On Wednesday, the Millennium Challenge Corporation (MCC) board met and approved a $350 million compact with Malawi. The compact will fund infrastructure development and policy reform in the energy sector, aiming to benefit more than 6 million people in Malawi over the course of the five-year compact.
When the government of Malawi began developing their compact proposals in 2008, they performed a constraints analysis with the World Bank, the African Development Bank and the UK Department for International Development to determine impediments to growth in the country. During this analysis, energy emerged as one of the main constraints to economic growth. Just 9 percent of the country’s population currently has access to power (one of the lowest rates in sub-Saharan Africa), and that number is closer to 2 to 3 percent in rural areas.
Even with so few people accessing the power grid, the current power supply is too low to fill demand and power outages are common across the country. This leads to both losses in productivity for business, and a decrease in quality of life for Malawians. Alternative sources of power, such as diesel generators, are costly and inefficient.
By focusing solely on the power sector, the MCC compact with Malawi will allocate most of its funds to building and upgrading infrastructure of the hydropower plants and distribution network. A smaller percentage of funds will also go to reforming and building capacity in the government institutions which manage the power sector. This will allow for greater sustainability of the project and set the groundwork for its expansion in the future. MCC is also hoping that the proposed reforms and upgrades will invite greater private sector investment in the country.
As the 12th sub-Saharan African country to receive a compact from the MCC, ONE is excited about the project and looks forward to following its achievements. As MCC CEO Daniel Yohannes stated, “Success of the program will depend on the Government of Malawi’s continued commitment to good governance, accountability, and transparency.”
Photo courtesy of Eyes on Africa Foundation.