“Power Africa” is a new five-year American presidential initiative launched by President Barack Obama in Tanzania during his Africa Tour in July 2013. The initiative aims at supporting economic growth and development by increasing access to reliable, affordable, and sustainable power in Africa.
The program is designed as a multi-stakeholder partnership among the governments of the United States of America, Tanzania, Kenya, Ethiopia, Ghana, Nigeria and Liberia, the US and the African private sector. The African Development Bank Group (AfDB) has been a key partner in the design of the initiative and will continue to be during its implementation. AfDB was praised by President Obama: “I want to thank the African Development Bank for its partnership, as well as many companies that have stepped up with commitments, including some here.”
The United States of America through its development agency USAID with close collaboration from the AfDB have taken the lead in shaping a list of priority power transactions across the six main focus countries where interventions will enable them reach significant milestones in the next 12-18 months.
The AfDB expects to allocate as much as $3 billion over the next 5 years. This will leverage at least 4 times more investments in the energy sector. The AfDB’s interventions will include investment loans, reforms, advisory, and guarantees will be committing at least $3 billion in the 6 priority countries.
“The billions of dollars available for investment in the energy sector will translate into actual bulbs in people’s homes and electricity necessary to grow small businesses if state utilities run efficiently and effectively. The policy reforms will facilitate and enhance cross-border energy markets,” AfDB President Donald Kaberuka said in Dar Es Salaam, Tanzania on the 1st of July.
The main financial source for the Bank’s assistance to the energy sector in the Power Africa countries is the African Development Fund (ADF), which is its concessional window. The ADF contributed $1.4 billion out of the Bank’s $1.6 billion over the last five years in the six priority countries’ energy investments.
In addition the priority power transactions, other areas of collaboration for the AfDB with Power Africa include:
SEFA is a joint initiative between the African Development Bank and the government of Denmark comprising of resources of up to USD 56 million for unlocking investments in small and medium-scale renewable energy generation and energy efficiency projects. SEFA is structured as a flexible multi-donor/multi-purpose platform to support the access to sustainable energy agenda in Africa, and one of Africa’s instruments under the UN-championed Sustainable Energy for All (SE4All) initiative. During the AfDB’s 2013 Annual Meetings in Marrakesh, the USAID assistant administrator for Africa, Earl Gast announced an initial $5 million pledge to SEFA as the first part of a multi-year commitment to the Fund.
ASLF is a legal services support housed at the Bank and committed to provide contract negotiation assistance to Power Africa countries to help advance key transactions in the energy sectors. The USAID has shown strong interest in supporting and scaling up the work of the ALSF.
Partial Risk Guarantee (PRG)
PRG is a risk mitigation instrument to stimulate private investment by covering private lenders and investors against the risk of the government or government-owned agency failing to perform vis-à-vis a private undertaking. The Power Africa initiative expressed interest in working with the AfDB to set up a Partial Risk Guarantee set-aside that will top up/co-guarantee with its existing ADF PRG instrument.
Unlocking Private Financing Sources for African Energy Projects
Recognizing the critical role that private financing sources such as sovereign wealth funds, pension funds, and insurance can play in financing major energy projects in Africa, the Bank together with USAID will collaborate to attract private local capital for investment in energy infrastructure. The new Africa50Fund, unveiled by the AfDB at its Annual Meetings in Marrakesh will also help fill the funding gaps in Africa’s infrastructure. The Africa50Fund aims at increasing the number of bankable infrastructure projects in Africa and support the delivering of the financial instruments required to attract additional infrastructure financing to the continent, including credit enhancement and other risk mitigation measures.
The AfDB is an anchor partner of the “Power Africa”. A strong 13th ADF replenishment would mean increased resources for catalytic funding that can crowd in private energy investments for the Initiative.