To Realize Africa’s Potential, Turn On the Lights
By Rob Mosbacher and Mark Green | JUNE 30, 2013
President Obama is in sub-Saharan Africa this week where he is likely to find a continent at a crossroads. Economies are growing, the middle class is expanding, yet millions of Africans lack access to electricity. Taking on the challenge of increasing reliable electricity across the continent is not only a development imperative, but it is a great opportunity for businesses both in Africa and here in the U.S. to do well by doing good.
Increasing access to reliable power will help every one of our current assistance programs – from global health to food security – to be more effective and efficient. Increasing such access will help Africa rise by enabling its entrepreneurs to process food for export, manufacture goods for markets at home and abroad, and more efficiently harness the possibilities of the Internet. Unfortunately, progress toward these benefits has been stymied by a cumbersome energy investment process that is far too costly, time consuming, and uncertain. The President’s efforts will be reinforced by the bi-partisan Electrify Africa Act of 2013 recently introduced by House Foreign Affairs Committee Chairman Edward R. Royce to create a strategic approach to support affordable, reliable electricity in sub-Saharan Africa.
We applaud the Administration and Congress for their commitment to forging deeper cooperation with the private sector to address Africa’s energy challenges. We think tapping into the strength of private enterprise is the right approach at the right time. We’d also like to offer a few suggestions based upon our own experience in development to help the power initiative reach its potential.
By most accounts, many of Africa’s nations are in the early stages of dramatic economic growth. The Brookings Institute suggests that six of the world’s 10 fastest growing economies are in Africa with a growing middle class of 350 million people. However, Africa’s rise isn’t inevitable: You simply can’t unlock the full human potential of a population when more than a half a billion people can’t turn on the lights. According to the International Energy Agency (IEA) there are 590 million people in sub-Saharan Africa without access to electricity. And if changes aren’t made to the current course of energy development this number will increase.
Fortunately, Africa’s energy deficit isn’t inevitable either. The continent has plenty of resources that can be harnessed to help address its electricity challenges and plenty of friends in the business community who are ready to help utilize these resources in smart ways and to develop efficient applications of renewable energy technologies.
Our experiences have shown that a number of recurring obstacles stand in the way of private enterprise revolutionizing Africa’s energy future. The first hurdle is time. Energy projects in Africa on average take 5-10 years from inception to completion compared to 18-24 months in other parts of the world. The longer timeframe leads to increased expenses, unnecessary and unforeseen setbacks, and tepid investors. In addition, many energy ministries don’t have the capacity to carry out transparent bid processes or navigate highly complex legal negotiations. And project financing from commercial banks and international financial institutions is not readily available.
There’s no reason that obstacles like these should dampen prospects for ramping up access to power. A number of private organizations, such as The Initiative for Global Development (IGD), are coordinating with investors, energy developers, banks, lawyers and governments to facilitate a better process. For example, they are working to create standardized documents such as model power purchase agreements and model implementation agreements that satisfy the financing requirements of multilateral development banks, such as OPIC, and are also flexible enough for country modification.
In addition to the work currently underway, USAID and other development agencies are helping to provide modest resources to host country governments to build capacity within energy ministries. This is a valuable use of public resources. Funding and expert assistance will help carry out technical feasibility studies and ensure Africa’s governments have competent legal representation to oversee the bid processes. As a result, investors and developers will feel more comfortable with a process that is professional, relatively fast, and transparent, and host countries will protect national interests, attract larger private investment, and deliver energy to millions of people in need. Moreover, quicker projects result in lower costs to developers which can be passed onto consumers in the form of cheaper energy.
Africa’s energy future offers an enormous investment opportunity for American business. In order to turn this opportunity into reality the private sector, development organizations and governments must work together to reduce barriers and forge a better development process. Our solutions may not be the only answers, but our experience shows they can play a leading role in untapping Africa’s energy resources and ensuring millions of people today have a better tomorrow.
Rob Mosbacher was chief executive officer of the Overseas Private Investment Corporation and chairs the board of directors for the Initiative for Global Development (IGD). Mark Green, a former congressman and U.S. ambassador, is President and CEO of IGD. They serve as the co-chairmen for the Consensus for Development Reform.