Africa: Power Africa Draws New Investment to Region
20 January 2014
United States Department of State (Washington, DC)
The U.S. initiative that aims to double access to electricity in sub-Saharan Africa has drawn new investments to the fast-growing region, according to representatives of three key agencies that support the project.
"We are seeing developers investing for the first time in power in emerging markets. We're seeing developers we've never seen before. We are also seeing with the private sector in Africa an opportunity to partner with American companies," said Mimi Alemayehou of the U.S. Overseas Private Investment Corporation (OPIC). OPIC mobilizes private capital to help solve critical challenges in developing countries.
Alemayehou, Andrew Herscowitz of the U.S. Agency for International Development (USAID) and Kamran Khan of the Millennium Challenge Corporation (MCC) provided an update on Power Africa on January 15 at the Center for Global Development, a Washington think tank.
President Obama announced the Power Africa initiative in June 2013. Through a public-private approach, Power Africa wants to increase generation capacity by about 10,000 megawatts in six partner countries with the objective of increasing access to electricity for 20 million people, improving reliability and reducing costs for African businesses.
OPIC has committed $1.5 billion to Power Africa for its first five years, Alemayehou said, and MCC has committed around $1 billion to the initiative, according to Khan. USAID will provide $285 million in technical assistance, grants and risk mitigation to assist private-sector energy transactions and help governments adopt policy and regulatory reforms to attract private investment.
The partner countries -- Ethiopia, Ghana, Kenya, Liberia, Nigeria and Tanzania -- and others in Africa have identified energy insecurity as a binding constraint to economic growth, said Ben Leo of the Center for Global Development. Alemayehou said that with a combined population of 800 million people, the countries of sub-Saharan Africa use the same power capacity as does Spain, with a population of 45 million.
Power Africa is intended to bridge the gap between Africa's power shortage and its economic potential by working with U.S., international and African businesses and government s to develop newly discovered resources responsibly, increase power generation and transmission capabilities, and expand the reach of minigrid and off-grid systems.
One example is a partnership in which U.S. and Icelandic businesses have joined to build 1,000 megawatts of geothermal generation capacity, Alemayehou said.
She also said that investments in Africa's power could add as much as two percentage points to the region's already strong growth rate and create jobs. The World Bank reports that sub-Saharan Africa's combined economies are expected to grow 5.3 percent in 2014.
Herscowitz, who is based in Power Africa's office in Nairobi, credits the initial success of the project with having specialists in the region that can help partners put together deals and strong interagency collaboration. He said Power Africa is building relationships with the World Bank, the European Union and the African Development Bank.
Alemayehou said Power Africa is encouraging countries to continue reforming their power sectors. "They want to be part of Power Africa," she said.