Obama’s $7 Billion Promise to help ‘Power Africa’

In Cape Town on July 1, U.S. President Barack Obama promised a major new initiative — Power Africa — to double access to electricity in Africa.

Obama said the goal is to try to bring electricity to 20 million homes and businesses.

Speaking at a plant in Tanzania, Obama stressed the importance of public-private partnerships across Africa.l “This facility was idle.  But the Tanzanian government, under President Kikwete’s leadership, committed to making reforms in the energy sector.  With support from the Millennium Challenge grant, General Electric, and Symbion, they got it up and running again.  More Tanzanians got electricity,” he said.

The U.S.-backed Power Africa embraces the public-private model. “Public and private resources will be matched with projects led by African countries that are taking the lead on reform.  In this case, African governments commit to energy reforms.  And the U.S. is committing some $7 billion in support, and private sector companies have already committed more than $9 billion.  And this is just the beginning — because we look forward to even more companies joining this effort. ”

According to a Whitehouse statement, the $7 billion in financial support would be provided over the next five years. Under the plan:

• The U.S. Agency for International Development (USAID) will provide $285 million in technical assistance, grants and risk mitigation to advance private sector energy transactions and help governments adopt and implement the policy, regulatory, and other reforms necessary to attract private sector investment in the energy and power sectors.

•     The Overseas Private Investment Corporation (OPIC) will commit up to $1.5 billion in financing and insurance to energy projects in sub-Saharan Africa.

•     The U.S. Export-Import Bank (Ex-Im) will make available up to $5 billion in support of U.S. exports for the development of power projects across sub-Saharan Africa.

•     The Millennium Challenge Corporation (MCC) will invest up to $1 billion in African power systems through its country compacts to increase access and the reliability and sustainability of electricity supply through investments in energy infrastructure, policy and regulatory reforms and institutional capacity building.

•     OPIC and the U.S. Trade and Development Agency (USTDA) will provide up to $20 million in project preparation, feasibility and technical assistance grants to develop renewable energy projects.  These efforts will be coordinated through the U.S. – Africa Clean Energy Finance Initiative (US-ACEF) and supported by the recently launched U.S. – Africa Clean Energy Development and Finance Center (CEDFC) in Johannesburg, South Africa.

•     The U.S. African Development Foundation (USADF) will launch a $2 million Off-Grid Energy Challenge to provide grants of up to $100,000 to African-owned and operated enterprises to develop or expand the use of proven technologies for off-grid electricity benefitting rural and marginal populations.

He called the program a win-win.  “It’s a win for Africans — families get to electrify their homes; businesses can run their plants; investors can say if we locate in an African country, that they’re going to be able to power up in a reliable way.  All this will make economies grow,” the president said.

He said the plan is also a win for the United States because the investments made on the continent, in things like cleaner energy, means more exports for the U.S. and more jobs in the U.S.  “Obviously, a growing market in Africa will mean more opportunities for all countries.”