US Stepping Up Presence In Sub-Saharan Africa Energy Boom

Written by D.A. Barber

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.

Sign up for the Moguldom newsletter — business news you need to know about economic empowerment for the digital age, delivered to your inbox.