Malawi has just signed a $500 million (K140 billion) deal with a Chinese company to build a 1 000 megawatt plant at Zalewa. With 62 days of power cuts last year (the highest in the sub-Saharan region), it appears to be exciting news. Businesses that were compelled to buy generators can now smile. The same can be said of households. It is high time the energy crisis was resolved to reduce costs of doing business. Households might also enjoy some extra hours of electricity. While we applaud such a move, I think it is also important to critically look at the business sense as well as possible efficiency gains or losses.
Firstly, the thermal power plant will use coal from Mozambique. The facts are that the Brazilian company mining coal in Mozambique will be supplying it. It is expected that in the future, our coal, hopefully from Mchenga, will be used to power the plant, according to the Energy Minister. Matters start here.
Firstly, the foreign coal supplier will not accept to be paid in Malawi kwacha, a currency shunned even by its consulates abroad. Essentially, the Malawi Government through its power corporation will start importing coal and drain the few reserves until sometime in the future when the Mchenga coal can be used. Unless, there is something we do not know. The other only way is to use the coal from Mozambique in exchange for the supplier to use our rail line for free. A kind of a barter trade! I would find such reasoning unpalatable for an economy struggling to modernise and in need of foreign reserves. We hope such is not the case. If anything, those using our rail lines pay for it, possibly in a currency that is tradable. Again, this is all speculative, but a prejudiced possibility.
Over the years, our main users of coal, Blantyre-based and bits of Lilongwe, find the Mchenga coal expensive. Most of them have opted to use coal from Moatize in Mozambique. Transport costs are the main factor given that coal is a bulky stuff to transport by trucks. Factor in the fuel shortages Malawi has experienced. It is less costly transporting it from Mozambique by rail than road from Mchenga in the North. This is where I have problems locating the thermal plant at Zalewa. Take it to Mchenga or near it. The reasons are many and the justification: efficiency!
Normally, you build a power plant close to its main source of raw materials. That is why we have Tedzani, Nkula and Wovwe power stations on rivers. We can simply build a coal-fired plant closer to the source of our coal and not even pay a single unit of forex for it. We now have an opportunity to make Mchenga Coal Mine more competitive by simply building the thermal plant closer to it (Mchenga) or on the Jalawe-Bale-Phwezi area.
The issue of high transport costs would be gone as the mine will have a ready user just on its door steps. No need for trucks to do a 600km journey to Zalewa. If it is a question of water, South Rukuru is a perennial river unless there is evidence to prove to the contrary. It would be enough to provide sufficient water for the coal to power the thermal plant. Mchenga is not far from the national electricity grid. Not only does it benefit the local mines, but it also makes the whole electricity production efficient by building the plant right at the source of coal. Besides, it gives business opportunities not just Mchenga Coal Mine, but also other small coal miners in the Mwabulambo-Mchenga-Jalawe area.
The thermal plant is an expensive long-term commitment in the shadow of a quick prospect of adding 1 000MW to the national grid. Any arguments to the extent that Mchenga coal will be used in the future are mal-informed on the cost structure. Unless you build a rail line to Mchenga, the coal will be so expensive to transport to Zalewa to fire the thermal plant. There is enough evidence from local coal users. Consequence: Continue importing coal from Mozambique and drain the foreign supplied forex.
The notion of adding more energy is indeed a welcome gesture by the government, but a quick fix is not the best way. The responsible minister argues that a hydro power-plant will take ages to complete unlike a thermal plant. We would rather have such a hydro-plant even though it will take ages to build and be assured of a much cleaner environment and even more generating capacity. But this is not to dismiss the idea of a thermal plant. The funds in question are a loan unless we are advised otherwise and we need to agree on favourable terms, business sense, future needs and the environment.
Whatever the case, the proposed thermal plant should be built close to our coal mines and not at Zalewa. There are no shortcuts and quick fixes in generating massive amounts of electricity. Such loans will be repaid in future.