Powering U.S. Business in Africa

U.S. assistance can promote economic development in Africa while expanding markets for U.S. businesses.

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People walk below power pylons at Hartebeespoort, South Africa, Friday Nov. 25, 2011. Eskom is Africa's biggest power utility, accounting for more than 60 percent of all the electricity generated on the continent, according to the World Bank. It also exports across southern Africa. Critics and even supporters say Eskom should have started its move toward renewable sources of energy earlier, and now needs to set its ambitions higher.

In recent years, the United States has used retooled foreign aid programs to positively – and powerfully – impact developing nations in Africa. For example, President George W. Bush's President's Emergency Plan for AIDS Relief has helped to give more than 5 million people in Africa access to HIV and AIDS treatment, up from only 50,000 at the program's start in 2003. Ten years later, Washington can build on PEPFAR's success by implementing policies that increase sub-Saharan Africa's reliable access to electricity, while at the same time opening and developing new markets for U.S. businesses.

In many parts of Africa, lack of reliable access to electricity forces many businesses to close during peak hours of operation, many hospitals to work in the dark and many schools to work without power. Brad Plumer of the Washington Post writes that, of the 925 million people in sub-Saharan Africa, "fully 590 million people lack access to power." That's nearly twice the size of the U.S. population.

The United States has strong economic, humanitarian and strategic interests in helping African nations to fix their energy shortfalls. Power Africa, President Obama's new initiative to bring electricity access to 20 million new households in sub-Saharan Africa over five years, can help advance those interests. At the same time, the initiative can help to create new market and investment opportunities for American businesses.

[Check out our editorial cartoons on President Obama.]

First, Power Africa seeks to encourage economic liberalization and regulatory reforms in Africa. For too long, Africa's energy infrastructure has been held back by government bureaucracies that too often lack the technical and legal expertise necessary to advance key initiatives. As a result, projects are often slower and more expensive to complete that originally planned. To help change this dynamic, Power Africa will partner with President Bush's Millennium Challenge Corporation to work with regional partner nations to broaden energy sector expertise within government institutions, develop more predictable regulatory environments, and improve overall government transparency.

Second, Power Africa expands sub-Saharan Africa's existing consumer base. Lack of power inhibits business activity and economic activity throughout much of sub-Saharan Africa, making it difficult to create jobs, improve education, and reduce poverty. Roughly 50 percent of companies in sub-Saharan Africa identified electricity as a "major constraint" to business, according to a survey conducted by the World Bank. However, Ambassador Mark Green and Rob Mosbacher, co-chairmen for the Consensus for Development Reform, write that access to electricity 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."

Third, Power Africa is affordable. On June 30, President Obama announced the United States would commit $7 billion over the next five years to "double access to power in sub-Saharan Africa." But as the Washington Post noted: "The money will mostly come from existing U.S. development banks, so it doesn't require new spending from Congress. For instance, the Export-Import Bank, a government-backed lender, will finance $5 billion in projects by U.S. companies."

[See a collection of political cartoons on energy policy.]

Moreover, Power Africa leverages more than $9 billion from the private sector. In one example, General Electric pledged to "help bring online 5,000 megawatts of new, affordable energy through provision of its technologies, expertise and capital in Tanzania and Ghana." Deeper government cooperation between government and the private sector will strengthen efforts to address Africa's energy challenges.

Leading Republicans and Democrats in the House of Representatives have put forward an ambitious plan that reinforces the Power Africa initiative. On June 28, a bipartisan group of lawmakers – led by House Foreign Affairs Committee Chairman Ed Royce, R-Calif., and Ranking Member Eliot Engel, D-N.Y. – introduced the Electrify Africa Act of 2013 (H.R. 2548). First, the bill directs the White House to issue a report to Congress outlining a comprehensive strategy to "support affordable, reliable electricity in sub-Saharan Africa in order to improve economic growth, health and education in Africa, while helping job creation in the United States through greater exports." Second, the bill encourages developing nations to implement government reforms that create better business environments for private-sector investments. Third, it urges international loan agencies to complement U.S. efforts by increasing energy investments to the region.

When the United States properly wields foreign assistance, it promotes economic development, prosperity and self-reliance abroad, while at the same time expanding international markets for U.S. businesses. Since the end of World War II, successful foreign assistance programs to Europe, Japan and South Korea have helped to transform war-torn nations into leading economies and major consumers of U.S. exports. If Power Africa is able to usher in a similar transformation in sub-Saharan Africa, the United States will succeed in not only dramatically reducing global poverty, but also growing its own economy.

Patrick Christy is a senior policy analyst at the Foreign Policy Initiative, where Sonia Morland is a research intern.

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