Malawi Compact

  • Grant Total: $350,700,000
  • Grant Committed: $250,466,896
  • Grant Expended: $81,892,081
  • Signed: April 7, 2011
  • Entry Into Force: September 20, 2013

Malawi’s $350.7 million Millennium Challenge Corporation compact is a single-sector program designed to increase individual and business incomes and reduce poverty by improving the availability, reliability and quality of the power supply, expanding access to power, reducing the cost of doing business, and revitalizing Malawi’s power sector. 

MCC is supporting the government in the identification and prioritization of investments in the sector by developing a resource plan to support the execution of the program. The compact is composed of three projects to increase the capacity and stability of the national electricity grid and the efficiency and sustainability of hydropower generation. The Government of Malawi will invest in new power generation capacity by completing the construction of the Kapichira II hydropower plant. 

Project activities will enhance future expansion opportunities by strengthening sector institutions, enhancing sector regulation and governance, and creating an attractive environment for private sector investment. The compact plans to reduce energy costs for businesses and households; improve productivity in the agriculture, manufacturing and service sectors; and preserve and create employment opportunities.

Financials as of June 30, 2016

Environmental and Natural Resource Management Project

The objective of the Environmental and Natural Resource Management Project is to improve environmental management in the watersheds that make up the Shire Basin while addressing food insecurity and poverty, which are key drivers of land-use change. 
 
The aims of the project are to reduce chronic weed infestations and excessive sediment buildup in the Shire River Basin, and to implement modern environmental and natural resource management in upstream areas. The project will accomplish the objectives through three activities:

  • A Weed and Sediment Management Activity will reduce the impact of weed overgrowth and sediment buildup on the Shire River Basin, identify environmentally appropriate disposal sites, and expand use of environmentally friendly control measures.
  • The ENRM Activity will improve environmental and natural resources management (ENRM) practices in the Shire River Basin. The new activities will decrease power outages and increase electricity output at three hydropower plants affected by invasive weeds and excessive sedimentation. These activities will improve land use and watershed management practices, and to help resolve underlying environmental and social issues impacting electricity generation and communities dependent on the natural environment.

A Social and Gender Enhancement Activity will promote shared values and complement the ENRM Activity through improved land use and natural resource-based economic development activities in the Shire River Basin performed by women and vulnerable groups. Women are often primary decision makers in activities that impact land use practices. The activity will establish a Social and Gender Enhancement Fund to improve sustainable management of resources, reduce natural resource degradation, increase economic opportunities, and help decrease outages at downstream hydropower plants. 

Infrastructure Development Project

The Infrastructure Development Project  supports economic development by addressing the most urgent rehabilitation, upgrade and modernization needs of Malawi’s power system. 

The project is composed of three activities aimed at preserving and increasing the generation capacity at the Nkula A hydropower plant, increasing the capacity and stability of the transmission and distribution network, and reducing losses. 

The Nkula A Refurbishment Activity will refurbish the Nkula A hydropower plant to improve the availability of power and reduce outages caused by the condition of the plant. This activity will maximize power output from Nkula A, improve the reliability of the plant, extend its useful life, and prevent a partial or total failure of the plant.

The Transmission Network Upgrade Activity will: 

  • upgrade the backbone of the transmission network to improve the quality and reliability of the electric power supply in Malawi; 
  • increase the capacity to move power from the south – where 98 percent of Malawi’s power is generated – to the central and northern regions; 
  • reduce technical losses on transmission lines; 
  • provide a secure transmission link between the southern and central regions; and
  • support future interconnection with neighboring countries.

The Transmission and Distribution Upgrade, Expansion, and Rehabilitation Activity invests in the upgrade and extension of existing network connections in the southern, central, and northern regions of the Malawi power network. The activity will provide new network extensions and install new controls and modernized communication systems.

Power Sector Reform Project

The Power Sector Reform Project supports the policy reform agenda of the Government of Malawi by modernizing the administration of critical sector institutions. 

The ESCOM Turnaround Activity aims to restore the financial health of the Electricity Supply Corporation of Malawi (ESCOM), and rebuild ESCOM into a financially strong, well-managed company. MCC funding will support three main areas of the turnaround: finances, corporate governance and operations.

The Regulatory Strengthening Activity will help the Malawi Energy Regulatory Authority strengthen its capacity and introduce a more robust regulatory framework consistent with best practices in independent power utility regulation. It will also help the Government introduce a new policy framework to stimulate additional public and private investment in new power generation and expand access to electricity.