US Stepping Up Presence In Sub-Saharan Africa Energy Boom

June 17, 2014 – Sub-Saharan Africa is one of the fastest-growing economic regions in the world, with the International Monetary Fund predicting continued growth as part of the continents economic transformation.

Much of that transformation has to do with a fast-growing middle class, as well as vast agricultural and mineral resources, which is attracting investors and businesses from around the world. According to the U.S. Commerce Department, which is stepping up its involvement in sub-Saharan Africa, the region is now home to seven of the world’s 10 fastest-growing economies.

In April 2014, the International Monetary Fund released its Regional Economic Outlook: Sub-Saharan Africa, which notes that the strong growth of recent years in in the region looks set to continue, “accelerating from 4.9 percent last year to around 5.5 percent in 2014, underpinned by high levels of infrastructure and mining investment. Growth in the region’s Low-Income Countries remains higher still at some 6.9 percent in 2014.”

But, according to the report, the outlook is subject to some downside risks: “Some of the favorable factors that have supported growth in the region have started to weaken. In particular, the shift in the composition of global demand—and of growth in some large emerging markets—is causing commodity prices to weaken (particularly copper and iron ore). Tighter global financial conditions have also raised the cost of financing for many countries. Should these trends continue, they would likely act as a drag on growth in many countries in the region.”

Nevertheless, the US Commerce Department’s International Trade Administration is more than doubling its presence in Africa, opening its first offices in Angola, Tanzania, Ethiopia and Mozambique to support White House initiatives like Trade Africa and Power Africa.

The U.S. Strategy Toward Sub-Saharan Africa

In 2012, President Obama launched the US Strategy Toward Sub-Saharan Africa, noting that Africa holds the promise to be “the world’s next major economic success story.” The US government is working to help businesses be part of that success story by promoting US trade and investment through its Doing Business in Africa campaign.

Trade Africa was launched by President Obama in July 2013 as a partnership between the US and sub-Saharan Africa to increase trade and economic ties between Africa, the United States and other global markets.

During oral testimony on the 2014 Trade Agenda at a May 1 Senate Finance Committee, US Trade Representative Michael Froman noted they were “working to conclude a comprehensive review of the African Growth and Opportunities Act, which expires next year.

Froman further noted that “the core of the Obama Administration’s economic strategy is to create jobs, promote growth, and strengthen the middle class. Through our trade policy, we are contributing to that strategy by opening markets for Made-in-America exports, leveling the playing for American workers and businesses by raising standards and fully enforcing our trade laws and our trade rights.”

The Focus on Energy

But much of this US strategy in the past few months has focused on energy development, particularly President Obama’s June 2013 Power Africa initiative to double access to power in sub-Saharan Africa, starting with Ethiopia, Ghana, Kenya, Liberia, Nigeria and Tanzania.

With more than 600 million people in sub-Saharan Africa lacking access to electricity, the power development challenge is enormous. According to the International Energy Agency, sub-Saharan Africa needs more than $300 billion in investments to achieve universal electricity access by 2030 — far beyond the capacity of any single development program.

‘What we think is likely to happen in Africa is that there will be a much more decentralized model and approach to energy generation,” Shari Berenbach, President and CEO of the US African Development Foundation, told AFKInsider in an interview.

“And while the urban centers and large industry will likely be served by large power plants, we think that when it comes to rural communities and the broad areas of Africa, that there won’t be any effort to really try and string transmission lines all across Africa the way it had happened in the U.S.”

A U.S. Trade Mission to Ghana and Nigeria in May and the U.S.-Africa Energy Ministerial in early June were part of a U.S. effort to get more American energy companies on the African development bandwagon.

The U.S. Trade Mission to Ghana and Nigeria was led by U.S. Secretary of Commerce Penny Pritzker to help African countries develop and manage their energy resources, as well as build power generation, transmission and distribution projects. One of the main goals was to “find partners for American companies, work to navigate regulatory hurdles and support the development that will help Africa thrive.”

As a followup to that meeting, the U.S.-Africa Energy Ministerial to Ethiopia in early June was also designed to promote American energy companies to African nations with the theme of “Catalyzing Sustainable Energy Growth in Africa.”

On that meeting’s agenda was accelerating development of clean energy sources and energy efficient technologies, review of best practices in oil and gas resource development, and progress reports on the President Obama’s Power Africa Initiative.

And entries are now open through June 20 for the second round of the Power Africa Off-Grid Energy Challenge, sponsored by the US African Development Foundation, the US Agency for International Development and GE Africa to offer 18 grants of up to $100,000 each.

“Even though the operating environment could be challenging, Africa offers a huge growth opportunity,” Patricia Obozuwa, Director of Corporate Communications for GE Africa told AFKInsider. “We believe in Africa’s potential. GE’s growth and investment plans are long-term – we have been here for over 100 years – we are here to stay.”

Simon Gosling, Director of EnergyNet which sponsored the third Annual Powering Africa conference in Mozambique last month, says businesses like GE are “transforming the sector, transforming the way they do their business and that all again is kind of tied to the whole Power Africa initiative.”

“There’s some really interesting stuff that is all coming on the back of this Power Africa initiative, so people are really riding that coat tail and there’s really an infused vibe around,” Gosling told AFKInsider in an interview.

All these developments came on the heels of an April U.S. Department of Commerce Power Africa B2B Summit in Miami as an effort to connect American companies with opportunities to provide energy services on the continent. That meeting included Nigeria’s CEOs of Africa’s major power companies, and representatives from the US Export-Import Bank and the US Agency for International Development.

But for the private sector, American investors work through the Washington-based Corporate Council for Africa to obtain partnerships with African companies.

“We’re the private sector coordinator for Power Africa. Just about every company that’s engaged or interested in getting involved in power projects in Africa are members or close to our members, Corporate Council for Africa President Stephen Hayes told AFKInsider in an interview. “There is a high interest in energy overall, and that includes oil and gas, and Hydro and so forth.”

During the World Economic Forum on Africa in May in Abuja, a ministerial meeting on the Africa Power Vision took place that included Ministers of Power and Finance from Nigeria, South Africa, Togo, Rwanda, and Ghana, as well as private sector entities that included the African Union Commission, the African Development Bank, and the UN’s Economic Commission for Africa.

Carlos Lopes, Executive Secretary of the U.N. Economic Commission for Africa, stated that there is a need for championing regional solutions to bring the Africa Power Vision to fruition. “The Power Africa Initiative is an enabler, and the Africa Power Vision, derived from Program for Infrastructure Development in Africa – PIDA – is focused on making projects more bankable and easier to sell,” he said at the meeting.

Power Africa – and other trade activity in Africa over the last few months – is all leading up to the first U.S.-Africa Leaders Summit in Washington, DC on Aug. 5 and 6.

The Whitehouse Africa Summit will give U.S. companies yet another opportunity to mingle with 47 invited African leaders to “build on the progress made since the President’s trip to Africa last summer, advance the administration’s focus on trade and investment in Africa, and highlight America’s commitment to Africa’s security, its democratic development, and its people.”

At the summit, the Obama administration plans to focus on trade and private investment rather than public aid.

Source: AFK Insider