More than two-thirds of sub-Saharan Africans—about 600 million people—live without electricity. Inadequate, unreliable, and unequal access to electricity constrains the continent’s ability to connect globally, drives up the cost of business, hinders investment and negatively impacts quality of life. To meet the African continent’s electrification goals, it has been estimated that approximately $40 billion per year in power sector investments will be needed.
To address the concerns of low access to electricity and high barriers to investment, the U.S. Government launched Power Africa in 2013. This effort, which combines the expertise of 12 federal agencies, brings together African governments, the private sector and other partners to increase investment that improves energy security, generates economic growth, and fights poverty.
MCC is a major contributor to the goals of Power Africa. The agency’s approach to helping countries achieve economic growth—through a focus on results, country demand, and good governance—is squarely aligned with the Power Africa effort. The agency has committed approximately $1.5 billion to support Power Africa through compacts and a threshold program that improve the quality and reliability of electricity, attract private investment, and build capacity to ensure sustainability.
Working closely with partner countries and the private sector, MCC is laying the foundation for business investment in power projects that will grow economies and reduce poverty across the continent. MCC is assisting governments in planning potential projects and establishing regulatory and institutional structures needed to promote private investment.
Working with Partner Countries
In 2015, MCC and the Government of Benin signed the $375 million Benin Power Compact to improve access to electricity for its citizens. Lack of access to electricity constrained economic growth in the country, where only one-third of the population has access to the grid. The Government of Benin is contributing an additional $28 million in support of the compact.
“The MCC compact is the most important envelope of investment ever in the history of Benin that has created deep commitments for this and the next administration.”
Lionel Zinsou, Prime Minister of Benin
The compact addresses the lack of electricity through policy reforms, institutional strengthening, and large-scale investments in energy generation and distribution infrastructure. The energy generation project will focus on increasing on-grid and off-grid electricity access through renewable energy. The compact will upgrade Benin’s electricity distribution infrastructure to reduce losses and outages, improve reliability and expand grid capacity for future growth. The program is expected to expand business production, increase economic opportunities for households and enhance the government’s capacity to provide public services.
In 2014, MCC and the Government of Ghana signed the $498 million Ghana Power Compact—the largest U.S. Government transaction under Power Africa to date—to help create a financially viable power sector that will meet the current and future needs of businesses and households.
The compact takes a system-wide approach across three areas: distribution, generation and access to energy. The compact also supports Ghana’s efforts to build climate resiliency by funding major energy-efficient initiatives and improving the investment climate for renewable energy.
The Government of Ghana is commitment to implementing necessary reforms to make the power sector sustainable and financially sound, which will improve the investment climate for private investment. The compact, which is supplemented by the government’s pledge of at least a $37 million contribution, is expected to generate about $4 billion in new private investment and activity in the coming years.
In 2015, MCC and the Government of Liberia signed a $257 million compact that aims to strengthen the power sector through policy reforms and infrastructure investments.
The compact includes the rehabilitation of the Mt. Coffee Hydroelectric Plant and associated infrastructure, development of a training center for technicians in the electricity sector, the creation of an independent energy sector regulator, and the development of a nationwide approach to road planning and maintenance. The Mt. Coffee project has already received investments from the Governments of Norway and Germany and the European Investment Bank. MCC is studying complementary investments in training and technical assistance for the energy sector, the Ministry of Land, Mines and Energy, and the Liberia Electric Corporation. This partnership complements the U.S. Government’s efforts to help Liberia recover from the Ebola outbreak.
“We worked in the past four years to pass the required indicators, including control of corruption that made us eligible for a compact with the Millennium Challenge Corporation…Power is a major priority under the compact. The promise of BIG LIGHTS tomorrow is now close at hand.”
Ellen Johnson Sirleaf, President of Liberia
Signed in 2011, MCC’s $350 million compact with Malawi is designed to increase incomes and reduce poverty by revitalizing the country’s power sector and improving the availability, reliability and quality of the power supply. MCC is investing in increasing the capacity and stability of the national electricity grid and bolstering the efficiency and sustainability of hydropower generation.
The compact also invests in strengthening power sector institutions and enhancing sector regulation and governance. MCC’s investments are designed to reduce energy costs for businesses and households, improve productivity in the agriculture, manufacturing and service sectors, and preserve and create employment opportunities.
In 2015, MCC signed a $44 million threshold program with the Government of Sierra Leone to implement policy reforms and strengthen institutional capacity and governance in the water and electricity sectors, with a focus on the capital city of Freetown. The program seeks to increase the financial sustainability of water and electricity services and limit opportunities for corruption in their delivery. The goals of the program will be to establish independent regulations, strengthen key institutions, and increase transparency and accountability. The partnership developed as the country is emerging from the devastating Ebola epidemic and working to regain compact eligibility with MCC.
Before MCC’s compact with Tanzania in 2008, power demands in Zanzibar far surpassed the electric utility’s capacity, subjecting the island to daily rolling blackouts. MCC’s Energy Sector Project in Tanzania financed the installation of a 100-megawatt submarine transmission cable that connects the island to the mainland’s electric grid.
MCC also installed a new control station and switchyard on Zanzibar, as well as 37 kilometers of transmission lines on the island—all to provide an improved source of electricity that will benefit the Zanzibari people and attract outside investment. The 100-megawatt submarine cable is helping to eliminate rolling blackouts and power surges that were regular occurrences in Zanzibar. The cable includes a fiber-optic component that has also improved the island’s Internet access.
Following MCC’s investments, the island’s utility can now handle up to 250,000 customers—almost double its previous capacity. Ahead of the Power Africa effort, the Tanzania Compact proved MCC is a key player in bringing power to Africa.
Working with the Private Sector
MCC’s First Trade Mission with 10 U.S. Firms
In June 2015, MCC led its first trade and investment mission to Tanzania and Malawi with the U.S. Department of Commerce and 10 American companies to explore business opportunities in those countries’ power sectors. The mission was designed to promote U.S. exports and the expansion of U.S. businesses’ presence in Africa.
Procurement and Investment Opportunity Roadshow
In late 2015, MCC hosted a Procurement and Investment Opportunity Roadshow event in Washington, D.C. with partners from Power Africa, the U.S Department of Commerce, and the Corporate Council on Africa as part of a four-city tour that also visited Chicago, Los Angeles and Las Vegas. The roadshow invited U.S. energy equipment suppliers, project developers, operators, and investors to learn about opportunities across Africa and meet with procurement officials from Ghana and Benin.