A US power surge in Africa competes with China

July 1, 2013
July 1, 2013

Sub-Saharan Africa has a power problem

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Six African countries contain a significant portion of the world’s electricity scarcity. More than two-thirds of the population in sub-Saharan Africa is without electricity, and even though several countries there have started developing sizeable oil and gas finds, their electrical infrastructure remains weak. This significantly cramps economic development—the African Development Bank estimates by as much as 2% of GDP in affected countries—and the International Energy Agency says it will take some $30 billion in yearly investment to get everyone on the continent plugged in by 2030.

Will $7 billion help?

US president Barack Obama, who is visiting Tanzania today, announced a plan to invest $7 billion over the next five years to bolster electrical access in Ethiopia, Ghana, Kenya, Liberia, Nigeria, and Tanzania. Most of that money will come in the form of loans to buy American electrical products, along with technical assistance for African policymakers and grants to African entrepreneurs. Large American companies like General Electric and Symbion, which hosted Obama at one of its Tanzanian facilities today, have promised an additional $9 billion in electricity-focused investment.

The goal is to double existing access to electricity, but whether that will be achieved remains to be seen. The IEA figures (pdf) that even if global investment in bringing electricity to the poor increased to $14 billion a year from a 2009 level of $9.1 billion, the number of people in sub-Saharan Africa without power still increases by 10% as population growth outpaces connections.

The race to invest in Africa

The investment plan comes at a time of increasing hope about Africa’s economic future, and in other countries, the ability to invest in it. The World Bank speculates (pdf) that fast-growing African economies are now like India 20 years ago or China 30 years ago, with the possibility of huge amounts of catch-up growth. This growth is one of the key factors putting pressure on electrical infrastructure, as you can see in this slightly outdated 2008 map:

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China has made a habit of providing lots of investment and aid to African countries, often to smooth access to natural resources, to the point of creating something of a backlash on the continent. (China’s own citizens, incidentally, will not have universal electricity access until 2015). Still, in Africa, the US is perceived as something of late-comer. But with McKinsey arguing that Africa has a better return on investment than any other developing region, the US wants to catch up by improving  trade and investment relations.

A different approach

China is known for large-scale infrastructure projects like Ghana’s $670 million Bui Dam or a $1 billion power plant in Zambia. The US model is more focused on good governance and incremental progress, in part to differentiate  from China’s heavy-handedness and willingness to engage with corrupt governments. “We’re not just building power plants ourselves,” Obama said today. “We’re working with the various governments that are involved to think about what are the laws and regulations that are required to sustain it, and how do we leverage the private sector to put more money in.” That strategy is slower going and might lack the big results, both in power generation and propaganda, that come with opening a huge power plant. Some aid experts, however, say it is more sustainable.

The American program includes renewable energy programs, including the construction of wind farms in Kenya, that is missing from China’s agenda. Another part of the American strategy is supporting entrepreneurs who find disruptive ways to bring power where grids don’t reach. One product Obama  mentioned during his visit is the Soccket Ball, a soccer ball designed by Harvard students to generate small amounts of energy, which can be used to power a lamp. “Kids play soccer all day long,” Michael Froman, the US Trade Representative travelling with Obama, told reporters. “They take the thing, the ball home, and you can plug a lamp into it and they can read at night. Or they can plug a cell phone charger into it.”

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