ENERGY POLICY AND DEVELOPMENT

“Now is the time to change our economic situation by making decisions which are relevant and plausible for the people of Malawi”. Said President Joyce Banda recently in New York.

One relevant and plausible decision that we must make, in my view, concerns our energy sector. It is undisputable that reliable energy is very critical to any country’s economic development , which is why, if we are really serious about changing our fortunes as a country, we need consider reflecting seriously on our energy policy. The Malawi Growth and Development Strategy acknowledges the need to improve our energy sector in order for us to achieve our other development goals. However, unless certain policy elements change, chances are very high that we will miss out on the goals that are in the MGDS.

For instance, it is very evident that the present power supply companies,  do  not have the capacity to supply all the required electricity to support Malawi’s economic and human development.  According to The Renewable Energy and Energy Efficiency partnership (REEEP), currently  only  8% of the Malawian population is connected to the national grid out of which, only 1% is rural.  It is worrying therefore that despite such a very low connection percentage,  the power companies that we have, are still unable to give the very few Malawians they have connected a decent service. It is also worrying that despite this evident failure, the country’s power companies  seem  to be a protected  from all competition by the government  and as such continue to enjoy undeserved  monopoly. It is my view, that with the current service that companies like ESCOM provide, Malawians may not be able to achieve any meaningful sustainable development unless  the policy changes to remove the hindrances that discourage other companies from investing in Malawi’s energy sector.

In spite of  the government’s unclear yet seemingly protectionist energy policies, companies like ESCOM have remained  with the status of  inefficient corporations which raises serious questions on whether such protectionism is justified. It is very surprising that the government of Malawi continues to protect  such very inefficient entities despite their being partly responsible for the continued plunder of the country’s forests and the economic underperformance. For example,  economic experts estimate the country’s business annual losses due to blackouts  at K62 billion which is equivalent to 15% of the current national budget. Hard as it may sound, when one considers the magnitude of this loss in respect to the size of our economy, it is clear that the country’s failure to develop has also been largely due to inefficient power corporations.

As if that is not enough, the frequent blackouts  have resulted in mass plunder of the country’s natural resources, mostly the forests. According, to a Malawi Annual Economic Report (MAER) of 2008, household firewood and charcoal consumption stood at 7.5 million tons per annum which exceeded the sustainable supply by 3.7 Million tones. This according to the report, resulted in the destruction of between 50000 to 75,000 hectares of natural forests.  Assuming that the rate of plunder has been static (Which obviously is not the case), from 2008 to present, we can safely assume that the country may have lost up to 300,000 hectares of natural forests partly due to such  inefficiency.

Secondly, it is very worrying that  in spite  of the alarming rate of deforestation, the Malawi government still does not see any problem with putting the Value added Tax (VAT) on electricity. The decision to maintain VAT on electricity is not only un justifiable considering the low connectivity to the national grid as shown above but it  also shows policy contradictions within the government. While the same government is encouraging people to abandon charcoal and adopt clean energy in the form of electricity through the Ministry of Energy and Natural Resources, the same government is able to justify VAT on electricity. One then wonders what the government is trying to achieve with such a contradictory policy. Taxing electricity in my opinion, assumes  that electricity is not a basic necessity but rather a luxury. It is my view that such an assumption, is  very mistaken as electricity affects so many things critical to national and human development. Therefore,  it cannot be taken as a luxury hence taxing it is counterproductive to any efforts the government is making to achieve significant human and national development.

In conclusion it is worth to note that as we are at a critical transition point, the decision we make on energy, can determine the country’s future. Therefore those responsible for drafting the country’s energy policy must take heed of the president’s call and make relevant and plausible decisions for the benefit of all Malawians.