By Wezzie Gausi:
Secretary to the Treasury Betchani Tchereni has stopped Electricity Supply Corporation of Malawi (Escom) and Ministry of Energy officials from travelling to Mozambique for the signing of the 120 megawatts (mw) interconnection power deal between Malawi and Mozambique.
Last year, Malawi, through Escom, signed a 50mw agreement with Mozambique at inter-ministerial level.
Among other things, officials agreed to increase the power capacity by 70mw to make it 120mw and the agreement was slated for signing in Mozambique this week.
Officials from the Ministry of Energy and Escom geared themselves up for the trip to sign the agreement but Tchereni has stopped them, arguing that the Escom board of directors did not engage all stakeholders on issues related to the trip.
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Tchereni has indicated this in communication dated April 30 2024.
Instead, he has advised the Escom board chairperson to pend the trip to Mozambique.
“The Ministry of Finance and Economic Affairs hereby directs your office to postpone the travel [sic] to Mozambique for purposes of signing the Interconnection Agreement with immediate effect in order to allow all internal due processes to be finalised.
Kindly note that authorities want Escom board of directors and management to engage all relevant stakeholders, including the office of the President and Cabinet, Treasury and the Reserve Bank of Malawi,” the letter reads.
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“By copy of this letter, Escom board of directors, chief executive officer and all top management are advised to discontinue the trip to pave [the] way for candid discussions and seek all necessary approvals, having provided the justifications, especially given the timing [of] the agreement,” the communication further reads.
Tchereni confirmed writing the letter in a separate interview.
He said while it is a positive development for Malawi to have the deal signed, there are some areas that need to be sorted out first.
“For matters of supply stabilisation and, of course, creating competition for power production, this is a good move.
“However, there are still a number of gray areas which need to be cleared before the signing can go ahead. Our hope is that we can clear such gray areas as soon as possible so that we get the agreement finalised. This is why we felt that it is important to postpone the signing and have the gray areas cleared the soonest,” Tchereni said.
On his part, Secretary for Energy Alfonso Chikuni said the ministry was aware of the development.
He said he was hopeful that things would work out soon.
“Once the deal is signed, Malawi will be obliged to pay fees to the nation where we will be getting the power, whether we use the power or not. So we thought it was important that we work with the 50mw that we already signed so as to pave the way for proper stabilisation of the forex [situation].
“As things stand, our electricity [supply] has stabilised, with the solar power in place, and the fixing of Kapichira. But when it comes to mining, we will be challenged as the current power won’t be enough. That is why we needed the 70mw,” Chikuni said.
Escom Chief Executive Officer Kamkwamba Kumwenda said the power deal was due to be signed this week.
He said one of the conditions of the deal is that Escom will be invoiced on a ‘Take or Pay’ basis, meaning that in the event that Malawi is not able to use the capacity to the maximum, Escom will still have to pay for the energy.
“The contract is in US [United States] dollars and the monthly invoice for 120mw will be approximately $10 million. The question is whether we, as a country, have enough foreign exchange reserves for such an obligation.
“Bear in mind that our tariffs are in Malawi Kwacha. Even if Escom will have the Kwacha, the source of the forex is critical. We cannot afford to default and embarrass the government. The policyholder and shareholder, who is the Treasury, has decided that we need to review the arrangement, hence the directive that the addendum should not be signed this week until advised,” Kumwenda said.
