Mining sector has potential to drive Malawi’s economic growth – World Bank

Kayelekera Mine carrying hope for Malawi

By Wahard Betha

The World Bank says Malawi’s mining sector has the potential to drive the country’s economic growth and address fiscal and foreign exchange constraints currently being faced.

In its 17th edition of Malawi Economic Monitor released in July 2023, the Brettonwood Institution says despite such potential, the sector currently, plays a relatively small role, accounting for less than one percent of Gross Domestic Product (GDP).

Reads the report: “Currently, seven larger projects are moving ahead and may begin production before the end of the decade, with many of these likely to produce so-called green minerals necessary to support the energy transition.”

“However, past mining projects in Malawi and elsewhere in the region have often failed to deliver on their promise while projections from mining firms indicate that the sector could play a significant role in the economy, these projections need to be treated with caution at this stage given the many variables that could influence the materialization of these benefits.”

“Moving ahead it will be important to ensure that these assets, which belong to the country, are not squandered.”

The World Bank also acknowledged delays in production saying the tendency and price fluctuations can create significant uncertainty around likely revenue and export outcomes.

It says: “The ongoing debt crisis in Ghana, was the result of, among others, heavy borrowing following the discovery of oil and poor public investment decisions.”

“This means there is need for both incentivizing investment and ensuring that the Government maximizes the fiscal gains from these resources over many years, and spends these resources effectively to benefit the population which will require a stable (but not necessarily low tax) fiscal regime, as well as careful assessments of the potential impact of different incentives.”

“The government is currently reforming the legal and institutional structure to support the sector and in this context, it will be important to ensure that expertise is sought to support negotiations and that all contracts are made public.”

“Malawi’s participation in the Extractives Industry Transparency Initiative (EITI) creates an important institutional framework to support this.”

On the energy sector, the Bank states that despite having a number of projects in pipeline, Malawi has one of the lowest electricity access rates in the world where by the electricity access rate for 2023 is estimated at 19 percent with severe disparities between urban 42% and rural areas 5%.

The Bank laments that Malawi has set ambitious policy goals in the energy sector, but implementation has often lagged behind.

The Government of Malawi set a goal to achieve universal energy access by 2030 whereby in 2018, it published a revised National Energy Policy (NEP 2018), which serves as the main guiding document for the sector.

NEP 2018 set the target of universal access by 2030, in line with the Government’s commitment to achieve Sustainable Development Goal 7.

This builds on the experiences of longstanding programs to increase electricity access and also incorporates recent programs, such as the United States Agency for International Development (USAID)-funded “Kick-Starter Program” and the World Bank-funded Malawi Energy Access Program (MEAP).

In 2019, the Ministry of Energy prepared a National Electrification Strategy in line with policies in the NEP 2018 whereby the NES proposes a framework through which the Government will guide accelerated access to households and businesses at acceptable quality and levels of service that is anchored in the priority policies presented in the NEP 2018.

The strategic elements of the NES are organized in four thematic pillars institutional, policy and regulatory, technical and planning, and financial that taken together define the means and processes by which electrification expansion will be implemented.  

One thought on “Mining sector has potential to drive Malawi’s economic growth – World Bank

Leave a Reply