Africa, Moving Into the Light

This past July, a Boeing 777 headed toward take-off from the main international airport in Lagos, Nigeria crashed into another plane on the tarmac. The reason: there was no electricity for the runway lights.

In Ghana, power outages cripple struggling hospitals and, on occasion, the first lights that newborns see through the darkness come from the cellphones of midwives.

To shop for clothes or gifts in the evenings, even well-to-do South Africans must sometimes take flashlights to the local mall because of the blackouts in the stores.

Such stark contrasts vividly illustrate the enormous challenges and the equally enormous opportunities that the electrification of Africa presents.

African nations have posted some of the highest growth rates in the world over the past decade, surpassed perhaps only by the growth rates in the levels of optimism about Africa's future. Yet hundreds of millions of Africans, particularly in rural areas and conflict-affected nations, are still mired in deep poverty.

The world cannot afford to have two Africas--one with prosperity, one without; one with electricity, one without.

That is why President Obama, in June of 2013, launched Power Africa, an ambitious initiative that will install more than 30,000 megawatts of cleaner generation capacity across the continent, enough to reach 60 million homes and businesses. The partnership among more than 100 public and private sector Power Africa partners is working to bring new power access to the more than 600 million Sub-Saharan Africans that currently live without electricity.

Private investment is crucial to this massive infrastructure build-out. Finding ways to stimulate that private capital using public sector tools is the key to success. Power Africa is designed to do just that: use the tools of US government agencies, such as the U.S. Agency for International Development and the Overseas Private Investment Corporation, to provide loans, risk mitigation and technical advice to propel private investment in power to the continent.

To support Power Africa, my agency, OPIC, the US Government's development finance institution, made an initial pledge to finance or insure at least $1.5 billion of power infrastructure in Africa. We anticipated that our market-based financing would mobilize (on average) another $3 billion or so more from private co-investors.

A few weeks ago, OPIC hit the mark, more than a year early.

We are proud of the work of our teams and the impact it will have. Electricity is not just about whether light switches, appliances and machinery work. Electricity improves and saves lives wherever it is available, reliable and affordable. And OPIC deal teams not only devoted extra hours, they created new financial innovations to help jump-start projects or improve their durability.

OPIC succeeded in achieving its milestone by working with power developers in a wide range of energy sectors: we made financial commitments to gas utility projects in Ghana, major wind-power projects in Kenya and small-scale solar projects in Nigeria. This was not the pursuit of technological diversity for the sake of diversity. Rather, it reflected the direct demand for projects of different sizes and fuel sources that were most appropriate for each community, region or nation.

Looking ahead, our robust pipeline of Power Africa projects reflects the growing interest of investors in the economic opportunity of power in Africa. However, we must be clear-eyed about the actual and potential challenges ahead. Macroeconomic trends that affect the capacity of African governments could interfere. Of late, there have been large capital outflows from the emerging markets, and the massive drop in oil prices has affected both stock prices of power developers and the public revenues of many resource-dependent African nations.

African governments will need to have the political will to make difficult decisions in allowing cost-covering tariffs. They will also need to agree to make their commitments to purchase power private generated by independent producers acceptable to lenders. Many have recently shown such political will as they have taken advantage of today's lower oil prices to reduce fossil fuel subsides.

And it will take teamwork, patience and staying power as power plants do not get built overnight and they require highly complex financing structures and partnerships. Investing over the long haul in partnerships with private businesses and investors is what OPIC has been doing successfully and efficiently for 40 years, both having a positive development impact and returning money to the taxpayer year in and year out.

So, OPIC remains very bullish about Power Africa not because it is a guaranteed bet, but because it is centered on harnessing private investment on a dynamic continent in a complex, rapidly evolving sector that is critical to growth and improving lives.

And it is urgent. The current base-case prediction is that more than 500 million Africans, primarily in rural areas, will still be living without electricity 25 years from now.

We can and should celebrate progress, but we should not and will not pause in doing so. OPIC will help prove these predictions wrong.