World Bank approves $350m grant for Malawi hydropower project
The World Bank said in a statement earlier this month 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 $1.5bn (R26.79bn) 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, according to its website.
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Daily Maverick
9 hours ago
- Daily Maverick
The VX Land Cruiser factor – why Africa is still poor
The fuel queues across Malawi's cities tell their own story of an economy and society in distress. The reason for the petrol shortage is not rocket science. It is also entirely predictable. The black-market rate of the Kwacha to the dollar is nearly three times that of the official figure. Thus, fuel at the pump is sold at the official rate, making it less than half the regional norm. This subsidy, along with other price distortions, is calculated to be costing the Malawian treasury some $7-million per day, this money being funded by off-the-books special government-to-government relationships with the likes of Oman, Kuwait, and China, along with loans and treasury bills. The cost of the latter is yet to be felt, though with bills issued at a 30% yield, it's likely to be painful to the point of default. The so-called country-to-country deals are mooted to involve the mortgaging of mineral assets. As the country runs dry of money and scurries about for cash, so does petrol, even if it comes from dodgy discounted sources. Malawi remains, as a result of years of poor governance and policy, firmly stuck in the bottom five poorest countries worldwide, its per capita income one-third of the sub-Saharan African figure and less than 5% of the global average. All the other countries in the bottom few – Afghanistan, Central African Republic, Burundi, South Sudan, for instance – have been beset by years of civil war. Malawi has managed to be poor simply by making bad choices. Hope dashed There was a lot of hope with the advent of Lazarus Chakwera as president in 2020, the first time the Malawi Congress Party had returned to power since the days of relative affluence (and authoritarianism) of Hastings Kamuzu Banda. But Chakwera has proven as hapless as his predecessors. Rather than creating conditions that would drive up investment, he instead has presided over low growth, excessive government spending and dashed hopes. Little wonder that, with poverty afflicting more than 70% of the population, nine out of 10 Malawians say the country is moving in the wrong direction, with most preferring a return to his predecessor, the 85-year-old Arthur Peter Mutharika, who many say would be better simply because 'he and his party have already eaten'. Mutharika's Democratic People's Party has been in power twice this century, between 2004 and 2012, and again between 2014 and 2020. Corruption not only eats into Malawi's present, but also the future. The cost of excessive spending by the state – the government deficit is running just under 10% per annum – is visible in the lavish 20-car presidential cavalcades, the 300,000-strong civil service, and the enormous overseas government entourages and spending habits. That the president's wife would take a whole floor of a luxurious Johannesburg hotel for her friends' shopping trip, or that Chakwera's son-in-law and his son hold prominent and powerful positions in State House, is another indicator that not all is well with the state of governance. The VX factor WaBenzi was once the term used to describe the ruling beneficiaries of government corruption in East Africa – literally, the class that drives Mercedes-Benz cars. Now it's the black VX Land Cruiser that is the vehicle of choice to navigate Malawi's potholes, a $300,000 status symbol, especially when it meets arriving members of the president's family at the foot of the aeroplane steps. But it's the cost of what the state does not choose to do which is still more expensive. Chakwera had a difficult inheritance when he took over amid a fraught election involving a re-run following a vote-tampering 'Tippex' scandal the first time around. Easy victories were possible through a combination of judicious expenditure on infrastructure, along with government austerity to create this spending wiggle-room and getting the state out of its middleman function, which simply discounted the value to the poorest of farmers. With public support and oodles of donor goodwill, it was the new president's war on poverty to lose. But lose it he did, and spectacularly, through a combination of paralysis and patronage. Rather than remove the middlemen from the economy, true to Kamuzu Banda's legacy, the MCP has doubled down on them, a colonial solution for a 21st-century digital world. The result is, for example, that a combination of export bans and the setting of a minimum price by government (effectively becoming a maximum price), the price down at the moment that the farmer reaps his harvest, while the commodity fetches a premium during the hunger season, sold back to the farmer at a vast profit. Malawi works well for the elite with access to forex and inside the system; for the other 80% comprising the rural poor, squeezed between rapidly rising demography and diminishing farm plots, it's a vicious cycle of births, debt, hunger, ill-health and death. Cars wait patiently under posters of President Lazarus Chakwera, which proclaim his eminent re-electability in the September elections. The patient passivity of the electorate, easily divided and thus ruled along tribal and religious lines, contributes to government neglect in failing to hold it to account at the polls over its performance. Malawi is poor because its leaders have wittingly made this choice, preferring to realise the benefits of power for themselves over their people. Rather than using their mandate and local agency, they have fallen back on worn excuses of external factors, from colonialism to Covid. Malawi not alone It's not just Malawi, of course. Next door, Tanzania, Zimbabwe and Mozambique have made an art form of externalisation as the excuse, all the while deepening the elite's extractive grip on the economy. And, in Zimbabwe, when the opposition managed to get itself into power for four years between 2009 and 2013, itself the product of a brave and principled struggle, this was undone by its own leadership, which focused less on the next election and the health of the party than the trappings of power. The outside world has seldom helped, even with the best of intentions. In some cases, the intent has been downright malicious, focused on transactionalism for resources or political influence. In others, the donors have simply played along, wittingly or not, with the externalism argument, preferring to stay in the game rather than call things as they are or leave. With his closing of USAid, President Donald Trump may prove a positive disruptor to this world of diplomacy and self-interest, but it depends on whether he is cutting back aid to change the system for the better of the erstwhile recipients, or simply to use aid (along with tariffs) as a lever to extort for better business deals. In all cases, donors have been complicit in failure, preferring to measure success by the metric of expenditure rather than the impact of reforms. As one German ambassador put it in Zambia during the worst days of the administration (if that is what it could be optimistically called) of Edgar Chagwa Lungu, 'hope dies last'. At the same time, the presidency of Hakainde Hichilema, which defeated Lungu at the polls in 2021, shows what is possible. In spite of a difficult inheritance including foreign debt which had galloped over the previous 10 years from less than $1-billion in 2012 to $23-billion, and a poor relationship with its principal investors in the mining sector, responsible for 75% of crucial forex earnings, HH quickly reset the relationship with the largest of the mining companies, spurring fresh investment and taking a series of punitive arbitration cases off the table, which acted as contingent liabilities for Zambia Inc. At the same time, HH cut a deal with the IMF and Zambia's debtors, which included the previously apparently imperturbable, inflexible and characteristically overly commercial Chinese. These results demonstrate what is possible with leadership that possesses a sense of urgency and is willing and able to prioritise and plan. It emphasises the importance of domestic agency, and of austerity in righting the ship of state. It demonstrates that reforms are not static, but always ongoing, as is the need to manage the civil service, which can act akin to an insurgency countering reforms if it considers its interests under threat. But this highlights the purpose of government, away from entitlement and enrichment to service and delivery. The results of reform are not to be measured solely in the size of convoys, splendour of hotels, number of VXs or frequency and lavishness of per diems, but jobs and growth, the inner-stuffings to end poverty. DM
Daily Maverick
5 days ago
- Daily Maverick
Why foreign loans are a self-imposed straitjacket for SA's economy
Loans from international financial institutions are often celebrated as victories. But we need to ask what these loans are actually financing – and to whose benefit. The increased presence of international financial institutions in South Africa since 2020 should not be seen simply as a turn to cheaper lending. Rather, they are playing a key role in legitimising policy reforms that are aimed at dismantling state power over key economic resources, benefiting domestic and international capital. At first glance, it may seem like South Africa has caught a break. International financial institutions, most recently the World Bank and the African Development Bank (AfDB), have funnelled billions of dollars and euros in loans into the public purse. These loans have been provided at below market interest rates and with generous grace periods, at a time when the debt markets are charging the government a premium to borrow money. These loans are often celebrated in headlines as victories: ' South Africa secures World Bank funding ' or ' AfDB backs green growth reforms '. But we need to ask what these loans are actually financing – and to whose benefit. Curiously, these loans are not for the construction of bridges, roads, rail or tied to mega infrastructure projects such as Medupi. Moreover, according to the media statements and project documents published by the institutions, these loans are not intended to help South Africa refinance foreign currency-denominated debts. In other words, they cannot be regarded as an alternative to the high cost of market borrowing. Instead, these loans are meant to finance the legal and regulatory infrastructure deemed necessary to dismantle the state's control over key economic resources and often include policy conditions in their terms. National Treasury is therefore voluntarily approaching international financial institutions for money it could otherwise acquire elsewhere without the conditionality and political baggage associated with such borrowing. Reading the clues The first clue lies in how these loans are structured. They are neither earmarked nor set aside for a particular infrastructure project, as is often suggested by media reports. Instead, National Treasury classifies these loans as 'general budget support'. This means they are lumped together with all the taxes, market debt and government income generated in a fiscal year. While it is good for the government to have discretion on spending, as is allowed by general budget support loans, this is problematic where there is a hidden or contentious agenda behind the lending. Fortunately, reports provided by international financial institutions provide some more clues: in assessing South Africa's readiness for new loans, institutions evaluate the extent and speed at which the government has been undertaking policy reforms. Let's take the 2025 World Bank loan as an example. The loan agreement document explicitly states that the release of the $1.5-billion is conditional on the World Bank's satisfaction with the 'programme being carried out by the Borrower [Republic of South Africa]'. This 'programme' comprises several pillars largely related to legislative and regulatory changes that are designed to increase the role of the private sector. In the energy sector (pillar one), the World Bank cites the government's mandate for the National Transmission Company of South Africa (NTCSA) to enter into electricity transmission services agreements with independent transmission providers. This, it says, is to promote 'private sector participation' and acts as proof of South Africa's adherence to 'the programme'. Similarly, in the transport sector (pillar two), the government is commended for expediting the unbundling of Transnet through the Transport Economic Regulator Act of 2024. Self-imposed straitjacket That World Bank loan is not an isolated case. The recently approved $476.6-million loan from the AfDB follows the same pattern. The AfDB board was thrilled with the success of the previous $300-million 2023 loan, which they say 'delivered key reforms that bolstered financial stability and increased renewable energy capacity'. The project appraisal for the 2023 AfDB loan outlined the bank's specific contribution. It included its support for the Electricity Regulation Act, which, in their view, would 'provide the legislative framework to restructure and unbundle the electricity industry to create a modern and competitive sector, crowd in large investment into renewable energy, and establish a transmission system operator'. Unlike the classic 'structural adjustment' loans prevalent in the Global South following the 1980s, these loans are a self-imposed straitjacket on economic policymaking as well as an undoing of the developmental principles underpinning the establishment of the South African democratic movement. Government commitments to international financial institutions, as argued by the IMF, are viewed by global capital as a stamp of approval for a country's 'readiness' for investment. It assures the private sector that the government will not reverse its policy stance. No surprises Greater policy certainty is viewed as a precondition for crowding in private sector commitments. The push by the National Treasury and the Presidency to pass these reforms, all of which fall under the banner of Operation Vulindlela, should come as no surprise. Civil society and organised labour have consistently raised the alarm about the nature of these reforms and about whose interests they serve. The South African Federation of Trade Unions views Operation Vulindlela as 'a neoliberal structural reform agenda that is accelerating the privatisation of South Africa's public infrastructure'. The Congress of South African Trade Unions has also expressed concern about the ongoing unbundling of Eskom. Meanwhile, the Alternative Information and Development Centre has noted the link between the acquisition of these loans from international bodies and the acceleration of reforms proposed in Operation Vulindlela. It argues that it serves 'to satisfy the narrow interests of private investors and business elites at the expense of the public good'. In sum, for the National Treasury, the proliferation of foreign loans not only provides certainty to the market that reforms will be carried through and maintained, but also makes it difficult for dissenting voices to trigger policy changes. Ultimately, protecting South Africa's economic sovereignty means ensuring that the vision for our economy is shaped by the people the economy is meant to serve – that is the general public. This would necessitate opening up the space for Parliament and the public to scrutinise and debate the uptake of loans granted by international financial institutions, including their terms, conditions and long-term consequences. It is about ensuring that economic decisions reflect the needs and voices of the people above the preferences of markets or the priorities of lenders. The call by Parliament's Standing Committee on Finance for greater transparency – despite resistance from the National Treasury – must now be taken up more widely. Decisions about who controls our electricity grid, our ports, our budgets, and our future cannot be made behind closed doors. The time for making lending decisions that foreground the interests of South Africans is now. DM
The Citizen
5 days ago
- The Citizen
G20 South Africa 2025: Defining moment for the nation and the continent
G20, is the world's premier forum for economic cooperation South Africa is preparing to welcome the world in 2025 as it assumes the presidency and hosts the G20 Summit in Johannesburg. This milestone places South Africa, and by extension Africa, at the centre of global dialogue on economic growth, sustainable development, climate resilience, digital transformation, and multilateral cooperation. In the words of South African Deputy President Paul Mashatile, South Africa's goal is to promote mutually beneficial economic growth, create jobs and advance sustainable development for its partner nations. The Group of Twenty, commonly known as the G20, is the world's premier forum for economic cooperation. Representing more than 85% of global GDP, over 75% of world trade, and two-thirds of the planet's population, the G20 convenes the most powerful economies to address pressing global challenges. As the only African founding member of the G20, South Africa's presidency could not be more timely or symbolic. At a time when the world is redefining recovery and resilience in the wake of geopolitical tensions, economic uncertainty, and climate disasters, South Africa brings a grounded, inclusive voice to the table, one that reflects the aspirations of the Global South and the urgent developmental needs of the African continent. The G20 countries' ability to respond collectively to mounting challenges facing the multilateral system will determine both the speed of global recovery and the future of sustainable development. Under the banner of 'inclusive growth for a just world', South Africa's leadership is expected to spotlight issues such as financing for sustainable infrastructure, the global energy transition, youth employment, food security, digital inclusion, and equitable access to global markets. These are not only global concerns, but they are also everyday realities for millions across Africa. The summit will attract heads of state, finance ministers, central bank governors, and global institutions like the UN, World Bank, and International Monetary Fund. Beyond political leadership, the G20 also engages civil society, youth, women, labour, business, and think tanks through structured engagement groups – offering platforms for a wider range of voices to shape global policy. Johannesburg, as host city, will become a strategic hub of diplomacy, business exchange, and cultural showcase. While the summit itself is a high-level, closed-door affair, South Africans can expect a wave of public engagement, community-driven programmes, investment conversations, and national pride as the event draws near. 'The G20 presidency is a powerful opportunity for South Africa to place Africa's priorities at the heart of global decision-making. We are committed to driving an inclusive agenda that ensures no country, and no person, is left behind,' said President Cyril Ramaphosa. For the South African government, this is more than ceremonial. It is an opportunity for G20 members to transform commitments into lasting action. Key issues remain a challenge in the country and the continent, and there is a call for greater accountability to drive tangible progress in the global pursuit of gender equality SA's G20 presidency is also an opportunity to elevate African perspectives, strengthen international alliances, and advance sustainable development goals. It is a chance to reinforce South Africa's commitment to multilateralism and global cooperation at a time when unity is more important than ever. As preparations intensify in the coming months, all eyes will be on South Africa not just as a host, but as a bridge between developed and developing economies. The 2025 G20 Summit is more than just a gathering of nations. It is a moment for South Africa to lead with purpose, to shape global consensus, and to drive transformation that begins on the continent but resonates across the globe. Stay updated by visiting or follow #G20SouthAfrica2025 for news, opportunities, and ways to engage.
