Posted on September 29, 2014 by Tom Haslett, Program Officer
Earlier today, MCC hosted a panel with leaders from Malawi’s key power sector institutions to discuss efforts underway to reform their organizations and the sector to help increase access to reliable electricity for Malawians. This event, part of a U.S. Trade and Development Agency reverse trade mission, comes at an interesting time. President Obama’s Power Africa initiative—a presidential initiative to triple the number of people with access to power in Sub-Saharan Africa—has turned a spotlight on the challenges of bringing electricity to growing economies throughout the continent.
The challenges Malawi faces in developing its power sector are representative of the issues Power Africa is designed to tackle. Only about 8 percent of Malawians are connected to the electricity network. The country has just 351 megawatts of generation capacity, and demand is expected to grow far beyond this level in the next several years.
The challenge is clear. Yet the government and the electricity utility, the Electricity Supply Corporation of Malawi (ESCOM), do not have the resources required to invest in generation to give Malawi’s economy the power it needs to grow. Bringing in private investment is a priority, and the country’s power sector institutions are adapting to improve the conditions for this to occur. MCC’s five-year, $350.7 million compact with Malawi—the agency’s first program focused exclusively on the power sector—is designed to help the country overcome these challenges.
Several factors currently limit the prospects for private investment. Any privately funded generation projects must sell electricity to ESCOM to reach consumers. This is because the utility owns all transmission and distribution infrastructure in the country. To date, no deals have been concluded, despite a number of ongoing negotiations. In the past, the utility was not viewed as a creditworthy partner for independent power producers because of concerns about its financial and operational health. However, recent improvements, in part supported by MCC, may help allay these concerns.
Additionally, the Malawian regulatory environment is still in its formative stages, creating uncertainty about key issues like access to the electricity grid and tariffs that independent power producers could receive. Finally, the government and ESCOM lack the experience and an established framework to structure complex power purchase agreements that maximize benefits for the Malawian public while ensuing value for money and minimizing potential risks and liabilities.
Malawi’s MCC compact is addressing these constraints head on. It recognizes the fundamental role that strong sector institutions and an appropriate governing framework must play to attract investment into any growing power sector. Our support includes a comprehensive set of technical assistance services to strengthen ESCOM’s finances and operations.
The compact also includes capacity building for the country’s energy regulator so it can play an effective role delivering reliable electricity service while deepening the confidence of investors and companies considering entering the market. The compact is also providing high-level advisory services to the Ministry of Natural Resources, Energy and Mining and supporting the development of a roadmap for restructuring the power market to ensure that roles are clarified as the sector matures.
Collectively, these reforms intend to create a more suitable environment for private sector investment in new electricity generation in Malawi. And the compact’s investments will also strengthen the transmission and distribution infrastructure to facilitate the delivery to customers of any new sources of electricity.
During the panel discussion at MCC today, the CEO of ESCOM, the acting CEO of the energy regulator and the Principal Secretary for Energy described their organizations’ experiences through the compact as well as their own efforts to drive change. Each of them emphasized the need to change the status quo to spur development in Malawi. For example, the Principal Secretary noted that mining is a potential growth avenue but the national grid can’t supply the power they need with the gap currently filled with expensive diesel fuel generators.
The CEO of ESCOM noted that this demand, combined with the ongoing reforms, will attract investors who need to know someone will buy the power they produce. And the CEO of the regulator highlighted the fact that his agency has developed a template for power purchase agreements that they hope to put to use for investors interested in the opportunities the country presents.
Throughout the discussion, one message was clear: Malawi is ready for growth in a power sector that is now open for business—and, with the changes afoot, the future is bright.
Posted on September 17, 2014 by Cynthia Berning, Program Officer, Department of Compact Operations
World leaders will convene in New York for the United Nations General Assembly next week, and the Millennium Development Goals will be an important focus—looking at the progress that has been achieved and establishing a new agenda for development over the coming years. This is another in a series of blogs highlighting some of MCC’s contributions to supporting the MDGs. Read the first one here.
In many of MCC’s partner countries, economic growth is constrained by lack of access to and low quality of education. To help break down these barriers, MCC has worked with its partners to improve these sectors and to help them make progress toward achieving Millennium Development Goals 2 and 3: to ensure universal primary education and eliminate gender gaps in school.
MDGs 2 and 3 set ambitious targets for ensuring universal primary education and eliminating the gender gap in schools. Providing general education to children is fundamental to a country’s economic and social development. It is one of the most effective tools to reduce poverty, improve the status of women, strengthen family health, and enhance social stability. Improving education quality ensures students leave school with the skills necessary to become productive citizens. In many countries, however, education access remains a challenge, especially for girls.
Education yields strong economic and social benefits for girls and women. Consider this: providing girls one extra year of education beyond the average can boost eventual wages by up to 20 percent. Adolescence is a time of high risk and missed potential. The education of adolescent girls, especially post-primary, is a priority.
Since 2004, MCC has invested $454 million in nine countries in projects across the education spectrum—including primary education, vocational training, non-formal training, and graduate degree programs—to equip people with the knowledge and skills they need to obtain good jobs, establish their own businesses and increase their earning potential.
There are still millions of girls in rural areas around the world who aren’t able to go to primary school, but MCC has helped to significantly reduce that number in Burkina Faso, for example, providing thousands of children with the opportunity for a brighter future.
The recently completed BRIGHT II Schools Project built hundreds of new primary school classrooms and preschools in Burkina Faso’s rural areas where primary completion, especially among girls, has been low. Many Burkinabé girls drop out to get married or work around the house; some stay away because their school lacks private restrooms. Boys often leave school to work in the mines, and younger children miss school because of hunger or illness.
To address these gaps, encourage attendance and ensure that students are physically capable of learning and retaining their lessons, solutions such as school meals, take-home rations for girls, school kits, and textbooks were implemented. Parental and community interventions included adult literacy training for mothers, community information campaigns on the benefits of education, especially the education of girls, and community capacity building on the importance of sustaining educational assets.
Teachers also benefited through better school facilities including teacher housing, the recruitment of additional female teachers and gender sensitivity training. The project also built 264 private latrines, dug 10 boreholes and rehabilitated another seven boreholes to ensure all students have access to safe drinking water and are learning in an environment where they can practice good hygiene.
Posted on September 16, 2014 by Jennifer Sturdy and Jack Molyneaux, Department of Policy and Evaluation, and Kathy Farley and Kristin Penn, Department of Compact Operations
MCC has just announced its first Open Data Challenge - the call-to-action to any masters and PhD students working in economics, public policy, international development, or other related fields who are interested in exploring how to use publicly available MCC-financed primary data for policy-relevant analysis.
The release of this data is intended to facilitate broader use of the data, above and beyond the scope of the independent evaluations that produced this data. Since the challenge was announced at the end of August, one question to MCC has been – what type of additional learning is the agency interested in?
During the release of MCC’s first five impact evaluations in farmer training, there was a lot of learning and soul searching going on within the agency. Sure, some of the evaluations pointed to positive, expected results, like increases in farm incomes in the El Salvador dairy, Ghana northern farmers’, and Nicaragua farmer training programs, but there were a lot of unexpected results as well. Why didn’t we see increases in farm income in Armenia? What were unique characteristics of farmers selected for training in Honduras? What led to the differential impacts in Ghana? And, the big question, why weren’t the increases in farm income leading to observable increases in household income?
With this in mind, the MCC agriculture team took some time to ask themselves what additional learning they would have liked to see beyond what was analyzed in the independent evaluations. There were three broad categories of additional potential learning:
Understand better what led to observable, realistic impacts. For example, in Ghana the team was left asking:
- Why were impacts positive in the North, while negative overall – was this related to the differing agro-climatic context? Did impacts differ by crop type? Was this a measurement or a timing of measurement problem?
Understand better what led to observable, counter-intuitive impacts. In some of the evaluations, the evaluators found counter-intuitive impacts. For example, in Ghana:
- In the North, crop incomes were up by 78 percent, land under cultivation was up by 32percent, yet there was no significant increase in yields. How is that possible? Did treatment farmers plant a different mix of (higher value) crops than control?
Understand better the impacts on project implementation, secondary outcomes, and positive/negative externalities. In many cases, analysis was limited to the primary evaluation questions and outcomes agreed to for the purpose of the evaluation. However, the initial analysis produced from the evaluations resulted in many questions that could possibly be answered by further analysis of the same data. For example, in Honduras:
- The evaluator makes a strong case that the farmers selected for the program were fundamentally different from the ‘average’ farmer that would have been selected following a random selection process. Additional analysis on who these treatment farmers were and how they differ from the average farmer, and certainly farmers living in the comparison areas where farmer training was not made available, would be useful for understanding and interpreting results of the evaluation.
In all of these evaluations, MCC also recognized the need to explore:
- Gender disaggregated impacts. Many of these evaluations were designed prior to MCC’s policy to require gender and other relevant disaggregation data and impacts. Can the available data be used to produce gender disaggregated impacts in Armenia, El Salvador, Ghana, or Nicaragua?
- Assets and Investments. While overall household incomes did not increase, is the available data able to demonstrate whether or not households increased investments in assets or other investments during the evaluation period?
While the learning from these evaluations cannot be undervalued, MCC is eager to fully explore the potential for more learning from the existing data produced by these evaluations to answer outstanding questions on how to design more effective agricultural investments and improve evaluation of these investments. We hope the Open Data Challenge is one way to motivate external researchers to use available resources to start answering these questions.
Posted on September 9, 2014 by Cynthia Berning, Program Officer, Department of Compact Operations
In September 2000, almost 200 countries announced their support for the United Nations Millennium Declaration, promising to help in the fight against poverty and hunger, strengthen access to education and improve health, including combating major diseases by 2015. MCC is one of several U.S. government agencies that help partner countries in their efforts to achieve the Millennium Development Goals (MDGs) and improve peoples’ lives.
When world leaders convene in New York for the United Nations General Assembly later this month, the MDGs will be a major focus—looking at the progress that has been achieved and establishing a new agenda for development over the coming years. This is the first in a series of blogs highlighting some of MCC’s contributions to supporting the MDGs in the lead-up to the United Nations General Assembly.
MDG 1 sets the target of eradicating extreme poverty and hunger. Each MCC compact is designed to fight poverty, and many countries have made fighting hunger and food insecurity a priority of their relationship with MCC.
Since its creation in 2004, MCC has committed over $9 billion in programs designed to spur economic growth in 38 countries, and more than half of these investments have been in projects designed to reduce food insecurity. MCC has helped its partner countries improve agricultural productivity, gain greater access to markets and post-harvest facilities, boost agricultural finance, increase land tenure security, improve land governance and land administration and contribute to improved nutrition.
The effects of MCC’s poverty- and hunger-reducing efforts are evident in large-scale irrigation projects in Senegal, Burkina Faso and Mali. Through these investments, we have provided a reliable source of water for thousands of family farmers who are now able to grow irrigated rice and vegetables—even in the dry season and during periods of drought.
And it’s not just the delivery of water that makes these investments significant. The sustainability of these investments has also been assured through participatory land allocation activities that protect the land rights of existing land users and give farmers a voice in deciding who receives new land rights, and land registration activities that provide secure, well-documented rights to the newly irrigated land.
More secure rights allow them to invest more confidently in making their land more productive and to take the lead in managing shared resources effectively. Community participation in land allocation decisions increases transparency and accountability of leaders and improves local governance structures. These investments should lead to increased income for these farmers, helping them to farm their way to a better life for themselves and their families.
Read more about MCC’s efforts to increase food security in its partner countries.
Posted on July 10, 2014 by Tom Haslett, Program Officer
Earlier this year, the Principal Secretary of Malawi’s Ministry of Energy convened the first semi-annual review of the country’s five-year, $350.7 million MCC compact. These reviews will be held every six months and provide key stakeholders with an opportunity to assess progress against the agenda for reform in Malawi’s power sector. The compact establishes an ambitious program to revitalize the country’s power sector through investments in critical infrastructure, hydropower plant efficiency and sector institutions.
The centerpiece of the review is a set of indicators focused on the performance of ESCOM, the country’s electricity utility, in areas like asset maintenance, bill collection and efficient provision of electricity. ESCOM’s financial plan establishes targets for these indicators, which are then compared against actual performance at the semi-annual review. This gives stakeholders in attendance and the Malawian public in general a window into what’s going on at ESCOM and with broader power sector reforms aimed at attracting new investment in electricity generation.
Why is this important? ESCOM is the main electricity provider for Malawian households and companies, and its operations are a matter of intense public interest. However, ESCOM’s recent performance has not been strong, and many Malawians lack confidence in the utility’s ability to improve. This was displayed recently as stakeholders spoke out against an increase in tariffs proposed by ESCOM; people asked why they should pay more for unreliable service and encouraged the company to increase efficiency, not raise rates. And in April 2014, the energy regulator approved a tariff increase below the level ESCOM identified as necessary to cover costs while highlighting the need for performance improvements.
ESCOM’s efforts to improve its service have given rise to a chicken-and-egg problem: The company believes a higher, cost-reflective tariff is necessary to improve service. But the public will have trouble accepting significantly higher tariffs until ESCOM’s operations improve.
This is where the semi-annual review can establish a path forward by providing a forum where objective data helps paint a picture of ESCOM’s performance and define corrective actions.
At the same time, emerging issues in the power sector can be jointly reviewed by power sector institutions and representatives of the private sector and civil society.
The review is also a perfect tool for the MCC model. The sustainability of our work in Malawi is based on strengthening ESCOM’s ability to recover costs, invest in service provision and be a viable partner for investors. We’re supporting these goals by introducing a modern management information system and helping build capacity in areas like financial management, procurement and billing efficiency.
The compact also targets policy reforms that can incentivize private investment in new power generation. The semi-annual reviews will allow us to understand if the compact is meeting its goals and provide learning opportunities. In addition, by bringing together stakeholders from across Malawian society, these forums will ensure the public consultations that helped develop the compact continue to inform its implementation.
This first semi-annual review gave concerned stakeholders a chance to better understand current power sector reform goals, progress to date against those goals and how the compact is supporting their achievement. A report that includes data on all key performance indicators discussed in the review will be publicly available soon. And three sub-committees with members drawn from the semi-annual review participants will meet on July 17 to review priority corrective actions to progress against the reform agenda and approve implementation procedures and timelines to address these issues. As our work continues over the coming months months, we’ll look forward to the next review—another opportunity to shed light on how MCC is helping to reform Malawi’s power sector.