The Electricity Supply Corporation of Malawi (Escom) has admitted that it is inefficient and non profitable because for it to produce a unit of electricity it spends almost twice the selling price of a unit of electricity.
In a questionnaire response, Escom public relations officer George Mituka said the heavy subsidy through the non cost reflective tariff has rendered the organisation inefficient and non profitable making it difficult to maintain its system optimally.
Said Mituka: “From our figures, it is apparent that Escom is operating at a loss and the heavy subsidy of generating electricity is rendering the organisation non profitable and inefficient. There is need to revise the tariff to be cost reflective and profitable if the energy sector in the country is to improve, and for Escom to start investing in new power supply systems.”
Mituka said apart from charging less per unit generated, inadequate supply of foreign exchange and floatation of the kwacha are other challenges Escom is facing since prices quoted by suppliers keep changing in line with changes in value of the kwacha to a dollar.
“Over 90 percent of Escom’s equipment and materials are externally sourced and require significant amounts of forex. This negatively impacts on our operations in that the inflow of materials is affected,” he said.
Concurring with Mituka, Consumers Association of Malawi executive director John Kapito said since the kwacha was floated it meant that Escom tariffs should also be adjusted upwards because the organisation buys most of its equipment in dollars.
He said he could have no problems if Escom adopts the automatic pricing system if the organisation is to start making profits.
“The Escom tariff is the lowest in the region and the whole company is operating like a subsidy programme. These people are failing to make money and coupled with the fact that they borrowed heavily both locally and internationally their inefficiencies will be exposed further and they will have difficulties to maintain their outdated equipment,” said Kapito.
Mituka said apart from outdated equipment, the organisation has problems with aquatic weeds and siltation due to poor farming practices and heavy deforestation which in turn causes extensive land degradation making generation of power difficult.
“Vandalism of Escom infrastructure is yet another challenge. Instead of expanding the network, Escom spends large amounts of resources to replace and maintain vandalised equipment and structure,” said Mituka.
As one way of the country ending its power woes, Mituka said It was pleasing to note that some players are now coming to invest in the sector in Malawi because the more players that are coming into the business, the more energy is going to be produced and more people will have access to power with very minimal supply interruptions.
“This will certainly ease up the pressure on Escom and allow the Corporation to operate effectively as a private commercial/profit making company. It is also good for national development,” said Mituka.
According to Mituka, Escom was established by Government to provide electricity in the country with a focus then on the social and not commercial aspect of the business.
“Government has since kept the cost of electricity at a minimal in order to ensure that as many Malawians as possible have access to electricity.
This heavy subsidy on electricity is reflected to date in the below-cost electricity tariff charged to its customers,” he said.