MCC grant to unleash $570m income in 20 yrs

The United States of America (USA) has estimated that nearly $570 million in additional income benefits are expected to be unlocked in Malawi from its Millennium Challenge Corporation (MCC) energy grant.

USA Ambassador Jeanine Jackson announced this in the capital, Lilongwe on Friday in her address after her government exchanged letters with Malawi Government signifying the official commencement of the five-year compact programme worth $350.7 million.

Said Jackson: “Nearly $570 million in additional income benefits are anticipated, not including the benefits of improved governance and regulation in the power sector and how sector reform will translate to greater poverty reduction.”

The estimated $570 million, according to the US government, is the expected net present value which could go as high as $830 million based on the estimated economic rate of return ranging from 18.7 percent to 24.6 percent.

The US energy grant to Malawi is the largest single grant the Malawi government has received for the energy sector since commissioning of Nkula A in 1966.

Jackson said compact programmes aim to benefit nearly one million Malawians over a period of 20 years.

She said the benefits would be accrued through reduced domestic and enterprise energy costs, leading to increased profits.

“Through investments in transmission and distribution upgrades, as well as environmental and natural resource management, the compact will also triple throughput capacity, increase distribution capacity by 20 percent and contribute to reduced outages and total system losses,” added the US ambassador to Malawi.

She also said through investments in power sector reform, it will help rebuild Escom into a financially strong, well managed company and develop an improved regulatory environment that attracts private sector investment.

Jackson said the compact will focus on investments in infrastructure development, power sector reform and in environmental and natural resource management, to mitigate the impact of aquatic weed infestation and sedimentation affecting hydropower generation in Malawi.

Finance Minister Ken Lipenga, who officially exchanged the letter with the US government on behalf of Malawi, said such an investment into the power sector is very critical, especially considering that the current erratic supply of power is one of the key constraints to economic growth in the country.

“This therefore, is the people’s project, to benefit all of us ,” said Lipenga.