Malawi Financial Mirror

Our Guest Comment: Mismanaging Large Scale Projects in Malawi

Whoever wins the election this year, one critical issue they must attend to is the mismanagement of large-scale projects in Malawi. Large scale projects have huge implications for the country’s economic development. One major argument for many big projects is that they have “spillover effects” that can be exploited for further development. Such effects can be through backward linkages (e.. Kayelekera project purchasing food from local communities or electricity from ESCOM) or forward linkages as inputs to other activities. Malawi has been singularly inept in exploiting these “externalities” of big projects. Take the following four projects

The first project was the Kayelekera mine. The Malawi government, through ESCOM, failed to provide electricity to the mine, forcing the company to use diesel which made Malawi a high-cost investment site. When uranium prices were around 170 US dollars per pound, the project was quite profitable even at unit costs twice as high as the global average. When the prices collapsed the project became unviable. However, the main point here is that the government failed to be of much use to the country's first major mining activity. As for the future of mining, the government seems totally unaware that it can influence the decision to re-open the mine by reducing some of the production costs such as electricity or it can speed up some planned projects by providing infrastructural.

The second project is the railway line to Nacala. This project is truly a bonanza brought about by the strategic location of Malawi for Zambia and Mozambique. However, to fully benefit from the project, Malawi would have to facilitate the handling of goods destined for Malawi and Zambia through the creation of a dry port at Liwonde with its excellent links to water and road transport. The Nacala project, initiated in 2010, was completed in May 2017. Malawi had enough time to build a dry port. However, it was only in In 2016 that Mota Engil signed a concession agreement with the Malawi government to develop a dry port at Liwonde under a Build, Operate and Transfer (BOT) arrangement. Mota Engil would invest US$250 million in the dry port and other ancillary facilities Early this year,  the President reported that the government will be spending $600 million on the dry port without explaining what happened to the Mota Engil projects. And so two years after the completion of the railway there are signs of a port.

The third case is the US (MCA) funded electricity grid project. The project was started in 2013 and complete in September 2018. To make use of this fantastic addition to the country’s energy sector, there had to be electricity to transport. As we write, Malawi is barely producing enough electricity for 7 percent of those that are connected. Thus, because of our failure to connect in time to the Cabora Bassa dam,  Malawi obtained a World Bank for the project in 1998. 10 years we have yet to embark on the feasibility study for the project. Another case is Kammwamba a coal power plant which, once again, has suffered from simply incomprehensible delays. The agreement for the project was reached under the Joyce Banda regime. but it took the Malawi government 4 years to enter into arrangements with the Chinese A project which would have been completed by now will only be ready 2012.

The -fourth project is the Salima-Lilongwe water project. First, there were questions about the tender. Then the Minister of Finance told us to wait as he checked with the IMF (who else?). Then he said he had received permission to proceed and that they had already paid the company some money. And since then there is silence and time is ticking. At the current pace,   we are heading towards a disastrous situation for water supplies to Lilongwe especially since the World Bank has pulled out of its own water supply project for Lilongwe.

Together these projects imply the mismanagement of US1.5 billion. The question that immediately arises is what lies behind such mismanagement? For the Kayelekera project, some have suggested pure regionalism – the project was in the North. For the dry port, a similar argument has been raised. This is UDF territory. As for electricity. The interconnectivity project was blocked by DPP and it seems the DPP took some time to accept the Kammwamba Coal power electricity project, which was Joyce Banda’s baby. Some have suggested that both the dry port and the electricity project have been undermined by the powerful fuel haulage’s lobby. Another persuasive argument is that these projects have left little room for personal gains. It also seems we have marginalized our national technocrats from these projects, with the implication that the learning process has been undermined.

Whatever is the true explanation, the blame for the failure to fully realise the benefits of these projects must be squarely placed on the highest level of government, at least as high as the Minister of Finance and Planning and the specialised ministry who have seemed so subdued and clueless that they too never seemed to mind. No one seems responsible for the implementation or exploitation of such large projects. Our Ministry of Finance is so focused on financial matters, especially those related to the IMF, that the ministry pays little attention to the real economy. At a lower level, the appointment of obviously incompetent and inexperienced officials into positions of overseeing the relevant Ministries or parastatals adds to the disastrous failure to exploit obvious opportunities.

Finally, it surprising how little political attention these projects. Parties in power have tended to view projects as their and the opposition has simply not cared. Our NGOs, busy with SMEs and “pro-poor’ have also ignored these projects as they have not understood that these mega-projects matter for the future of the country and the well-being of the poor.