Malawi Compact

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.

The compact is composed of three projects to increase the capacity, efficiency, and stability of the national electricity grid and the capacity and sustainability of hydropower generation at the Nkula A generation plant. 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

Compact Budget

Milestones

  • Signed:
    April 7, 2011
  • Entry Into Force:
    September 20, 2013
  • Closed:
    September 20, 2018

Compact Projects

Environmental and Natural Resource Management Project

  • $32,526,000Project Total Amount
  • $29,106,680Project Amount Committed
  • $21,360,702Project Amount Expended

The Environmental and Natural Resource Management (ENRM) project will empower the poor among Malawi‘s residents by reducing costly disruptions to Malawi’s hydropower generation, providing them with greater opportunities for work and study during nighttime hours.

The project is designed to improve the availability of power by reducing chronic weed infestations and excessive sediment buildup in the Shire River Basin, which can disrupt hydropower generation, and to implement modern environmental and natural resource management techniques in upstream areas. Three activities will support the ENRM project’s goals:

  • A Weed and Sediment Management Activity will reduce the impact of weed overgrowth and sediment buildup on the Shire River Basin through the mechanical removal of weeds and sediment, identify environmentally appropriate disposal sites, and expand use of environmentally friendly control measures. While removing weeds and sediments addresses the symptoms of poor natural resource and watershed management, sustained efforts are needed to reverse the drivers of land use change.
  • To do just that, 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. MCC is working to sustain these activities over the long-term by putting in place setting up an environmental trust that will utilize funding generate from the electrical tariff to fund grants to upstream communities to improve land-use practices.
  • 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

  • $249,181,040Project Total Amount
  • $227,576,302Project Amount Committed
  • $133,965,619Project Amount Expended

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 rehabilitate  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

  • $27,521,160Project Total Amount
  • $24,804,333Project Amount Committed
  • $16,676,210Project Amount Expended

The Power Sector Reform Project supports the policy reform agenda of the Government of Malawi by modernizing the management and operation of critical sector institutions and supporting legal and regulatory changes.

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  supports three main areas of the turnaround: finances, corporate governance and operations.

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

As of September 20, 2018