The World Bank says its $350 million (K612 billion) grant for the Mpatamanga Hydro Storage Project (MHSP) is a catalyst for another $1billion (K1.7 trillion) financing but government needs to fulfil critical reforms to unlock it.
The bank’s division director Nathan Belete stressed this at the grant’s signing ceremony meant for construction of the project which is expected to double the country’s current hydro electricity generation capacity when commissioned in 2031.
Belete, who described the Mpatamanga project as critical to Malawi’s economic growth by providing energy solutions needed for the Agriculture, Tourism Mining and Manufacturing to thrive, said to unlock the funding, Malawi needs to fulfil reforms such as macroeconomic discipline which it committed for the project.
“Our expectation is for the economy to grow and that economic growth will result in significant poverty reduction. So it is our belief that this investment will see job creation and the growth of production sectors such as agriculture, tourism, mining and manufacturing. Through these, we believe economic transformation will happen.
“However, in order to achieve this, there has to be strong commitment to reforms, strong commitment to macroeconomic discipline for government and also strong commitment to uphold the commitments that they made in order to leverage financing from the private sector,” Belete said.
In her speech, United Kingdom ambassador to Malawi Fiona Ritchie cautioned the government about the existing risks like foreign exchange challenges that could result in investors being cautious hence there is need for it to continue implementing relevant reforms that instil confidence to investors for the project.
Minister of Finance Simplex Chithyola-Banda, who described the project as a game-changer for the energy sector, and as the engine for the country’s economic development, said government has already started working on the financing aspect as some of the reforms are already in progress.
Chithyola-Banda said: “I wish to reaffirm government commitment to fulfilling the conditions precedent as per the Financing Agreement. I am fully aware that timely fulfilment of the conditions is necessary to unlock the much-needed disbursements.
“More also, this week on Monday, we had a meeting with potential sponsors and lenders. I was very much encouraged by the positive feedback and interest in the project by the financiers. Reforms are underway which will see improvements in Escom’s operations. And paramount to the reforms is the issue of addressing foreign exchange concerns.”
The MHSP will involve the construction of hydropower and transmission facilities for the Mpatamanga main dam, regulating dam, hydropower infrastructure, and transmission lines.
Beyond expanding access, it will stabilise power supply during peak demand and allow Malawi to export electricity through the Southern African Power Pool, with annual foreign exchange earnings projected at $50 million.
World Bank Country manager for Malawi, Firas Raad, earlier said the project could raise Malawi’s GDP growth by 1.2 percentage points annually—up to five percentage points if expansion in the mining sector is realised.
“The project is expected to reduce national poverty from 51 percent to 25 percent by 2050, ten percentage points faster than in a scenario without the project,” he said.
In addition to its long-term impact, MHSP is expected to create approximately 4 000 direct jobs during construction in Chikwawa, with thousands more to emerge indirectly as improved power supply drives industrial activity and small and medium enterprises growth.
The energy boost i s seen as critical to unlocking stalled mining ventures and enhancing manufacturing and agro-processing.
The facility will be implemented under a public-private partnership through Mpatamanga Hydropower Limited, a special purpose vehicle jointly owned by Electricité de France, SN Power Malawi BV.
