Power outages threaten manufacturing growth

The manufacturing sector is set to face subdued growth thanks to the prolonged power outages, economists have said.

The sector, which contributes about nine percent of the gross domestic product (GDP), is forecast to grow by 5.6 percent in 2017 from two percent in 2016.

However, for most of the manufacturing companies, production has come to a halt as the power problems have disrupted production, effectively threatening the expected growth projections.

Some companies have raised their retail prices, arguing that their production costs have gone up as running on alternative sources of energy such as diesel-powered generators have proven to be costly.

Currently, the Electricity Generation Company (Egenco), which sells power to Electricity Supply Corporation of Malawi (Escom), is failing to meet the power demand, producing only 160 megawatts (MW) of electricity against the average demand of 300 MW, which has largely been attributed to the lowering levels of water in the Shire River.

Last Friday, Escom released a statement which indicated that power supply has dropped by another 13MW.

In an interview, Catholic University dean of social sciences Gilbert Kachamba said the power problems might affect growth negatively considering that the manufacturing sector, though small, is still significant to the economy.

He said the power outages would result in the cost of production rising significantly in the manufacturing sector and some small-scale firms may find it hard to run on alternative sources of energy.

Economics Association of Malawi (Ecama) newly-elected president Chikumbutso Kalilombe said slow growth in manufacturing may also affect wholesale and retail as the sector, to an extent, is also dependent on manufacturing sector.

“Growth projections for manufacturing sector are likely to be negatively affected with the worsened power outages,” he said.

But earlier, Minister of Finance, Economic Planning and Development Goodall Gondwe was upbeat that the country will still register a growth of over five percent.