STRATEGIC PLAN

2020 - 2024

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STRATEGIC PLAN 2020 -2024

STRATEGIC PLAN
2020 - 2024

STRATEGIC PLAN 2020 -2024

 Foreword by the Board Chairperson................................iii
Preface by the Chief Executive Officer.............................iv
1 CHAPTER ONE
1.0 MANDATE, INSTITUTIONAL FRAMEWORK AND
CONTEX.............................................................................1
1.1 Rationale for the Strategic Plan........................................1
1.2 Strategic Planning Process................................................1
1.3 History of MERA................................................................1
1.4 Mandate............................................................................2
Table of Contents 1.5
1.6
1.7
Purpose of MERA..............................................................2
Services.............................................................................2
Institutional Structure of MERA........................................3
1.8 Sustainable Development Goals (SDGs)...........................3
1.9 Vision 2020.......................................................................4
1.10 Malawi Growth and Development Strategy (MGDS) III....4
1.11 Public Service Reforms Commission (2017).....................5
1.12 National Energy Policy for Malawi (2018)........................5
1.13 Integrated Resource Plan (2017)......................................5
1.14 Southern African Development Community (SADC)........5
1.15 Southern African Power Pool (SAPP)................................6
1.16 Regional Energy Regulatory Authority (RERA)..................7
2 CHAPTER TWO
2.0 REVIEW OF 2014 – 2018 STRATEGIC PLAN.......................9
2.1 Introduction......................................................................9
2.2 MERA Performance Against Strategic Goals....................10
2.3 Challenges Faced in Implementing the 2014 - 2018
Strategic Plan .................................................................13
2.3.1 Bureaucracy....................................................................14
2.3.2 Finance...........................................................................14
2.3.3 Stakeholder Engagement................................................14
2.3.4 Institutional Capacity......................................................14
2.3.5 Corporate Governance...................................................14
2.3.6 Energy Infrastructure and Regulatory Tools...................15
2.3.7 MERA as an Arbitrator....................................................15
2.3.8 Nature of MERA’s Regulatory Practice............................15
2.3.9 MERA and the New Energy Market................................16
2.3.10 MERA in the Regional Context........................................16
2.3.11 Emerging Issues..............................................................16
3 CHAPTER THREE
3.0 SITUATIONAL ANALYSIS...................................................19
3.1 Introduction....................................................................19
3.2 PESTEL Analysis: An Overview........................................19
3.2.1 Political...........................................................................20
3.2.2 Economic........................................................................20
3.2.3 Social..............................................................................21
3.2.4 Technological..................................................................21
3.2.5 Environmental.................................................................21
3.2.6 Legal................................................................................22
3.3 SWOT Analysis ................................................................22
3.4 The Linkage.....................................................................25
3.5 Stakeholder Analysis and Management.........................27
3.6 Emerging Strategic Issues...............................................28

STRATEGIC PLAN 2020 -2024

 4 CHAPTER FOUR
4.0 STRATEGIC DIRECTION............................................................31
4.1 Values: ...................................................................................31
4.2 Strategic Pillars and Strategic Objectives................................31
4.2.1 Strategic pillar 1: Positive ContributionTowards an Energy
Secure Nation.........................................................................31
Table of Contents 4.2.2
4.2.3
4.2.4
4.3
Strategic Pillar number 2: Financial Sustainability..................34
Strategic Pillar 3: Efficient and Effective Service Delivery.......36
Strategic Pillar 4: Public Trust.................................................37
Strategic Plan Implementation Matrix 2020-2024.................39
4.4 Monitoring and Evaluation Methodology..............................48
4.4.1 Monitoring..............................................................................49
4.4.2 Evaluation...............................................................................49
4.5 Critical Success Factors...........................................................50
4.5.1 Leadership and Organizational Commitment.........................50
4.5.2 Stakeholder and Employee Engagement................................50
4.5.3 Innovation...............................................................................50
5 CHAPTER FIVE
5.0 FINANCING AND RESOURCE MOBILIZATION FRAMEWORK...52
5.1 Financial Performance Review................................................52
5.2 Projected Income and Expenditure........................................52
5.3 Projected Funding Mix (Sources of Income)...........................53
5.4 Estimated Cost for implementingthe Plan.............................54
5.5 Financial Sustainability............................................................54
5.6 Investment Strategy................................................................55
5.7 Risk Management...................................................................55

i STRATEGIC PLAN 2020 -2024

STRATEGIC PLAN 2020 -2024 ii
 Foreword by the Board Chairperson
MERA’s functions have grown as the energy
market has evolved and national energy
legislation and rules expanded. Our operating envi-
ronment is becoming increasingly complex; and new
products, services and technologies are emerging,
changing the way consumers produce, buy and use
energy. Innovative ideas have allowed new business
models to develop that are reshaping the
energy market.

In the previous Strategic Plan period, the country wit-

nessed several structural changes including the unbun-
dling of the Electricity Supply Corporation of Malawi
(ESCOM) into two separate companies: one respon-
sible for Transmission, Distribution, System Market
Operations, and Single Buyer (ESCOM); and the oth-
er for Generation (Energy Generation Company,
(EGENCO). We have also witnessed an expansion of
the Liquid Fuels and Gas industry, including the oper-
ationalization of the Strategic Fuel Reserves. This was
also the time we developed a lot of regulatory frame-
works to help level the playing field, at the same time
giving hope to the consumers.

Time has now come to build on these foundations and

make a better future for our children and generations
to come. We want to create an Energy Secure Nation,
It is with great pleasure and excitement that I one that will lead to increase in energy use to power
present the Malawi Energy Regulatory Authority the economy.
(MERA) Strategic Plan for the period 2020-2024.
In the next five years, the Malawi Energy Regulatory
This Strategic Plan builds on the many achieve- Authority will be guided by four Strategic Pillars of (1)
ments attained in the previous Plan (2014-2018) Energy Secure Nation, (2) Financial Sustainability, (3)
and the lessons learned to-date, and positions Efficient and Effective Service Delivery, and (4) Public
MERA in the present. Thus, the 2020-2024 Strate- Trust. These strategic pillars show the lead role that
gic Plan provides a firm way-forward for our coun- MERA will play as a regulator in partnership with in-
try’s energy future. dustry players and other Government agencies.

One outstanding feature of this Strategic Plan is This will lead MERA “To be a recognized global leader
the tackling of the structural challenges we have in energy regulation,” hence our new Vision.
faced over the years in pursuit of regulating energy
for sustainable development. There are clear signs I am confident that the Authority and its dedicated
of progress being made to end electricity outages, staff will continue to meet the needs of the Malawians
we are diversifying our sources of energy, and we and serve in the public interest.
have completely done away with shortage of fuel
in the country. The future for Malawi is bright. Rt. Rev. Dr. Joseph Paul Bvumbwe
BOARD CHAIRPERSON

7iii STRATEGIC PLAN 2020 -2024

 Preface by the Chief Executive Officer
have set ourselves, be assured that we will deliver
because failure is not an option.

This plan is a product of extensive stakeholder con-

sultation and it has established a framework for
monitoring and evaluating performance. In prepar-
ing this Strategic Plan, the Authority undertook a
situational analysis in order to better understand
the environment in which MERA operates. MERA,
being an active player in the regional energy market,
and in line with international best practice, needs to
constantly benchmark its performance against other
regional energy regulators.

MERA is an Energy Sector Wide Regulator man- In our evaluation, it transpired that the Strategic
dated by the four Energy Laws namely the Energy Goals and Objectives continue to reflect the direc-
Regulation Act (2004), the Electricity Act (2004), tion of the Authority and continue to speak to the
the Rural Electrification Act (2004) and the Liquid future of the energy policy of our country. The key
Fuels and Gas (Production and Supply) Act (2004). pillars contained in this plan still effectively capture
our priorities and methods for attaining further suc-
The Laws mandate MERA to regulate the energy cess.
sector in Malawi in a fair, transparent, efficient
and cost-effective manner for the benefit of the The 2020-2024 Strategic Plan outlines the key strat-
Malawi economy, using the various regulatory egies, activities, risk management, and capabilities
tools and regulations that guide our operations. we will use to achieve our purpose, and describes
our operating environment and performance
This Strategic Plan is therefore a perfect tool that measures. MERA will continue to work towards clear
embodies the aspirations that we will be actual- and measurable targets. We will be assessing our
izing in the period 2020-2024. The Strategic Plan performance on an annual basis to ensure maximum
will guide the activities of MERA as we seek to performance on the agreed deliverables.
contribute to Malawi Government’s development
agenda, which identifies energy as a strategic We will continue to build on our strong reputation
sector that should be managed in a manner that for being an expert, independent and trustworthy
facilitates economic development. regulator to instil public confidence in the sector. We
will continue to rely on MERA’s statutory establish-
Thus, this Plan is a summation of our ambitions ments and enabling regulations to meet the pressing
and a declaration of our belief in ourselves as a energy needs of our time. In executing our mandate,
team to achieve the goals we have set out. It is we will continue to balance the competing needs
also a statement of the potential we see in this and interests of both licensed entities and consum-
country in the sectors that fall under our man- ers, and fulfil our role as an independent energy reg-
date. This Strategic Plan will guide MERA in ulator.
pursuit of its mission of regulating energy sector
for sustainable development in accordance with I believe that this strategy will go a long way towards
international best practices. ensuring that we execute MERA’s mandate and en-
hance regulation of the energy sector.
We have given ourselves a challenge and we
are up to it. We are a people who believe in Collins Magalasi, PhD
possibilities and our abilities. Whatever target we CHIEF EXECUTIVE OFFICER

STRATEGIC PLAN 2020 -2024 iv

 MANDATE, INSTITUTIONAL
FRAMEWORK AND CONTEXT

• Rationale for the Strategic Plan

• Strategic Planning Process

• History of MERA

CHAPTER • Mandate

ONE •

•
Purpose of MERA

Services

• Institutional Structure of MERA

v STRATEGIC PLAN 2020 -2024

 1.0 MANDATE, INSTITUTIONAL FRAMEWORK AND CONTEXT
1.1 Rationale for the Strategic Plan
The 2014-2018 Malawi Energy Regulatory Authority (MERA) Strategic Plan has now lapsed. In view of this a
strategy to guide our operations in the next five years is now an imperative. The new plan will cover the period
2020- 2024. The plan articulates the strategic direction of MERA in view of the envisioned changes in the operat-
ing environment. The regional and national economy is expected to continue path of slow growth occasioned by
recent shocks in the global economy. This will negatively impact Malawi’s economy, occasioning a slowdown in
growth sectors. The consequence of this will be low energy uptake and therefore low collections from levies and
licenses. This plan is therefore crafted to be a strategic guide to the Authority in view of national and international
environmental challenges.

The strategic plan has taken stock of the institutional policy context to ensure strategic actions have been pro-
posed to be in tandem with Government policy and legal provisions.

1.2 Strategic Planning Process

Management hired an international consulting firm to facilitate the creation of a future desired by the Board,
secretariate and all stakeholders. This Plan is therefore a sum of our individual and collective thinking. The process
to develop the plan was consultative and participatory. Management created a steering committee composed
of senior staff to lead the strategic thinking process. This Team also acted as a bridge between the Board, Man-
agement, Staff and other stakeholders. The steering committee produced the working documents that served as
inputs for the staff consultation process.

The staff inputs led to the production of a draft plan for Board and Management consultation process. The out-
come from this process formed the basis of other stakeholder consultations in Blantyre, Lilongwe and Mzuzu. The
consultants facilitated the drafting of the final strategic plan, which was presented to Management for validation.
The Board approved the Plan for implementation. This Plan captures our ambition as we seek to fulfill the national
aspirations as captured in our legal mandate.

1.3 History of MERA

The establishment of MERA was based on a need to ensure a planned and coordinated approach to regulating the
country’s energy sector. The Energy Policy of 2003 articulated the need for energy regulation arrangements at the
time to make them cost effective and efficient. The challenges identified included housing of the legal instruments
governing energy sub sectors (electricity, liquid fuels, and gas, bio-mass, renewable energy and coal) in different
institutions that did not often synchronize their activities.

Prior to formation of MERA, The National Electricity Council (NECO) was responsible for regulating the electricity
sub-sector, while Petroleum Control Commission (PCC) was responsible for regulating liquid fuels and gas.

This means that the fragmented institutions, in some instances, only had one monopoly to be regulated. This
dissonance in action created need for an independent energy regulatory agency to replace NECO and PCC to en-
sure the energy sector was appropriately regulated. To this end, the Government set out to reform the sector, by
among other things, (a) The formulation of an Energy Framework Law in the form of an Energy Regulation Act and
related sub sector legislation, including the Electricity Act, the Rural Electrification Act, the Liquid Fuels and Gas
Act, to provide a legal basis for improved energy sector governance; and (b) the establishment of a sector wide
Energy Regulator to regulate all commercial energy supply industries. Therefore, MERA is a creation and outcome
of the Energy Policy of 2003.

STRATEGIC PLAN 2020 -2024 1

1.4 Mandate
MERA is a body corporate established under the Energy Regulatory Act No. 20 of 2004. It is the Energy Sector
Wide Regulator with the mandate to regulate the energy sector in Malawi in a fair, transparent, efficient and
cost-effective manner. In this way, MERA’s activities will benefit consumers, operators and the economy in
general. This mandate is derived from the Energy Laws in general and the Energy Regulation Act in
particular. Specifically, the mandate includes:
1. Receive and process license applications for energy undertakings;
2. Grant, revoke or amend licenses granted under the Act and Energy Laws;
3. Approve tariffs and prices of energy sales and services;
4. Monitor and enforce compliance by licensees with licenses granted under the Act and the Energy
Laws;
5. Develop and enforce performance and safety standards for energy exploitation, production, trans
portation and distribution;
6. Prescribe and collect fees, charges, levies or rates under the Energy Regulation Act and Energy Laws;
7. Arbitrate commercial disputes under the Act and Energy Laws; and do all such things as are neces
sary or incidental or conducive to the better carrying out of the functions of the Authority provided
for in the Act and Energy Laws;
8. Promote the interests of consumers of energy with respect to energy prices and charges and the
continuity and quality of energy supply;
9. Monitor the efficiency and performance of energy undertakings, having regard to the purpose for
which they were established;
10. In conjunction with other relevant agencies, monitor the levels and structures of competition within
the energy sector in order that competition in, and accessibility to, the energy sector in Malawi
should be promoted;
11. Facilitate increasing access to energy supplies;
12. Promote energy efficiency and energy saving;
13. promote consumer awareness and education;
14. promote the integrity and sustainability of energy undertakings and seek to ensure that energy
undertakings, whilst providing efficient service, are able to finance the carrying on of the activities
which they are licensed or authorized to carry on;
15. In conjunction with other relevant agencies, formulate measures to minimize the environmental
impact of the exploitation, production, transportation, storage, supply and use of energy and en
force such measures by the inclusion of appropriate conditions to licenses held by energy
undertakings;
16. Promote the exploitation of renewable energy resources; and
17. Taking all such measures as are necessary to fulfill the above purposes through regulations to be
made under this Act or the Energy Laws.

1.5 Purpose of MERA

The purpose of the Authority is to regulate the energy sector in line with the provisions of various
energy laws of Malawi and relevant Protocols and Agreements.

1.6 Services
In order to fulfill its mandate, MERA provides the following regulatory services:
i. Electricity and renewable energy undertakings;
ii. Liquid fuels and gas energy undertakings;
iii. Provision of energy economic regulation;
iv. Provision of energy legal regulation;

2 STRATEGIC PLAN 2020 -2024

In addition to the regulatory services, the following support services are provided
i. Public relations and consumer affairs;
ii. Financial management activities;
iii. Human resource and administration services;
iv. Procurement services; and
v. Internal audit services.

1.7 Institutional Structure of MERA

The Board of MERA as stipulated in Section 4 of Energy Regulation Act, 2004 comprises five appointed mem-
bers and three Ex-Officio members. The five Board Members including the Chairperson and the Vice Chair-
person are appointed by the President, and confirmed by Parliament, for a tenure of three years. The three
Ex-Officio members comprise the Secretary for Energy, the Director of Energy Affairs and the Chief Executive
Officer of MERA. The Secretary to the Treasury and Department of Statutory Corporations (DSC) also sit on
the Board of MERA as co-opted members.

The Secretariat headed by the Chief Executive Officer supports the Board of Directors in the execution of its
mandate. The Secretariat is organized into five directorates, namely, Economic Regulation, Legal and Compa-
ny Secretarial Services, Finance, Liquid Fuels and Gas, and Electricity and Renewable Energy. MERA has a staff
establishment of 90 located in Lilongwe (Headquarters), Blantyre and Mzuzu.

Organization

MERA carried out a functional review in 2018. The review recommended that the Secretariat should be
organized into the following Directorates, Divisions and Section

Directorates
i. Electricity and Renewable Energy;
ii. Liquid Fuels and Gas;
iii. Economic Regulation;
iv. Legal Services and Board Secretarial Services;
v. Finance.

Divisions
i. Monitoring & Evaluation;
ii. Internal Audit and Risk Management;
iii. Human Resource and Administration;
iv. Information and Communication Technology;
v. Consumer Affairs and Public Relations;
vi. There are two regional offices; regional office north located in Mzuzu and regional office south
located in Blantyre.

Section
Procurement Section.

1.8 Sustainable Development Goals (SDGs)

The global SDG number seven that states; “ensure access to affordable, reliable, sustainable and modern
energy” is of relevance to MERA. Energy is central to nearly every major challenge and opportunity the world
faces today. This includes job creation, security, climate change and food production or increasing incomes;
access to energy for all is essential. Focusing on universal access to energy, increased energy efficiency and
the increased use of renewable energy is of importance to the world today and in the foreseeable future.

STRATEGIC PLAN 2020 -2024 3

Currently, it is estimated that there are approximately 3 billion people who lack access to clean-cooking solu-
tions and are exposed to dangerous levels of air pollution worldwide. Additionally, slightly less than 1 billion
people are functioning without electricity and 50% of them are found in Sub-Saharan Africa alone. Therefore,
there is need for increased public and private investments in energy production. Consequently, focus on
regulatory frameworks and innovative business models to transform the world’s energy systems for
sustainable development is a strategic imperative.

1.9 Vision 2020

Malawi’s Vision 2020 advocates for the provision of efficient energy supplies as a key pre-requisite for achiev-
ing economic development and middle-income status. Two strategic issues are identified as strategic drivers
to achieve this vision: a) promoting efficient electricity supply and distribution and b) improving supply of
petroleum products.

The Vision recognises several strategic challenges among them: The inadequacy of the supply of modern
energy systems and the limited access to modern energy services, high cost of energy service production,
unreliability of supply due to monopolistic market structures, underdeveloped services, and lack of compe-
tition among other challenges. These issues necessitate the need for an effective energy regulator to ensure
entities in the sector operate in a manner that benefits the consumer. The outcome for this regulation is to
ensure affordable prices and guaranteed supply of energy to the economy

1.10 Malawi Growth and Development Strategy (MGDS) III

The MGDS III is premised on a vision of building “a productive, competitive and resilient nation.” It covers the
period 2017-2022, meaning it creates an overlap with the vision 2020. The MGDS III is built around a theory
of change that ‘by producing the preconditions necessary to long term productivity, competitiveness and
resilience, the MGDS III will move Malawi towards its ultimate goal of becoming a technologically advanced,
middle income nation.’ The MGDS III is built around three strategic pillars as follows:
• Sustainable inclusive growth (SDGs to be impacted on directly: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 13 and 16).
• Inclusive and Human Capital Development (SDGs to be impacted on directly: 1, 2, 3, 4, 5, 6, 7, 8, 12,
15 and 16).
• Resilient People and institutions who can withstand economic and environment shock transforma
tion (SDGs to be impacted on directly: 1, 2, 3, 4, 5, 6, 7, 14 and 15)

The following are the Key Priority Areas (KPAS):

• KPA 1: Agriculture, water development and climate change management
• KPA2: Education and Skills Development
• KPA3: Energy, Industry and Tourism Development
• KPA4: Transport and ICT Infrastructure
• KPA5: Health and Population

It is important to note that sustainable energy supply for national development has been given a lot of weight
as an enabler and driver of development processes (as KPA 3). This places MERA at the centre of this national
priority due to its importance as an energy regulator.

4 STRATEGIC PLAN 2020 -2024

 1.11 Public Service Reforms Commission (2017)
The completion report of the Public Service Reform Commission gives a broad overview of the
results achieved and challenges that lie ahead. There has been a creation of electricity transmission and
distribution from current Electricity and Supply Company of Malawi (ESCOM). The Electricity Amendment
Act (2016) separated energy generation from transmission and distribution. MERA reviewed and submitted
several pieces of draft legislations: Liquefied Fuels and Gas Regulation Amendment (2017), and Strategic
Fuel Reserves Regulations (2018). MERA’s performance is rated as satisfactory by the Public Service Reform
Committee (PSRC).

1.12 National Energy Policy for Malawi (2018)

Malawi is pursuing an integrated energy policy that recognizes developments in the energy sector as
having an important bearing on economic development initiatives of the country. There is the need to
fully exploit the energy potential that exists, as well as the need to fully involve the private sector in energy
development and delivery. Other important considerations include the emergence of regional trading
opportunities as a result of globalization and regional integration and growing international concerns over
environmental issues.

The objectives of Malawi’s Energy Policy are as follows:

i. Improve efficiency and effectiveness of the commercial energy supply industries;
ii. Improve the reliability and security of energy supply systems;
iii. Increase access to affordable and modern energy services;
iv. Stimulate economic development and rural transformation for poverty reduction;
v. Improve energy sector governance; and
vi. Mitigate environmental, safety, health impacts of energy production and utilization.

1.13 Integrated Resource Plan (2017)

The Integrated Resource Plan (IRP) is a least-cost investment plan in generation, transmission and demand side
measures covering a 20-year period between 2017 and 2037. The main purpose of the IRP is to help make deci-
sions concerning investments that should be initiated in the coming 3-5 years. The generation investments identi-
fied by the IRP study may be implemented by the private sector or EGENCO. If they are developed by the private
sector, they will sell their output to the Single Buyer function within ESCOM under long-term Power Purchase
Agreements. If developed by Independent Power Producers selling to ESCOM, ESCOM, Department of Energy
Affairs and MERA will need to be assured that these are the least-cost investment options. Similarly, if they are
developed by EGENCO, these entities will also need to be assured that these investments are least-cost. Trans-
mission investments will be made by the Transmission Licensee within ESCOM and these investments must also
be the least-cost options. This is therefore the primary purpose of the IRP-to identify the generation and trans-
mission projects that are least-cost and that should be developed by ESCOM or by IPPs with long-term contracts
with the Single Buyer.

Another purpose of the IRP is to consider unsolicited power plants that may be developed by IPPs. These will
again sell their output to the Single Buyer. MERA and Department of Energy will need to be assured that these will
not cause an increase in electricity costs and corresponding increases in prices that must be charged to end-users.

1.14 Southern African Development Community (SADC)

The main objectives of Southern African Development Community (SADC) are to achieve economic development,
peace and security, and growth, alleviate poverty, enhance the standard and quality of life of the peoples of
Southern Africa, and support the socially disadvantaged through Regional Integration. These objectives are to be
achieved through increased Regional Integration, built on democratic principles, and equitable and sustainable
development.

STRATEGIC PLAN 2020 -2024 5

The overall aim of the Southern African Development Community (SADC) is to achieve Regional Integra-
tion and Eradicate Poverty within the Southern African region. To achieve these goals, Member States need
to work together harmoniously in achieving effective results on common problems and issues. In order to
enable this kind relationship, several legal and institutional instruments have been put into place to guide
and standardize the work of SADC with Member States. One of these instruments is the SADC Protocols,
which enshrine the aims of the Community by providing codes of procedure and practice on various issues,
as agreed by Member States.

A Protocol is a legally binding document committing Member States to the objectives and specific procedures
stated within it. In order for a Protocol to enter in to force, two thirds of the Member States need to ratify or
sign the agreement, giving formal consent and making the document officially valid. Any Member State that
had not initially become party to a Protocol can accede to it at a later stage.

For an amendment to be made to a Protocol any Member State may propose the amendment to the Execu-
tive Secretary of SADC for preliminary consideration by Council after all Member States have been notified.
The amendment to this Protocol can then be adopted by a decision of three quarters of the Member States
of SADC.

A provision for any disputes arising from the application or interpretation of a Protocol is made by referring
grievances to the SADC Tribunal if they cannot be resolved amicably through regular diplomatic channels.
Currently, SADC has 26 Protocols, including those that have not yet entered into force. To see a list of all SADC
Protocols, and access the individual documents, please refer to the Protocols section of the
Documents and Publications Menu of SADC.

1.15 Southern African Power Pool (SAPP)

The SAPP was created in August 1995 at the SADC summit held in Kempton Park, South Africa, when
member governments of SADC (excluding Mauritius) signed an Inter-Governmental Memorandum of
Understanding for the formation of an electricity power pool in the region under the name of the South-
ern African Power Pool. The ministers responsible for energy in the SADC region signed the Revised
Inter-Governmental Memorandum of Understanding on 23 February 2006.

The SAPP is governed by four agreements: the Inter-Governmental Memorandum of Understanding which
enabled the establishment of SAPP; the Inter-Utility Memorandum of Understanding, which established
SAPP’s basic management and operating principles; the Agreement Between Operating Members which es-
tablished the specific rules of operation and pricing; and the Operating Guidelines, which provide standards
and operating guidelines.

The SAPP has twelve member countries represented by their respective electric power utilities organized
through SADC.

The SAPP has four working committees: the Environmental Sub-Committee, the Markets Sub-Committee, the
Operating Sub-Committee and the Planning Sub-Committee under a Management Committee which in turn
reports to the Executive Committee. The Markets Sub-Committee is a new sub-committee that was created
in April 2007 following the signing of the Revised Inter-Utility Memorandum of Understanding by the SAPP
Executive Committee on 25 April 2007. Also created in April 2007 is the Coordination Centre Board to govern
the activities of the SAPP Coordination Centre.

The SAPP coordinate the planning and operation of the electric power system among member utilities.

6 STRATEGIC PLAN 2020 -2024

1.16 Regional Energy Regulatory Authority (RERA)
The Regional Energy Regulatory Authority of Southern Africa (RERA) formerly the Regional Electricity
Regulators Association (RERA) is a sub-organization of SADC States for the cooperation of their national electrici-
ty and energy regulatory authorities. The Secretariat is in Windhoek, Namibia. The objective of this international
organization is to harmonize policies, legislation, standards and regulatory procedures and to ensure effective co-
operation between Member States. The current status of RERA is to include all other subsector energy elements.

The Regional Energy Regulatory Authority of Southern Africa (RERA) develops guidelines for cross-bor-
der electricity trade and investment between Member States and thus establishes the framework for the
respective national regulatory authorities.

The organization was founded by SADC energy ministers on July 12, 2002 at a conference in Maseru,
Lesotho.

Their creation is based on NEPAD agreements and several multilateral agreements:

1. SADC Energy Protocol, 1996;
2. SADC Energy Cooperation Policy and Strategy, 1996;
3. SADC Energy Sector Action Plan, 1997;
4. SADC Energy Activity Plan, 2000;
5. RERA officially started its activities in Windhoek on September 26, 2002.
6. The organization was registered under Namibian law on 3 October 2003.
7. The SADC Regional Energy Access Strategy and Action Plan of March 2010 stated their intention to
extend the scope of the RERA to other energy sources

STRATEGIC PLAN 2020 -2024 7

 REVIEW OF 2014 – 2018
STRATEGIC PLAN

CHAPTER
• MERA Perfomance Against
Strategic Goals

TWO • Challenges Faced in Implementing

the 2014 - 2018 Strategic Plan

158 STRATEGIC PLAN 2020 -2024

 2.0 REVIEW OF 2014 – 2018 STRATEGIC PLAN

2.1 Introduction
The review of the 2014 - 2018 MERA Strategic Plan was aimed at identifying key issues that emerged during
its implementation and those that will still need to be addressed in the new Strategic Plan.
This chapter documents achievements against each of the seven (7) Strategic Goals of the 2014- 2018
Strategic Plan:
i. Strengthened Regulatory Framework for Optimum Delivery of Regulated Services
ii. Facilitate Increased Electricity Supply
iii. Enhanced Conducive environment for Security of Fuel Supply
iv. Enhanced Financial Sustainability
v. Improved Stakeholder Understanding of MERA Roles and Mandate
vi. Strengthened Institutional Capacity, and
vii. Strengthened Research in Energy Technologies.

The achievements documented here are based on consultations with MERA Stakeholders across the coun-
try and MERA staff.

STRATEGIC PLAN 2020 -2024 9

2.2 MERA Perfomance Against Strategic Goals
The achievements made by MERA are analyzed against strategic objectives under each of the 7 strategic goals:
• Table 1: MERA Performance

STRATEGIC GOAL STRATEGIC OBJECTIVES ACHIEVEMENTS

1. Strengthened Regulatory 1. Streamline the Fuel 1. The following frameworks

Framework for Optimum Delivery Review Process were developed:
of Regulated Services • Tariff Methodology.
• Review of Liquid Fuels and Gas
(LFG) regulations.
• Ethanol Pricing

2. Improve Enforcement 2. The following frameworks were

Mechanisms for fuel developed for electricity and fuel
and gas sector and sectors
electricity and • Grid Code Review.
renewable energy • Market Rules.
sector. • Legislation enabling
Independent Power Producers
to operate.
• Investment and Information
submission requirement
• Key Performance Indicators
(KPI’s) for performance
monitor
ing.
• Transportation of bulk fuel.
•Emergency Response Plan.
• Construction guidelines.
• Strategic Fuel Reserve
regulations.
• Licensing regulations.
• Transmission connection
agreements.
• Power Purchase Agreements
(PPA’s)review
• Development of rular service
station model
• Development of mini-grid

10 STRATEGIC PLAN 2020 -2024

 STRATEGIC GOAL STRATEGIC OBJECTIVES ACHIEVEMENTS

2. Facilitate Increased 1. To facilitate improved 1. MERA reviewed and

Electricity Supply efficiency in generation, approved Power Purchase
transmission and Agreements (PPA’s) to
distribution increase electricity supply
2. MERA facilitated an
increase in the use of
renewable energy by
households and businesses

1. There is an overwhelming
2. To develop and improve
registration of Independent
frameworks for increased
Power Producers following
generation and expansion
facilitation of the
of transmission and
development of electricity
distribution capacity generation, transmission
and distribution policy
tools.

1. MERA conducted
3. Enhanced Conducive To ensure uninterrupted fuel diversified route assessment
Environment for Fuel supplies for fuel supplies
Supplies 2. Developed a framework
and regulations of the
Strategic Fuel Reserve
operations
3. Contributed to increased
fuel storage capacity by
licensing operators
4. MERA has contributed to
increased stock days cover
from 15 days to 60 days
5. Through licensing, MERA
has contributed to an
increase in coverage of
service stations in rural
areas.

1. MERA has increased its

4. Enhanced Financial 1. To optimize income licensing base thus
Sustainability sources contributing to higher
revenues
2. MERA has widened its
revenue base by investing
sur plus funds.
3. MERA has reduced the
period of credit period from
45 days to 30 days
4. MERA has instituted cost
reduction measures such as
reducing on hire of vehicles
and sharing ICT and other
resources.

STRATEGIC PLAN 2020 -2024 11

 STRATEGIC GOAL STRATEGIC OBJECTIVES ACHIEVEMENTS

2. To diversify income sources 1. MERA is building an office

complex which will have
some extra office space
for rental to other
institutions.

5. Improved Stakeholder 1. To enhance MERA’s image 1. MERA developed and

Understanding of MERA launched the Customer
Roles and Mandate Service Charter
2. Continued information
dissemination through
media channels such as
electronic, print and radio
3. Hosting of press
conferences and Media
training on MERA’s
mandate
4. MERA website regularly
updated with information
on regulatory tools and
decisions on various
regulatory matters.

2. To maximize opportunities MERA undertakes Corporate

for Corporate Social Social Responsibility activities.
Responsibility

6. Strengthened Institutional 1. To recruit, develop and 1. Training in Power Sector

Capacity retain high caliber staff Reforms
2. To review modalities for 2. Unbundling of the
implementing the Strategic Technical Services
Plan Directorate into two
3. To develop a robust record separate Directorates.
management and archive One dealing with Electricity
system and Renewable Energy and
the other dealing with
4. To develop a regulatory Liquid Fuels and Gas.
impact assessment 3. Reviewed Conditions of
framework Service
5. To strengthen the 4. A Functional Review of
organizational MERA was undertaken by
arrangements through an independent consultant.
policies and management The report was discussed
information systems (MIS) and adopted by the MERA
Board. Now being
implemented.

12 STRATEGIC PLAN 2020 -2024

 STRATEGIC GOAL STRATEGIC OBJECTIVES ACHIEVEMENTS

5. Developed a Fraud and

Anti-corruption policy.
A whistleblower policy was
also developed.
6. Staff development was
enhanced
7. Salary structure was
reviewed.
8. Various policies were
reviewed and new ones
developed.
9. Management Information
System phase one was
implemented.

7. Strengthened Research in 1. To develop controls for Very little achievement was

Energy Technologies energy technologies recorded in the energy
2. To increase the level of technologies research.
research in energy related
affairs
3. To increase the capacity of
MERA to facilitate research
in energy
4. To disseminate best
practices in energy
technologies

2.3 Challenges Faced in Implementing the 2014 - 2018 Strategic Plan

Despite the above mentioned achievements, MERA faced a number of challenges in the course of
implementing the 2014 – 2018 Strategic Plan. These have been classified in the following categories:
• Bureaucracy
• Finance
• Stakeholder Engagement
• Institutional Capacity
• Corporate Governance
• Energy Infrastructure and Regulatory Tools
• MERA’s role as an Arbitrator
• Nature of MERA’s Regulatory Practice
• Positioning MERA in the new Energy Market Structure, and
• MERA in the regional context.

STRATEGIC PLAN 2020 -2024 13

2.3.1 Bureaucracy

MERA experienced delays in approval of proposed amendments to the Liquid Fuel and Gas Act, legislation
to reduce levy credit period; and policies and administrative frameworks. Other delays related to Board
Appointments, lack of implementation of the Bulk Purchase Procurement of fuel leading to high landed costs.

2.3.2 Finance

The challenges MERA faced related to inadequate financial resources, partly due to late or non-remit-
tance and under declaration of levies by some major industry players. This was also compounded by MERA’s
inability to optimize license fee collection as billing is not yet automated.

2.3.3 Stakeholder Engagement

MERA undertook many initiatives to inform, educate and communicate with its many stakeholders. De-
spite these efforts, there is still some lack of clarity on MERA’s roles and mandate. As a result, some stake-
holders have unrealistic expectations of MERA. Further, some stakeholders also perceive that MERA is
biased towards other regulated industry players. All these have tended to cast MERA in a negative light from
stakeholders’ point of view. MERA witnessed some negative advocacy undertaken by some Civil Society
Organizations’ and even Court Injunctions.

2.3.4 Institutional Capacity

During the period under review, MERA’s staff compliment did not match the pressure of work. This
affected the quality of services delivered. In addition, MERA did not have the capacity to undertake research
on Energy Technologies.

2.3.5 Corporate Governance

During the last plan period, MERA took several initiatives to enhance corporate governance. MERA devel-
oped the following policies:
• Fraud and Corruption Prevention policy
• Whistle Blower policy
• Risk management Policy.

MERA has also established the following:

• Institutional Integrity Committee
• Risk Management Section within Internal Audit

In addition to the above, MERA engages External Auditors and Government Auditors and Procurement
Auditors.

These initiatives are in line with international best practices of good corporate governance. However, there
some perceptions by stakeholders about MERA’s overall corporate governance.

These include the following:

i. MERA’s perceived lack of consistency in the application of its own laws and regulations,
ii. Inadequate enforcement of laws leading to low compliance levels among industry players,
iii. Perception of Regulatory capture by some big industry players,
iv. Perceived lack of transparency in the review of energy prices,
v. Perceived inadequate consultations with stakeholders especially with regard to energy projects,
vi. Perception of political interference in the management and operations of MERA,

14 STRATEGIC PLAN 2020 -2024

These perceptions by stakeholders may have created an unfortunate impression of poor corporate gover-
nance. This may have damaged the image of MERA in the standing of citizens, employees and potential
investors among others groups. These issues will be addressed in the current plan.

2.3.6 Energy Infrastructure and Regulatory Tools

Another challenge that MERA faced in enforcement of its regulations is that some of the installed infrastruc-
ture countrywide is old. For example, MERA has modern construction standards for Petrol Stations. Yet a
number of these stations were constructed a long time ago. So for MERA to enforce the new construction
standards in this case is problematic. This contributes to low compliance levels by some industry players.

2.3.7 MERA as an Arbitrator

MERA has a complaints handling system which requires that aggrieved consumers should first report to the
licensed energy supplier. MERA then requests the Licensee to provide feedback on how the consumer com-
plaint was handled. This system has not gone down well with consumers who feel that MERA should take a
pro-active stance and intervene on their behalf. As a result, some aggrieved consumers have stopped com-
plaining preferring to “suffer in silence” but still believing that MERA has let them down.

2.3.8 Nature of MERA’s Regulatory Practice

Global practices in energy regulation indicate that there are 4 main types:
• Command and Control
• Self-Regulation
• Incentive Based Regulation, and
• Market Controls.

Command and Control regulation relies on legal standards which allow, prohibit or force certain activities
to be undertaken. The same law also provides for sanctions to be meted out if standards are not complied
with.

Self-regulation allows industry players or trade associations to develop their own rules (code of practice) on
how to conduct their business. The association also monitors and enforces these rules, even where there is
some form of Government oversight.

Incentive based regulation is based on “rewards and sanctions”. It views regulation as a “transaction”
between the regulator and the regulated entity. Energy players may be given incentives such as subsidies to
undertake a certain activity deemed to be socially beneficial. The benefit could also be taxes to limit or stop
an undesirable activity.Market controls involves regulation based on competition laws (usually to level the
playing field and /or prevent monopolies from emerging), regulation by contract and disclosure regulation.

Among these four types, MERA practices more of the Command and Control regulation than others. The
advantages of Command and Control regulation includes the following: -
• It sets out clearly defined limits hence enabling decisive action against noncompliance; and
• It is amenable to fair and rapid implementation

The Command and Control regulation also has several disadvantages including: -

First, it requires very close working relationship between the regulator (MERA) and the regulated entities.
An example is where MERA would ask for performance information from the regulated entity. In the long
run, this close working relationship may easily lead to Regulatory Capture - A case of familiarity breeding
contempt.

STRATEGIC PLAN 2020 -2024 15

 Second, command and control regulation can easily stifle an industry which is experiencing rapid technolog-
ical changes like the energy sector. Since command and control regulation relies on existing laws, the speed
of changing the laws does not match the speed at which the technological changes are taking place in the
industry. This may make regulation to be ineffective.

Third, sheer volume and complexity of laws and regulations tends to lead to problems of enforcement. This
is mainly because laws and regulations may not have been framed to encompass all possible activities being
undertaken by industry players.

2.3.9 MERA and the New Energy Market

Over the past 4 years, the energy industry in Malawi has witnessed transformation of epic magnitudes. This
transformation has taken place within the ambit of the Government’s Public Sector Reforms Programme
which started in 2015.The reforms are being championed by the Office of the President and Cabinet through
the Public Sector Reforms Management Unit.

In the Energy sector, the reforms led to the review of the Energy policy and Energy Law to address problems
of unreliable power supply. As such, the Electricity Amendment Bill (2016) led to the unbundling of electric-
ity generation from transmission and distribution. A new company called Electricity Generation Company
(EGENCO) was created. The Electricity Corporation of Malawi (ESCOM) remained with transmission and dis-
tribution functions. It also led to the liberalization of the market to allow Independent Power Producers (IPP)
to invest in the industry.

The Government also created the National Oil Company (NOCMA) in December 2010 to manage a strategic
fuel reserve facility and promote upstream oil and gas exploration among other functions.

MERA developed regulations and guidelines for bulk procurement of fuel. MERA drafted the Liquid Fuel and
Gas (Production and Supply) Regulations which designated NOCMA as the strategic fuel reserve agent in
Malawi effective July 2018.

The implication of the above reforms is that MERA needs to reposition itself to effectively handle its roles and
responsibilities in a vastly changed energy market. Among other issues, MERA needs to enhance its capacity
not just in staff numbers but also the requisite competencies to be a truly effective regulator. In addition,
MERA has to rethink its regulatory practice. MERA should progressively move away from the command and
control type to a self-regulatory one. This will require to be studied carefully to come up with the best mode
of transitioning.

2.3.10 MERA in the Regional Context

MERA is an active player in the regional energy market. In line with international best practice, MERA needs
to constantly benchmark its performance against other regional energy regulators.

With the strong political will from the Government, MERA can continue to operate more independently.

2.3.11 Emerging Issues

In this section, we present issues which need to be considered going forward.

i. The need to develop more frameworks to support the unbundled electricity market in Malawi such
as a charter for Independent Power Producers.

16 STRATEGIC PLAN 2020 -2024

ii. Greater efforts at promoting the use of alternative energy sources at household level, for example,
gas as a clean fuel for cooking.
iii. Facilitating the coverage of retail service stations in rural areas
iv. Implementing the transportation regulatory framework
v. Implementing an optimal route mix i.e. road and rail modes for transporting fuel
vi. Automating the licensing and billing functions
vii. Enhanced stakeholder engagement especially information, communication and education by
implementing MERA’s Communications Strategy
viii. Enhance MERA’s image as a responsible corporate citizen by publicizing its Corporate Social
Responsibility activities
ix. Operationalizing the client service charter by reengineering critical core business processes,
staff training and reviewing and simplifying application forms
x. Enhanced staff capacity for undertaking research of new Energy Technologies
xi. MERA to enhance training of industry players on a continuous basis
xii. Enhanced Corporate Governance.

STRATEGIC PLAN 2020 -2024 17

 SITUATIONAL ANALYSIS

• PESTEL Analysis: An Overview.

• SWOT Analysis

CHAPTER • The Linkage

THREE • Stakeholder Analysis and

Management

• Emerging Strategic Issues

18 STRATEGIC PLAN 2020 -2024

 3. SITUATIONAL ANALYSIS
3.1 Introduction
In order to better understand the environment in which MERA operates, it became imperative to under-
take a situational analysis. This was done using the PESTEL and SWOT analysis tools. PESTEL was conducted
at three levels – international, regional and national. Later, PESTEL and SWOT were merged so as to isolate
which factors presented either an opportunity or a threat to MERA.

Stakeholder analysis was also undertaken. In addition, stakeholder consultations were held in the three re-
gions of Southern (Blantyre) Central (Lilongwe) and Northern (Mzuzu).
On the basis of the situational analysis, a number of critical issues were identified. These were later clustered
into four Strategic Pillars for MERA’s Strategic Plan.

3.2 PESTEL Analysis: An Overview.

The following is the analysis of how the external environment could impact the management and
operations of MERA during the period 2020 - 2024.

PESTEL FACTOR ISSUES

1. Political • The Trump Effect
• War on Terror
• Brexit
• China Africa Relations
• Government support to the Energy Sector

2. Economic • Financing Global Climate Change programmes

• Interest rates
• Investments
• Exchange rates
• Trade Wars

3. Social • Rapid population growth

• Demand for Energy
• Impacts on the environment

4. Technological • Capacity for research

• Energy Mix
• Developments in ICT
• Developments in the Transportation sector

5. Environmental I. MGDS III

II. Renewable sources of Energy

6. Legal • Bureaucracy
• Anti-Money Laundering Act

19
24
STRATEGIC PLAN 2020 -2024
 The following section provides detailed analysis of each factor:

3.2.1 Political

The analysis points to a very fragile business environment over the 5-year plan period. The global political
and economic landscape has changed drastically – thanks in part to the “Trump effect”. The USA President
has almost single handedly dictated the pace and direction of the change.The “Make America Great Again”
and “America First” campaigns have contributed to the reduction of American aid to developing countries.
This has started to affect ongoing projects including those in the energy sector.

The continued fight against terror has contributed to reduced financial inflows to the developing world, some
of which could have been in the energy sector.
The uncertainty over Brexit will most likely make the United Kingdom look inwards in an attempt to minimize
the negative effects of withdrawing from the European Union. The United Kingdom has in the past been a
traditional supporter of its former African colonies of which Malawi is one of them. This policy shift could also
lead to reduced investments in Africa. The energy sector may not be spared. A countering effect to the above,
is the growing relationship between China and Africa. The Chinese economy is officially the second biggest
in the world. Chinese investment in Africa has been concentrated in infrastructure. The energy sector could
also benefit from Chinese investment.

The Government has shown its support to the Energy sector especially through the Public Sector Reforms
Programme. The passing of various pieces of legislation that has created new opportunities for investment in
the Energy sector is testimony of this commitment.

3.2.2 Economic
Financing climate change mitigation globally is likely to suffer with the USA announcement of pulling out of
the Paris Accord. Consequently, Malawi, like other African countries, must enhance domestic resource mo-
bilization.

It is encouraging that the Reserve Bank announced early in 2019 a reduction in policy rate from 16% to 14.5%
and the Lombard rate from 200 basis points to 40 basis points. The consequent drop in commercial bank in-
terest rates from 26% to 14.9% is expected to spur borrowing by private investors some of whom could invest
in the energy sector. However, this drop in interest rates must be accompanied by a reduction in the spread
i.e. the margins between deposits and lending. Currently, deposits attract an average of 2.6% per annum
whilst borrowing attracts 14.9% interest.

This has the potential of discouraging borrowing especially by small scale investors. This would negate the
anticipated increase in borrowing hence make little impact on new investments in all areas of the Malawi
economy. This would be in direct contrast to the MGDS III expectations on Domestic Resource Mobilisation.
MGDS III anticipates increased resource mobilization based on expanding revenue by stimulating investment
in economic activities. Fewer investments would lead to reduced tax base. In turn, this would mean less
revenues accruing to the Government hence reducing its ability to invest in development projects including
in the energy sector.

The exchange rate of the Malawi Kwacha to the United States Dollar is an important factor for MERA’s pricing
of energy. There has been some semblance of stability in the exchange rate movement so far this year. The
Government seems to be on course to maintaining the macroeconomic fundamentals.

The Trade Wars instigated by America will contribute to increasing the cost of doing business globally. It may
also contribute to increases in oil prices particularly the sanctions America is imposing on Iran. This would
mean Malawi spending more on oil imports. Such increased oil prices would call for using the most cost-ef-
fective routes for transporting fuel into Malawi so as to reduce the in bond landed costs. It is instructive that
the Malawi Government has developed a Transport Master Plan 2017 – 2037. This plan envisages
20 STRATEGIC PLAN 2020 -2024
investments in rail and maritime transport modes so as to reduce costs and ease pressure on roads.
The implication for MERA is the need for continuous route assessment with a view to selecting the most
appropriate ones.

On a more positive note, OPEC is reviewing its production cut agreement. This agreement entailed cutting
oil production by 1.2 million barrels per day from January 2019 up to June 2019. Once the cut is relaxed, we
would expect oil supply to increase hence contributing to a drop in prices.

3.2.3 Social
Malawi’s population is estimated at 17.5 million and is projected to grow to 19.4 million by 2022. The rapid
population growth will translate into high energy demand especially at household level. As such, the energy
sector must scale up efforts in expanding the country’s energy mix so as to meet the anticipated demand for
energy as Malawi steadily moves to a middle-income economy. Whereas the demand for electricity is 600
megawatts, Malawi only produces about 351 megawatts.

Another effect of the rapid growth in population is the impact on the environment. As people seek liveli-
hoods, issues such as cutting down of trees for wood fuel and building houses near water catchment areas.
The former effect would also contribute to deforestation hence affecting rainfall patterns. Reduced rainfall
would then negatively impact on electricity generation and supply from hydropower sources.

3.2.4 Technological
There is an urgent need for MERA to strengthen its capacity to carry out research especially on Energy Tech-
nologies. The knowledge so generated could benefit the country in terms of improved efficiency and in-
creased use of clean energy products.

Developments in Information and Communications Technology (ICT) provide an opportunity for MERA to
improve efficiency of operations. In addition, ICT has the potential of improving the efficiency of the Supply
Chain in the energy sector in terms of access to and sharing of information.

The transport sector is developing very rapidly. This is so especially in energy sources for traction. Electric
cars and solar powered vehicles are becoming commonplace in the developed countries. Soon, these devel-
opments will reach Africa. Already in Uganda, for example, they are experimenting with a solar powered bus
for public transportation. In the city of Osaka in Japan, one company, Genepax is experimenting on a car us-
ing water to generate electric power. The energy generator takes out the hydrogen from the water, releases
electrons and finally generates electric power. The car runs at 80km per hour. Service stations will in future
also be selling water as an energy source for cars.

3.2.5 Environmental
The Malawi Growth and Development Strategy III 2017 – 2022 whose theme is “Building a Productive, Com-
petitive and Resilient Nation” is premised on 5 Key Priority Areas; Agriculture, Water Development and Cli-
mate Change Management; Education and Skills Development; Energy, Industry and Tourism Development;
Transport and ICT Infrastructure; and Health and Population.

There is a clear link between the first and third priority areas. Water development and climate change have
an impact on energy development. This calls for policies and strategies to counter the negative impacts of
climate change. Of special mention is the importance of scaling up efforts in developing projects in Renew-
able Energy sources. This also calls for intensified public- private partnerships instead of leaving the burden
solely on the Government.

STRATEGIC PLAN 2020 -2024 21

 3.2.6 Legal
Bureaucratic delays in changing proposed amendments to the Energy laws and regulations can make MERA
ineffective as a Regulator. This is because technological changes will take place faster than the law changes.
In as much as the country welcomes investment in the energy sector, it is imperative to ensure the effective
implementation of the Financial Crimes Act and other legislations against money laundering.

3.3 SWOT Analysis

Below is a summary of MERA’s internal strengths and weaknesses and the opportunities and threats in the
external environment.

INTERNAL STRENGTHS ELABORATION

MERA was established by statute. • The Energy Regulation Act of 2004 gives
the mandate to regulate the energy
sector using other Energy Laws and
Regulations.

Self-sustaining organization • Permanent dedicated levy to finance the

operations of the Authority.
• Completion of own office
accommodation
• Other sources of financing such as Office
Complex rentals.

Existence of Corporate Governance Structures. • Independent Board of Directors and its

Committees
• Competent Secretariat

Qualified professional staff • Academic qualifications at PhD, Masters,

Bachelors, Diplomas, professional levels
in disciplines appropriate for energy
regulation;
• Staff with vast experience and
membership to professional bodies;

Effective operational systems • Clear operating procedures, policies and

standards

Member of regional and international energy • Membership to RERA, AFUR, RAERESA

regulatory bodies for benchmarking with international best
practices

Clear reporting and differentiation of responsibil- • Functional organizational structure,

ities in the organizational hierarchy • Clear Job descriptions
• Annual Work plans for each Directorate

Well established advisory committees. Potential • Low staff turnover

to retain qualified staff • Motivated staff

National presence. • Offices in all the three regions of the

country- Southern, Central and Northern.

22 STRATEGIC PLAN 2020 -2024

INTERNAL STRENGTHS ELABORATION

Inadequate interaction and engagement with • Customers not satisfied with MERA’s
customers and industry players Services
• Inordinate delay in making decisions on
regulatory matters.
• No consideration of the implications/
impact of MERA decisions on Consumers
and Licensees.
• Inadequate staff complement.

Limited capacity to monitor every energy • Existence of many unlicensed operators

undertaking in the industry
• Failure to inspect/check compliance by
licensed operators
• Incomplete database of all energy
operators

Inadequate consultation with existing major Lack of clear engagement framework with
stakeholders when engaging in a project stakeholders.

Gaps, duplication and conflicting legal framework • Multiple authorities confusing operators
in the industry.
• Lack of clarity of certain provisions in the
governing legislation.
• Current gaps in the legislation create
uncertainty and leads to lack of
compliance.

Inadequate teamwork • Lack of coordination of activities within

Directorates/Sections
• Inadequate number of Management,
Staff and executive committee meetings

Inadequate Staff Welfare provisions • Limited programmes to support Staff

welfare activities

STRATEGIC PLAN 2020 -2024 23

 EXTERNAL OPPORTUNITIES ELABORATION
`````````````````````````````````````
The energy sector is attractive to investors • Cost recovery tariff has been put in place.
• Enabling legal framework – has been
formulated and assented to.
• Reasonable return on investment- can
be earned by investors due to an
enabling environment as stated above
i.e. cost recovery tariff and enabling legal
frame.work

Wide labour market from which it can recruit • Able to attract experienced, professional
personnel and qualified staff.
• Availability of tertiary institutions
providing specialized energy related
courses.
Linkages to regional and international bodies Membership to regional bodies e.g. RERA,
AFUR and RAERESA

EXTERNAL THREATS ELABORATION

Lack of compliance to regulations by some • Noncompliance with licensing conditions
players • Big monopolies – threat to enforce
ment-regulatory Capture
• Inadequate enforcement provisions and
tools in the regulation.
• Prevalence/dominance of illegal
operators.

Government bureaucracy and interference into • Delays in approval processes by other

organization’s plans. stakeholders such as law reviews and
gazetting of regulations;
• Government interference with matters
that are within the Secretariat’s mandate

Political influence • Interference by political figures in MERA’s

decision making processes, i.e. license
application.

Land linked • Potential risk of security of energy

supplies arising from disruptions in the
existing supply chain.

24 STRATEGIC PLAN 2020 -2024

 3.4 The Linkage
In the following section, we link PESTEL and SWOT Analyses

Issues and develop- Effects of changes in terms of Opportunities and

ments that are likely to Threats to MERA
impact negatively or
positively on MERA’s
capacity to achieve
Strategic Objectives

PESTEL FACTOR OPPORTUNITIES THREATS

Political
• War on Terror • Government to explore • Possible disruption in
• Brexit alternative sources of oil supplies due to
investments in energy American sanctions on
• Government support
sector Iran. This could lead
to a rise in oils prices
on the international
market thus affecting
the In Bond Landed
costs of fuel.

• Government to explore • Inability to secure

Economic
alternative sources of funding for climate#
• Financing Global
funding climate change change programmes.
Climate Change
programmes • Climate change to have
programmes
• The steady exchange rate a negative impact on
• Interest rates
of the Malawi kwacha the energy sector in
• Investments
to the US Dollar and its Malawi
• Exchange rates
possible appreciation in • The exchange rate
• Trade Wars
future could reduce the depreciating against
In Bond Landed cost of fuel. the US Dollar leading
This would be an immense to high import costs of
boost to economic fuel.
development in Malawi. • The spread
• If the spread is narrowed, remaining big leading
it could attract small scale to small scale investor’s
investors to borrow funds inability to borrow
for energy projects funds for energy
projects. Negative
impact on the country’s
Energy Mix

STRATEGIC PLAN 2020 -2024 25

 Social • Increased population • Rapid population
• Rapid population growth will demand more growth leading to
• Demand for Energy energy especially at environmental
• Impacts on the environment household level degradation in pursuit
• Malawi moves to of livelihoods
middle income level. • Possible encroachment
The growing middle at water catchment
class will be better able points thus affecting
to afford energy. sources of water supply
• Some of this middle for hydropower
class will become generation
entrepreneurs hence • Cultural beliefs and
increase the demand literacy levels may
for energy for their hinder adoption of
businesses. clean energy sources
• Higher energy like gas for cooking at
consumption leading household levels
to higher levies for • Cases of vandalism,
MERA in the long run. theft of power cables,
transformers may
become more
common- thus
affecting operations of
one of MERA’s major
customers, ESCOM

Technological • Enhanced capacity to • No or little uptake on

• Capacity for research conduct research research results
• Energy Mix leading to knowledge
• ICT sharing
• Developments in • More efficient and
Transportation high-quality energy • Possible resistance to
products leading to high adopting new energy
consumption rates products
• Developments in • Cybercrimes
Transportation such as
Electric cars and Hybrid
cars (electric and fuel)
leading to demand for
energy. MERA should
create an enabling
environment for
electric and hybrid cars.
• More efficient
communication
facilitating information
sharing.
• Enhanced supply chain
management due to
greater use of ICT.
• MERA using ICT for
billing and invoicing for
levies.

26 STRATEGIC PLAN 2020 -2024

 Environmental • Intensified search for • Inability to mobilize
• MGDS III solutions mitigates adequate resources to
• Renewable Energy Sources negative impact of climate mitigate climate change on
change for the energy energy sector
sector
• Environmental Impact
Assessments for all new
energy projects

Legal • MERA should engage and • Delays in approvals of

• Bureaucracy sensitize the Government amendments making
• Anti-Money Laundering on the negative impact MERA’s Regulatory
of delays in approving oversight ineffective.
proposed amendments to • Weak enforcement of laws
legislation on the energy leading to influx of illegal
sector. operators in the energy
• Assurance that only sector
genuine and clean
investors participate in
the energy sector

3.5 Stakeholder Analysis and Management

Stakeholders were engaged as part of the process. This led to the following needs and expectations for the
period 2020 -2024:
i. MERA should be seen to be independent and unbiased in decision making
ii. Timely processing of requests
iii. Enhance information communication and education of stakeholders especially regarding to MERA
roles and functions
iv. Strict enforcement of Safety Standards
v. Increased research activities in energy sector
vi. Collaborate with Malawi Bureau of Standards in regulating importation of supplies of Renewable
energy products
vii. Continuous Professional Development of Energy Industry players
viii. Consistency in the application of Regulations
ix. Transparency and openness
x. Improved efficiency in operations.

The stakeholder analysis undertaken indicates that MERA has several very influential stakeholders. Many of
these stakeholders have very high interest in the work of MERA. In this regard, MERA will continue to engage
them to leverage their contributions. This Strategic Plan will be the main platform for engagement.

STRATEGIC PLAN 2020 -2024 27

 A stakeholder map which summarizes the various relationships is shown below.

SECONDARY PRIORITY- HIGH POWER, LOW TOP PRIORITY – HIGH POWER, HIGH INTEREST
INTEREST

• Comptroller of Statutory Corporations • Ministry of Natural Resources, Energy and

• Ministry of Labour Mining
• Ministry of Justice and Constitutional Affairs • Department of Energy Affairs Ministry of
• Road Traffic and Safety Services Finance
• Anti-Corruption Bureau • Competition and Fair-Trade Commission
• DHRMD • Consumer Affairs of Malawi (CAMA)
• National Audit Office • RERA
• AFUR

LOW PRIORITY- LOW POWER, LOW INTEREST SECONDARY PRIORITY- LOW POWER, HIGH
INTEREST
• National Construction and Industry Council • Ministry of Transport
• Reserve Bank of Malawi

• National Commission for Science and • Malawi Bureau of Standards

Technology • Ministry of Trade
• National Statistical Office • Tertiary Institutions
• MEJN • Independent Power Producers
• Electrical Contractors Association of Malawi • International Haulage Brokers
• Road Transport Operators Association • Afrox Malawi
• TEVETA • Ethanol Industry
• Atomic Energy Regulatory Authority (AERA) • Oil Marketing Companies
• Malawi Environmental Protection Agency • Single Buyer (ESCOM)
(MEPA)

MERA will disaggregate the map and engage each stakeholder in their own right. Four main strategies will
be used:
• Consultations and Feedback
o Consultations and Feedback will be through surveys and focus group meetings

• Involvement and Collaboration

o Involvement and Collaboration will be through workshops, polls and fora.

• Information Sharing
o Information sharing will be through Annual Reports, Website, Newsletters and Media Conferences.

• Engagement and Empowerment.

o Engagement and Empowerment will be conducted through open dialogue, joint planning sessions
and “one ¬-on- one” meetings.

3.6 Emerging Strategic Issues

On the basis of the institutional analysis - PESTEL, SWOT and linkage of the two, the following strategic
issues were identified:
• The country’s electricity generation is over reliant on hydro power sources. As such, low rainfall
leads to inadequate capacity hence load shedding;

28 STRATEGIC PLAN 2020 -2024

 • High losses in transit fuel much in excess of the internationally acceptable standard of 0.5%
• MERA should enforce compliance of the Law regarding levy remittance;
• To improve efficiency in revenue collection, MERA should automate its invoicing system for levies
and optimize license fees collection;
• MERA should strive to have alternative sources of revenue;
• Need for Frameworks for approval processes in the development and review of regulatory
frameworks;
• MERA should do all it can to ensure a level playing field and encourage competition in the energy
sector;
• There is need for improving enforcement mechanisms as some industry players are operating
illegally i.e. Unlicensed operators;
• Streamlining the energy pricing review mechanisms to ensure predictability of energy decisions;
• There is need to continue creating a conducive environment to attract more investment in the
energy sector. This should be targeted at both domestic and foreign investors;
• MERA should increase its staff complement and competencies to match the increased workload;
• MERA must engage the Government over the lengthy consultation process in approval policies and
administration frameworks;
• Business Process Re-engineering must be conducted regularly to enhance efficiency;
• MERA should enhance use of ICT in its operations.

STRATEGIC PLAN 2020 -2024 29

 STRATEGIC DIRECTION

Vision: “To be a recognized global leader in energy regu-

lation.”

Mission: “Regulating the energy sector for sustainable

development inaccordance with international best

practices.”

• Values

CHAPTER
Transparency:
Accountability:
Responsiveness:

FOUR
Integrity:
Professionalism:
Impartiality:
Teamwork:

• Strategic pillars and strategic

objectives
Strategic pillar 1: Positive Contribution towards an
Energy Secure Nation
Strategic Pillar 2: Financial Sustainability
Strategic Pillar 3: Efficient and Effective Service Delivery
Strategic Pillar 4: Public Trust

30 STRATEGIC PLAN 2020 -2024

 4.0 STRATEGIC DIRECTION.
Vision: “To be a recognized global leader in energy regulation.”
Mission: “Regulating the energy sector for sustainable development in accordance with
international best practices.”

4.1 Values:

• Transparency: We shall deliver our duties and responsibilities openly and give reasons for any
administrative decision and actions if required.
• Accountability: We shall be responsible and accountable to the government and the public for our
decisions and submitting to whatever scrutiny appropriate to our office.
• Responsiveness: We shall listen to our Customers and treat them with dignity and respect
• Integrity: We shall put the interests of our customers above our own and shall conduct ourselves in
a manner that is above reproach
• Professionalism: We shall carry out our duties with high degree of expertise, skill and competence
while maintaining high ethical standards
• Impartiality: We shall exercise fairness in adjudicating on matters based on approved policies and
regulations without bias and prejudice
• Teamwork: We shall achieve our goals by embracing diversity and supporting each other.

4.2 Strategic Pillars and Strategic Objectives

The plan is organized around four strategic pillars as follows:

Strategic pillar 1: Positive Contribution towards an Energy Secure Nation

Strategic Pillar 2: Financial Sustainability
Strategic Pillar 3: Efficient and Effective Service Delivery
Strategic Pillar 4: Public Trust

The following is the justification for each pillar and in terms of what MERA’s contribution would be and why it
is important for the organisation to make investments in this area. The strategic pillars show the lead role that
MERA will play as a regulator in partnership with industry players and other Government agencies. Three pillars
are internal to MERA and support the core pillar: MERA’s contribution to an energy secure nation. This reflects
the importance that the energy sector enjoys under Malawi Growth and Development Strategy (MDGP) III.

4.2.1 Strategic pillar 1: Positive Contribution towards an Energy Secure Nation

Malawi’s energy sector will keep undergoing a transformation as the country races towards a middle-income
status. This growth will lead to increase in energy use to power the economy.

The energy mix is also expected to undergo further rebalancing to include new and renewable energy sourc-
es. This environment will pose a challenge to the energy sector players and also MERA as a regulator. MERA’s
regulation of the industry should result into predictable and reliable energy supplies to ensure the country has
energy security in terms of supply, quality and distribution.

In the complex and rapidly evolving energy marketplace, environmental scanning is necessary to ensure that
market rules are effective and practicable for those who must follow them. MERA monitors market activities
and conducts audits of regulated entities to understand the factors affecting compliance and facilitate compli-
ance through information sharing, feedback, and practical recommendations.

STRATEGIC PLAN 2020 -2024 31

The following were identified as the Strategic Issues that will require attention during the plan period:
• What is the Impact of load shedding due to inadequate capacity in electricity generation and
supply?
• Why is Malawi experiencing high losses in transit fuel?
• What should be done to reduce the delays in approval processes in the development and review of
regulatory frameworks?
• Why is there inadequate innovations and research in the energy sector? What is the impact on
service delivery?
• What should be done to create a level playing field and encouraging competition in the energy
sector?
• What should be done to improve enforcement mechanisms?
• What should be done to make the energy pricing review mechanisms more predictable?
• How do we make the investment climate in the energy sector attractive?

Under this pillar, the following strategic objectives will be pursued:

1. Increase compliance with Energy laws to detect and deter market manipulation to create a level
competitor environment

2. Promote the development of safe, reliable and secure energy infrastructure that serves the public
and consumer interest

3. Minimize risks to the public in energy infrastructure development in compliance with energy and
environmental laws.

4. Implement a predictable and reliable pricing mechanism that promotes transparency in decision
making.

4.2.1.1 Strategic Objective 1.1: Increase compliance with Energy laws to detect and deter market
manipulation to create a level competitor environment

The Energy laws, along with other statutory authorities, give MERA oversight and enforcement
responsibilities that focus on increasing compliance of regulated entities and detecting and deterring
market manipulation.

Within the compliance focus of this objective, MERA gathers information about and analyzes market
fundamentals, behaviour, and other trends in order to take proactive steps to reduce the probabili-
ty that violation of applicable laws, regulations, or market rules will occur. MERA also polices compliance
programmes and employs a robust audit programme to identify problems and provide recommendations to
improve compliance. In addition, MERA makes market and audit data transparent to the public and market
participants so that market efficiency is promoted, and anomalies and areas of concern may be identified
and reported.

Fraud and market manipulation pose a significant threat to the markets overseen by MERA, and the
financial harm imposed by such actions ultimately is borne by consumers. To detect and deter fraud
and market manipulation, MERA uses market surveillance and other sources to identify indications of
misbehavior. MERA then conducts investigations, and, when appropriate, exercises the Authority’s civil
penalty authority to discourage violations. Promoting compliance and inhibiting market misconduct strength-
en markets, increases market confidence, and supports the Authority’s goal of ensuring that rates, terms,
and conditions of jurisdictional energy services are just, reasonable, and not unduly discriminatory or pref-
erential.

32 STRATEGIC PLAN 2020 -2024

 4.2.1.2 Strategic Objective 1.2: Promote the development of safe, reliable and secure energy
infrastructure that serves the public and consumer interests

The nation’s demand for energy will continue to grow, requiring the expansion of the infrastructure that
provides that energy. This relates to the Infrastructure for which MERA approval is required (in future this
may include natural gas pipelines and other fuel storage projects (LNG facilities). These facilities are critical to
meet the nation’s growing energy needs.

Ensuring the development of safe, reliable, and secure infrastructure that provides energy for consumers at a
reasonable cost is a significant, multifaceted challenge. Interest in developing more hydropower projects has
also increased. Hydropower facilities provide renewable and domestic energy. MERA’s role as an
independent regulatory agency includes both the review of infrastructure projects as well as the
minimization of risks to the public in the operation of the infrastructure. To promote safe, reliable, and
secure infrastructure, MERA shall ensure the sustainability and safety of energy projects and throughout their
entire life cycle; oversee the development and review of, as well as compliance with, mandatory
reliability and security standards for the bulk-power system.

4.2.1.3 Strategic Objective 1.3: Minimize risks to the public in energy infrastructure development in
compliance with energy and environmental laws.

The Energy laws, among other statutory authorities, charge MERA with ensuring that energy infrastructure,
once approved, continues to operate safely and reliably. Failure of Liquefied Natural Gas or hydropower infra-
structure due to structural issues, unsafe operations, natural disasters and physical attacks, or other hazards
can result in loss of life as well as negative environmental and economic consequences.

In addition, MERA has the authority with respect to oversight on reliability standards for the energy system
and oversight of electric reliability. In fulfilling these responsibilities, it is critical that the authority
minimises risks to the public associated with MERA-jurisdictional energy infrastructure. MERA achieves this
objective through a range of activities. MERA conducts timely safety reviews and inspections with rigorous
requirements, thereby advancing the safety of the energy system. MERA also oversees the development
and review of mandatory reliability and security standards for the energy system, as well as compliance with
these standards. In addition, MERA collaborates with regulated entities and other government
agencies to identify and seek solutions to threats to MERA-jurisdictional infrastructure, facilitating proactive
efforts that prevent or mitigate loss or damage.

4.2.1.4 Strategic Objective 1.4: Implement a predictable and reliable pricing mechanism that promotes
transparency in decision making.

The nation’s security and economic prosperity depends on maintaining economically efficient, safe,
reliable, and secure energy services at a reasonable cost for consumers. MERA’s regulation ensures just and
reasonable levies, tariffs, terms, and conditions for regulated services. In carrying out its regulatory role,
MERA uses a range of legal instruments as well as market oversight and enforcement. This is done in an open
and transparent manner.

Electricity, natural gas, and oil are vital resources that fuel economic activity and help to meet the nation’s
energy needs. Through the Energy laws, MERA has authority to regulate the energy sector players. MERA
carries out this responsibility by issuing orders and policies that continually balance three important
interests: protecting energy consumers against excessive prices, overall impact on the economy and
providing an opportunity for regulated entities to recover their costs and earn a reasonable return on their
investments.

In exercising its authority, MERA ensures that interested stakeholders have the opportunity to provide their
views. Stakeholder engagement and transparency help MERA establish regulations and revised laws that
result in just, reasonable, and not unduly discriminatory or preferential tariffs/levies, terms, and conditions.

STRATEGIC PLAN 2020 -2024 33

4.2.2 Strategic Pillar number 2: Financial Sustainability

The financial sustainability strategy must consider the short- and long-term financial needs of MERA. In
recognition of the importance that financial stability gives to MERA operations, more efforts will be made
during the plan period to increase and diversify MERA’s revenue base. The real needs of regulated entities,
consumers and the general public will have to be met in a balance that is always challenging. MERA as
a public institution collecting public funds and regulating a key sector of the economy must strive to be
accountable as a good steward.

The operations of MERA are funded based on both percentage amounts and not on quantum basis. This
makes the income to MERA to fluctuate on basis of both revenue and volumes of imported products by the
regulated entities. In addition to this, MERA has a single stream revenue from fees and levies. The financial
sustainability initiatives must try to diversify the revenue base. All efforts will be made during the plan period
to ensure that MERA attains some level of financial sustainability. The following are the strategic issues that
need to be addressed during the plan period:
• Inability to optimize license fees collection due to system operation challenges
• Lack of other alternative sources of revenue besides levies and license fees
• Enforce compliance of the Law regarding levy remittance
• Inefficiency in revenue collection

The strategic objectives to be achieved under this strategic pillar are:

1. To increase collection rates by strict enforcement of compliance of the law regarding levy
remittances
2. Increase revenue generation base by growing new income generation streams
3. Promote efficiency and effectiveness in financial resource mobilization and adherence to budget
plans.

4.2.2.1 Strategic objective 2.1: To increase collection rates by strict enforcement of compliance of the law
regarding levy remittances and improve efficiency on revenue collection.

Levies are a major source of revenue that supports MERA’s operations. This source is guaranteed under the
Energy Laws. The Law stipulates that all licensees shall remit levies to MERA within 45 days from the date
of sale of energy products. Some licensees however do not comply with this provision hence affecting the
available cash flows to MERA which in turn affect implementation of planned activities.

4.2.2.2 Strategic Objective 2.2: Increase revenue generation base by growing new and additional income
generation streams

MERA relies heavily on fuel levies and levies from regulated entities. Moving forward in the next five years,
ways and means will be explored to increase the revenue base. This will strengthen the financial base of the
Authority and help to ensure predictability and sustainability of operations. Under this strategic objective,
efforts will be deployed towards achievement of financial sustainability.

4.2.2.3 Strategic Objective 2.3: Promote efficiency and effectiveness in financial resource utilization and
adherence to budget plans

The Authority will develop and implement financial policies, controls, budgets and the management of MERA’s
accounting systems and related services to ensure prudent management of the Authorities financial resources in-
cluding assets and levies. Efficiency in billing and revenue (fees and levies) collection, expenditure control, sourc-
ing finance for project investments, financial management and reporting including budgeting and forecasting
financial requirements besides providing financial advice to management will be enhanced. Under this strategic
objective, MERA will ensure value for money in all operations is achieved to serve the public interest.

34 STRATEGIC PLAN 2020 -2024

STRATEGIC PLAN 2020 -2024
4135
 4.2.3 Strategic Pillar 3: Efficient and Effective Service Delivery

During the plan period MERA will ensure that all support and administrative systems respond to the business
needs to increase customer satisfaction. MERA will achieve organizational excellence by using resources effec-
tively, adequately equipping employees for success, and executing responsive and transparent processes that
strengthen public trust.

The public interest is best served when the Authority operates in an efficient, responsive, and transparent
manner. The Authority will pursue this objective by maintaining processes and providing services in accordance
with governing statutes, authoritative guidance, and adopting best practices.

The Authority’s staff, while serving in different functional offices and locations, will work collaboratively and
execute processes that work in concert with each other to produce the high-quality results expected by the
regulated entities and citizens. The Authority will use its resources efficiently, empower its employees, and earn
the public trust.

The following are the strategic issues that need to be addressed during the plan period:
• Strengthen staff competencies and skills to increase institutional capacity
• MERA remuneration be benchmarked against the market and regulated entities for motivation
• Engage Government Departments and Agencies regarding lengthy consultation process in approval
of policies and administration frameworks
• Improve business processes through technology
• Improve operational and service efficiency
• Improve data and information security
• Recruit, develop and retain high caliber staff
• Provide conducive working environment

In view of the above, the following strategic objectives will be achieved to increase operational efficiency and
effectiveness.
1. To strengthen institutional capacity through staff recruitment, capacity development and staff
motivation to meet evolving market challenges.
2. Implement and deploy modern information communication technologies to meet market demands
3. Improve the work environment to increase efficiency and staff motivation

4.2.3.1 Strategic Objective 3.1: To strengthen institutional capacity through staff recruitment, capacity
development and performance management to meet evolving market challenges.

On an annual basis, MERA allocates a significant portion of its budget to strengthen its institutional capacity;
learning and growth; and best in class processes and directly cover the compensation costs of its employees.
Given this investment, MERA will place extremely high value on its employees and is focused on ensuring that
employees have a performance management system that clarifies expectations, removes barriers to performance
and engagement, and provides useful, honest and timely feedback that supports employee effectiveness.

To enable the effective execution of performance expectations and responsibilities, MERA provides technology,
employee development and training programs, and health and wellness programs. Regular performance apprais-
als indicate how well employees are performing against expectations and objectives, identify performance issues
and obstacles, and provide honest and timely feedback that enables performance improvement.

As MERA faces new and increasing challenges, the demands on offices and employees continue to grow.
To keep up with this scenario, the Authority will provide support that addresses internal needs (learning and
growth; and best in class business processes) and enables organizational excellence. MERA will achieve this
objective by providing processes and services that help office leadership prioritize resource allocations, make
prudent investments that yield returns that directly benefit the agency’s mission, and use resources in an efficient
manner. These processes and services also help management meet statutes that require the Authority to recover its
operating costs from the entities it regulates and do so in a manner that avoids unnecessarily increasing the cost
of energy to consumers.

36 35
STRATEGIC PLAN 2020 -2024
 4.2.3.2 Strategic Objective 2: Implement and deploy modern information communication technologies to
meet market demands 3.

The advances in information technology will usher in the virtual organisation where space is no longer phys-
ical. This will have a deep impact on how MERA regulates the industry and how it does business internally
and with its customers. The block chain technologies, artificial intelligence and internet of things will impact
organisations in ways not imagined before. During the plan period, MERA will invest in new ICT capabilities
to cope with a changing business environment. MERA is regulating an industry that is sophisticated. As such,
the Authority has to keep pace to remain effective. The next five years will witness growth and innovations
in the ICT sector that MERA needs to take advantage of.

4.2.3.3 Strategic Objective 3: Improve the work environment to increase efficiency and staff motivation

Exciting and enabling working environment will spur efficiency in service delivery as members of staff will be
motivated. MERA will construct the modern Office Complex that provides modern office features and ample
office space for members of staff, and office facilities for health and wellness activities as well as lactating
room.

The Authority will ensure that there is secure, convenient and safer working environment for its staff to
align with the local and international regulations and best standards.

4.2.4 Strategic Pillar 4: Public Trust

MERA will learn public trust and understanding of its activities by promoting transparency, open communi-
cation, and exemplifying high standard of ethics. Trust and understanding will increase acceptance of MERA
decisions and reduce the potential for the public to dispute MERA decisions and regulations. MERA’s proac-
tive communication, along with an online presence and timely responses to inquiries, foster awareness and
understanding of the Authority’s activities. The Authority also advances this objective by maintaining internal
processes and services that ensure adherence to statutes, regulations, and self-imposed standards. In addi-
tion, MERA will provide training and guidance to promote an ethically informed workforce.

The following strategic issues have been highlighted for action during the plan period:
• Negative advocacy by stakeholders impacting on the image of MERA
• Information asymmetry between MERA and Stakeholders on developed policies and frameworks
• Stakeholders perception that MERA is biased towards other regulated entities
• Lack of clarity on stakeholders’ role on implementation and solicitation of energy projects

In view of the above, the following strategic objectives will be pursued over the plan period:
1. Increase compliance by identifying anomalies and potential improvements, and through stakeholder
education and outreach.
2. Improve public relations programmes to the regulated entities, consumers and the public
3. To improve Inter-institutional cooperation, coordination and communication to strengthen service
delivery.
4. Improve corporate governance systems

During the plan period, there is need to change the public’s negative perception on the integrity of MERA
employees. Efforts will be deployed to ensure that public confidence in MERA is restored. The following
strategies will be implemented to achieve this:
• Enhance transparency in MERA processes;
• Develop a complaints procedure charter and increase access to the leadership of the MERA to deal
with specific complaints;
• Introduce public awareness campaigns to educate members of the public on their rights and obliga
tions and MERA procedures and processes

36
STRATEGIC PLAN 2020 -2024 37
 • Periodical sensitization of employees on ways and means of avoiding corrupt practices such as, so-
liciting or receiving bribes for service delivery and the consequences thereof
• Development of the Code of conduct and Ethics and sensitization of employees
• Training programmes will be available and will include topics such as ethics and accountability.

4.2.4.1 Strategic objective 4.1: Increase awareness about MERA’s role and mandate

Transparency in energy regulation is an integral part of building Public Trust. However, transparency is to be but-
tressed by initial understanding of the regulators mandate. Transparency and open communication will ensure
that regulated entities and other stakeholders have access to timely and accurate information about the Author-
ity’s activities. Public discontent with MERA’s decisions emanates from lack of understanding of MERA’s role and
mandate and limited appreciation of the regulator’s procedures and processes. This calls for MERA to create
widespread understanding of its activities and generate support for its decisions. This can be achieved through
enhanced dissemination of information, visibility, and improved stakeholder and public engagement. Measuring
public awareness and confidence in MERA will help the Authority identify information gaps, formulate and imple-
ment more effective stakeholder and public awareness initiatives.

The strategic objective ‘increase awareness about MERA’s role and mandate’ will be pursued through the fol-
lowing:
• Enhanced stakeholder sensitization on MERA regulatory oversight role
• Creation of partnerships and networks for disseminating information
• Operationalization of the Client Service Charter by re-engineering processes, training staff.
• Acceleration of implementation of MERA Corporate Social Responsibility
• Development of Communications and stakeholder engagement strategy
• Conducting Customer Perception Surveys on a regular basis.

4.2.4.2 Strategic objective 4.2: Improve complaints handling and customers’ understanding of their rights
and responsibilities

MERA is mandated to resolve or mediate consumer complaints against licensees in the energy sector.
Delayed complaint resolution erodes consumer trust in the regulator. This exacerbates the culture of
forbearance which prevents consumers from seeking MERA’s complaints resolution services and in
turn can encourage poor service and complacency from the licensees. Improved complaints handling,
therefore, does not only seek to address challenges facing individual customers/consumers but also
encourages licensee improved service delivery.

Inadequate consumer awareness on their rights and obligations contributes towards low levels of
complaints lodged with the licensees themselves and the regulator. Consumer education and aware-
ness programmes will empower consumers/customers to demand quality service from licenses as well as
stimulate consumer compliance with their obligations. Specifically, strategies to be implemented for
improved complaints handling and consumers’ understanding of their rights and obligations include:
• Implement complaints handling mechanisms and protection of energy consumers in order to meet
their needs.
• Develop and maintain internal processes and services that promote high standards of ethics
• Conduct sensitization meetings with consumers & disseminate messages through traditional and
new media channels
• Conduct Knowledge Attitude and Practices (KAP) Survey
• Explore opportunities to engage more effectively with the public and enhance public participation in
MERA proceedings through its online applications and website.
• Focus on deploying more flexible, multimodal mechanisms to enhance communication with the
public and other stakeholders

38 37
STRATEGIC PLAN 2020 -2024
4.2.4.3 Strategic objective 4.3: Improve corporate governance systems

Corporate governance in energy regulation is an integral part of building a Public Trust. This strategic
objective can be achieved by the following strategies:
1. Operationalize the works of the Institutional Integrity Committee (IIC)
2. Implementation of the Fraud and Corruption Prevention Policy
3. Operationalization of Tip Off Anonymous reporting and the Fraud Management Committee
4. Develop and Operationalize a Risk Management Policy.
5. Establish Risk Management Section
6. Provide Assurance to the Board of the Effectiveness, Risk Management and Internal

4.3 Strategic Plan Implementation Matrix 2020-2024

STRATEGIC PILLAR 1: POSITIVE CONTRIBUTION TO AN ENERGY SECURE NATION
STRATEGIC STRATEGIES KEY PERFORMANCE TARGET ACTIVITY
OBJECTIVE INDICATOR CHAMPION
BASELINE STRETCH

1. Increased Regular review of Liquid Fuels and Gas Act Ministry Act reviewed DLABS
compliance with laws, regulations and and Energy notified and
Energy Laws and standards and Regulation Act process has
regulations, penalties for reviewed and in use started
detection and non-compliance
Updated Energy Energy Electricity DLABS
deterrence of
efficiency guidelines, Regulation Reliability
market
Electricity Reliability Act in place Standards
manipulation to
Standards and Metering and Metering
create a level
Standards developed and Standards
playing field
in use approved, ga-
zetted and in
use by 2020

Develop Energy Laws Availability of Renewable National Board DLABS

and associated Energy Act and Energy Policy approved
Energy
Regulations and Regulations; in place
Efficiency
Standards.
guidelines and
in use
Energy Strategy % compliance with laws, National Enacted DLABS
developed regulations and Energy Renewable
standards Policy in Energy Act
place and Reg-
ulation in
operation.

Approved DLABS
Renewable
Energy
Regulations

Availability of an IPP IPP Enacted DERE

Procurement Service Procurement PPP Act that
Charter ; framework includes IPP
developed procurement

Board
Approved IPP
Procurement
Charter in use
STRATEGIC PLAN 2020 -2024 39
 Energy Strategy % compliance with laws, National Enacted
DLABS
developed regulations and stan- Energy Policy Renewable
dards Energy Act
in place
and
Regulation in
operation.

Approved DLABS
Renewable
Energy
Regulations

Availability of an IPP IPP Enacted DERE

Procurement Service Procurement PPP Act that
Charter framework includes IPP
developed procurement

Board
Approved IPP
Procurement
Charter in
use

Availability of Electricity Grid Code Electricity DLABS

Regulations and Codes; operational Regulation
approved,
gazetted and
in use.

Board
approved
Electricity
codes in use
Rural Electrification Act Amended Reviewed DLABS
and Incorporating Electricity Electricity
Mini-Grid Framework Act 2010 By-Laws
approved by
Approved the Board
Mini- grid gazetted and
framework in use.

Rural Enactment
Electrification of reviewed
Act 2004 in Rural
place Electrification
Act in use

Regular review of % of prosecutions against 90% 100% DLABS

laws, regulations and non-complying regulated
standards and entities Updated laws,
penalties for regulations, standards and
non-compliance penalties in use.
Stricter enforcement Stricter enforcement
of laws, regulations of laws, regulations
and standards and standards

Develop LFG Regula- Develop LFG Regula- % of regulated 84%

% of regulated entities 84%
entities comply-
tions tions complying ing

40 STRATEGIC PLAN 2020 -2024

 Greater use of % of in- transit fuel >0.5 ≤0.5 DFG
Information technology losses within
fuel level sensing and in acceptable limits
transit tracking of fuel
supplies

Promote greater use of % of the energy mix 7 12 DERE

Alternative Sources of from alternative
Energy Sources of Renewable
Energy

2. Promote the Stricter enforcement % of regulated entities 70% 90% DFG - Fuels
development of safe, of laws, regulations complying; DERE –
reliable and secure and standards Electricity
energy infrastructure
along the supply chain
that serves the public Enforce compliance to Number of compliance 2 4 DFG
consumer interest standards along the assessments done per
liquid fuels and gas year.
supply chain through
Continuous review of % of compliant 50 80 DFG
the Liquid fuel and gas regulated entities
operations.
Number of standards 2 5 DFG
developed to guide
operations along the
supply chain

Ensure availability of % of licensees 10% 50% DFG

adequate complying to storage
infrastructure to capacity requirements.
achieve security of
supply in the country Increased fuel in days
30 DAYS 60 DAYS DER
(e.g. Storage facilities cover storage capacity
in line with
regulations.

transport facilities, % cover of rural service 20% 30% DFG

retail service stations) stations developed in
the country
% uptake / Consumption
of alternative fuel
1 3 DFG
sources i.e. LPG and
Diversify energy biofuels
products to ensure
optimum product mix
Number of regulato- 1 5 DFG
ry frameworks and
standards developed
for alternative energy
sources.

STRATEGIC PLAN 2020 -2024 41

 Diversify product Number of alternative 1 3 DFG
supply sources to routes and supply ports
ensure sustainability of
supply through
Road freight rates 3 5 DER
diversified routes and
reviewed per annum
transportation mix

Number of reported 7 3 DFG

Ensure efficient accidents and incidents
operations along the along the fuel supply
supply chain to reduce chain.
the landed cost of fuel
% of reduced in transit 0.5% 0.3% DER
losses

Enhanced compliance Number of quality 2 4 DFG

to quality standards monitoring compliance
along the supply chain assessments conducted

% of compliant samples 60% 80% DFG

to quality standards

3. Promote the Increase use of

development of safe, Alternative Sources of
reliable and secure Energy
energy infrastructure
that serves the public % increase in Public 5% 90% CPRM
consumer interest awareness carried out
on efficacy of renewable
energy technologies;

Continued technical % of energy players 25% 80% DERE

audits and compliance complying with the
monitoring on energy Grid Code;
players

Improved efficiency in Number of meetings 4 4 DERE

Energy undertakings regarding Grid Code
and Market Rules
Administration
Investigate accident % of Investigations of 100% DERE
100%
occurrence accidents occurrence
in the energy supply
industry.

Develop and Availability of bulk 0 1 DER

implement Bulk Procurement System
Procurement System regulations and
regulations and guidelines developed
guidelines and implemented

42 STRATEGIC PLAN 2020 -2024

4. Implement a Regulatory Audits on Number of audits con- 2 4 DER
predictable and Energy Supply ducted
reliable pricing industry.
mechanism that
promotes Implementation of time- % of satisfied stake- 50% 80% DER
transparency in table for price approval holders
decision making. Review of
energy prices in
accordance with Energy Number of price
Pricing methodologies 12 12 DER
reviews

STRATEGIC PILLAR NUMBER 2: FINANCIAL SUSTAINABILITY

1. To increase Review timelines for Reduction of Number 45 days 30 days DOF

collection rates by the remittance of fees of Levy collection days
strict enforcement and levies
of compliance of the
law regarding levy
remittances and Automate licensing % of licensing and 0% 100% DOF
improve efficiency and billing functions billing functions
in levy collection automated
Enhance regulatory
audit of the energy Number of Regulatory 1 per month 1 per month DOF
supply industry audits

Regular review of Reviewed energy fees 2008 2020 DOF

Energy fees and in use
charges
Legislation changed to 2008 2020 DOF
incorporate new rates of
fees and charges

2. Increase revenue Finalize construction of Construction of the 45% 100% DOF

generation base by MERA office complex MERA office complex
growing new and by 2020. completed.
additional income
generation streams Designs and construct % construction 100% DOF
the Regional Office
South by 2023
Investments of surplus % of surplus funds 60% 100% DOF
funds invested

Develop annual Business plans in place 1 1 DOF

3. Promote efficiency business plans
and effectiveness
in financial Produce monthly man-
Monthly 12 12 DOF
resource utilization agement accounts / re-
management reports
and adherence to ports comparing actual
budget plans performance against
plans
Review and develop
Internal controls in 100% 100% DOF
internal controls in
place
cash management

STRATEGIC PLAN 2020 -2024 43

 STRATEGIC PILLAR NUMBER 3: EFFICIENT AND EFFECTIVE SERVICE DELIVERY

STRATEGIC STRATEGIES KEY PERFORMANCE TARGET

ACTIVITY
OBJECTIVE INDICATOR TARGET STRETCH CHAMPION

1. Strengthen Implement % of vacant 5% 0% HRAM

institutional capacity competitive positions filled
through staff recruitment, recruitment process
capacity development % of Staff Retention 95% 99% HRAM
and staff motivation to
meet evolving market Number of Staff 40 50 HRAM
challenges. given annual
meritorious awards
in excellent level of
performance.

Regular review of Number of policies 6 10 HRAM

conditions of service developed and/or
and policies reviewed

Continuous upgrade of % of Staff attending 100%

60% HRAM
staff skills to match the
short- and long-term
changing competence
requirements of MERA training

Implement the Revised PMS be Current Revised HRAM

Performance implemented in the PMS PMS
Management second year of
System (PMS) Strategic Plan that will
enhance overall staff
productivity at the end
of strategic plan period
through PMS, Learning
and Development,
Resource Availability,
Organizational
Culture among others.

Implement the Annual PMS 85% 100% HRAM

Strategic Plan implemented in the
through the final month of
Individual Financial Year in July
Performance leading to % increase
in staff productivity
Agreement;

47

44 STRATEGIC PLAN 2020 -2024

 Implement the % of Individual 0 24 HRAM
Functional Review Employee
Work-plans linked to
Strategic Plan.

Number of new
positions filled

2. Implement and deploy Implement and % increase in ICT 20% 80% ICT Manager
modern Information Review Management infrastructure and
Communication Information Systems systems support
technologies to meet services provided
market demands
% increase in on-the- 30% 100% ICT Manager
job ICT training
provided

% uptime of all 10% 98% ICT Manager

computers and related

hardware
Implement and % of Modern and up 40% 95% ICT Manager
Review data, and to date ICT systems
information security and services
measures
Enhance use of Security of network 80% 100% ICT Manager
Information technology and internet systems
in service delivery

Manage MERA ICT Operational, updated 90% 100% ICT Manager

related Projects, and dynamic MERA
corporate website and website`
other online services

Implement Business Availability of critical o 100% ICT Manager

Continuity and systems and data
Disaster recovery through online and
mechanisms offline technologies
such as Work Folders,
One Drive achieved

Offsite Disaster recov- o 100% ICT Manager

ery site in place and
functional

3. Improve the work Construct Office % of staff 60% 100% HRAM

environment to Complex; accommodated in
in crease efficiency modern offices;
and staff motivation
Provide secure, % of staff provided 70% 100% HRAM
convenient and safer with modern ICT
working environ- gadgets and office
ment; furniture;

STRATEGIC PLAN 2020 -2024 45

 Enhance use of HR % of staff accessing bio 100% 100% HRAM
Information System. data information and
employee self-service
(ESS)

Promote employee Number of labour 1 2 HRAM

relations related workshops
for staff union
members conducted
annually;

Implement the Number of health 3 5 HRAM

Workplace Health and wellness
and Wellness programs in place.
Programs

% of Workshops 100% 100%

under MBCA attended

4. Improve User (internal Minimize product/ % of on time delivery 5% 90% PO

customer) satisfaction to service delivery lead
increase productivity times.

Right first-time full % of full deliveries 5% 98% PO

deliveries

Acceptable quality % of rejected items 5% 100% PO

goods and services
delivered.

Compliance with % of budgeted items 70% 100% PO

procurement regulations procured.

Develop and review Availability of Nil 1 PO

internal procurement internal procurement
policy and policy and guidelines.
guidelines.

46 STRATEGIC PLAN 2020 -2024

STRATEGIC PILLAR NUMBER 4: PUBLIC TRUST.

STRATEGIC PILLAR 1: POSITIVE CONTRIBUTION TO AN ENERGY SECURE NATION

STRATEGIC STRATEGIES KEY PERFORMANCE TARGET ACTIVITY

OBJECTIVE INDICATOR BASELINE STRETCH CHAMPION

1. Increase Enhance stakeholder % of stakeholders who 50% 70% CPRM

awareness about sensitization on MERA can correctly state
MERA’s role and regulatory oversight MERA’s role & mandate
mandate role

Create partnerships % of Functional 35% 90% CPRM

and networks for Partnerships developed
disseminating
information

% of clients satisfied 70% 90% CPRM

Operationalize the
with MERA services
Client Service
Charter by % of stakeholders who
68% 80% CPRM
re-engineering perceive MERA to be
processes and accountable, transparent
training staff. and ethical in business
undertakings

Implement MERA % of planned Corporate 30% 80% CPRM

Corporate Social Social Responsibility
Responsibility programmes successfully
implemented

Conduct Customer Number of Customer 1 2 CPRM

Perception Survey Perception service
delivery report

2. Improve Implement com- % of consumer 70% 90% CPRM

com plaints plaints handling complaints resolved
handling and mechanisms and within the stipulated
consumers’ protection of energy time frame
un derstanding consumers in order to
of their rights meet their needs.
and
responsibilities Conduct sensitization % of stakeholders aware 50% 70% CPRM
meetings with of their rights and
consumers & responsibilities
disseminate messages
through
traditional and new
media channels

STRATEGIC PLAN 2020 -2024 47

 3. Improve Corporate Operationalize the Operationalize the works 5 5 ICC Chair
governance systems works of the of the Institutional
Institutional Integrity Integrity Committee (IIC)
Committee (IIC)

Implementation of the No of annual programs 3 5 IAM

Fraud and Corruption to Publicize the policy
Prevention Policy through radio and
electronic media
Operationalization of % of number of reported 70% 100% IAM
Tip Off Anonymous fraud cases fully
reporting and the investigated
Fraud Management
Committee
Develop and Risk Management Policy 0 1 IAM
operationalize a Risk Developed and
Management Policy. operationalized

Establish Risk No. of staff employed 0 2 CEO

Management Section in the risk management
section
Provide assurance No of annual Internal 1 1 IAM
to the Board of the Audit Reports to the Board
effectiveness of gov- (quarterly)
ernance, risk manage-
ment and internal % of Internal Audit 60% 90% IAM
Recommendations
accepted by the Board

4.4 Monitoring and Evaluation Methodology

The Monitoring and Evaluation of the MERA Strategic Plan will follow the Implementation Matrix outlined
above.
i. Identification of MERA Strategic Pillars. These are the outcomes which will ultimately lead to impacts
for which MERA wants to be held accountable for their achievement.

ii. Identification of MERA Strategic Objectives (SO’s) for each Strategic Pillar. These are the outputs
which when collectively achieved, will contribute to the achievement will show the progress MERA is
making towards achieving Strategic Objectives and ultimately Strategic Pillars.

iii. Identification of Key Performance Indicators (KPI’s) for each Strategic Objective.

iv. Identification of Baseline data. This data shows the prevailing situation prior to the implementation
of the MERA 2020/2024 Strategic Plan. In this case, the base year is 2019. Baseline data is useful
for developing targets. This is because a target is made up of a baseline indicator plus the desired
level of improvement. This makes it easier for MERA to assess if an improvement has taken place
and by how much it is compared to the baseline or original situation. When targets have been
formulated in this manner, it becomes easier to make comparisons

v. Determining the frequency of Monitoring and Evaluation of MERA interventions. This maybe
quarterly, annually or any other period deemed suitable for MERA.

vi. Identification of Data Sources. These are sources where MERA will get information needed to mea

48 STRATEGIC PLAN 2020 -2024

sure the Key Performance Indicators. Such sources include surveys, programme reports.

The MERA Monitoring and Evaluation framework is paradigm shift from a project and programmatic to
Strategic Pillars / Outcome based. This framework is Results Based and focuses on the achievement of
higher-level objectives and outcomes rather than lower level ones of inputs and activities.

4.4.1 Monitoring
Monitoring is a continuous process of systematically collecting data on a set of specified indicators. The
main objective is to measure the progress programme interventions are making in achieving Strategic Objec-
tives and ultimately the Strategic Pillars in the MERA Strategic Plan. Monitoring focusses on the efficiency of
programme implementation.

4.4.2 Evaluation
Evaluation, on the other hand, is a systematic and objective assessment of an on-going, completed
programme or policy design in terms of achievement of the desired results. Evaluation focuses on the effec-
tiveness of programme implementation.

The Table below gives a summary of Monitoring and Evaluation:

Table 4.1 Monitoring and Evaluation: What and Why.

S/N ASPECT OF MONITORING WHEN CONDUCTED OBJECTIVES

AND EVALUATION

1. MONITORING • Continuously and • Continuously and

regularly during regularly during
implementation of implementation of the
the MERA Strategic Plan MERA Strategic Plan
2020/2024 2020/2024

2. EVALUATION • Conducted at different times • To check the

during the implementation relevancy, efficiency,
of the MERA 5-year effectiveness impact
Strategic Plan. i.e. and sustainability
i. Before programme • To improve the quality
interven tion (ex-ante) of programme
ii. During implementation of interventions by taking
programme interventions corrective action, and
iii.Mid way during • To accumulate lessons
implementation of to inform future
programme interventions planning within MERA.
iv. At the end of the
implementation of the
2020/2024 MERA Strategic
Plan, and
v. Afterwards to determine
the sustainability of impacts
of achieving the Strategic
Pillars (ex post).

STRATEGIC PLAN 2020 -2024 49

4.5 Critical Success Factors
The successful implementation of this Strategic Plan will depend on the following factors:

4.5.1 Leadership and Organizational Commitment

The following critical success factors will be required:
• Commitment and focus
• Flexibility to accommodate and manage change
• Value for money service delivery

4.5.2 Stakeholder and Employee Engagement

The following critical success factors will be required:
• MERA Senior Management
• MERA Staff who should be committed and motivated
• Licensees
• Suppliers
• Investors

4.5.3 Innovation
The following critical success factors will be required:
• Enhanced capacity for research and development
• New and demand driven energy products

50 STRATEGIC PLAN 2020 -2024

 FINANCING AND RESOURCE
MOBILIZATION FRAMEWORK

• Financing and Resource Mobilization

Framework

• Financial Performance Review

• Projected Income and Expenditure

CHAPTER
• Projected Funding Mix
(Sources of Income)

FIVE • Estimated Cost for implementing

the Plan

• Financial Sustainability.

• Investment Strategy

• Risk Management

STRATEGIC PLAN 2020 -2024 51

 5.0 FINANCING AND RESOURCE MOBILIZATION FRAMEWORK

5.1 Financial Performance Review

MERA financial performance was satisfactory during the strategic plan period 2014 to 2018 constantly
achieving surpluses as can be seen in summary of Income and Expenditure presented in Table 1 below.

Table 1: Income and Expenditure Summary 2014 to 2018

S/N DETAILS 2014 2015 2016 2017 2018 Period

MK’000 MK’000 MK’000 MK’000 MK’000 Total

1 Total 1,817,188 2,766,460 4,259,220 5,326,332 6,802,266 20,971,466

Income

2 Total (1,074,043) (1,393,112) (2,328,227) (3,110,006) (3,637,873) (11,543,261)

Expendi-
ture

3 Surplus 743,145 1,373,348 1,930,993 2,216,326 3,164,393 9,428,205

The total income grew from MK1.82 billion to MK6.80 billion during the period 2014 to 2018. MERA’s major
source of financing the Strategic plan for the period 2014 to 2018 was fuel levy which represented about 72%
of the total income. In July 2015, there was a shift from absolute figure to ad valorem computation of fuel
levy. This led to a change in computing fuel levy on percentage basis which contributed to the increase in the
levy. Electricity and Gas levies represented 17% of total income. License fees and other income contributed
about 2% and 9% respectively during the period.

5.2 Projected Income and Expenditure

MERA projects to have a positive performance during the plan period 2020 to 2024. The forecasted
recurrent expenditure is planned to grow by an average of 10% annually. Table 2 below presents the
projected Income and Expenditure summary for the plan period 2020 to 2024.

52 53
STRATEGIC PLAN 2020 -2024
 Table 2: Projected Income and Expenditure the period 2020 to 2024

ITEM 2020 2021 2022 2023 2024 PLAN

MK’000 MK’000 MK’000 MK’000 MK’000 PERIOD
Income 8,256,375 8,806,737 5,913,198 10,287,508 11,110,505 47,974,327

Recurrent
expenditure (5,929,645) (6,522,609) (7,174,870) (7,892,357) (8,681,593) (36,201,074)

Capital (1,500,000) (1,100,000) (2,200,000) (2,300,000) (2,400,000) (9,700,000)

expenditure

Surplus 826,730 1,184,126 138,328 95,151 28,916 2,273,253

5.3 Projected Funding Mix (Sources of Income)

MERA has permanent dedicated levies to finance the various operations in accordance with the law. It is
the levies that provide the bulk of the financial resources required for MERA’s operations. The reliance on
levies is expected to continue during the plan period. Table 3 below present the main sources of financing
for the plan period and the projected income.

Table 3: Projected Financing (Income Sources) Mix for the period 2020 to 2024

S/N Pillar 2020 2021 2022 2023 2024 Total for

MK’000 MK’000 MK’000 MK’000 MK’000 Plan Period

1 Fuel 6,152,400 6,644,592 7,750,252 8,370,272 36,093,675

7,176,159
Levies

2 Electricity 1,667,300 1,834,030 2,014,450 8,532,227

1,500,720 1,515,727
and Gas
Levies

3 License
63,255 66,418 69,739 73,226 76,887 349,525
Fees
4 Other
Income 540,000 580,000 600,000 630,000 648,900 2,998,900
(Finance
Income/
Interests/
Rent etc.)

Total 8,256,375 8,806,737 9,513,198 10,287,508 11,110,509 47,974,327

54
STRATEGIC PLAN 2020 -2024 53
 Some Key Assumptions for Income Projections
The income projected are based on the following key assumptions: -
• Fuel levies are assumed to grow by 8%. This has been the trend in the past
• Electricity levies are assumed to grow by 10% in line with the planned tariff increase as well as new
connections
• License fees are assumed to grow by 5% in line with the past trends
• Other income is assumed to grow in line with projected surplus cash flows and current investment
return levels.

5.4 Estimated Cost for implementing the Plan

About MK36.2 billion will be required to implement the Strategic plan 2020 to 2024. Table below presents
the summary of the projected total expenditure for implementing each of the four strategic pillars.

Table 2: Projected Income and Expenditure the period 2020 to 2024

S/N Strategic 2020 2021 2022 2023 2024 Total for

Pillar Plan Period
MK’000 MK’000 MK’000 MK’000 MK’000 MK’000

1 Positive con- 2,673,142 2,614,806 3,146,287 3,585,801 4,073,578 16,093,614

tribution to an
energy secure
nation

2 Financial 1,637,150 1,964,580 2,025,300 2,165,046 2,316,599 10,108,675

sustainability

3 Efficient and 1,400,191 1,680,229 1,732,160 1,851,680 1,981,298 8,645,558

effective ser-
vice delivery

4 Public trust 219,162 262,994 271,123 289,830 310,118 1,353,227

Total 5,929,645 6,522,609 7,174,870 7,892,357 8,681,593 36,201,074

5.5 Financial Sustainability.

MERA’s income is mostly dependent on the legislated levies. MERA will therefore seek to strengthen financial
sustainability through the following measures: -
• Increase collection rates by strict enforcement of compliance of the law regarding levy remittances
• Increase revenue generation base by growing new and additional income generation streams
• Promote efficiency and effectiveness in financial resource utilization and adherence to budget plans
• Implement effective risk management measures
• Promoting an ethical culture, good governance, transparency and accountability

54 55
STRATEGIC PLAN 2020 -2024
5.6 Investment Strategy
The economic environment in Malawi presents investment opportunities that could be explored by MERA
in the long term as well as medium/ short term. MERA projects to have average annual cash and cash
equivalents of more than MK2.3 billion during the plan period. Some of these funds will be held in trust for
various government agencies and MERA is expected to remit to the relevant agencies within 7 days. Some
funds are managed by MERA on behalf of agencies. Given the nature of the operations and in line with
MERA’s Investment policy, MERA’s investment strategy will be biased towards the short term near cash fi-
nancial instruments. In this regard MERA will continue to invest in term deposits with a diversified portfolio
of financial institutions.

On the long-term investments, MERA will continue with the construction of MERA office complex at the
headquarters in Lilongwe. Further investment in office complexes will be made for regional offices which
will have some space for renting.

5.7 Risk Management

This section focuses on key risks at the strategic level. These risks will be regularly monitored and reported
on during the Board meetings. It is noted that since new risks may emerge, management will keep assess-
ing the environment in which MERA operates and update the risk register and bring to the attention of the
Board any new strategic risks that emerge during the implementation of the plan.

STRATEGIC PLAN 2020 -2024 55

 RISK MANAGEMENT MATRIX

S/N RISK FACTORS LIKELIHOOD IMPACT SEVERITY MITIGATION

1 Environmental risks 3 4 12 • Encourage afforestation

• Unfavourable climatic and avoid further
and weather conditions deforestation
leading to erratic rainfall
hence low electricity • Encourage use of
generation and supply. alternative fuel to wood
This would impact on
MERA revenues/ levies • Support research in new
from ESCOM energy technologies
• Increased pressure on
the environment due to
rapid population growth
rates. This would lead to
accelerated deforestation
as people search for wood
fuel as a source of energy.
Yet MERA is promoting the
use of clean energy such
as gas for cooking.

2 Planning and • Enforce compliance to the remit-

3 5 15 tance of levies by all
Implementation Risks regulated entities
• Carry out effective and
• Compromised prod independent regulatory audits
uct / service quality due • Awareness campaign about the
to noncompliance with fraud and Corruption Policy and
operational standards encourage people to report any
in the supply chain. This malpractice
could be partly due to old • Strengthen Risk
Management processes by
infrastructure
establishing a Risk management
Section

3 Budgetary and 4 4 16
Financial Risks
• Energy supplies falling
short of industry and
domestic requirements
due to the country’s poor
energy mix
• Delays in receipt of
fuel levy
• Major fuel importing
enterprises not remitting
the levies within the
stipulated number of days.
• Failure to ensure total
collection due to defaults
or discrepancies.
• Fraud and corruption
leading to ineffective
assets and other resource
utilization and financial
loss

56 57
STRATEGIC PLAN 2020 -2024
4 Political interference • Strengthen Legal
• In energy price setting Instruments that ensure
• Recruitment of senior MERA is independent
5 5 25
• Continue to lobby for the
members of staff
• Red tape may scare appointment of
investors in the energy independent and
sector delaying professional non-political
financing of projects Board members

• Installing anti-virus
5 Business Continuity 3 5 15
Loss of Data and software and setting up
Information due to fire, firewalls and keeping
Water, Cyber Attacks, Theft, them updated
Crashing of • Have secure login system
Machines, Sabotage in place to protect
Failure of Operational passwords
Systems Succession • Have a reliable offsite
Planning backup system

6 Technological Risks 4 4 16 • raining and capacity

- Absorption of building
available technology • Adopt use of user-
- Lack of integration friendly technologies and
- Technology systems
obsolescence due to • Regular replacement of
rapid changes old infrastructure
- Lack of capacity to use
the technology by staff

7
Governance and
4 5 20 • Operationalize risk
Reputational Risks management policy.
• Non-compliance with
• Strengthen the capacity
regulations, laws, and
of internal audit division
other mandatory
• Effective Internal Audits
MERA obligations.
• Effective internal controls
• Application of MERA
• Encourage institutional in
Fund resources
tegrity committee activities.
towards non qualifying
programmes
• Fraud, corruption,
unethical behaviour
and misconduct or
major irregularity of
staff.
• Perception of poor
governance and
accountability leading
to reputational risk
• Failure to enforce the
laws to the regulated
entities
• Management override
of internal controls

58
STRATEGIC PLAN 2020 -2024 57
 • Enhance Conditions of Service
8 Human Resources Risks 3 3 9
review, salary restructure, and
• Employee Motivation
improve working environment.
• Inadequate institutional
• Invest in staff development
and staff capacity
programs.
(complement and
• Align strategic training needs
competence) to deliver on
with training plans.
the expected services
• Promote Soft Skill training.
• Recruitment of staff
• Promote Institutional Integrity
without integrity
Committee activities for staff.
• Review organizational
functionalities and reporting
lines.
• Promote regional skill
development with regional
energy regulators
• Lobby for development of
long-term training
development partners.

9 Legal and Compliance 4 5 20 • Enforce compliance with

Risks procurement and other laws by
imposing stern punishment for
• Ineffective procurement any noncompliance and
processes due to miss-procurements
noncompliance with • Encourage and instill
the procurement laws compliance culture within the
and guidelines. This may hierarchy by setting the
result in financial loss compliance tone at the top
and increased
reputational risk
• Unsatisfactory
regulatory environment

58 59
STRATEGIC PLAN 2020 -2024
 The Chief Executive Officer
Malawi Energy Regulatory Authority
2nd Floor Development House, City Centre
Private Bag B-496
LILONGWE 3
MALAWI
Phone: +265 (0) 1 774 103/135/+265 (0) 1 775 810
Fax: +265 (0) 1 772 666
Email: [email protected]

60
STRATEGIC PLAN 2020 -2024 59
www.meramalawi.mw [email protected] +265 (0) 1 774 103/135/

STRATEGIC PLAN 2020 -2024