In a year when electricity supply was moderately stable and Lilongwe Water Board (LWB) performed well, the Malawi-Mozambique Power Interconnector and various independent power producers (IPPs) missed their respective 2024 deadlines.
Among many developments, the four were enough to bring to light the highs and lows of the utility sector in 2024 –which mainly comprises electricity and water supply services.
To be fair, the overall performance of the sector was above average with a projected gross domestic product (GDP) growth of 4.7 percent which is only below accommodation and food, construction and financial services.
More so, the 4.7 percent estimate in October by the Reserve Bank of Malawi (RBM) was an upward revision of the 4.6 percent projection in May after noting progress of some electricity and water projects aimed at improving production.
“The Salima 50-megawatt [MW] Solar Power Plant, which was split into three phases of 10MW, 10MW and 30MW, the initial 10MW phase of which was finalised in July 2024 contributed to growth in the sector.
“Additionally, the Southern Region Water Board’s commissioning of the Nkhudzi Bay Scheme and other ongoing water and sanitation projects further boosted the industry’s growth in 2024,” reads RBM’s economic report for the third quarter 2024.
Other projects include LWB’s densification drive to unserved peri-urban areas and increased water treatment capacity to 50 000 cubic metres and the Northern Region Water Board (NRWB) upgrading and replacement of pipe networks in Karonga and Nkhata Bay to improve water supply reliability.
However, despite ongoing efforts, overall, the sector continued to struggle financially partly because of high non-revenue water which at 36 percent average, means all their finances are generated from 64 percent of their product.
Such a situation coupled with billions of arrears that individual water boards are owed by statutory corporations affected profitability, cash flows and limited their interventions of improving supply.
“The utility sector remains the biggest challenge in the delivery of basic services because of corrupt practices, especially in the procurement of goods despite many reforms they have undergone.
“The institutions lack strong management that can effectively reduce internal losses such as non-revenue water and push for debt collection where they are owed huge sums of money and affect their operations,” said consumer rights activist John Kapito.
However, on a positive note, the Electricity Supply Corporation of Malawi (Escom) had a timely relief early this year after the government wrote off the K65.9 billion Egenco it owed.
Escom board chair Morgan Tembo said: “Over the years, Egenco billed Escom based on machine capacity and not energy generated. On average, Escom was getting 54 percent of the capacity and this had an adverse effect not only on Escom but also on the power sector.
“Once the dispute was resolved and billing was agreed to be a composite of capacity and energy, Egenco improved generation capacity to more than 85 percent.” This reduced Escom’s payable balance to Egenco to K86.3 billion and provided fiscal space for it to invest in some maintenance projects that guaranteed steady supply of electricity except when faults occur.
Tembo said such initiatives improved revenue generation and financial performance of Escom as it increased its customer base from 572 000 to 655 000.
On the other hand, Escom chief operations officer Maxwell Mulimakwenda said: “The main maintenance project that we conducted at Escom apart from normal repairs is the transmission investment of $20 million that was assisted by Japan International Cooperation Agency.”
He said this investment has scaled up its transformers at Kanengo in Lilongwe from 85MW to 158MW, which has stabilised power supply in the capital city.
However, despite such improvements in supply and transmission, there was little to show in generation of electricity as both the Malawi Mozambique power interconnector and IPPs missed the 2024 deadline.
The interconnector, which will link Malawi to the Southern African Power Pool, missed three deadlines this year in June, October and December as it is now projected to be completed in March 2025 at the earliest.
Meanwhile, the Ministry of Energy’s dream of attaining 1000MW of electricity supply by 2025 from the current 554.25MW lies in jeopardy as foreign exchange scarcity delayed most IPPs projects to the effect that out of 30 licensed, only four rolled out.
According to figures from the Ministry of Energy, out of the 11 IPPs that were projected to add 343.26MW by 2023/24, only four succeeded; namely 80MW JCM Power (Salima and Golomoti in Dedza), 21MW Serengeti Plant in Nkhotakota, 8.2MW Mulanje Hydro in Mulanje and 3.06MW Cedar Energy Limited in Mulanje.
Ministry of Energy Principal Secretary Engineer Alfonso Chikuni, while admitting the setback, said the government is banking on the interconnector project which he is positive will eventually materialise.
“Unfortunately, after the unbundling of the sector to improve the generation aspect, the IPPs have not been moving at the required pace due to forex scarcity. For instance, JCM Power and Serengeti are still struggling to access foreign exchange.
“The foreign exchange situation that we are facing in the country, we believe, is also barring other IPPs from coming to invest in the country although we did not conduct a special study on this.”
Malawi Energy Regulatory Authority director of finance Zacharia Ng’oma who recently applauded Press Corporation plc for investing in energy, also acknowledged IPP delays and said they, together with the ministry will act on such projects.
As we bid farewell to 2024, project delays in the utility sector meant the gains registered in the year were outshone although supply remained moderately stable.
