As he heads to Africa, Obama's electricity plan in jeopardy

2015-07-23 12:03
Barack Obama. (File: AP)

Barack Obama. (File: AP)

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Washington - As President Barack Obama returns to Africa this week, his signature programme to help the continent double its access to electricity is in jeopardy, undermined by Congress' refusal to re-authorise the Export-Import Bank.

Of the $7bn that Obama set aside for Power Africa, $5bn fell under the auspices of the now-defunct bank, which guarantees loans to foreign companies buying US-made products. But out of that $5bn, just $132m in transactions had been approved before the bank's charter expired last month, rendering it unable to approve new transactions. Although the bank says it had several billion dollars of Power Africa projects in the pipeline, none of them can proceed unless lawmakers revive the bank.

For American companies, that could mean losing out to competitors like China, which is investing heavily in Africa and would be all too pleased to see its own companies get the contracts to build and equip power plants in Africa. Andy Herscowitz, Power Africa's coordinator, said companies with access to financing help from their governments have a competitive advantage.

"There are plenty of investors interested in investing in Africa, and a lot of great ideas, but you've got to get to bankability," Herscowitz said in an interview.

Little to show

For Obama, the snag illustrates how Power Africa, slow to get off the ground, may fall far short of his lofty ambitions. Two years after the president unveiled Power Africa during a visit to South Africa, the programme has yet to add any megawatts of electricity to Africa's overburdened, underdeveloped grid.

With little to show for his top Africa initiative, Obama may find it harder to persuade African leaders that he's maximised his opportunity as America's first black president to make Africa's development a US priority. Although this week's trip to Kenya and Ethiopia will be Obama's third to sub-Saharan Africa as president, his global agenda has been largely focused on Asia and the Middle East.

To be sure, building power plants takes time — often years — and Power Africa officials say it's more instructive to look at deals closed rather than the number of power plants already built. In an annual report for Power Africa, the US Agency for International Development said last July that 2 792 megawatts of electricity will be generated as a result of deals that have closed — roughly a quarter of Obama's goal. USAID also said Power Africa had leveraged more than $18bn in private sector financing although it's unclear how much of that resulted directly from US efforts.

Power Africa declined to provide updated figures on how many megawatts will be created by deals that have closed. Officials said they're still on track to meet Obama's goal.

Yet promises of future power plants are a far cry from power plants up and running — particularly in Africa, where business deals fall through at a notoriously high rate. In the meantime, chronic power shortages and rolling blackouts continue to stymie development and make life harder for hundreds of millions of Africans. The president's objective is to expand access to power to 20 million households and businesses through new gas, oil, solar, wind and other power plants.

Potential expansions

Vera Songwe, the West and Central Africa regional director for the World Bank Group's International Finance Corp., said Obama's program doesn't set out to fund all of the continent's energy needs, but rather to spur the private sector's interest in taking on that challenge.

"Many of these US companies are a bit shy about coming onto the continent. With Power Africa, there is a concerted effort by all the US agencies to trying to accompany US businesses into Africa," said Songwe, also a Brookings Institution scholar.

Yet a key component of that effort ground to a halt on June 30 when Export-Import Bank lapsed for the first time in its 81-year history. Conservatives have denounced the bank as corporate welfare.

"Orders are on hold, business is in danger, potential expansions will stall, fewer employees will be hired if we do not get this done," Obama said on Wednesday, joined by heads of businesses that have benefited from the bank.

In the Senate, the bank's supporters hope to add reauthorization to a must-pass highway bill, an idea the White House eagerly embraced. Although supporters have the votes to prevail, the underlying highway legislation may run into trouble. The House has passed its own, shorter highway bill that leaves out the Export-Import Bank, and House Republicans oppose the Senate bill.

Read more on:    barack obama  |  us  |  kenya  |  east africa

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