strides have been made in improving food security in the country. This has been achieved through the countrywide promotion of the agricultural subsidy programme which has supported small scale farmers to access cheaper farm inputs such as inorganic fertilisers and improved seed varieties.
Fourthly, there is greater commitment to good governance, accountability and transparency.
Way Forward
The MCC grant will go a long way in contributing to socio-economic development of the country. However, the following suggestions should be considered in the application or implementation of the grant funds:
(a)The funds should be applied to the improvement of electricity generation capacity by building new and upgrading existing power generation plants;
(b)The funds should help in the installation of new and upgrading of existing electricity transmission infrastructure such as grid lines to cater for strategic urban and rural development centres;
(c)The funds should help speed up the rural electrification programme in order to make electricity more accessible to people, the majority of who live in rural areas.
Expected Impact
Investment in electricity generation and distribution in both urban and rural areas is going to be a major catalyst for the country’s socio-economic development efforts. Some immediate gains from such investments will include the promotion of small to medium scale industries in such sectors as: agriculture (agro processing), mining and tourism.
Increased supply and access to affordable electricity will also have a positive impact on environmental protection and climate change adaptation. Affordable electricity will provide an alternative to fuel-wood as a source of energy. The use of fuel- wood by the majority of Malawians as a source of energy has been singled out as a major contributing factor to environmental degradation through deforestation. If trees are conserved, Malawi will stand to benefit climatically through carbon sequestration and potentially benefit from the carbon trading and financing facilities that will be more effective with the agreements reached at the Cancun COP 16 – United Nations Global Climate Change Negotiations held from 29 November to 11 December 2010.
Overall, providing access to affordable electricity just like water, food and shelter should be an integral part of any government policy agenda which is aimed reducing poverty and improving the people’s well being.
Kennedy Bisani Lweya, PhD
6 Junuary 2011
Johannesburg, South Africa
posted by kennedylweya at 3:17 AM
3 Comments:
Dr. K.B.Lweya,
I like the outline indeed and the grant will go a long way to meet the evergrowing energy demand as you rightly put. Its my hope that the strategic plan designed is as SMART as possible to yield results. It calls for our cerebration and I am particilarly indebted to the donor for the grant which has come on timel.
John
Dr. K.B. Lweya,
The Malawian press-Daily Times and Nation-state the MCC energy grant of $350 million to Malawi has been frozen and expect more frequent power outages for a while.
Personally-after reading through the MCA-M Energy Paper's decision that ESCOM should be the sole beneficiary of the grant-I was left bemused. The decision fails because it gives a carte blanche to ESCOM to abuse the resources: all the time dragging their feet on implementing the grant's programs. ESCOM needs a public and/or private competitor to up rate the quality of their energy services. Also the decision failed to address the needs of decentralization i.e. localize power generation, supply and distribution at city and local authority levels in order to support responsive service delivery and creation of sustainable and liveble socio-economic conditions in these localities.
Also the MCA-M decision ignored need to transform Malawi into a "predominantly exporting economy" especially as urbanization in Malawi is set to reach 60% in three decades; requiring more energy to support urban-based agro-processing and export-oriented industrialization [EOI] across the country! The 'short-termist' approach of MCA-M document failed to ensure part of the grant would be earmarked for green energy research that could be developed into competitor service providers to ESCOM as well as enable localized energy provision.
With tobacco-a primary industry on its last legs as a forex earner-technology-driven industrialization-demanding vast amounts of electricity-is now the only option. Meantime-ESCOM-even with the MCC grant-would be hard pressed to scratch the surface to meet such emphasized demand.
My suggestion-as the MCC grant come up for a review in the near future: revise the basic concept and decision rationale that informed this particular grant. Extend its terms of reference to include the new realism I have outlined above.
[for more arguments see my blog 'Claude A1 Sense']
Great insights in your analysis Claude - I agree with your idea of making the energy market more competitive in Malawi. This can only improve the quality of service delivery - the current monopoly is undermining this. I hope that the MCC will take your suggestions seriously and consider them in the review of the compact. Considering also that the MCC grant has now been put on hold, I would suggest that you perhaps forward your comments to MCC. Overall, the grant is timely, and should be supported as it will go a long way in improving our electricity generation capacity albeit with some bottlenecks, such as monopoly yet to be fully resolved.
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