Malawi must do its part of the MCC bargain

The Malawi Government on September 28, 2022 signed the long-awaited $350 million (K362 billion) second Millennium Challenge Corporation (MCC) compact. The compact seeks to assist the Malawi government in addressing the root causes of constraints to economic growth. Specifically the programme will, among others, seek to promote agriculture commercialization with a focus on rural communities, who will be linked to the commercial value chain. The programme also seeks to address the high price of freight transport service and remove barriers to linking farms to markets in rural areas.

President Lazarus Chakwera and the United States Secretary for State       Anthony Blinken witnessed the signing of the compact by Malawi’s Minister of Finance Sosten Gwengwe and the compact’s Chief Executive Officer (CEO) Alice Albright in Washington. This far, I can only say congratulations are in order to the Malawi Government for finally bagging the compact. Malawi has been waiting for this development for four years having qualified for the compact in 2018. Why this long wait is something we can discuss another day. 

Today, the first point I want to make is that qualifying for the compact is one thing; but keeping and taking the project to its conclusive end is another kettle of fish altogether. The programme can be suspended or stopped if the MCC Board of directors is unhappy with how the beneficiary government is handling democratic and governance issues. Put simply, there are strings attached to the programme which must be religiously observed. And there is precedence to this.

The first compact ran from 2013 to 2018. It was not free-wheeling. In July 2011, the MCC placed a hold on the compact before formally suspending the assistance in March 2012. The suspension was due to a pattern of actions by the Government of Malawi that was inconsistent with the democratic governance criteria that MCC uses to select its compact partners. Some of these actions were the draconian laws that the Democratic progressive Party (DPP) administration enacted between 2009 and 2011. This was during the late Bingu wa Mutharika’s second term. Bingu died in April 2012.

The MCC Board of Directors voted to lift the suspension of the Malawi Compact on June 21 2012 after the new administration under former president Joyce Banda took clear steps to reverse the DPP administration’s pattern of actions which led to the suspension.

The then MCC CEO Daniel W. Yohannes had this to say: “In lifting the compact suspension, the MCC Board recognises that the Government of Malawi has taken decisive action to restore democratic accountability, to demonstrate respect for the rights of individuals, and to implement sound economic management. As a result, I am pleased to move forward with this critical investment in Malawi’s energy sector. MCC expects Malawi to continue to demonstrate its clear commitment to strong democratic and economic governance.”

One of the low hanging fruits of the first compact was the completion of the Kapichira II hydropower plant which added 129.6 megawatts to the national grid.

The second point I am making is that the Tonse administration should not take the signing of the compact for granted. The compact is like an egg—very delicate—and should be handled with care at all times. The MCC expects Malawi to continue to demonstrate clear commitment to strong democratic and economic governance. This includes fighting corruption which is rampant in the country. It is against this background that Blinken promised that like all MCC endeavours, projects under the second compact will be transparent, collaborative and built to meet the highest standards of quality. That is a strong statement.

And there is an icing on the cake that came with the signing of the compact. Blinken pledged the support of the US government in helping Malawi get the so-far-elusive Extended Credit Facility programme with the International Monetary Fund. It cannot be sweeter than that. But all this goodwill from the US can vanish in a flash of a second if the Malawi government does not do its part of the bargain.