Monday, 14 July 2014


Malaŵi's Minister of Energy, Atupele Muluzi is today qouted in the Nyasatimes (
as saying:  "We would like to separate the functions of [the Electricity Supply Corporation of Malawi] ESCOM into electricity production, distribution and marketing and this will be run by autonomous institutions away from political interference"

Now letting ESCOM free from political clutches and claws of politicians is a good and noble thing. However, we have been there before and as they say the taste of the phala (pudding) is in the eating - let us see how the Minister will resist his fellow polotishans (politicians) who want 'orders' - it is the 'orders business' that kills organisations such as ESCOM. ESCOM and other state companies have been milked by greedy politicians who put pressure on management of these state entities to award them lucrative contracts, most of the times without going through an bidding process at all. Reports have been made of some politicians being paid upfront and never delivering on their orders! There was a time when ESCOM's store yard was full of material that had been over-procured and which the utility did not need; thereby tying money in unproductive-assets.

I hope the Minister is aware that this is not the first time we have been told this. last time it was when Bakili Muluzi (his own father) was President. The move to fully unbundle ESCOM was resisted because it was revealed the plot was to sell the lucrative parts of the business (distribution) to some business magnates with no experience in the energy sector! The idea then was to unbundle it into generation; transmission and distribution. I hope this is not  "Attempt Number 2" of more-of-the-same! I hope the the Minister has done his homework well and realizes that fully unbundling a vertically integrated entity like ESCOM has consequences for a country like Malawi with great income inequalities.

In the energy chain, the distribution unit is always the money-spinner. The generation unit is the money-sinker. Most countries who have unbundled (and are now regretting) try to keep the transmission at least under state control. There are reasons why in poor countries, it is recommended to have electricity and water utilities under [some form of] state control. Already ESCOM operates as a holding company with distinct business units. Maybe the model can be enhanced and improved. I would hesitate to fully detach the units making them autonomous [at this stage]. The energy costs may soon become unbearable. The example of the de-regulated market in the UK is there for those who wish to see how the poor can be 'shut-out' and 'freezed-out'. On the other hand, Électricité de France (EDF) has remained a well operated and managed state entity and is now operating in other jurisdictions like the UK! Maybe we can learn lessons from this? To attain efficiency does not [always] equal to unbundle.

Is the Minister aware that ESCOM is already a private company and no longer a parastatal or statutory corporation (brought into existence by the enactment of a Parliamentary statute)? If so, shouldn't the company start 'behaving' like a private company in the truest sense? For starters, we can start with stopping the Statutory Corporations from appointing the ESCOM Board and issuing directives and controlling ESCOM as a parastatal. ESCOM is no longer a statutory body. It is [since the late 1990s] a private company owned by the Government. The Minister may also need to revisit the instruments incorporating ESCOM as a company. It is not the Ministry of Energy in charge of ESCOM (as representing the major shareholder), it is the Minister of Finance!

On a more broader level; shouldn't it be a government policy to let all state companies (whether parastatals or not) free from political interference anyway? What about ADMARC? The Water Boards, Malawi Housing Corporation etc? In a manner of speaking, are these still out for grabs? The President two days ago issued a directive that chief executive officers (CEOs) of parastatals should stop attending party and presidential function unless related to their business. The fact that the President has to issue this warning is worrisome and shows the 'level' of the CEOs that we have and how patrimonial our politics has become. Once again, let us see how this directive plays out. Once again, we have been there before, and it is the same politicians who put pressure on CEOs under the disguised threat of "we do not see you at the President's functions". Maybe the first thing is to ensure that the right people are hired as management of these state entities. Rewarding people based on political, ethnic or other grounds is what has led us to where we are. Time for a real paradigm shift? Unfortunately, so far, the words do not match actions. We see once again the vicious cycle whereby a new president fires most CEOs and top managers appointed by the previous CEO of Malawi inc. and replaces them with people that reek of political and ethnic connections. Now I must be clear; I have no problems in appointing anybody as long as they are appointed on merit. It is when we start questioning the merit and realize that 'other consideration' came into play that I take issue with. I always get baffled at how 'satisfying' it must be to surround one self with people who are always bound to agree with you! Shouldn't one attempt to get people who will challenge your intellect and force you to think outside the box, in a manner of speaking? On the other hand, one must fully appreciate the political ramifications of our political system. In a country where the President is not elected by a clear majority, what do we expect? Is it really fair for 'blocs' that did not vote for the President to expect him abandon his 'stronghold'?  Politics, it would seem does not mix well with social and distributive justice. Ideally the President should appoint his cabinet and top managers across the country. Ideally. But this is politics and our political landscape is as polarized as ever. However let us see how time, the best player of all, plays this one out. Maybe there will be a convergence between the words and the actions! As it is said, the President will be judged by the 'actions of his hands'!

But I digressed. Coming back to the 'poor state of electricity', is the root not in the deprivation that the generation sector has endured especially in post-one party era? Yes we have had the development of the Wovwe Generation Plant in Karonga and Kapichira in Chikwawa but these have all been to try to 'meet current demand'. Interestingly since building a generation pant takes a very long time (the decision, planning, financing, building), by the time these power stations were finished, the demand had already moved further upwards (should we really be surprised?). Is it not time we had real and earnest investment in electricity generation? There is talk of a Chinese firm building a coal-fired 500 Mega Watt generation plant in Mwanza. Now whilst the ethical debate (from an environmental point of view) building a coal-fired power station in the 21st century is one which may preoccupy our minds, the more direct question would be is 500 MW even enough? It may lead to more than doubling the current generation capacity but it is imperative to bear in mind that the demand that ESCOM  refers to for electricty is what is referred to as 'suppressed' demand. What this means is that the actual demand may actually be much much more. And in some sectors of the society there is no demand because there is simply no electricity to demand! Shouldn't we be looking at ensuring that we have enough electricity production not only for now but for the next 10-20 years? Shouldn't we be more forward-planning? An example may illustrate this point. 30 years ago, most middle income households only used electricity for lighting. Radios were mostly battery operated (remember the Xirico?). And we hade the charcoal iron! Within a decade, this expanded to include heating water (and the geyser is an energy guzzler) and cooking. Now a typical middle income household will use electricity almost for everything; lighting, cooking, heating, cooling, ironing, TV, Hi-Fi Stereos with Sub-woofers etc. In other words, the energy demands have taken a quantum leap whilst the capacity (supply) has not coped up. And to make matters worse, the number of Malaŵian who have moved intro the middle and apple classes has increased as has the population.

Therefore it is all well and good to have dreams on increasing customer base but how will the customer base be expanded if there is no energy 'reserve' to connect them from? If after 50 years of independence, only 4% of the population is connected to the grid, then there is need for a more grander and bold plan. Now in the energy sector, it is trite that investment in generation is capital intensive and provides returns only in the long-term. Maybe the Minister and the Government need to seriously consider serious investment in the generation and transmission sectors. Energy distribution is self-financing and usually takes care of itself. Like I said earlier, it is the 'mint'. However, without a reliable energy source, we should forget about developing the country and attaining ~7% growths in the economy. Meanwhile as we await for investment (and ensure energy security), should we not be revisited the interconnection with Moçambique? This would provide a mid-term solution to our electricity needs although personally I think the country needs to ensure energy self-sufficiency in the long term. Now this is not to  trivialize the real bottlenecks that hampered the conclusion of the deal under President Bingu wa Mutharika. However I believe that these can be overcome. And maybe the electricity deal with Moçambique could be discussed together and levered with other projects such as the Nsanje Port?

The above views notwithstanding, the Minister should be applauded for the bold stance to remove ESCOM from political interference. But let us hope his fellow politicians are on the same wavelength with him!