Selling Escom will hurt consumers and hamper development

Just as the sale of one of the country’s commercial banks formerly owned by the Government of Malawi, the Malawi Savings Bank (MSB), started as a rumour, another rumour about government’s intention to sell, or is it privatise, ESCOM has been making rounds in recent months in the country’s media.escom  load shedding

Local media has reported that government intends to strip ESCOM of some of its powers of supply and distribution while leaving generation—considered the heart of the entire process—in private hands. Some media houses have gone further to say that government will complete the dismantling process by 2017.

As a bonafide and well-meaning citizen of the country, I felt compelled to share my sentiments on these rumours and whatever government intends to do with ESCOM with the readership here.

Let me start by briefly describing how markets operate. There are four broad types of markets: Free market, Oligopoly, Duopoly and Monopoly; each having different characteristics from the other. The main distinguishing features are the number of players in each industry (where industry means suppliers or firms supplying the same or similar commodity) and availability of information to consumers.

A Free market is a market in which there are many firms, there is information flowing to consumers resulting in consumers making informed decision and there is perfect competition. Under this customers are ultimate beneficiaries in that the price of commodities is determined by the market forces of demand and supply. All the other forms are imperfect market forms in that there is no or little information, there are one to few players and pricing is not determined by market forces of demand and supply; there is deliberate intervention in price determination whose primary motivation is achieving maximum profits. In a duopolistic market, there are only two main players who determine pricing and other behaviours. In oligopolistic market there are few players who usually connive. The worst form of market structure is monopolistic market; there is usually a single player in the market.

The main disadvantage of the monopolistic market is that consumers are always at the mercy of the single player. Prices are not determined by the factors of demand and supply. Usually there is little or no information passed on to consumers; in other words there is no transparency in how decisions are made. At the end of the day customers pay the price heavily.

In Malawi we have for example electricity and sugar production. Without government intervention customers are ripped off. Now when you consider this and factor in the fact that certain goods and services are essential in the development of a country, leaving the provision of such goods and services in the hands of independent, let alone private, hands spells doom to the development agenda of a country.

With this information in the background one wonders why our callous government seeks to privatise the generation of electricity knowing pretty well that so far ESCOM is a monopoly. What would be the true motivation of privatising ESCOM? In the case of MSB the lame excuse was that government should not be in the business of banking services. In the case of ESCOM they are hiding behind improving efficiency at ESCOM. It is an open secret that all the inefficiencies at ESCOM are as a result of political interference especially in procurement processes.

Given a serious government that has the welfare of people at heart, ESCOM would be run as efficiently as possible without political interference. Unfortunately we have political vultures who prey on ESCOM’s resources. While the MSB’s sale would be excused on apparent competition in the banking industry, the sale of ESCOM would have devastating effects on the development agenda of the country! Nobody should deceive the nation into believing that putting ESCOM into private hands is the way to go in as far as efficiency improvement at ESCOM is concerned.

The important thing the government needs to do is to ensure that there is competition particularly in the generation and retail of electricity. This is only possible if the generation and the retail businesses are sold or leased to different investors. So, for example, we should have 4 different entities running Nkula, Tedzani, Kapichila and Wovwe.

There could be two or more retailers which can operate anywhere in Malawi and shouldn’t be regional based to create competition and drive electricity tariffs down. The poles and wires business can be privatised as well but should be strictly regulated since it’s a natural monopoly because of the impracticability of customers to change physical connections from one provider to another. That’s how it works in most developed countries.

ESCOM sale, in the current form, has the potential to derail the development agenda of this country. Ultimately, the final consumer, towards whom government has a social responsibility, will pay the price. ESCOM sale will harm the ultimate consumer.

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25 thoughts on “Selling Escom will hurt consumers and hamper development”

  1. leegy says:

    Beta it be privatised, most ppl there dont work to capacity coz they know at the end of month they hav a salary nomatter wat. Take note of how they attend to a fault. Wen they want n no updates to consumers. Beta we be being higher but the service is 100%.

  2. yuda kondowe says:

    Eya! Ipitedi Escom.boma limadyamo kwambiri mpaka kumakanika kugula equipment,ma tariff akweraakwera kuti mususe

  3. Chipimpha says:

    Izinso Ndiye Ayi Bola Malemu Aja,kugulisa Bank Mpakanso Escom? Mwationjeza Guyz

  4. silence douglas says:

    please malawi house never must u sell this escom company ,if u feel that it is not giving enough profitabilities just invest much money then inturn u shall see its goodness.we shouldnt leave all companies in the hands of foreigners pliz pliz boma……………………………….mukuti tithawire kuti tsopano amalawie?

  5. Kholes says:

    Ndinangovutika kudzuka mamawa kukavoter mpakaso escom mugulitseso?

  6. FRED says:

    seriously ESCOM needs to improve much on their services, imagine having no power for almost 12 hours in the name of load shedding, how can we convince foreign investors with these erratic power supplies? you are just busy improving the control and monitoring of your machinery, grid and distribution system and yet you are failing to improve the efficiency of power supply to consumers, to us when a day goes without a black out its like a miracle. Malawi will never develop if we continue having this kind of erratic power , Energy is one of the things that acts as a back bone f any developing country.

  7. Truth Recognizes Truth says:

    Deliberate misinformation by the author. You got it wrong.

  8. MAPWEVUPWEVU says:

    NDIKUKHULUPIRA PRESIDENT PETER MUTHALIKA ANABWERA KUDZAWONONDA DZIKO LA MALAWI MSB ANTHU AKUSIYA NTCHITO OKHA ESCOM NDIKUWONA ANTHU AMBIRI AKUSIYA NTCHITONSO NDE PRESIDENT NKUMANENA KUTI BWERANI KUMALAWI KUDZATANI ANTHU ANZAVUTIKE ANTHU AMBIRI TILI PA UKAYIDI KOMA SITIKUDZIWA NGATI TILI NDI MWAYI TIYENI MAIKO OTI TITHA KUPEZA NTCHITO NKUMASAMALA MAANJA ANTHU OSATI WINA ADZITI BWELANI KU MALAWI KUTI TIDZAKHALE MAKASU AKE CHONDE CHONDE TIYENI TITHANDIZANE POPEZA MA VISA A MMAIKO OTUKUKA MWINA NKUPEZA GREEN PASTURE

  9. johnM says:

    I do not agree with the author. What he has wrote is hogwash. Its a high time we changed and ESCOM should be reformed. When MTL was under post office, the same things were being said. Experts stated that the poor will not benefit yet after the liberalisation of the telecommunication sector, the poor have access to telephones far more than they ever did when there was one operator. The sooner the electricity sector is liberalised the better.

  10. Charter says:

    Better expensive reliable power than cheap unreliable power! ESCOM is largely to blame for the country’s sluggish economic growth.

  11. Che Wanimiliyoni says:

    I wudav been happy if transmission and distribution part of ESCOM was the one to be privatised and let generation still be in govt hands. The reason is simple: our country is poor and our ruling political parties are usually too corrupt to be trusted with the responsibility of buying electricity for us. What if the govt missapproriate the money and fail to buy electricity units for the country? The generation business guys will just switch off their machines leaving the whole country in darkness. While as if it were the other way round it wud be the distribution and transmission private businesses buying power from govt.

  12. Changaputwa says:

    Chala chimodzi sichiswa msabwe. Wakumva zayenkha adabva nkhwangwa ili pa mutu. Analipo amene samafuna kubva za yena, zinthu zitawanthina anafa ndi maganizo. Ndibwino kupeleka kwa anthu amene angakwanise kuyendesa dzikoli. Kunena zoona zakukanika chaka chimodzi chonkha. Ikamantha period yako chuma chonse chinkhala chitagulisidwa.

  13. bwino bwino says:

    when government was selling MTL we all disagreed,say it will raise ma tariff awo kwambili,,relo its the cheapest,,,,,,,,,,,,,,,,after 51 years of independence its only 9% of the population who have magesti with only 2% using it for cooking,,,,,,,in Botswana for instance power is generated by one company,distribution another company,,,,,lets learn to let go some of these headaches A Malawi

  14. Jelbin mk says:

    MERA is a problem here I don’t know who this most corrupt department because all it is interested in is robbing the poor. For example crude oil has fallen world wide and so many countries have reduced fuel prices including south Africa which has reduced 51c a little last night equating K20 a little but with Malawi the prices are still static and I don’t know where where does Malawi buy its fuel or maybe they have their own wells that do not respond to any decreases in fuel prices.

  15. Professor Mwanaveka-Cypress University says:

    Political Vultures=DPP govt with Mathanyula as Head

  16. vin mongu says:

    while all this might be speculation since the true form is not yet public. it will come out eventually since it is a commission with an act, parliament will be involved and we will get it. i do not get worried with escom myself but its father MERA whihc fails to regulate for the consumer. by the look of things, we will tend to be better off as a country if we reduce government footprint. get escom off govt hands just improve the environment basi. malawians are just used to fear anything, we did not want fixed phones company to be privatised but now landline is used by just a few. Let us reduce money government pays to parastatals, maybe they can put more in salaries and other basic amenities.

  17. Chinyanga says:

    selling or privatising our unproductive ESCOM wont change anything for the better..instead this will surely bringforth negative outcomes to the nation. The new owners will raise the prices & the govt will be rendered poweress that they wont even have anything to say or do on the price hike.This will eventually lead to the untold high price of commodities since electricity is the driving power to almost every busines. I dont think this is good idea. It’ll just worsen the situation.

  18. Che Nkasala says:

    When a person starts selling off “family silver”, you must know that he has no clue on how to provide for that family other than sell off that which he inherited from his father. The Mutharikas have added NOTHING to the country’s wealth apart from looting it. Even Bakili, as economically daft as he was, he had the balls to tell the IMF where to get off! But these fools do not care…as long as it is their Lomwe brothers who pretend to buy these things when infact it is themselves who are stripping the nation of its hard earned assets. Bravo Kamuzu. you realty were a visionary leader…We miss you father of the nation…not the copy cat Ngwazi or his idiotic brother.

  19. el- Chapo(small in stature. big in mind ) says:

    Escom is not customer oriented and it’s work as you earn for the employees. this is retrogressive to the economic growth of the country. It should have been sold yesterday.

  20. jb says:

    ESCOM has already damaged the economy. It has also failed to include the rural areas where economic growth could take place at a faster pace than in the congested urban areas. Sell!

  21. mmm says:

    Mukutaya nthawi ndi kutokota pa nkhani iyi, mwina wakagulitsa escom ku zambia anapita kuja. Remember MSB, anthu munatokota eeeee koma kuti? Anali atagulitsa kale kwa Mpinganjira.
    Possible kuti a Malawi tizazindikira pambuyo kuti anatigulitsanso kale.

  22. captain says:

    Peter and Goodall are too old, any mess on our country will not affect them coz they are all old and will be gone shortly

  23. cs says:

    ITS A FACT. BRINGING IN PRIVATE COMPANIES TO RUN ESCOM WILL JUST LEAD TO HIGH ELECTRICITY TARRIFS . HIKES ON COMMODITIES BECAUSE ELECTRICJTY ACTS AS A HUB TO PRODUCING INDUSTRIES. THE PRIVATE PLAYERS WHO ARE TO COME IN WILL BE SOLELY PROFIT ORIENTED AND THE GOVERMENT WONT BE INTERVENING IN TARRIF HIKING. .SO CHILIMA AND COMPANY GIVE IT A SECOND THOUGHT.

  24. Wokhuzidwa says:

    Why Selling or privatising everything? Koma nzeru zayekha adaviika nsima m’madzi.

  25. musolin says:

    I think it is true that we should have many firms producing power in Malawi and not one company…. There are alot of irregularities happening at Escom, money is being siphoned out by greedy politically appointed Vultures. Why Escom gas alot of poshy vehicles than any other statutory corporation in Malawi… Mbava izi, ntchito amalembana pachibale Ku Escom.

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