Mozambique-Malawi interconnector project, Malawi

For a summary of the report and its main findings, please see the Information Brief below.

Among the key mandates of the ILO STRENGTHEN2 project is to conduct a series of employment impact assessments of investment projects to promote the creation of more and better jobs in sub-Saharan Africa. This report presents an employment impact assessment on the Malawian part of the Mozambique-Malawi interconnector (MoMa) project. The project aims to contribute to Malawi’s economic growth by integrating the country’s electricity market to the Southern Africa Power Pool and balancing regional power deficit through regional power trading. The estimated cost for the Malawian segment of the project is about USD 35 million and involves the installation of 76KM interconnector transmission line in Malawian territory and the extension of a 400KV power sub-station in Phombeya. The EU is expected to contribute with approximately EUR 20 million through KfW.

An ex-ante employment impact assessment has been undertaken since the project implementation started in 2023. The available information allowed us to obtain three distinct employment effects: direct, temporary and permanent. Direct employment effects were obtained from project documents, while modelling techniques were used to estimate temporary and permanent employment effects. Results are provided in headcounts and indicate that 1,077 direct jobs are projected to take place across nine contractors. The project’s direct employment estimates mostly show biases against female, skilled and youth workers. Regarding skill biases, it may vary due to the different responsibilities of each contractor regarding the project implementation. Given the construction sector’s existing challenges with low rates of female employment, the presence of gender bias against women is troubling and indicates a need for initiatives aimed at enhancing female participation in this sector.

As part of this assessment, information on quality of direct employment was collected through surveys, focus group discussions and interviews. This provided key insights across four main areas related to the Decent Work Agenda, namely the conditions of workers, social protection, social dialogue and discrimination at work. Workers' conditions showed that although all employees earned above the minimum wage, the remuneration was insufficient for a decent living. Most workers complied with the legal eight-hour workday, though a significant portion reported working up to twelve hours. In terms of social protection, the majority lacked medical scheme coverage and only a small percentage were enrolled in pension schemes. Social dialogue mechanisms, such as worker representation and grievance boxes, were found to be generally ineffective. Lastly, gender discrimination was not considered a major issue, with performance assessment differences between genders being the most notable concern. Overall, the assessment indicates a need for improved living wages, social protection and more effective social dialogue structures for direct workers.

Temporary employment effects could be as high as 2,498 jobs, with most of these jobs being created in the construction sector, followed by the retail trade sector. In addition, temporary effects may tend to be biased against female, skilled and youth employment. The bias against female employment would be the strongest. This challenge could partially be addressed in the short-run by promoting gender-sensitive hiring policies. In addition, long-run policies such as workplace, education, and training policies can encourage more female workers to participate in the labor force and opt for jobs in this sector. Estimated temporary macroeconomic effects suggests that short-term impacts of the project could generate economic growth accompanied with an improvement in government and private finances. Furthermore, all rural farm households would have their real income growth improved by about 0.25 per cent.

The model estimates a potential of 363 permanent jobs, with the vast majority in the electricity sector followed by the retail trade sector. Permanent employment may tend to favor female, skilled and youth workers in the long run. Therefore, we recommend that in those sectors where the permanent job creation takes place, labour policies should focus on transforming those jobs into decent jobs. Although of smaller magnitude, permanent macroeconomic effects are associated with an increase in economic growth and deflation. The poorest rural non-farm households are the ones who could benefit the most in terms of real income growth due to long-lasting effects.

The modelling framework applied requires the use of assumptions. Hence careful interpretations of the results are in order. Complementing the study with a sector-specific analysis and empirical studies on the evolution of labour productivity in Malawi could help to overcome the limitations posed by the assumptions. Nevertheless, with the present modelling framework we obtain useful insights into the potential employment and macroeconomic impacts for the MoMa project, which have allowed us to methodically assess its temporary, permanent and macroeconomic potential effects.