US agency ‘set for more energy focused investment deals in Africa’

The African Development Bank (AfDB) said the second phase of support for energy focused compacts with African nations has been confirmed by MCC chief executive officer Dana Hyde.

The AfDB said its role in the second phase will be to help more African nations become eligible for MCC support and “to break institutional regulatory barriers, and manage risk to help unleash private sector investment”.

According to the MCC, the agency expects to invest around $2 billion to support the ongoing US-backed Power Africa programme “through compacts that improve the quality and reliability of electricity and promote climate-smart measures, such as energy efficiency and renewable energy”.

MCC-supported projects in Africa under existing agreements include an electricity infrastructure investment scheme in partnership with the government of Benin and a five-year, $498 million ‘Ghana Power Compact’, which the MCC said is the largest US government transaction under Power Africa to date.

“At the heart of the (Ghana) compact is a strong commitment from the government of Ghana to implement reforms needed to transform its power sector and put it on a path to solvency and sustainability, ultimately creating an investment climate that will attract private investment,” the MCC said.

AfDB president Akinwumi Adesina, who held talks with President Barack Obama last month on the sidelines of a United Nations event, said both sides agreed to continue cooperation “to propel Africa to new level of energy sufficiency”. Adesina said: “Africa has today over $82 trillion in discovered natural resources. We must add value to these resources so the wealth will stay on our continent.” The bank chief said “the only way that will happen is through industrialisation powered by reliable sources of energy”.

Adesina's US visit followed his unveiling of a landmark AfDB initiative, the ‘New Deal for Energy in Africa’, designed to “solve Africa’s huge energy deficit” by 2025. He told regional business and political leaders at the AfDB’s headquarters in Abidjan, Cote d’Ivoire: “Together, we must close the $55bn financing gap for energy in sub-Saharan Africa. And we must raise our level of commitment to meet the $22bn needed to support universal access to energy in the region.”

Adesina said major regional energy projects that should be developed under the initiative included the Inga dam on the Congo River in the Democratic Republic of Congo.

The US commerce department’s International Trade Administration (ITA) said in an economic report published in August 2014 (21-page / 962 KB PDF) that US foreign direct investment (FDI) stock in Africa grew by 40% from 2009 to 2012, which was “faster than global FDI stock, which grew by 27% over the same period”.

The largest sub-Saharan Africa country recipients of US FDI at year-end 2012 included Nigeria ($8.2bn), Mauritius ($7.0bn), South Africa ($5.5bn) and Ghana ($3.6bn), the ITA said.