August 5, 2014
MCC and Power Africa
More than two-thirds of sub-Saharan Africans—about 600 million people—lack access to electricity. Inadequate and unequal access to energy constrains the continent’s ability to connect globally, drives up the cost of business, hinders investment, and negatively impacts healthcare and education.
To address this concern, the U.S. Government launched Power Africa in 2013 to double access to electricity on the continent. This initiative, which combines the efforts and expertise of 12 federal agencies, works with African governments, the private sector and other partners to enhance energy security, decrease poverty and generate economic growth.
The Millennium Challenge Corporation is playing a critical role in Power Africa and is developing compacts with three of the initiative’s six focus countries: Ghana, Liberia and Tanzania. MCC plans to invest about $1 billion to support Power Africa by increasing access to electricity, strengthening the reliability of power systems, improving the sustainability of the energy sector and creating the enabling environment required to attract private investment through infrastructure projects, improving policies and regulations and helping build better power institutions.
Working hand-in-hand with partner countries and the private sector, MCC is helping clear the way for businesses to invest in power projects that will grow economies and fight poverty across the continent. MCC is assisting governments in preparation of potential projects, while also helping establish regulatory and institutional structures that are required to protect private investments. By pursuing fair, open and transparent procurements, MCC is helping American companies invest in some of the fastest-growing economies in the world.
In August 2014, MCC and Ghana signed a five-year, $498 million compact to support the transformation of Ghana’s power sector. The Ghana Power Compact—the largest U.S. Government transaction under Power Africa to date—will help create a financially viable power sector that will meet the current and future needs of households and businesses.
The compact takes a system-wide approach with six projects across three areas: distribution, generation and access to energy. The compact also supports Ghana’s efforts to mitigate climate change by funding major energy-efficiency initiatives and improving the investment climate for renewable energy.
At the heart of the 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 profitability and sustainability, ultimately creating an investment climate that will attract private investment. The government has also pledged to invest at least $37.4 million of its own money, and the compact is expected to catalyze at least $4 billion in private energy investment and activity in the coming years.
Liberia needs more reliable, lower-cost electricity in the short- and medium-terms to support business activity and industrial production, as well as to create more and better-paying jobs. MCC is working with the Government of Liberia to define potential compact projects that strengthen the energy sector through a set of infrastructure investments and reforms to energy-related policies and regulations.
MCC and the Government of Tanzania are working together to identify and develop a high-impact compact to address the country’s inadequate supply of reliable power, which constrains the country’s long-term economic growth. The proposed energy investments aim to improve the availability, reliability and use of electric power by supporting broad reforms in the power sector. They will primarily focus on the technical, financial and operational turnaround of the public utilities and will increase access to electricity, mainly in rural areas.