19 July 2007
London — The World Bank's Board of Directors on Wednesday approved two loans to fund the building of new transmission lines between Mozambique and neighbouring Malawi.
The loans, from the International Development Association {IDA}, the Bank's soft loans facility, are of 45 million US dollars to Mozambique and 48 million to Malawi. They are intended to develop the regional electricity grid with the aim of increasing industrial competitiveness and fostering economic growth.
As part of the second phase of the Southern African Power Market Programme, the Mozambique-Malawi Transmission Interconnection Project will connect Malawi to the Southern African Power Pool (SAPP), facilitating two-way energy trade between the two countries.
Malawi will benefit from the ability to call on Mozambican electricity, and the link will provide a new source of revenue for Mozambique's energy sector. According to World Bank energy specialist Wendy Hughes, "the interconnection will allow Malawi to reap the full benefits of membership of the Southern African Power Pool, both to import electricity when necessary - particularly if there's a drought - and also to export any surplus electricity Malawi doesn't use at night-time".
Mozambique will use the fund to build a 220 kV transmission line from the Matambo substation in Tete province to the Malawian border 135 kilometres away. The line will then travel a further 75 kilometres to a new substation at Phombeya.
As part of the project, Mozambique's publicly owned electricity company, EDM, will receive technical assistance, capacity building, training, and equipment. The funds will also help replace worn-out, inadequate, or obsolete equipment to remove critical bottlenecks.
The Southern Africa Power Pool was set up in August 1995 to address the growing power shortage in the Southern African Development Community (SADC) region. It has been estimated that the region will need to increase capacity by at least 1,000 MW each year to meet growing demand and regional trade in electricity is seen as crucial for tackling what could become a severe restraint on growth in coming years.
According to the latest SAPP annual report, demand for electricity is due to outstrip supply by 2014. Already many parts of the region face periodic outages at times of peak demand. It has been estimated that at least 5.2 billion dollars will need to be invested throughout the region to increase supply.
Currently the grid systems of Botswana, the Democratic Republic of Congo, Lesotho, Mozambique, Namibia, South Africa, Swaziland, Zambia, and Zimbabwe form the regional network. In the SADC region only Angola, Malawi and Tanzania are not yet connected.
The World Bank is encouraging the development of the regional pool through soft loans. This latest loan will have a ten-year grace period, after which the repayments will be spread over the next 40 years.
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