Minister of Finance, Economic Planning and Development Goodall Gondwe is upbeat about the country registering an economic growth of over five percent despite acknowledging the possible threat to the same created by extended power outages.
In an interview yesterday, Gondwe said while nobody is denying the fact that the power outages are crippling production, government is still banking of agriculture—which did well this year—as the game changer.
He said: “The interesting thing is that because agriculture did particularly well this year, our growth rate is higher than what we expected it to be. It will be beyond the 5.5 percent and it seems agriculture did well beside the armyworms incident.
“And, as President [Peter Mutharika] has said a number of times, the reasons [for power outages] are also known because since independence, we have not been maintaining this equipment and, therefore, it has caught up with us and it is retarding our production. We are doing something about it.”
The minister was responding to The Nation inquiry on threats power outages pose to the gross domestic product (GDP) growth. In recent years, natural disasters—floods and drought—have negatively affected growth projections, leading to downward revisions in the past two years.
Gondwe said government has secured $250 million (K182.5 billion) from the World Bank (WB) for the 300 megawatts (MW) Mpatamanga Hydro-electric Power Project, $70 million (K51.1 billion) for a solar energy plant, $30 million (K21.9 billion) and another $30 million (K21.9 billion) for the power link between Malawi and Mozambique. These projects are besides the proposed 300MW Kam’mwamba coal-fired power project.
He said: “We have been assured that growth rate will be higher than any other country in Southern African Development Community [Sadc], but if we did not have these power outages, we could have grown even more.”
In 2007, the World Bank approved a $93 million credit for the construction of a power link between Malawi and Mozambique, with Mozambique’s share of the credit at $45 million. The project scope involved installation of a 135-kilometre (km) 220kV power line from Matambo substation in Mozambique to Phombeya in Malawi.
On the Malawi side, about 75km of the 220kV transmission line was to be built and a new 200kV substation installed at Phombeya.
However, despite being initiated in 2007 by the Bingu wa Mutharika administration without Parliament approval, the agreement virtually collapsed after Parliament refused to approve the Loan Authorisation Bill in 2009 on cost benefit grounds.
International Monetary Fund (IMF) resident representative Jack Ree said the level of power outages was neither sustainable nor compatible with the level of growth which would make Malawi to move up.
He said: “It is comforting that a very significant array of power projects are lined up already. Until these the new projects are brought on line, however, we could definitely manage the interim gaps better. The power outages are definitely adding to downside risks to growth.
“However, I still believe that we have a macroeconomic window of opportunity this year as we are finally winning the war against inflation. We just need to stay the course, find a way to tackle infrastructural challenges in a fiscally sustainable way, and bring on a few ambitious reforms to unlock private investment.”
Ree said IMF’s forecast for Malawi at 4.5 percent, is not going to be affected that much as we already built in severe power outages in our baseline forecasts.
In a separate interview, Economics Association of Malawi (Ecama) president Henry Kachaje said the power outages will negatively affect the private sector, especially the manufacturing industry.
He said consequently, there will be a slowdown in production and reduction in tax revenue.
Said Kachaje: “As you are aware, we have already started experiencing a shortage of cement and other manufacturing products. So, this is going to have an impact unless it is sorted out.”
In its August 2017 Revenue Performance Report, public tax collector Malawi Revenue Authority (MRA) attributed its subdued performance to weak collections in provisional tax, domestic excise and trade taxes and the expected reduction in profits from businesses due to power outages.
During the review period, MRA missed its target by K7.6 billion, collecting K63.42 billion against a target of K71.04 billion.
Commenting on the revenue performance report, Malawi Confederation of Chambers of Commerce and Industry (MCCCI) president Karl Chokotho said reduced production by industries in the face electricity outages entails reduced volumes which translate into reduced tax revenue. n