Abstract

Electricity is a good not yet provided in most parts of rural Malawi because ESCOM (the sole provider) argues that it cannot profitably extend its supply because of high cost of installing transformers and the weak potential demand. As a result, the main sources of energy for cooking among rural Malawian households are firewood and charcoal. Lack of alternative sources of energy such as electricity is having an environmental consequence as Malawi’s forests are being depleted at an alarming rate. The study uses the contingent valuation method (CVM) to assess willingness to pay for electricity connections among small scale business owners in rural trading centers of Malawi. A Tobit model is estimated and results show that willingness to pay increases with household’s annual income, expenditure on alternative sources of energy, operating a retail type of business but decreases with age of the household head. Elasticities obtained indicate that willingness to pay is inelastic with respect to income, expenditure on alternative sources of income as well as age of the household head. The significance of income in determining willingness to pay would entail that policies that will target improving income levels for the rural households would be essential if rural electrification is to be sustainable. Similarly, if rural electrification is to address environmental concerns of deforestation, complementary policies have to be pursued such as user fees or charges to deter people from overexploiting forestry resources.

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School	: School of Law, Economics and Government
Issued Date	: 2006

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