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.
The Millennium Challenge Corporation is a major contributor to the goals of Power Africa. The foundational principles of MCC – a laser focus on data, growth and country demand – are squarely aligned with the Power Africa effort. The agency has committed approximately $1.5 billion to support Power Africa through compacts and threshold programs that improve the quality and reliability of electricity and promote climate-smart measures, such as energy efficiency and renewable energy.
Working hand-in-hand with partner countries and the private sector, MCC is helping lay the foundation for businesses to invest in power projects that will grow economies and reduce poverty across the continent. MCC is assisting governments in the preparation of potential projects while also helping to establish 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, a binding constraint to economic growth in a country where only one-third of the population has access to grid electricity. 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 aims to address 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 electricity through solar, thermal and hydropower generation and off-grid electricity through renewable energy. The compact will also include upgrades to 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 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 mitigate climate change by funding major energy-efficient 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 put its power sector on a sustainable and financially sound path, ultimately creating an investment climate that will attract private investment. The government has also pledged to invest at least $37 million of its own money, and the compact 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 rehabilitation of the Mt. Coffee Hydroelectric Plant and associated infrastructure, development of a training center for technicians in the electricity sector, support for the creation of an independent energy sector regulator and support for the development of a nationwide road maintenance framework. The Mt. Coffee project has already received investments from the Government of Norway, the Government of Germany and the European Investment Bank. MCC is also studying complementary investments in capacity-building for the energy sector and technical assistance to the Ministry of Land, Mines and Energy and to the Liberia Electric Corporation. This partnership also 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 (MCC)…This happened when the Vice President witnessed the signing by the Minister of Finance and Development Planning and the MCC for a US$256.7 million dollar grant on November 2nd (2015) in Washington DC. Power is a major priority under the Compact. The promise of BIG LIGHTS tomorrow is now close at hand. The Compact is significant because it is a new partnership that would transcend the administrations of President Barack Obama and me.”
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, build institutional capacity, and improve governance in the water and electricity sectors, with a focus on the capital city of Freetown. By establishing independent regulations, strengthening key institutions, and increasing transparency and accountability, the program seeks to create a foundation for the delivery of financially sustainable water and electricity services, while limiting opportunities for corruption in the delivery of these services. The partnership developed as the country is emerging from the devastating Ebola epidemic and seeking to regain eligibility for a compact 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 completed its first trade and investment mission together with the U.S. Department of Commerce to Tanzania and Malawi with 10 American companies to explore business opportunities in the 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.