Star Report: Malawi Compact | Updated June 2021 | April 2020

Compact Changes

Infrastructure Development Project

Nkula A Hydropower Plant: The design of the Nkula A HPP Refurbishment Activity originally envisioned a refurbishment of the existing turbines to original or better specification. The turbines were designed and built robustly, and ran for 50 years with minimal maintenance. However, during the issuance of the tender documents, tenderers were offered two options to bid on: provide new turbines or refurbish the existing turbines. The tender stated a fixed price contract, and the tenderers, reticent to opt for the refurbishment option because of the higher unknown risks, all tendered for new turbines.

Power Sector Reform Project

ESCOM Corporate Governance: MCC and MCA-Malawi agreed to change the condition in the compact that required a study to assess the practices and performance of ESCOM’s Board against international comparators to be completed prior to the second year of the compact. This study was instead required to begin prior to the end of the third year of the compact. The delay in conducting the study was linked to the significant amount of work planned at ESCOM under the Power Sector Reform Project during the second year of the compact. Pursuing the study at the same time would have resulted in challenges in ensuring the appropriate level of attention to the development and follow through of the Corporate Benchmarking Study. The study was funded later in the compact as anticipated; however, the impact of the study was limited due to a general lack of interest in corporate governance improvements on the part of the Government and, by extension, the ESCOM Board.

Further, MCC agreed to remove a requirement in the compact to have all ESCOM interaction with the Government take place through the Department of Statutory Corporations (DSC). This was removed due to the fact that the Ministry of Natural Resources, Energy & Mining (MNREM) had assumed the lead in Government interactions with ESCOM. However, in practice ESCOM leadership was still subject to influence from different parts of the Government, including the DSC, MNREM, Ministry of Finance and the Office of the President through a variety of formal and informal mechanisms. The informal mechanisms in particular were not conducive to the introduction of improved norms and practices of corporate governance sought by the compact.

Rural Electrification: The compact included support for the Government to clarify the Rural Electrification Act. However, during implementation, other donor partners began work on rural electrification and national energy policy, and MCC did not provide this support as a result.

Environment and Natural Resource Management Project

Under the Weed and Sediment Management Activity, EGENCO was originally supposed to construct the disposal areas for the dredged material. With the unbundling of ESCOM and EGENCO later in the compact lifecycle, EGENCO did not have the financial resources required to build the disposal area. Instead, MCC used compact resources to initiate construction.

  • 1. Transmission refers to the bulk movement of high-voltage electrical energy from where it is generated (such as a power plant) to an electrical substation. Distribution refers to the local wiring from substations to consumers.
  • 2. This activity was also supported by complementary funds from the GOM.
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  • 6. Taulo, John L; Gondwe, Kenneth Joseph; SEBITOSI, Adoniya Ben. Energy Supply In Malawi: Options And Issues. J. Energy South. Afr., Cape Town ,  V. 26, N. 2, P. 19-32,  May  2015
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  • 8. For more information on MCC’s Suspension and Termination Policy, please visit our website here:
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  • 11. Under MCC’s country ownership model, governments receiving MCC assistance are responsible for implementing the MCC-funded programs. Partner governments establish units known as accountable entities, referred to as MCAs, to manage implementation for compact projects.
  • 12. The unit cost of electricity from petrol/diesel generators is far higher than that of grid-supplied electricity in Malawi, a landlocked country whose fuel is imported from afar.
  • 13. According to the Integrated Household Survey (2004-2005), fewer than 6 percent of households nation-wide were supplied with electricity.
  • 14. While data on female employment in the construction industry is difficult to find in Malawi, the World Bank ILO reported that the percentage of female employment in industry (which includes mining and quarrying, manufacturing, construction, and public utilities) in Malawi was 6.1 percent in 2018.
  • 15. GSI Implementation Report Malawi Compact, November 2018
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  • 17. At the time of the trainings, ESCOM had a total of 2,036 employees (1,825 men and 211 women), and EGENCO had 509 employees (465 men and 44 women).
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  • 20. For details on how MCC is incorporating these lessons in current and future programming, see here:
  • 21. Percent deviation from the target is calculated for this indicator, as well as others noted in this table, instead of percent complete. Progress for this indicator is best tracked by percent deviation from the target, because the actual should be as close to the target as possible. A percent deviation of 0% implies the target has been reached, and percent deviation closer to 0% implies better achievement than a higher percent deviation. Percent deviation is calculated using the following formula: 100*|Actual-Target|/Target. Because this indicator is a ratio of Total Revenue / Total Costs, a deviation above or below the target may reflect either a stronger financial position (a positive result), or a failure to effectively meet their maintenance and capex (spending) targets.  A target close to 100% indicates that ESCOM is effectively balancing available revenue with effective execution of core functions to operate the grid.
  • 22. A baseline for this indicator is unavailable, due to the fact that ESCOM did not have a reliable estimate for its long-run costs at the start of the compact, a key input to this indicator. The Project provided support for a Cost of Service Study which informed the development of the 2018 tariff application, with projections of costs through 2022.
  • 23. The cost-recovery ratio is the ratio of a utility’s revenues to cover its costs, including operating expenditures, depreciation and capital costs.
  • 24. These two segments of the Shire River Basin are upstream from Malawi’s main hydropower plants.
  • 25. In coordination with the World Bank, MCC prioritized five of the 10 hotspots in the Middle Shire, and the World Bank program worked in the other five.
  • 26. REFLECT was developed by ActionAid in 1993 and first used in El Salvador (South America), Bangladesh (Asia) and Uganda. REFLECT is now used in over 60 countries to tackle problems in agriculture, HIV/AIDS, conflict resolution and peace building. It is based on the theory pioneered by the Brazilian educator Paulo Freire Link
  • 27. ENRM Grantees guidance questionnaire for the GSI Implementation Report Malawi Compact
  • 28. ENRM Grantees guidance questionnaire for the GSI Implementation Report Malawi Compact
  • 29. Payment for Ecosystem Services are programs where a beneficiary or user of an ecosystem service (such as hydropower use by electricity users) make a direct or indirect payment to the provider of that service, which is then used to maintain the natural resource. PES programs can also benefit the conservation of the ecosystem being used.
  • 30. Infrascope has several uses for various audiences. For project sponsors, it can assist in and lower the cost of market entry by providing country research. For donors and governments, it can assist in the policy dialogue around PPPs. Other donors may also be able to use the indicators from Infrascope for their own M&E purposes, while academic researchers may also find Infrascope to be a useful tool.