The World Bank’s board of directors has approved a $350 million grant to support a large hydropower storage project in Malawi that will significantly increase the Southern African country’s generation capacity.
The World Bank said in a statement late on Thursday that the Mpatamanga Hydropower Storage Project would help supply electricity to over 1 million new households and create thousands of jobs.
The public-private partnership with an expected overall cost of over $1.5 billion will represent the largest foreign direct investment in Malawi’s history.
In September 2022 the Malawian government selected a consortium consisting of Electricité de France and SN Malawi BV owned by British International Investment, Norfund and TotalEnergies to lead the project’s development and implementation.
The project will have a total generation capacity of 358 megawatts, doubling Malawi’s installed hydropower capacity by building two dams along the Shire River between two existing hydropower facilities.
Nathan Belete, World Bank Division Director for Malawi, Tanzania, Zambia and Zimbabwe said. “This new hydropower project is a game-changer for Malawi, capable of catalysing transformative change in productive economic sectors such as mining, agri-business and tourism.
“As the country works on driving its economic development agenda, this new source of clean and reliable energy will help drive business growth, create jobs, and improve the lives of millions of Malawians.”
Malawi’s Energy minister, Ibrahim Matola, Minister said at completion, MHSP will significantly increase the country’s installed capacity, delivering 1,544 gigawatt-hours of clean energy annually emphasising that this additional energy will help supply electricity to over a million new households in the country and will create thousands of job opportunities.
Said Matola: “MHSP is a top priority for our government as the least-cost option in meeting our growing energy demand and achieving our access targets.
“Once operational, this project will help drive long-term energy security and support lasting, inclusive economic growth.
The energy minister further said energy access is fundamental to reducing poverty, fostering economic growth, and attracting private investment.”
Economic vulnerability
Malawi’s economic recovery remains fragile due to the slow implementation of macroeconomic adjustment reforms and a series of recent shocks and the fiscal low growth and high inflation underscore Malawi’s economic vulnerability.
GDP is expected to have grown by only 1.8% in 2024, a downward revision from 2.0% growth projected in April 2024. With the population growth rate at 2.6%, this marks the third straight year of declining GDP per capita.
The El Niño-induced drought in early 2024 has adversely affected agricultural output, which is expected to have contracted by 2.0% in 2024.
Inflation is gradually easing but remains high due to rising food, housing, and utility prices, as well as the rapid growth of the money supply.
Food insecurity remains a major concern due to weak harvests from 2022 to 2024 and the likelihood of a challenging 2024-25 season.
Approximately 5.7 million people—or 28% of the population—are expected to face crisis-level food insecurity between October 2024 and March 2025.
In 2023, 4.4 million people experienced acute food insecurity, due in part to continued challenges around access to inputs, as well as the impact of Cyclone Freddy, which disrupted agricultural production in the southern region.
Reform momentum
Limited fertilizer availability, including for beneficiaries of the AIP, may negatively impact the 2024-25 agricultural season. By the start of the planting season in December 2024, only 23.8% of the required 105,000 MT of fertilizer had been accessed.
Reform momentum has stalled, while fiscal and external imbalances continue to increase, and the cost of inaction is rising.
Continued delays in addressing widening fiscal and current account deficits increase the scale of the eventual adjustment and heighten the risk of further deterioration.
Conversely, implementing announced stabilization and adjustment reforms could enable the Malawian economy to achieve significantly higher growth rates over the next five years, as planned large-scale investments materialize.
These investments would create numerous jobs, boost exports and revenues, and catalyse further FDI.
The 20th edition of the Malawi Economic Monitor (MEM) outlines urgent policy measures needed to realize Malawi’s significant medium-term growth potential and avoiding a further weakening of the economy.
Harnessing power
The Mpatamanga Hydro Power Plant (MHPP) Project will generate electricity by harnessing the power of flowing water and the change in elevation of the Shire River.
The project will construct two dams, in series, along the Shire River, located between two existing hydropower facilities.
The main dam will be built across the river to store water and create a reservoir.
To generate electricity, the stored water is released in a controlled manner from the reservoir (during peak electricity demand) it flows downhill, due to gravity, through large tunnels into the main power station.
MHSP was co-developed by the Government of Malawi and the International Finance Corporation (part of the World Bank Group) as a public-private partnership (PPP) with an expected overall cost of over $1.5 billion including financing costs during construction.
In September 2022, the Malawian Government selected a consortium consisting of Electricité de France (EDF) and SN Malawi BV (owned by British International Investment, Norfund and Total Energies) as MHSP’s strategic sponsors using an international competitive tender process.
The project’s financing is expected to consist of grants, equity contributions, loans and guarantees from various development partners and private sector stakeholders; and will represent the largest foreign direct investment in Malawi’s history.
MHSP’s main and regulating dams on the Shire River will generate clean energy and store power to supply electricity during peak demand hours, helping to improve the reliability of Malawi’s national grid.
The hydropower facility will also boost the grid’s capacity to support the growing demand of the country’s mining companies, an industry which holds significant potential to boost the country’s economic development prospects over the coming decade.
MHSP is one of several large energy projects in Malawi supported by the World Bank Group, reflecting the institution’s strong commitment to supporting this sector as an important enabler of economic growth and development.
“MHSP is a top priority for our government.”
Ibrahim Matola
Minister of Energy
