President Obama announced Tuesday that private companies are providing an additional $12 billion in aid to the administration’s electrification program for Africa, while U.S. firms will invest more than $14 billion on the continent in sectors including banking, construction and information technology.
The new pledges — which came during a day-long program at the U.S.-Africa Leaders Summit focused on business opportunities, trade and development — reflect some of the most concrete outcomes of this week’s gathering of nearly 50 African heads of state and government in the District. Speaking to delegates at the Mandarin Oriental Hotel, Obama said that this willingness to help Africa grow — rather than simply extract resources — is “what America offers” the continent.
“The United States is determined to be a partner in Africa’s success, a good partner, an equal partner and a partner for the long term,” he said.
Now boasting more than
$26 billion in commitments, Power Africa aims to add 30,000 megawatts of additional capacity and expand electricity access to at least 60 million households and businesses. World Bank President Jim Yong Kim said Tuesday that his institution will commit $5 bil- lion in direct financing, investment guarantees and advisory services to Power Africa, while the Swedish government is also contributing to the initiative. The U.S. government is adding $300 million a year to the initiative, which began as a $7 billion, five-year federal program in June 2013.
Tuesday’s announcements highlighted a dichotomy Africa now faces: Even as the administration touted the business opportunities beckoning there, experts and government officials say an adequate power supply remains the biggest obstacle to economic development.
More than 70 percent of Africans lack a reliable electricity supply. Power outages cost more than 5 percent of the gross domestic product in Malawi, Uganda and South Africa, according to Standard Bank, and between 1 and 5 percent of GDP in Senegal, Kenya and Tanzania.
Vera Songwe, a nonresident senior fellow in the Brookings Institution’s Africa Growth Initiative, noted that even rapidly expanding sectors, from Internet to mining and the service industry, are energy-intensive.
“So, for every place you turn on the continent, for production, we need power,” Songwe said.
Sen. Christopher A. Coons (D-Del.), who chairs the Senate Foreign Relations subcommittee on African affairs, said American chief executives have identified three primary obstacles to investment when it comes to Africa: “The physical infrastructure, the lack of transparency and the lack of electricity.”
“It’s really hard to refrigerate your products, to manufacture at any significant level, when you don’t have reliable electricity, and the vast majority of Africa does not have affordable, reliable electricity,” he added.
In a little more than a year since Obama launched the program during a visit to Africa, the initiative has spurred signed agreements that will generate 2,800 megawatts of electricity, while deals for an additional 5,000 megawatts are being negotiated.
The president called the response to the initiative overwhelming. “Today we’re raising the bar,” he said.
The administration has earmarked $1 billion of the program’s funds for off-grid and small-scale energy solutions over the next five years, which are overwhelmingly renewable. And Tuesday, Secretary of State John F. Kerry and Ghana President John Dramani Mahama oversaw the signing of a Millennium Challenge Corp. compact in which the independent U.S. foreign aid agency pledged to invest as much as $498 million over the next five years to help overhaul Ghana’s power sector.
At a breakfast meeting with reporters Monday, General Electric chief executive Jeffrey Immelt — whose company, along with Standard Bank, has a $350 million financing agreement for power projects in Africa — said the administration’s involvement has accelerated the pace of deals on the continent because it provides “a seal of approval” that reassures investors.
“Whenever the U.S. is even a small partner in a deal, it brings a lot of investors with it,” he said.
Still, lawmakers on Capitol Hill are pressing to institutionalize the initiative through legislation, a task that has become complicated in part because of the political debate on climate change. The administration funds Power Africa by taking money away from existing programs at the U.S. Agency for International Development, including ones supporting democracy and governance efforts on the continent.
House Foreign Affairs Committee Chairman Rep. Edward R. Royce (R-Calif.), whose bill to make the program permanent has passed the House by a wide margin, said the administration’s electrification effort “doesn’t have any real long-term strategy or oversight. Trying to get these projects up and running will take much longer than two years — longer than the administration’s clock.”
Coons, who has a companion bill in the Senate with Sen. Bob Corker (R-Tenn.), said the reason to pass legislation in both chambers is “to send signals to our African partners, to the markets and to American investors that this is a sustained, serious and long-term intervention to support the development of a modern electricity infrastructure and generating capacity across more than a few of our principal allies in Africa.”
While Coons said he remained optimistic it would reach the president’s desk by the end of the year, he cautioned, “Any bill that touches on energy, on power generation, has become very difficult to get passed in this Congress because of the issues around coal and climate change.”
Even in the absence of a permanent program, African and American corporate executives made it clear this week they are eager to strike deals to expand Africa’s power sector. During a panel with Immelt and former president Bill Clinton on Tuesday, Aliko Dangote, president and chief executive of the Dangote Group, a Lagos-based business conglomerate, announced a $5 billion deal with Blackstone to invest in power and power infrastructure in sub-Saharan Africa.
“With this, we will definitely close the gap,” Dangote said. “There’s quite a lot of gap. We know about the gap, and it’s there, and we’re going to be very serious and very aggressive, and the two organizations will really make it work.”
At that point Immelt piped in. “Just remember who sells power-generating equipment,” he said to laughs, prompting Clinton to quip, “I should have been your agent.”