‘Everyone wants electricity supply to improve’
Millennium Challenge Corporation (MCC) resident country director, Oliver Pierson, is leaving Malawi after working for four and a half years in the country. During this period, Pierson has been instrumental in assisting Malawi to put in place all necessary structures, processes, procedures and overall create the necessary environment for the successful implementation of the Power Compact. Before he takes his flight out of Malawi, Weekend Nation engaged Pierson on a number of issues around the Malawi Compact.
Q
You have been in Malawi for some years now. First, take us back to the time you first arrived?
A
I first arrived in late 2012. Malawi was coming out of a challenging period where fuel shortages and electricity blackouts were frequent, and President [Joyce] Banda had made some tough decisions including to devalue the kwacha and there were concerns about inflation. Expectations around the MCC Compact were quite high, and I was often greeted with the question of “when will MCC solve Malawi’s electricity problems?” So we had a lot of work early on to manage expectations and remind interested parties in Malawi that the compact was a five-year effort and the benefits would not begin to be felt until 2018 when all the infrastructure will be commissioned. On a personal note, my family and I were warmly welcomed to Malawi and we really enjoyed getting to know Malawian culture from day one.
Q
How would you describe the support from different stakeholders towards implementation of the compact?
A
Overall, the key government stakeholders have provided strong and active support to the Compact. In particular, Electricity Supply Corporation of Malawi [Escom], the Ministry of Energy and Mining, Malawi Energy Regulatory Authority [Mera] and now Energy Generation Company [Egenco] have all been active partners in many aspects of compact implementation, and the staff of these institutions have shown both ownership of and commitment to the compact. We have seen support at the political level, such as through the passage of the Electricity [Amendment] Act, and at the operational level, such as through the review of hundreds of engineering documents by Escom engineers. I think our partners understand that the MCC Compact is really a unique opportunity to improve Malawi’s electricity sector and have generally risen to the challenge and given the Compact the degree of support it requires to achieve its full potential. We have also seen active interest in and contribution to the compact from different players in Malawi’s private sector community, and their willingness, as evidenced by countless interviews, to pay more for reliable electricity is at the heart of our efforts here to expand access to power and reduce the costs of doing business in Malawi.
Q
You have been instrumental in getting the MCC Compact to where it is. What is your impression on the progress as you leave the Compact?
A
We have made a lot of progress, after a lot of hard work by many people! It is great to see that the construction of all of our electricity infrastructure is now underway and at various stages of completion. Just driving around Lilongwe or between Lilongwe and Blantyre one can see ample evidence of all the construction going on, and seeing the towers go up and the new transformers being installed is a clear sign that we are making progress. We will have to work quickly to get all the new infrastructure finished by September 2018, but I am optimistic that we will get it done.
On the reform agenda, we have also made a great deal of progress, as shown by the passage of the Electricity [Amendment] Act in 2016, the unbundling of Escom and creation of Egenco, and the first efforts by Escom to source the much-needed new electricity from private sector power producers. There is still much left to do in the final 14 months of Compact implementation, including progress towards a cost-reflective electricity tariff, but overall I am pleased with the progress that Malawi has made.
Q
With slightly over a year before the MCC Compact ends, what is your impression on progress?
A
Well, the key challenge now is how quickly can we get the work done? We have around 14 months left, and so certain aspects of our programme will likely only get finished right before the compact’s completion date, on September 20 2018. So, it is a race to the finish, and there are risks that we need to manage, but as I said, I think we can get the works complete and achieve some of the final reforms.
Q
Any challenges that you feel can derail the project?
A
We need continued political will for reform to achieve our goals of a cost-reflective electricity tariff, a financially viable Egenco with a power purchase agreement in place with Escom, and the completion of power purchase agreements to get the much-needed new electricity generation capacity in place. So, if the political will to make hard decisions that may be painful over the short-term but are essential for the long-term success of Malawi’s electricity sector fades, we could see some of the Compact’s goals go unfulfilled.
For example, Escom and Egenco need revenue to buy power and expand access to electricity but they can only do that if the electricity tariff is cost-reflective, and Mera has not approved an electricity tariff increase since 2015, meaning that some of our efforts are being handicapped by inadequate revenue at the utilities. Tariff adjustments, of course, provides some short-term pain to consumers, but I think everyone wants service to improve overall, which requires investment and revenue.
On the infrastructure construction side, we would like to avoid an above average rainy season at the end of this year so that our works contractors can keep moving on construction, and we would also like to avoid any more resettlement-related challenges. As most project-affected people have been compensated by MCA-Malawi now, generally in a very generous manner consistent with international standards, I hope these types of challenges will now be a thing of the past. Finally, I hope that the great staff at MCA-Malawi sticks around to the end of the programme, as their knowledge and expertise will be difficult to replace in the final 12 months of implementation.
Q
The Malawi Compact expires in September next year, what is your greatest wish for this Compact?
A
My greatest wish is that the Compact achieves its expected goals of expanding access to electricity in Malawi and that we have a positive impact on the lives of hundreds of thousands of Malawian people who have been struggling with inadequate access to power for far too long now. Specifically, I’d like to see all the works contracts completed successfully so that Malawi’s electricity grid is strengthened and Nkula A is ready for another 40 years of production, see Mera approve a cost-reflective electricity tariff, and see Escom sign a number of power purchase agreements with independent power producers to increase the supply of electricity in Malawi. With those achievements, we would have created a strong foundation for Malawi’s power sector to continue to grow and meet the needs of the country.
Q
The talk now is the possibility of a second Compact. Are we on track as a country to qualify for a second Compact with eligibility criteria in mind?
A
MCC has a “higher bar” for countries under consideration for second compact eligibility. In addition to demonstrating successful implementation of the first compact and a commitment to sectoral reform, a country also needs to show improved scorecard policy performance. Malawi remains a historically strong scorecard performer relative to other low income countries, and is currently passing 16 of 20 eligibility indicators.
However, Malawi’s performance on the Control of Corruption indicator has been trending downwards over the last four years and is getting close to the median—currently in the 57th percentile. Should this trajectory continue, and Malawi will fall below the median, Malawi would no longer meet the Control of Corruption “hard hurdle,” and would, therefore, no longer pass the scorecard. The downward trend and potential for scorecard failure thus presents a challenge for Malawi’s ability to meet this aspect of the second compact “higher bar.”
Additionally, to meet our requirement to sectoral reform, Malawi will need to establish a cost-reflective electricity tariff, which the Government of Malawi has committed to do by the end of the first compact. If these two issues are addressed successfully, I think Malawi’s chances for a second MCC Compact will be strong.
Q
As you depart Malawi, what memories do you leave behind?
A
Well, I have been here for four and a half years and so I have countless memories, both on the work side as well as on the personal side. A few highlights include: Putting together a strong team at MCA-Malawi and working on a regular basis with these 50+ staff members to get this programme going and successfully implemented. This group is my Malawian family and we could not have made as much progress as we have without their commitment.
I also had rewarding and challenging meetings with Escom, Mera, Ministry of Energy and Mining, Egenco and private sector partners, and I really look forward to Malawi signing its first power purchase agreement [PPA] with an independent power producer!
We also successfully awarded eight works contracts to qualified international companies to construct around $200 million worth of new electricity infrastructure.
I cycled through the beautiful countryside of Malawi and interacted with people in villages, and tried to avoid the gule wamkulus who often chases after the azungu on a bike! And above all, I had an excellent time with my family and friends in the country enjoying Lake Malawi and the delicious chambo fish!
Q
Any last words?
A
Implementing a Compact is a marathon, not a sprint, the finish line is finally in sight, and we all need to finish strong! Therefore, I urge everyone involved in the compact to use every single day left until 20 September 2018 and every dollar left in the Compact budget to achieve our shared goals of improving Malawi’s power sector! Nothing succeeds like success and if Malawi can deliver on compact one, the country will be closer to achieving a key development objective and be well placed for a second MCC Compact. n
