Bringing Power to Africa, Literally

24 April 2014

During President Obama's trip to Africa in 2013, he made four major commitments. Some in his administration have referred to the commitment as the four points of a diamond, each addressing a critical need in African development, while at the same time strengthening US relationships with Africa through the private sector, civil society and government-to-government. The four points are infrastructure development, regional integration, leadership development and governance.

With each point, the administration chose one particular priority. In the area of infrastructure, it focused on the development of electrical power. It was a wise choice. No country in Africa is meeting its current power needs, let alone its projected future needs. The growth and development of Africa is physically limited by the amount of power available.

Africa is in need of many forms of infrastructure development, but the area in which the U.S. private sector can play a major role is in the development of the power sector. With that in mind, perhaps, the president announced America's commitment to developing the power sector in Africa, with an initial focus on six countries: Tanzania, Ethiopia, Kenya, Ghana, Nigeria and Liberia.

While the choice of these six countries has been debated, and the administration has not really attempted to defend or explain its choices, one assumes that they were chosen for reasons of regional development, as well as for meeting U.S. political exigencies.

Nigeria and Ethiopia are the two most populous nations in Africa, and the other four are playing major roles in regional security. The stability of these nations is critical to the stability of East and West Africa. Therefore, the sooner one develops a power supply accessible to the whole population, the faster the development and the slower the discontent.

This is especially so in Nigeria, which is not meeting 20 percent of its current power needs, and is also facing its most severe internal crisis since the Biafran Civil War in the 1960s. Boko Haram threatens to divide the country between North and South.

Development of power is one of President Goodluck Jonathan's highest priorities, and his political future, and perhaps the future of Nigeria, depends on the delivery of electrical power.

The administration has offered $7-9 billion in loan guarantees for American companies engaged in power sector development in Africa.

Unfortunately, much of this has not yet been tapped by U.S. companies, even though the lack of U.S. financing for U.S. businesses seeking business investment and trade with Africa is one of the biggest reasons the U.S. is lagging behind other nations.

Although the Export-Import Bank of the United States was created to mitigate risks for U.S. businesses exporting internationally, it has been notoriously slow in providing loan guarantees to American companies trading with Africa.

Most U.S. companies doing business in Africa, in fact, go to the banks of other nations if they need financing. The Overseas Private Investment Corporation, meanwhile, is designed for U.S. companies actually investing in another country, but its track record has also been one of slow response, no matter the best of intentions of its leadership.

Another challenge to PowerAfrica will be the frequency with which U.S. companies secure contracts with African governments, and the alacrity with which governments will pay for the services.

Early results are m ixed, and far more cooperation and mutual support between the private and public sectors is needed if U.S. companies are to win the contracts from African governments and then be paid. One suspects the slow payments are a contributing factor to Ex-Im caution. After all, Ex-Im's performance is judged by Congress on the returns to Treasury each year. Ex-Im cannot afford losses as its charter is reviewed annually.

There is little doubt that the priorities announced by Obama last summer are the right priorities. Now the challenge is to make them work.

Obama's political appointees and many long-term dedicated civil servants certainly are promoting PowerAfrica, but until we get more U.S. companies actually engaged in Africa, PowerAfrica runs the same risk as the African Growth and Opportunity Act, another well-meaning platform for African development that falls well short of its goals. Neither Africa nor America can afford to let this happen.

Category: Energy

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