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Obama's Megawatt Diplomacy Is Great News For Sub-Saharan Africa

01/05/2015 12:31 EST | Updated 03/07/2015 05:59 EST

U.S. President Barack Obama's call for fundamental change in development assistance is as refreshing in 2015, as when first made in a speech at the University of Cape Town, South Africa, on June 30, 2013. This is how the President put it:

"America has been involved in Africa for decades. But we are moving beyond the simple provision of assistance, foreign aid, to a new model of partnership between America and Africa -- a partnership of equals that focuses on your capacity to solve problems, and your capacity to grow...We've been dealing with agriculture, we've been dealing with health. Now we're going to talk about power -- Power Africa -- a new initiative that will double access to power in sub-Saharan Africa...Access to electricity is fundamental to opportunity in this age. It's the light that children study by; the energy that allows an idea to be transformed into a real business. It's the lifeline for families to meet their most basic needs. And it's the connection that's needed to plug Africa into the grid of the global economy. You've got to have power. And yet two-thirds of the population in sub-Saharan Africa lacks access to power -- and the percentage is much higher for those who don't live in cities."

Who can argue with that? Obama is rightly emphasizing the reality that electricity is an input into nearly every good and service in households, villages, towns and national economies. A region in which 600 million out of 960 million are without power cannot possibly ignite, expand or sustain economic growth and development. And that is why the President decided to do something about it -- launching what I have baptized Obama's Megawatt Diplomacy that aims to build no less than 30,000 megawatts in Sub-Saharan Africa (SSA).

Prior to Power Africa, China was the lone ranger in building major energy infrastructures across SSA. And thanks to its increasing openness about its aid, more is known about China's approach, categories and financial resources it commits to development assistance. According to the 2014 White Paper on Foreign Aid, China's assistance was 89.34 billion yuan or USD14.4 billion in 2010-2012 period. This was slightly less than Canada's official development assistance which was USD15.5 billion in the same period, meaning that while Canada's aid averaged USD5.1 billion per year, China's annual aid expenditure was USD4.8 billion. From this data, we learn that China became a member of top ten donors by volume after US, UK, Germany, Japan, France, Sweden, Norway, Netherlands, Canada - with China replacing Australia for the 10th position.

Of particular interest is use of China's concessional loans to finance economic infrastructure, the largest component of China aid, amounting to 49.76 billion yuan (USD8 billion) or 55.7 percent of its total aid in 2010-2012. The White Paper defines "concessional" as a loan whose interest "is lower than the benchmark interest released by the People's Bank of China," with the difference "made up by the state as financial subsidies." We further learn from the White Paper that China assisted construction of more than 20 energy projects around the world during this phase, including Ghana's 400 megawatts Bui hydropower plant.

The Bui Power Authority reports that the multi-purpose project that, besides power, supports irrigation, fisheries, and tourism, was commissioned by Ghana's President John Dramani Mahama in December 2013, and currently provides an additional 20 percent of installed capacity that has sharply reduced load shedding.

A few examples outside the 2010-2012 period show how active China is in increasing power generation and transmission in SSA. In Nigeria construction of the USD1.3 billion, 700 megawatts Zungeru hydroelectric project began in 2014. The multi-purpose Merowe hydropower in Sudan was completed in 2009 with installed capacity of 1,250 megawatts making the plant the largest in Africa. In the same year the 300 megawatts Tekeze Dam in Ethiopia was completed. When the Grand Ethiopian Renaissance Dam becomes operational, it will take that title with its capacity of 6,000 megawatts. Chinese power companies are currently building several other hydropower plants in Ethiopia, and have left a footprint across the continent in such countries as Botswana, Gabon, Republic of Congo, Angola, Senegal, and Kenya.

If momentum generated by Obama's Megawatt Diplomacy is maintained, a lasting mindset shift could indeed lead to turnaround in building basic energy infrastructure in SSA. China will no longer be the lone builder of this strategic sector. The business of building power plants in SSA will also no longer depend on public financing alone.

There are already good signs. The U.S. Agency for International Development (USAID) says that its private sector Founding Partners have pledged investments worth USD20 billion in power-generation in five SSA countries. This figure of private investments is more than double the collective contribution by the World Bank, African Development Bank, and the government of Sweden amounting to USD9 billion made in 2014. This private and public investments totalling USD29 billion comes on top of the original USD7 billion committed to Power Africa by the Obama administration.

This is great news.

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