A Barrier to African Growth: Energy


Most of the African continent lacks electricity, especially in comparison to the other continents.

Throughout Africa, opportunities, and barriers to those opportunities, are often critically linked. This is perhaps illustrated best in the dire energy needs in rural and urban environments across the continent. With over 1 billion people living throughout Africa, 70 percent do not have access to power to meet their basic needs. This is not merely a challenge for meeting individual energy requirements but the lack of reliable energy also discourages growth and investment of the private sector and limits job creation, increases reliance on foreign aid, and creates environments that lead to instability. As the reauthorization of the Africa Growth and Opportunities Act (AGOA) approaches, addressing Africa’s energy challenges provides a real opportunity to address and increase beneficiary country utilization of this important legislation.

While there is much to celebrate about African nations’ rapid growth rates and the attention of BRIC nations (i.e., Brazil, Russia, India, China ), one of the great obstacles to even stronger growth trends is the fact that energy needs in public and private sectors is insufficient, unreliable and dirty. The World Bank reports, in Africa, local and regional energy challenges include “low access and insufficient capacity. Twenty-nine percent of the population of sub-Saharan Africa (SSA) has access to electricity versus 40 percent in other low-income countries. Excluding South Africa, the entire installed generation capacity of SSA is only 28 gigawatts, equivalent to that of Argentina.”

Factoid:

Argentina is home to 40.1 million people compared to Africa’s 1.033 billion.
What does all this mean for people in business in Africa? The ONE Campaign recently published a blog by Evans Wadongo, founder and executive director of Sustainable Development for All Kenya, and one of CNN’s top 10 heroes of 2010. In his blog post, Wadongo summed the challenge well: “Without access to energy service, the poor will be deprived of the most basic of human rights and economic opportunities to improve their standard of living. People cannot access modern hospital services without electricity or feel relief from sweltering heat. Food cannot be refrigerated and businesses cannot function. Lack of access to energy has a direct negative effect on infant mortality, illiteracy, rural-urban migration, and security. Children cannot study at night” and women may give birth by candle or flashlight.

With the challenge of how to address Africa’s deeply entrenched energy needs is the opportunity to significantly increase the potential for economic growth, investment, and raising the standard of living for all. The Africa Update will continue to look at barriers to economic growth, including in energy. Keep a look out for upcoming congressional and executive branch announcements on this very topic.
As noted in the previous Africa Update, President Obama embarks on his second visit to sub-Saharan Africa on June 26, 2013, he will visiting Senegal, South Africa and Tanzania. This issue of Africa Update provides brief profiles on the final two nations that the President plans to visit.

South Africa



The Republic of South Africa, a strategic partner of the United States, is an economic and political force throughout the continent.  A country of nearly 51 million people, South Africa has 11 official languages, but was ruled by a white minority from independence in 1948 to the end of apartheid in 1994, when it elected Nelson Mandela as the nation’s first democratically elected president.

With a GDP of approximately $592 billion in 2012, South Africa boasted the continent’s biggest economy and joined the ranks of BRIC nations – Brazil, Russia, India and China as an emerging world economic powerhouse.  The 15th largest stock exchange in the world, this upper-middle income country is the world’s largest producer of platinum, gold and chromium. South Africa is AGOA-eligible. The United State Trade Representative (USTR) reports that “the five largest import categories in 2011 were: Precious Stones (platinum and diamonds) ($3.6 billion), Vehicles (cars) ($2.2 billion), Iron and Steel ($853 million), Machinery ($448 million), and Ores, Slag, Ash ($402 million).”

While South Africa still suffers from one of the highest rates of HIV in the world, the government’s response to the pandemic has significantly improved over time.  In 2000, then-president Thabo Mbeki denied that the HIV virus caused AIDS and rejected appeals for the national assembly to declare a national health emergency.  In a complete policy reversal decided by South Africa’s Supreme Court, the South African government is now undertaking comprehensive efforts to prevent the spread of the virus.  In December 2010, then-Secretary of State Clinton joined South African Minister Maite Nkoana-Mashabane to sign a Partnership Framework, which provides a five-year joint strategic plan to fight HIV/AIDS. The United States President’s Emergency Plan for AIDS Relief (PEPFAR) and the government of South Africa continue to work in close partnership in addressing the country’s HIV/AIDS epidemic.  The U.S. is heartened by South Africa’s increased investments in its people’s health as outlined by the U.S.-South Africa Partnership Framework Implementation Plan.  The U.S. remains committed to continued collaboration toward helping South Africa achieve an AIDS-free generation with a, country-led, sustainable health program.

Tanzania



Known for its spectacular landscapes, coastal plains and highlands, Tanzania has the largest land area among its East African neighbors. Situated between Kenya and Mozambique, Tanzania is bordered by the Indian Ocean and boasts pristine sandy beaches and Africa’s highest and snow-capped mountain, Kilimanjaro. The country is home to an estimated 40 million people of which one-third are Christian, another third are Muslim, and indigenous beliefs represent the final third.

Tanzania has transitioned to a liberalized market economy, however, the government still retains some controls and influence in sectors including telecommunications, banking, energy, and mining. Like many Africa nations, Tanzania’s economy is largely dependent on agriculture, which accounts for over a quarter of the country’s GDP.  In recent years, the country’s financial sector has expanded and at present foreign investment accounts for nearly 50 percent of all banking assets.

In 2008, Tanzania received the largest Millennium Challenge Corporation (MCC) compact grant, totaling nearly $700 million. In December 2012, MCC selected Tanzania for a second compact. MCC describes their multi-year investments as “seeking to reduce poverty and stimulate economic growth by increasing household incomes through targeted investments in transportation, energy, and water. The investments in three projects will help Tanzanians address the inadequate transportation network by improving roads that will increase commerce and help connect communities with markets, schools, and health clinics; improve the reliability and quality of electric power and extend electricity service to communities not currently served; and increase the availability and reliability of potable water for domestic and commercial use which will increase health and productivity.”


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