Electricity Alleviates Poverty Through the Electrify Africa Act

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SEATTLE, Washington — The Obama Administration made the electrification of Africa a major policy initiative during its second term. In 2013, this administration launched a multilateral partnership between the American government, African governments and various development partners to expand the electricity grid in sub-Saharan Africa. This initiative, known as Power Africa, led to the collaboration of 12 different government departments and agencies with the goal of doubling access to electricity in sub-Saharan Africa.

The Electrify Africa Act

On February 8, 2016, President Obama signed the Electrify Africa Act into law. The Act passed the House and Senate with bipartisan support. This legislation reinforces the sentiment that electricity alleviates poverty by accelerating economic growth and development. The Electrify Africa Act provides the Power Africa Initiative with the government support needed to implement its agenda and achieve its goals. 

The Electrify Africa Act was built on the Obama Administrations initiative by making it U.S. government policy to create a multilateral government and private sector collaborative effort. Through this law, the government hopes to provide more than 50 million people in sub-Saharan Africa with electricity by 2020. It will also provide access to affordable energy in “rural and under-served areas.” Through reforms in power generation and the elimination of financing barriers, the law will allow for more energy projects. One project will install higher capacity generators.

The Electrify Africa Progress Report

In May 2019, USAID released the Electrify Africa Progress Report of 2018. It detailed the continued successes of the Electrify Africa Act. This report explains the successes of Electrify Africa in the generation of additional megawatts and the increase of access to energy. It shows how communities were able to more efficiently produce and distribute electricity. 

As of January 2019, Power Africa, through the support of the Electrify Africa Act, has invested $20.5 billion in Power Africa Transactions. It has provided power to 58,552,435 beneficiaries. Power Africa has been able to guide sub-Saharan African governments in the prioritization, coordination and efficient implemention power projects. Its team of professionals has helped 120 projects reach financial close, totaling 10,095 megawatts. As of Jan. 2019, there were an additional 945 transactions with the prospect of creating 85,291 MW power generation capability. 

Improving Access to Energy

This growth in MW power generation is in large part thanks to Power Africa’s innovative financing and technical solutions as well as personnel training. Power Africa’s support of the Nigeria Bulk Electricity Trading Company prompted negotiations with the Ministry of Finance to provide payment assurances to developers and investors without adding to Nigeria’s debt burden. These negotiations have led to an additional 450 MW of power generation in Nigeria. They also provide a template for other African governments to lower risk for future energy projects.

Promoting off-grid access to energy is a crucial step to advancing the self-reliance of sub-Saharan African countries. That alone is a key reason why electricity alleviates poverty. Power Africa’s Beyond the Grid program seeks to use USAID and USADF resources to support off-grid private-sector companies in order to promote and implement more innovative products and services. It has provided a way to regulate policy to each specific country’s needs and improve access to funding for off-grid companies 

Power Africa’s BTG has made good progress in its goal of expanding access to electricity in off-grid communities. So far, BTG has created an additional 12 million off-grid connections, providing more than 55 million beneficiaries with access to electricity. This in large part is due to the work that BTG did to secure $113 million in financing for local businesses to implement development projects and accelerate access to the electricity grid. 

Promoting an Enabling Environment

Power Africa seeks to promote an environment that enables developmental projects by providing personalized technological and policy guidance to key ministries, regulators and other power-sector officials. This strategy both helps advance current transactions and support future private investment in the energy sector. This has been accomplished by reforming policy, regulation and legislation, increasing the building capacity by providing technical assistance and strengthening regional power tools. 

Power Africa has helped lower risk and increase investor confidence by clarifying pricing, land rights and environmental and social performance standards. Power Africa has also provided support and funding to the African Development Bank to hire competent and ethical legal counsel to negotiate equitable and sustainable deals that will help expand local economic activity and access to electricity. In addition, USAID and the State Department’s Bureau of Energy Resources have provided the technical assistance necessary to facilitate cross-border trade of electricity, enhancing energy security and utilizing local energy resources at a lower cost.

Impact of the Electrify Africa Act

So far the Electrify Africa Act has been a success. This strategy has helped local sub-Saharan African distribution companies increase revenues by a combined $154 million. It has trained more than 4,000 staff members and connected an additional 546,000 new customers to the electricity grid. It has provided millions of off-grid sub-Saharan Africans with access to electricity and generated thousands of additional megawatts with the opportunity for thousands more. 

It is important to look at this success in the context of how electricity alleviates poverty. The Electrify Africa Act has led to the development of local economies by providing communities with new or expanded access to electricity. This piece of legislation demonstrates how an efficiently structured to aid system and increased financing can create a lasting impact on alleviating poverty in developing countries throughout Africa. 

Peter Trousdale
Photo: Flickr

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