Millennium Challenge Corp. Compact Helps Strength Malawi’s Energy Sector

Malawians line up to celebrate the commissioning of a hydropower plant, one of the conditions MCC and Malawi agreed upon before the compact would begin
Picture and story courtesy of MCC Poverty Reduction Blog
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.