Small, medium and big businesses have had little or nothing to smile about in 2016 due to a sluggish business environment brought about by incessant power outages Malawi continues to experience.
The extensive power outages that reached climax in the second quarter (April to June) saw businesses producing below their optimal capacity, pushing them to spend more than their budgets to run their machines on diesel-powered generators.
Karl Chokotho, president of Malawi Confederation of Chambers of Commerce and Industry (MCCCI), a grouping of private sector companies, told Business News that firms reduced output by between 40 and 80 percent, which meant reduced products for sale, translating into reduced turnover.
He said: “Reduced production with the same fixed costs and reduced revenues have driven some companies to restructure and scale-down on staff, and some to relocate. This is worrying and a serious issue that needs redress urgently.
“For the manufacturing sector, it is critical to have power. Alternative power sources are far more expensive and not sustainable over long periods, thus raising fixed costs and ultimately some have still downsized. This includes small businesses with smaller margins.”
At the peak of the crisis, which Electricity Supply Corporation of Malawi (Escom) said was due to lower water levels, some manufacturing firms could not hide their grievances, saying electricity outages has impacted on their businesses.
One such company was Nampak Malawi Limited, manufacturers of paper and board packaging.
The company’s managing director Symon Itaye said they struggled with production costs due to the prolonged power outages.
He said the situation left the company with no choice but to bring in an alternative power source despite not meeting the capacity.
“In the thick of things, we bought a generator, but its capacity is 400 KVA against our demand which hovers at around 600 KVA. We are using about 1 000 litres of diesel per day to power the generator which is just too expensive,” said Itaye, adding that this compelled the company to reshuffle its shifts according to the load shedding programme which Escom provided just to ensure that they continue to operate.
A representative of the Asian Business Nationals in Malawi, Mukbul Latif, could not hide his frustrations as a result of the power cuts, saying they have been an obstacle to doing business in Malawi.
“Every business needs power to run production. I know that for an economy to grow, power is critical and this situation has affected businesses at all cost.”
Small-scale businesses were also not spared.
Henry Manyanga of Chandamale Milk Bulking Group in Thyolo lamented that persistent blackouts blew up the cost of keeping milk fresh in times of power cuts.
In August last year, Escom announced that frequent and prolonged power outages would ease at the onset of rains later in 2015, but this was not the case.
Come 2016, Escom indicated that the water flow in the Shire River, the main source of hydropower, only allows it to produce up to 200 megawatts (MW) against a maximum generation capacity of 351.75 MW topped up by a 10 MW diesel-powered plant installed in Lilongwe. This forced Escom to load shed 140MW.
Escom said plans are underway to diversify into solar, thermal, diesel, and gas to ensure sustainable electricity generation in the long run.
Chikumbutso Kaonga, a senior lecturer in environmental sciences at the Polytechnic, a constituent college of University of Malawi, described the current situation as warning signs of an impending major crisis, urging Escom to diversify to other sources of energy.
He said Malawi is on a dangerous path due to climatic factors that continue to threaten the availability of enough water for electricity generation.
Another local development partner in the energy sector, Community Energy Malawi (CEM), urged government to be pro-active in planning, implementation, research in order to avert the electricity crisis.
CEM urged government to intensify conservation efforts of rivers and catchments by reverting in full to the law enforcement policy that was abandoned in preference to social forestry management.
The NGO called for planning in rural electrification programmes, urging government to look beyond the grid extension and invite small- scale micro grids either operated by communities or entrepreneurs saying can help to reduce demand on the national grid. n