16 February 2016

Nigeria: America's Electricity Gift


Now that the Electrify Africa Act has been signed into law by the United States Government, the big question on the lips of many Africans and Americans is what happens next? Adeola Akinremi in Washington DC, writes on how African leaders can make the Electrify Africa Act work based on the opportunities it provides in improving access to electricity to over 600 million people in Africa that have no access to this important utility

Limuru, Nivasha and Kisumu are inseparable. They are Kenyan townships trussed by location, vocation and trouble. They are located on the main highway linking Nairobi, the capital of Kenya. Boom of tourism and agriculture is the allure of the tri-cities. But for their trouble, the townships are tied by poor power supply and poverty. In Africa, access to power is a big bottleneck to growth, where six hundred million people lack access to a power grid. That figure represents about seventy per cent of the population. On a continent, where industrialisation is key to a prosperous future, large-scale power supply will do more than changing life in rural areas for the better, but reasonably change the fortune of Africa in export commodities. Surprisingly, only seven countries in sub-Saharan Africa-Cameroon, Gabon, Ghana, Ivory Coast, Namibia, Senegal and South Africa-make available electricity to about half of their inhabitants, according to the Economist. In a typical year, the Economist argued that "the entire region generates less electrical power than Canada, and half of that supply is in South Africa." In Nigeria for instance, there is an estimated 34 million people living "under the electricity grid" without access to electrical energy. For these Africans, lack of access to electricity means poor health care and poverty. For businesses, it stifles growth. So over two years, one of Africa's most visible entrepreneurs, Tony Elumelu, teamed up with others to remain in the forefront of championing the passage of an act to fuel prosperity in Africa-The Electrify Africa Act. And after several failed attempts by the United States congressmen, the bill was passed on a recent week to improve access to electricity through public-private partnerships. Last Tuesday, America's President, Barack Obama, gleefully signed the bill into law to accelerate the plan of bringing electricity to 50 million people in sub-Saharan Africa by 2020. Elumelu has commended Obama for signing the initiative into law as he called for concerted efforts on the part of African leaders to take advantage of the opportunities the Act will provide. "It is up to us whether Power Africa is a success or another power failure. Africa has had enough of power failures. We must therefore remain committed and resilient because the enabling environment for this sector on the continent is tough, but it is getting better. Africa handsomely rewards the patient investor, however it is not just enough for us to be resilient investors, we must see access to power as a humanitarian emergency in Africa. Lives are lost and potentially extinguished everyday that the power deficit persists," Elumelu enthused. The Electrify Africa Act of 2015 is expected to give legal teeth to Mr. Obama's Power Africa initiative, which has been in doldrums for some time.

Clearly, one of the impacts of the Electrify Africa Act is that it will build sustainability for the Obama's Power Africa Initiative, though the US president is now in the twilight of his administration. The Electrify Africa Act now requires the US President to outline a comprehensive strategy for boosting access to electricity in Africa. As Obama prioritises plan for the year, this strategy involves tapping "on-grid" and "off-grid" sources to ensure more people on the African continent have access to electricity. So with the Act, the US will be putting its intellectual, technology and financial power behind the quest to light up Africa. Some analysts agreed that the Electrify Africa Act opens a new platform of opportunity for the US to support increasing access to electricity on the continent, because it follows the US foreign policy in Africa. The House Foreign Affairs Committee Chairman Ed Royce of California, said the Electrify Africa Act would address the serious problem of electricity shortage that makes life difficult for millions in Africa. During a debate on the bill, members from both major political parties pointed out that without reliable electricity, millions of people in Africa cannot use tools necessary for modern life, such as lights, cellphones and computers. They cannot refrigerate foods or medicines. Royce reportedly said the lack of electricity drives some families in sub-Saharan Africa to use charcoal and other toxic fuels, which cause more deaths than HIV/AIDS and malaria combined. He explained that the US foreign policy that seeks to help Africa become one of the world's great trading partners through the Africa Power Initiative is a foot in the right place, while insisting that the high cost of energy in sub-Saharan Africa makes producing goods for export almost impossible, and that it is the United States' interest. In a statement, one of the non-governmental organisations that mobilised people to support the passage of the Act, Oxfarm, has said, "the bill signals bipartisan affirmation of President Obama's Power Africa Initiative, seeking to provide 30,000 megawatts of new, cleaner electricity and provide access to at least 60 million new connections. Oxfam research has shown that sustainable renewable energy is best positioned to meet the energy needs of the poor in Africa due to accessibility, the majority of whom are not grid connected. Moving forward, clean energy should continue to remain a US priority in supporting energy access in Africa" Specifically, the Act declares that the United States, in consultation with sub-Saharan African governments, will encourage the installation of an additional 20,000 megawatts of electrical power in sub-Saharan Africa by 2020, provide first-time access to electricity for at least 50 million Africans by 2020, and pursue any reforms necessary to facilitate these goals. The rational for the Electrify Africa Act arises from the limited success the US achieved with its Africa Growth and Opportunity Act (AGOA) which was aimed at increasing the exports of African made goods to the US. But with AGOA, US realised that people with little or no access to electricity will not be in a position to manufacture or make the goods needed by the US market. Also, people without access to electricity tend to be low users of technology, low consumers and low participants in the global economy. The Electrify Africa Act has thus been passed to tackle energy poverty on the continent in a bid to get more Africans on the electricity grid and become economic participants in the global economy. The US government is not, however going to intervene directly according to its plan. The Electrify Africa Act creates a framework for a major public-private partnership between the United States and sub-Saharan African countries to help millions of people gain access to affordable and reliable electricity. Explaining why he was eager to see the passage of the Electrify Africa Act, Elumelu said: "Africa must win the energy challenge if it seeks to become an industrial power in the 21st century. Power outages on the continent must spark power outrage. The kind of outrage that ignites the activist in us." At a recent conference on power generation and supply, the Powering Africa Summit, that held in Washington D.C the week before the passage of the Act, Elumelu emphasised the criticality of power in driving economic growth. "Power is a cross-cutting issue that impacts job creation, education, healthcare delivery, food security, communications and virtually every other sector of commercial activity," he said. He called the passage of the bill and the assent given to it by President Obama, a "landmark decision" that will help to "transform the lives of millions of Africans who cannot wait for power". True, as an advocate of electrical energy for all in Africa, Elumelu is walking the talk. His investment company, Heirs Holdings has made a commitment of $2.5 billion investment in the power sector to generate 2,000 megawatts of power. Through Transcorp Power, the company currently generates 19 per cent of the power consumed in Nigeria and plans to up the generating capacity to 25 per cent in the near feature. "As an investor, I have invested in a variety of sectors including financial services, hospitality, real estate, healthcare etc, but every day, my working day starts with a view of the dashboard of the megawatts generated at our Ughelli power plant. And I can tell you that, good or bad, the numbers have an emotional impact on me every day," he said in Washington DC. So now that the enabling law is in place, it is important the African governments and private sector devise strategies to put in place the necessary reforms required to tap into the opportunities presented by this new law. The new law immediately opens access to make US government-backed credit available to the private sector which could help interested investors tap into Africa's estimated $300 billion energy market. However, African governments will have to put in place strong reforms in their energy sectors in order to benefit from the opportunities presented by the Electrify Africa Act. The idea behind the Electrify Africa Act is to work with African governments to open energy markets in a bid to use private capital and access to low cost credit to reduce energy poverty on the continent. Thankfully, Nigeria is in a pole position in this direction due to the significant reforms it has implemented in its power sector, which is now largely dominated by the private sector. But power companies will have to significantly scale up their governance standards in order to benefit from the access to US backed credit presented by the Electrify Africa Act. The mandate to prioritise electricity projects in support to African governments and private sector now falls on US development agencies like the Overseas Private Investment Corporation (OPIC), the United States Agency for International Development (USAID) and others, but transparency and efficiency of operations will be critical for private sector firms seeking to tap into credit facilities and new sources investments opened up by this act. Undoubtedly, the Electrify Africa Act opens a new vista of US and Africa relationship, but as Elumelu said, the Act can only provide a roadmap, set targets and provide technical assistance and partners, but it is up to Africa, partner countries and the private sector, to implement it.


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