Power cuts cost Malawi $215 mln/yr, hurt investment

16 March 2010, Reuters
URL: http://af.reuters.com/article/investingNews/idAFJOE62E0D620100315

Lilongwe:  Erratic power supply in Malawi is costing the southern African nation about $215 million a year and deters new investment, an economist said on Monday.

Alex Gomani, chief economist at the Millennium Challenge Account-Malawi (MCA-M), a U.S. bilateral development fund, said the loss represents 4.4 percent of the total national income based on the country's current GDP of $4.9 billion a year.  "Lack of reliable power supply is costing Malawi $215.6 million per year, it's deterring new investments in the country," he said.

Last year alone, Malawi had 63 days of power outages, the most out of 24 sub-Saharan countries and only 6 percent of its inhabitants have access to electricity.  Gomani said apart from the economic impact, power outages are also exacerbating deforestation in a country dependent on agriculture and hydro power supply.

Finance Minister Ken Kandodo said separately on Monday that Malawi urgently needs to invest in power generation to meet future demand and cut these losses.  "Losing over $200 million per year is unacceptable, because it is hurting our small economy and we need to do something urgently," Kandodo said.

Malawi has long faced power supply problems mainly because of deforestation along the banks of the Shire river which has polluted the water and cut river levels, curbing its hydro power potential.  The 402-kilometre long Shire river, which draws from Lake Malawi, has six hydro electric stations that generate a total of 285 megawatts.

Energy experts say the country must raise power output to 300 MW to meet rising demand as the economy grows. In the last four years, Malawi's economy has grown at an average of 7 percent. Last month, MCA-M said that Malawi was in line for a $300 million investment to help ease its power problems.