US - Africa’s Saving Grace?

Africa’s growth means global growth. The US is wisely tapping in to this potential.
Published: Wed 10 Jul 2013

Africa needs power. The continent is home to almost 17% of the world’s population yet it produces only 4% of the world’s generated power. Over 66% of Sub-Saharan Africans do not have electricity despite living in a region where the economy is growing rapidly. The continent plays host to six of the 10 fastest-growing countries in the world. Experts say that Africa’s GDP can grow by 10% if power generation increases by 16%. There are even predictions that the average African economy will eventually outpace China. It is therefore essential that the electric infrastructures in African countries support this growth. 

The US has recognized this growth potential and has already shown interest by investing millions.  A joint US government and private sector initiative will see a total investment of US$16-b (this includes contributions of US$7-b from the state and US$9-b from the private sector for clean energy projects). This recent commitment will bring power to 20 million households in six sub-Saharan African countries including Kenya, Tanzania, Ethiopia, Ghana, Nigeria and Liberia. The funds, which will be paid out over a 5 year period, will go a long way in assisting these African countries that have been struggling to raise enough finance to develop power generation projects. 

Last year US President Barak Obama announced  the importance of tapping in to this potential. He explained that his “Power Africa” initiative-a continent-wide plan to provide energy for all- has been designed to “plug Africa into the grid of the global economy.”

Although Africa has abundant clean energy resources, there is often a lack of support to cover project development costs. It is for this reason that the US State Department OPIC and the US Trade and Development Agency developed the U.S.-Africa Clean Energy Finance Initiative (US-ACEF). The initiative, which has already contributed US$20-m to help African countries complete power projects, assists with: 

  • Project preparation assistance
  • Feasibility studies
  • Pilot projects
  • Technical assistance
  • Study tours
  • Reverse trade missions                        

The US Agency for International Development (USAid) will also be providing US$285-m in technical assistance, grants and risk mitigation to advance private sector energy transactions and help governments adopt and implement policies, regulations and reforms required to attract private sector investment in the energy and power sectors.

In an exclusive interview with Jason Nagy, Africa Business Development manager and US Trade and Development manager of Sub-Saharan Africa, he explains that the US Trade and Development agency is always on the look-out for partnerships and opportunities for development in Africa. He says the agency, which is balanced in terms of trade and development, aims to assist in connecting US and African businesses and investors. This obviously has benefits for both continents. He explains that the Agency wants to be innovative, approachable at all levels, trusted and localized in order to understand where opportunities lie. Nagy also points out that projects will be assessed holistically - aspects such as training and telecommunications also need to be developed in order to make the project work.

The US is no stranger to Africa, explains Paul Hinks-CEO of Symbion Power LLC, who took time to talk with Engerati at the AUW2013. He says that the US believes that it can make a huge difference in developing Africa’s energy sector and is currently designing a developmental strategy. Hinks points out that Africa is not keeping up with “normal” growth, let alone elevated growth. African countries will need to up its capacity before it will see real growth in all sectors. Africa will fall behind if transactions and projects are not followed through, says Hinks. He adds that while power interconnection between African countries is an exciting prospect, each country must first develop its own capacity.

Hinks concludes on a positive note: “Symbion is highly invested in Africa. I have a great vote of confidence in Africa-we are at a turning point now.”

According to the International Energy Agency, over US$300-b will be invested in Africa between now and 2030 to ensure universal electricity access.

Engerati Analysis 

If Africa is thriving, it can only benefit global markets.  Only when Africa is part of the global system, will the world economy reach its full potential.  For projects to really succeed, investor relationships must be symbiotic and sustainable.

Sources                                      

ESI-Africa-Jason Nagy [pdf]

OPIC- Secretary Hillary Clinton and OPIC’s Elizabeth Littlefield Announce the U.S.-Africa Clean Energy Finance Initiative

Telegraph-Handing Africa the power to charge ahead

The East African-$16bn US fund targets energy projects