Malawi Compact

Malawi’s $350.7 million Millennium Challenge Corporation compact was 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 was 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 also invested in new power generation capacity by completing the construction of the Kapichira II hydropower plant.

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

Financials

Financials as of December 31, 2018

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

  • $19,948,053Project Total Amount
  • $19,985,890Project Amount Committed
  • $19,465,104Project Amount Expended

The Environmental and Natural Resource Management (ENRM) project aimed to 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 was 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 supported the ENRM project’s goals:

  • A Weed and Sediment Management Activity aimed to 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 were needed to reverse the drivers of land use change. To address this, the ENRM Activity aimed to improve environmental and natural resources management (ENRM) practices in the Shire River Basin. The new activities decreased power outages and increased electricity output at three hydropower plants affected by invasive weeds and excessive sedimentation. These activities aimed to 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 worked to sustain these activities over the long-term by 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 aimed to 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 established 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

  • $260,160,107Project Total Amount
  • $252,502,089Project Amount Committed
  • $252,038,624Project Amount Expended

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

The project was 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 rehabilitated the Nkula A hydropower plant to improve the availability of power and reduce outages caused by the condition of the plant. This activity maximized power output from Nkula A, improved the reliability of the plant, extended its useful life, and prevented a partial or total failure of the plant.

The Transmission Network Upgrade Activity:

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

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

Power Sector Reform Project

  • $27,507,859Project Total Amount
  • $27,389,141Project Amount Committed
  • $27,389,141Project Amount Expended

The Power Sector Reform Project supported 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 aimed 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 supported three main areas of the turnaround: finances, corporate governance and operations.

The Regulatory Strengthening Activity helped 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 February 5, 2019