President Obama is wrapping up a wide-ranging trip to Africa this week, one in which he talked about everything from human rights, the triumphs of Nelson Mandela, a return to growth in Zimbabwe and the prospects of an African renaissance.
But it was his comments about access to electricity that should have drawn the most attention. The President is setting the stage for a huge leap in Africa's standard of living - and most people probably didn't notice.
As we've reported before, there are plenty of reasons to be bullish here at the start of the African Century. It's true that, all across the continent:
- Poverty rates are falling
- Conflicts are winding down
- Incomes are rising
- Economic growth is accelerating
- The middle class is growing, and
- Investment is increasing
But there are some key infrastructure necessities that are still lacking. Chief among those is access to electricity.
The Need Is Painfully Clear
Earlier this week in Cape Town, South Africa, President Obama unveiled his "Power Africa" initiative, which sets the bar at doubling access to power in parts of Africa. At the same time, American power and energy management companies will see benefits, too.
Lack of power is a huge problem in countries all over Africa, even where economies are growing. The Lancet reports that 3.5 million Africans die every year due to indoor pollution, more than malaria and HIV/AIDS combined. This pollution comes from wood smoke, petroleum fumes, and other sources, because of a dearth of power-generated heat and light.
The Washington Post's Wonkblog, who had stringers covering Obama's tour in Dar es Salaam, Tanzania, noted that the deluxe Hotel Kilimanjaro where they were staying had frequent blackouts. Wonkblog reported that a small contingent of reporters was trapped in an elevator in the otherwise ritzy hotel as the power cut out.
The brief pratfall underscored the President's point perfectly. It couldn't have been scripted any better than that. Africa needs power, and it needs lots of it in short order to continue its economic growth.
Money Well Spent
To that end, he promised nearly $7 billion over the next five years to governments in Ethiopia, Ghana, Kenya, Liberia, Nigeria, and Tanzania. This money will go toward enhancing electricity access to some 20 million households in these countries and, what's more, some of the money will go to helping emerging energy producers like Angola and Mozambique develop their energy export sectors.
These pledged funds will come from the various government-backed U.S. Development Banks in stages. The funds will be used to attract American companies to contract with the various African countries in need of development.
The President is also stumping for American companies to get involved directly, lining up close to $10 billion in private sector commitments. General Electric Company (NYSE:GE) is the biggest player on board so far. But GE is only the first among the heavy hitters lining up to power Africa.
According to the White House statement on "Power Africa," the company has committed to bringing 5,000 megawatts of affordable energy to Tanzania and Ghana. In the latter country, GE has inked a deal to build a 1,000 megawatt plant already.
The power to actually run this new plant will be supplied by Anadarko Petroleum Corporation (NYSE:APC), which has just contracted to operate the struggling Jubilee offshore oil field off the coast of Ghana. Ghanaian companies have struggled to operate the field efficiently, and will be taking a back seat, watch-and-learn position to Anadarko on this.
The Race Is On
The United States is not alone in its desire to invest in Africa. In fact, as with many emerging markets, there's stiff competition to be the first in. Japan is financing a Sumitomo Corp (TYO:8053) 240 megawatt gas-fired plant in Tanzania, and China is spending $600 million to build a 400 megawatt hydroelectric facility. Netherlands-based Aldwych International, a private concern, is planning a wind farm in breezy Kenya. The race to power Africa - and profit from it - is most assuredly on.
But there's plenty of business to do in Africa. The White House estimates that some $300 billion will be needed to meet the goal of fully powering sub-Saharan Africa.
More than Just Light And Power
As in a case of what's good for the goose, is good for gander, the effort will yield benefits for both the African countries and American businesses. American know-how will be deployed on a large scale. In addition to the economic boost for America and Africa, American strategic interests will be very well-served by these investments.
When peoples' living standards rise, when more and more poor people come out of poverty, the danger of extremism and conflict diminishes in a real way. Al-Qaeda, for instance, has made significant inroads in Africa, as we're seeing in conflicts across Mali and Nigeria. We need to admit that they've beaten us to the punch in Africa in getting there first with the most power.
But the issue is far from settled. The United States has more to offer citizens of the region, with power, light, heat, jobs, economic development than Al-Qaeda does with all its killing, brutality, religious fundamentalism, and mindless destruction
But when these regions become developed, when their people become just a bit more hopeful, and a bit more secure, the dubious, the evil allure of extremist groups like Al-Qaeda loses quite a bit of power. In these terms, any investment the United States can make in Africa's build-out will pay big dividends.
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The Washington Post:
A Closer Look at Obama's $7 Billion Plan to Bring Electricity to Africa
- The Lancet:
Global Burden of Disease Study 2010
- The White House Press Office:
Fact Sheet: Power Africa