Poverty Reduction Blog Tag: Malawi
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 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.
Posted on March 28, 2014 by Ben Campbell, Director, Environmental and Social Assessment, Department of Compact Operations
MCC is marking World Water Day with a blog series on our investments in the delivery of clean water, effective sanitation services and long-term solutions that help build economic growth. This is the sixth in the series.
Population pressures in Malawi have pushed poor and vulnerable farmers up the steep hillsides where they scratch out a living growing maize. Having grown up an Iowa farm boy, I would have never contemplated planting corn on such steep slopes—but of course, we were nowhere near as desperate for land or production as the farmers in Malawi.
Unfortunately, there is a knock-on effect to the poverty-driven hillside planting: Tons of topsoil sediment makes its way into the Shire River, where it flows into and fills the head ponds, damaging the hydroelectric plants. The topsoil’s rich nutrients feed invasive weed blooms which get caught in the turbines, leading to power blackouts all over the country.
The effect represents a real long-term threat to MCC’s Malawi Compact, which includes the rehabilitation of the hydroelectric plant on the Shire River and an upgrade of the electric grid through much of southern and central Malawi.
In response, the project on which we are working in partnership with the Malawians seeks long-term financing to promote better land-use practices in the Upper and Middle Shire Basin, the source of much of the soil runoff. Working with private and government-owned companies, we aim to establish an environmental trust.
These downstream companies that make up the trust—including sugarcane producers, bottlers, water utilities, and the electric company—are affected by the same sediment as the hydroelectric plant. Individually, there is little they can do. Together, though, they can contribute the money needed to provide grants to local non-government and community-based organizations which, in turn, can help farmers improve their methods through conservation agriculture, forestry and soil erosion techniques.
For the farmers, the use of one or all of these practices should lead to improved yields. For the trust companies and the hydroelectric plant, these plans will reduce pressure on the forests and hillsides that are the source of the water.
By linking the land-use interests of the downstream entities with the upstream communities, our project hopes to create long-term funding to support these efforts, even after MCC has left.
Posted on February 3, 2014 by Oliver Pierson, resident country director, Malawi
MCC and MCA-Malawi staff are working hard to strengthen Malawi’s energy sector. The country's five-year, $350.7 million compact will address its inadequate and unreliable electricity and make a major contribution to the country’s economic growth over the next five to 10 years.
The compact comes after more than five years of development and preparation, and at an event full of high expectations and significant anticipation, more than 100 people gathered at the Sunbird Capital Hotel in Lilongwe late last year to mark the Malawi Compact’s entry into force—when the compact projects officially begin, and the countdown toward the five-year deadline begins. There was excitement about what lies ahead, relief that the compact was finally getting going and a bit of nervousness about all the work that lies ahead.
It took a lot of work to reach this point.
Development was marked by a delay from July 2011 to June 2012 due to the operational hold and suspension resulting from a pattern of actions by the Government of Malawi that was inconsistent with MCC’s eligibility criteria. Since compact reinstatement in June 2012, MCC and the Government of Malawi have worked diligently to both prepare for implementation and meet the conditions both sides agreed upon before the compact would begin; these conditions involved a number of power sector reforms to ensure the compact’s sustainability.
The reforms the Malawian government made were difficult, necessary and showed their strong commitment to the compact.
Access to power is a major issue in Malawi and creates a drag on the nation's economy. Only 6 percent of Malawi’s nearly 14 million people have electricity, and even those with access experience frequent outages and blackouts. What now is underway is fulfilling the compact’s ambitious infrastructure program. This includes constructing a new 400-kilovolt transmission line linking Blantyre to Lilongwe—a distance of about 150 miles or equivalent to the distance from Washington, D.C. to Virginia Beach—that will greatly improve power supply reliability.
The program also includes rehabilitating a hydropower plant to increase generation capacity and the development or rehabilitation of approximately 25 substations to deliver more reliable electricity to the homes and businesses of nearly 1 million Malawians.
The compact aims to reduce the costs of energy for domestic and business uses, and we project the compact will boost household incomes nearly $570 million. And that figure doesn’t include the benefits of improved governance and regulation in the power sector that the compact l helps motivate.
People often ask me when the compact will show some impact in Malawi. I can confidently respond that, with entry into force behind us, the impacts of our investments on Malawi’s power supply should be felt within four years, once our new transmission lines and substations are in place and our work to rehabilitate the Nkula A hydropower plant is complete.
While that may seem like a long time to some, the significant improvements these policy reforms and investments are expected to bring will be worth the wait.
Posted on April 30, 2010 by Daniel W. Yohannes, Chief Executive Officer
“Africa’s future is up to Africans,” said President Barack Obama during his historic first visit to sub-Saharan Africa. By partnering effectively with African countries on their homegrown antipoverty strategies, MCC puts this powerful truth into practice. With over 70 percent of MCC’s portfolio benefiting the people of Africa, we are investing in solutions for long-term prosperity that Africans themselves are designing. These include building transportation networks, increasing agricultural productivity throughout the entire value chain, improving water supply and sanitation, expanding health, education, and community services, and broadening access to finance for greater enterprise development.
On Tuesday, I met on Capitol Hill with members of the Congressional Black Caucus (CBC). Congressman Donald Payne and Congresswoman Barbara Lee hosted the gathering, which focused primarily on MCC’s work in Africa. I shared with them how we are currently working with Malawi and Zambia to develop initial compacts and with Cape Verde to pursue a second compact. MCC’s Board of Directors will also be considering a threshold program proposal from Liberia. CBC’s support will help MCC broaden our investments in Africa and forge new partnerships.
My meeting on Wednesday with the African Diplomatic Corps provided a forum to emphasize the importance of sound policy performance to long-term development. MCC seeks partners committed to good governance, the rule of law, fighting corruption, economic freedoms, and the health and education of their citizens. We welcome the difficult steps so many African partners are taking to reform their policies and embrace the policy changes necessary for sustainability.
And, yesterday, I joined OPIC, the U.S. Commerce Department, EXIM Bank, and the U.S. Trade and Development Agency at the Corporate Council on Africa’s infrastructure conference for a discussion on trade and development. MCC helps to create strong, stable, growing markets in the developing world, which, in turn, helps to create jobs here at home. By working with African partner countries to remove internal barriers to trade, enhance institutional capacity in areas such as customs and national standards, develop trade-related skills, and build the infrastructure needed to enable trade, MCC is deepening Africa’s capacity to trade and attract private sector investment.
With ongoing guidance from congressional supporters, with countries willing to do their part to practice good policies, and with the private sector’s growing role in fostering trade and development, Africa is poised to fully maximize its partnerships with MCC. This will deliver meaningful and sustainable change in the lives of the continent’s poor.
Posted on March 4, 2010 by Jason Bauer, Director of Private Sector Initiatives
This week more than 167 companies attended a procurement conference and heard about contracting opportunities arising from projects funded by Millennium Challenge Corporation compacts. Supported by Business Unity South Africa, Standard Bank, and the U.S. Embassy, the conference was hosted at the Development Bank of Southern Africa in Midrand, South Africa. Country teams from Burkina Faso, Lesotho, Malawi, Mozambique, Namibia, and Tanzania discussed over $3 billion in procurement opportunities, ranging from building roads and water systems to building health centers and schools. The compact in Ghana and compacts still being developed with the governments of Malawi and Zambia were also discussed.
The conference highlighted the business opportunities that ultimately support MCC’s mission of reducing poverty through economic growth. The conferences key themes included the openness and transparency of the procurement processes, the ability for international companies to bid on compact projects and the unique opportunities for U.S. and international suppliers.
Companies attending the conference included those focusing on infrastructure engineering, design, and construction, as well as those providing project management and technical assistance. The resounding message: MCC partner countries throughout Africa are open for business.
Posted on November 30, 2009 by Patricia Moser, Director of Health
Tomorrow, we mark the 21st commemoration of World AIDS Day. In 1988, the World Health Organization designated December 1st to raise awareness about and focus attention on the global HIV/AIDS epidemic. There is a link between HIV/AIDS and the work of MCC, particularly in southern Africa where high HIV/AIDS rates constrain economic growth and compound human misery through early deaths, illness, and orphaned children.
Lesotho’s MCC compact signed in 2007, for example, recognizes the economic and human toll of HIV/AIDS. Thirty-four percent of the compact is dedicated to assisting Lesotho’s Ministry of Health and Social Work and the non-governmental sector expand access to HIV/AIDS prevention, treatment, and response. The compact provides financing to improve health infrastructure and to strengthen health systems nationwide.
The compact is renovating clinics and staff housing at up to 139 primary health centers throughout the country in an effort to improve the working and living conditions of health staff. The program is also reconfiguring the out-patient departments of 14 of the 19 secondary hospitals in order to provide needed space for integrating HIV/AIDS activities into these departments. Particular attention is being paid during these renovations to reducing the potential spread of tuberculosis in waiting rooms and clinical spaces, providing greater occupational safety for health workers, and decreasing the level of deadly tuberculosis co-infection of HIV positive patients.
In addition to infrastructure improvements, the compact is working to strengthen health systems by funding efforts to improve health care waste management. This reduces the level of infectious medical wastes at health facilities and in communities. It is also improving management systems and capacities for community health, district health management, and hospital out-patient departments. On-the-ground coordination between MCC, MCAthe local entity implementing Lesotho’s MCC compact—USAID, and the Centers for Diseases Control (both implementing agencies for the Presidents Emergency Plan for AIDS Relief, or PEPFAR, funds) has been exceptionally strong, including the co-location of U.S. Government health-related staff and regular coordination of programming and implementation issues.
Moreover, MCC is looking at issues related to HIV/AIDS issues beyond the health sector. Construction activities in all high prevalence countries require HIV/AIDS mitigation efforts, including HIV/AIDS awareness and education for workers and communities to prevent the spread of HIV, especially as a result of labor migration. MCC compacts in Tanzania and Namibia, and compact development activities in Malawi, pay special attention to HIV/AIDS prevention and mitigation in non-health sector activities.
December 1st is an important reminder of global HIV/AIDS prevention efforts, and MCC is committed to working with partner countries to help provide better access to health services and treatment to ensure a better future for those affected.
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