NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, July 24, 2015

As President Barack Obama returns to Africa this week, his major initiative to help the continent double access to electricity is in jeopardy, undermined by Congress.

Of the $7 billion that Obama set aside for Power Africa, $5 billion fell under the auspices of the now-defunct Export-Import Bank, which guarantees loans to foreign companies buying U.S.-made products. Just $132 million in transactions had been approved before the bank’s charter expired last month, and now it cannot approve new ones.

The bank, denounced by conservative critics as corporate welfare, said it had several billion dollars of Power Africa projects in the pipeline. But none can move ahead unless lawmakers reauthorize the bank.

For American companies, that could mean losing out to competitors such as China. Beijing is investing heavily in Africa and would be happy to see Chinese 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.

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 announced the program during a visit to South Africa, the program has yet to add any megawatts of electricity to Africa’s overburdened, underdeveloped grid.