JOBSGENERATEDBYTHEENERGYSECTORSUPPORTPROJECTINMALAWI1

PublicDisclosureAuthorizedPublicDisclosureAuthorizedPublicDisclosureAuthorized

PublicDisclosureAuthorized

CASE

STUDY

JOBSGENERATEDBYTHEENERGY

SECTORSUPPORTPROJECTINMALAWI

JobCreationPotentialofthe

CleanEnergyTransition

JOBSGENERATEDBYTHEENERGY

SECTORSUPPORT

PROJECTINMALAWI

CASE

STUDY

JobCreationPotentialofthe

CleanEnergyTransition

Assistanceprogram

THEWORLDBANK

IBRDOIDA

ABOUTESMAP

TheEnergySectorManagementAssistanceProgram(ESMAP)isapartnershipbetweenthe

WorldBank

and

over20partners

tohelplow-andmiddle-incomecountriesreducepovertyandboostgrowththroughsus-tainableenergysolutions.ESMAP’sanalyticalandadvisoryservicesarefullyintegratedwithintheWorldBank’scountryfinancingandpolicydialogueintheenergysector.ThroughtheWorldBank,ESMAPworkstoacceleratetheenergytransitionrequiredtoachieve

SustainableDevelopmentGoal7(SDG7)

,whichensuresaccesstoaffordable,reliable,sustainable,andmodernenergyforall.IthelpsshapeWorldBankstrategiesandprograms

toachievetheWorldBank'sClimateChangeActionPlan

targets.Learnmoreat:

.

?November2023|InternationalBankforReconstructionandDevelopment/TheWorldBank

1818HStreetNW,Washington,DC20433

Telephone:202-473-1000;Internet:

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Contents

Acknowledgmentsv

AboutthisReportvi

Acronymsvii

KeyFindingsviii

1.Introduction1

2.SummaryofRelevantEnergyInterventions5

3.OverviewoftheLaborMarket13

4.IdentificationandQuantificationofDirect,Indirect,andInducedJobs17

5.Results21

6.Conclusion31

References35

AppendixA:DetailsonDirectJobs37

AppendixB:Dinkelman(2011)EstimatesofEmploymentImpactsofElectricityAccess61

JOBSGENERATEDBYTHEENERGYSECTORSUPPORTPROJECTINMALAWIiii

ivCONTENTS

ListofTablesand

Figures

ListofTables

Table1.PDO-LevelIndicators8

Table2.PercentageDistributionofWorking-AgePopulation(Aged15YearsandAbove)14

Table3.OverviewofDataSources18

Table4a.OverviewofDirectJobsduringtheImplementationPhase,byProject,Contract

Type,andSkillLevel22

Table4b.Contract-LevelDirectJobsduringtheImplementationPhase,byproject23

Table5.EstimatedEmploymentImpactsofAccessinMalawi26

Table6.RelationBetweenEmploymentandOutagesbyFirmandYear27

Table7.Direct,Indirect,andInducedJobsinMalawi31

TableA.1Contract-LevelDirectJobs(ESSP)37

TableA.2Contract-LevelUseandValueofInputs(EnergySectorSupportProject)43

TableA.3Contract-LevelUseandValueofInputs51

ListofFigures

Figure1.TheoryofChangefortheEnergySectorSupportProject33

Acknowledgments

ThisworkwasmadepossiblebytheEnergySectorManagementAssistanceProgram(ESMAP)withfinancialsupportfromtheRoyalMinistryofForeignAffairsofDenmark.ESMAPisa

partnershipbetweentheWorldBankand19donorstohelplow-andmiddle-incomecountriesreducepovertyandboostgrowththroughsustainableenergysolutions.

ThereportwaspreparedbyateamcoordinatedbyZuzanaDobrotková(SeniorEnergy

Specialist)andcomprisingofSheoliPargal(LeadEnergyEconomist),AnnaAghababyan

(SeniorOperationsOfficer)andAndersPedersen(SeniorEnergySpecialist).TheworkwasinitiatedundertheguidanceofRohitKhanna(PracticeManager,ESMAP)andcompletedunderGabrielaElizondoAzuela(PracticeManager,ESMAP),withoverallstrategicdirectionprovidedbyDemetriosPapathanasiou(GlobalDirector,EnergyandExtractivesGlobalPractice).

AteamfromtheconsultingcompanyMathematica,consistingofFarazUsmani,DuncanChaplin,PatriciaCosta,SarahLeser,andSaraBryk,collectedbackgroundmaterialand

conductedupstreamresearchforthiscasestudy.Theteamacknowledgestheimportantinputs,insightsandassistancereceivedfromMichaelChipalauleGondwe(SeniorEnergySpecialist),KagabaPaulMukiibi(SeniorEnergySpecialist)andZhengjiaMeng(Senior

EnergySpecialist)andWorldBankconsultantsStephaniePinnington,NicolasFichauxandKavitaRai.

Editor:FayreMakeig.

JOBSGENERATEDBYTHEENERGYSECTORSUPPORTPROJECTINMALAWIv

AboutthisReport

Thisreportpresentsthefindingsandconclusionsofacasestudyundertakenunderaprogramofanalyticalworkthatinvestigatestheimpactsoftheglobaltransitiontocleanenergyonthequantityandqualityofjobsinlow-andmiddle-incomecountries.Undertheprogram,entitled“EstimatingtheJobCreationPotentialoftheCleanEnergyTransition,”theWorldBank’sEnergySectorManagementAssistanceProgram(ESMAP)undertookmultiplestreamsofanalysis:

.Areviewoftheliteratureandcommonlyusedmethodologiesofinvestigation

.ModelingofeconomywidejobimpactsofpoliciessupportingthecleanenergytransitioninselectedcountriesinSub-SaharanAfrica

.CasestudiesoftheeffectsonemploymentofselectedWorldBankcleanenergyprojects.Deepdivesintotheimpactonjobsofclosureofcoal-firedpowerplants;ofproductiveuses

ofelectricityassociatedwithminigridsinNigeria;andoftheRusumoFallsHydropowerProject.

Buildingontheabove-mentionedsteamsofanalysis,theprogramhasalsoproducedahigh-levelreportsummarizingitsfindingsandconclusions“JobsforaLivablePlanet:JobCreation

PotentialoftheCleanEnergyTransition”andadiscussionpapertosupportprojectdesign

“TrackingJobsinProjectsFocusedonCleanEnergyandProductiveUsesofElectricity”,providingstrategiesfortrackingandenhancingjobcreationthatcanbeusedinthecleanenergyprojects.

Thereportsdevelopedunderthisprogramtogetheraimtosupportlow-andmiddle-incomecountriesinreapinggreatersocioeconomicbenefitsfromtheenergytransitionbysupportingtheminincreasingthenumberandqualityoflocaljobsgeneratedwhileimplementingcleanenergyprojects.Realizingthebenefitsofthejobscreatedbycleanenergyinterventionswilldependoneffectiveplanningandpreparationintheearlystagesofprojectsandsustained

supportduringtheirimplementation.

Thereportstargetmultipleaudiences,frompolicymakerstodevelopmentpractitionersandacademics.Theyalsoaimtofamiliarizeenergyspecialistswiththeeffectsofenergyprojectsonjobsandgivethemtoolsthatenablethemtotakeaccountof—and,wherepossible,

maximize—thesocioeconomicbenefitsofthecleanenergytransition.

Thereportscanbefoundat

/publications

.

viABOUTTHISREPORT

Acronyms

ESCOM

ElectricitySupplyCorporationofMalawi

ESSP

EnergySectorSupportProject

GDP

grossdomesticproduct

GoM

GovernmentofMalawi

HWG

hotwatergeyser

ICR

ImplementationCompletionandResultsReport

kV

kilovolt

MCC

MillenniumChallengeCorporation

MoNREE

MinistryofNaturalResources,EnergyandEnvironment

MW

megawatt

O&M

operationandmaintenance

PDO

ProjectDevelopmentObjective

PSRS

PowerSectorReformStrategy

TOC

theoryofchange

AllcurrencyisinUnitedStatesdollars(US$,USD),unlessotherwiseindicated.

JOBSGENERATEDBYTHEENERGYSECTORSUPPORTPROJECTINMALAWIvii

KeyFindings

RuralelectrificationprojectsinMalawigeneratedsubstantialdirectandindirectemploymentopportunities,particularlyinconstructionandskilledroles.Theprojectsalsohadanimpactongenderdisparityinemploymentandhighlightedtheneedtostrengthendomestic

capacityformaterialsandequipmentproduction.Moreover,improvedaccesstoelectricityandenhancedreliabilityhadpositiveeffectsonjobcreationandenterprisedevelopmentintheregion.Keyfindingsfromthecasestudywere:

DirectJobs:EESP,whichfocusedontheconstructionandrehabilitationofpowerlines

andsubstations,createdanestimated6,010job-years.MCC’slarger-scaleInfrastructureDevelopmentProjectgeneratedapproximately79,134job-years,withbothprojects

consideringemploymentinO&Movera50-yearlifespan.Constructionrolesvariedand

includedprojectmanagers,engineers,professionalservicesworkers,cablejointers,meterinstallers,andconstructionworkers.

GenderDisparity:Bothprojectsemployedveryfewwomen,primarilyduetothepredominanceofconstructionroles,wherewomenconstituteasmallfractionofthesectorinMalawi.

ForeignWorkers:Asignificantnumberofforeignworkerswereemployed,especiallyintheMCCproject,whereapproximately46percentofworkerswereforeign.Theseforeignworkersweremainlyengagedasskilledprofessionals,indicatingashortageofdomesticskilledlaborforthistypeofwork.

IndirectJobs:Theprojectsgeneratedanadditional168,341job-yearsofindirectemployment,primarilyduetothedemandforconstructioninputslikecables,circuitbreakers,andvoltagetransformers.Allindirectjobswereforeignbecauseallmaterialsandequipmentwere

procuredinternationally.

CapacityConstraints:Therelianceonforeignprocurementhighlightsaseverelackof

capacityinMalawi,evenforitemsthatcouldtheoreticallybeproduceddomestically,suchaswoodutilitypoles.Futureclean-energyprojectsinlow-incomesettingsshouldconsideraddressingsuchdomesticconstraintstomaximizejobcreation.

InducedJobs:Thecasestudyestimatesthatproductiveuseofelectricityinareaspreviouslywithoutpowerledtothecreationof375newjobs.Additionally,improvedelectricityreliabilitymayhavebeenassociatedwitha6–7.6percentincreaseinemploymentamongregistered

firms,potentiallybenefiting9,000to12,000workers.

viiiKEYFINDINGS

ONE

INTRODUCTION

Thiscasestudyseekstoshedlightontheemploymentoutcomesassociatedwiththe

investmentsmadeinMalawi’sdistributionnetwork(includingrehabilitation,upgrade,and

expansionofprioritysegmentsoftheexistingdistributionsystem)undertheWorldBank–

financedEnergySectorSupportProject(ESSP),whichwasapprovedin2011andclosedin

2018.ItalsodrawsonacloselyrelatedprojectthatwasfundedbytheMillenniumChallengeCorporation(MCC)throughitsMalawiCompact,whichwasineffectfrom2013through2018.

Malawifacedfiscalchallengesintheearly2000s,culminatinginaneconomiccrisispriorto2004duetounsustainabledomesticdebt,whichreachednearlyaquarterofgrossdomesticproduct(GDP).Theimplementationofastrongstabilizationpolicyin2004,coupledwith

debtreliefundertheHeavilyIndebtedPoorCountriesinitiative,helpedeasethefiscal

challengesfacedbytheGovernmentofMalawi(GoM)andcreatethefiscalsettingneededtosupporteconomicgrowth(WorldBank2011).Asaresult,between2004and2010,annual

GDPgrowthaveragednearly7percent(WorldBank2022a).

Whilethegovernment’sfiscalperformancedidimprove,unreliablepowerremainedakeyimpedimenttosustainablelong-termgrowthinMalawi(WorldBank2011).Forexample,

thecountryfacedsignificanttransmission-relatedchallenges.Thecountry’snational

transmissionnetwork—comprisingapproximately1,250kilometers(km)ofwoodpole

linesand815kmofsteeltowerlinestransmittingbulkpowerat66kilovolts(kV)and132kV,respectively,andfeedingpowertoover70transformerslocatedat39substations—was

characterizedbyheavilyloadedtransmissionlinesandtransformers,frequentfailures,

andlow-qualityandunreliablesupply(WorldBank2011).Inaddition,regionaldisparitiesinsystem-levelinvestmentsmeantthatthequalityofthetransmissionnetworkvaried

significantlyacrossthecountry.Forexample,approximately60percentofthepower

distributedbytheElectricitySupplyCorporationofMalawi(ESCOM),theGoM-owned

electricutilityresponsibleforelectricitygeneration,transmission,anddistribution,was

suppliedtocustomersintherelativelymoreindustrializedandpopuloussouthernpart

ofthecountry,whereMalawi’spowergenerationcapacitywaslocated.Thetransmissionnetworksupplyingthenorthernareaswasextremelyweakandinsecure,posingamajorconstraintonthatregion’seconomicdevelopment(WorldBank2011).Inparticular,the

network’slongtransmissionlines,whichhadexhaustedcarryingcapacityandhighlossesduetolowtransmissionvoltage,meantthatadequatepowercouldnotbetransferredtothenorthernareastomeetexistingdemandevenifthesouthernregionsmighthavehadavailablepower.ESCOMthusroutinelyreliedonrollingblackouts(“loadshedding”)toeasethesystem-leveldemand.

Similarly,themajorityofthelow-voltagedistributionnetworkssupplyingthemainload

centerswereoverloaded,andoperatingbeyondtheirdesignlimits,therebyaffectingthequalityandreliabilityofsupply(WorldBank2011).Inaddition,ESCOMhadsignificant

resourceconstraints,whichimpliedthatthemaintenanceofthedistributionnetworkwas

largelyguidedbytheneedtocarryoutemergencyrepairs,withlimitedinvestmentin

systematicrehabilitationandupgrades.Thismeantthatsupplyinterruptionsduetonetworkinadequaciesandequipmentfailureremainedakeyconcernevenforhigh-priorityindustrialandcommercialusersofelectricity,whichweretypicallyprotectedfromoutagesduetoloadshedding(WorldBank2011).

JOBSGENERATEDBYTHEENERGYSECTORSUPPORTPROJECTINMALAWI1

Electricitysupplywasalsoinsufficienttomeetdemand,andnewcapacitywasurgentlyrequiredinthegenerationsystem.In2010,theinstalledgenerationcapacitywasapproximately

290megawatts(MW),consistingprimarilyofsixrun-of-riverhydropowerprojectsontheShireRiver,whichprovided98percentofthegrid-suppliedelectricalpower(WorldBank2011).

PeakdemandinMalawiwasestimatedatabout330MW,anddemandwasexpectedtogrowatabout5percentannuallyoverthenextdecade.

Toaddressthesepowersectorchallenges,theWorldBankfinancedtheESSP.TheESSP,

whichentailed$84.7millioninfinancingfromtheWorldBank,wasdesignedtocomplementthelarge-scalepowersectorinvestmentsoftheMCCthroughits$351millionMalawi

Compact,whichwassignedin2011,cameintoforcein2013,andendedin2018.Specifically,planningfortheMalawiCompactcommencedin2007,whereasthatfortheESSPwas

undertakenfrom2010onward,bywhichpointthescopeofthenecessarypowersector

investmentsthatwouldnotbecoveredbytheCompactwasclearandcouldhencebe

targetedbytheESSP.TheESSPaimedtoincreasethereliabilityandqualityofsupplyin

themajorloadcentersbysupportingthestrengtheningandexpansionofthedistributionandtransmissionnetwork,feasibilitystudiesfornewgenerationcapacity,demand-sidemanagementandenergy-efficiencymeasures,andcapacitybuildingandtechnicalassistanceforkeypowersectoractors.1

Thiscasestudyproceedsasfollows:Section2describesrelevantenergyinterventionsand

reformscarriedoutbytheGoMinthelead-uptotheESSPtosituatetheinvestmentsmadeaspartoftheprojectwithinthebroadercontextofthecountry’senergysector.ItalsoprovidesadditionaldetailsontheactivitiessupportedbytheESSP,aswellasinformationonbroaderelectricitynetworkinvestmentsmadebytheMCC.Section3describesrelevantlabormarketconditionsinMalawipriortotheESSP’sapproval.Section4providesanoverviewofthe

methodologyanddata.Section5presentsthefindingsfromanalysesofproject-leveljobsandinput-usedatafromESCOM.Section6summarizestheresultsofthecasestudy.

Endnote

1.AdditionalinformationabouttheESSPisavailableat

/en/

projects-operations/project-detail/P099626

.AdditionalinformationontheMalawiCompactisavailableat

/resources/doc/star-report-malawi

(MCC2020b).

2INTRODUCTION

TWO

SUMMARYOF

RELEVANTENERGY

INTERVENTIONS

TheGoMimplementedaseriesofenergysectorreformsandinterventionsintheearly

2000s.KeyamongthesewasthePowerSectorReformStrategy(PSRS),approvedin2003,

whichprovidedfortheunbundlingofESCOMandopenedthedoorforprivatesector

participationinthepowersectorvialong-termconcessionsintransmissionanddistribution,andtheentryofindependentpowerproducersfornewgenerationcapacity(WorldBank

2011).ConsistentwiththePSRS,thenationalparliamentapprovedasetofpowersectorlegislationin2004(includingtheEnergyRegulationAct,theElectricityAct,theLiquidFuelsandGasAct,andtheRuralElectrificationAct).

However,duetoimplementationchallengesrelatedtopowersectorunbundling(partlyduetothesizeofthenationalpowersystem,whichwassubsequentlyassessedtobetoosmallforESCOMtobeunbundledandconcessionedout),thelegislationdidnotcomeintoeffectuntiltheendof2007,withsomeprovisionsoftheElectricityActeventuallybeingdeferred(WorldBank2011).Aspartoftheoperationalizationofthe2004legislation,theMalawiEnergyRegulatoryAuthority(MERA)wasestablishedwithamandateto(1)reviewtariffapplicationsfromESCOMandrecommendtariffchangestotheGoM;(2)grantlicensesforgenerationanddistributionoperators;and(3)arbitrateanycommercialdisputesarising

underthe2004energylegislation(WorldBank2011).

Toclarifythefuturedirectionofitsenergysectorreformagenda,theGoMprepareda

“LetterofIntent”inthelead-uptotheapprovaloftheESSP,whicharticulatedthereforms

thatitintendedtoimplementovertheproject’slifetime.Specifically,theletterdescribedhowtheGoMwouldreviewthePSRSandclarifytheframeworkforprivateinvestmentinthe

energysector(WorldBank2011).Usingitsownfinancingaswellassupportfromdonors

(includingtheMCC),theGoMalsolaunchedaseriesofnewpowersectorinterventions,includingthosepertainingtolong-termgenerationpotential,andtransmissionand

distributionnetworkupgrades:

.Long-termgenerationpotential:Giventheneedtourgentlyacceleratethedevelopmentofnewgenerationcapacitytomeetthecountry’scapacitydeficit,ascreeninganalysiswasconductedbytheGoMtoidentifypotentialhydropowergenerationsites.ThiswasinlinewiththerequirementundertheMCCCompact(describedindetailbelow)toprepareforthedevelopmentofadditionalgenerationcapacity.Basedonthefindingsofthisanalysis,itcommittedtofinancingthesecondphaseoftheKapichiraHydroelectricPowerStation,andworkonthesitewasunderwayby2011(WorldBank2011).However,thescreening

analysishadalsoidentifiedseveralothercandidatesites,fullfeasibilitystudies(includingdetailedenvironmentalandsocialimpactassessments)forwhichwereurgentlyrequiredasthefirststepinbeginningtheirdevelopment/expansion.1

.Transmissionanddistributionnetworkupgrades:Evenifadditionalgenerationcapacitywasavailable,itwasunderstoodthatthenationaltransmissionsystem,particularlytotheeconomicallypromisingnorthernregionofthecountry,wasweakandinneedofreinforcement.TheexistingsystemalongtheLakeMalawishoreline,forinstance,

waslimitedto33kVtransmissioncapacityinsomeplaces,andasystematicstrengtheningoftransmissioncapacitytothenorthwasneededtoensurereliablesupplyforminingandotheremergingindustrialloadsinthatregion.WithsupportfromtheMCCCompact

JOBSGENERATEDBYTHEENERGYSECTORSUPPORTPROJECTINMALAWI5

(detailsbelow),theGoMcommittedtoupgradingtheexistinglakeshoretransmissionsystem.Inaddition,theGoMwasinterestedinfindingfundingfortheconstructionofanewmedium-orhigh-voltage“backbone”farthertothewest,headingnorthfromLilongwe,thecapital.

EnergySectorSupportProject

Asnotedabove,ESSP’sProjectDevelopmentObjective(PDO)wastoincreasethereliabilityandqualityofpowersupplyinthemajorloadcenters.Itaimedtodosobysupportingthestrengtheningandexpansionofthedistributionandtransmissionnetwork,feasibility

studiesfornewgenerationcapacity,demand-sidemanagementandenergy-efficiency

measures,andcapacitybuildingandtechnicalassistanceforkeypowersectoractors.

Assuch,WorldBanksupportfortheESSPwascomplementarytotheBank’spriorand

ongoingportfolioofenergyinterventions.Forexample,throughitssupportforelectricitynetworkstrengtheningandexpansion,theESSPsoughttoestablishafoundationfor

long-termeconomicgrowththroughimprovedinfrastructure,akeyobjectivearticulatedintheWorldBank’s2007–11MalawiCountryAssistanceStrategy.

AsoutlinedintheESSPProjectAppraisalDocument(WorldBank2011),theprojectcomprisedfourcomponents:

1.Electricitynetworkstrengtheningandexpansion($56.2million):Thiscomponentincludedtherehabilitation,upgrade,andexpansionofprioritypartsoftheexistingdistributionandtransmissionsystem.Thecomponentwasdividedintothree

subcomponents:

a.Distributionandtransmissionupratingandexpansion($41.9million):Theactivitiesunderthissubcomponentincludedthe(1)constructionoffournewsubstationsandassociatedlines;(2)upratingoffiveexistingsubstations;(3)constructionofnew

33kVand11kVlines,andinstallationofcapacitorbanks;(4)rehabilitationof33kVlines;(5)rehabilitationofundergroundcables;(6)expansionoftheperi-urbannetwork;

and(7)acquisitionofgenerationspareparts.Theplannedsubst