What's next after the end of Power Africa?

From the newsletter

US President Donald Trump has terminated Power Africa, an initiative launched in 2013 by then-US President Obama to support renewable energy projects and expand electricity access in Africa. Since its inception, the program has funded over 150 projects, adding 15.5 GW of power generation and connecting 216 million people.

• The initiative helped to remove obstacles blocking financial flows into Africa. Since 2013, it has facilitated the mobilisation of $29 billion in power project finance from external sources–a 24x mobilisation ratio.

• However, the closure of the US Agency for International Development (USAID) funding, which supported Power Africa, terminates this financial support. How will this impact Africa, and is this the opportune moment for the continent to reduce its reliance on foreign aid?

More details

• When the Power Africa programme began, approximately 62% of the African population lacked access to electricity. This figure now stands at about 43%. A clear progress made. The project worked to de-risk private sector investments and mobilise capital. By 2029, the projected mobilisation ratio was 31x ($50 billion in investment mobilised from a $1.6 billion budget allocation).

• However, the abrupt termination of funding leaves many planned projects in limbo, especially those that had not reached financial close. While precise figures for these projects are unavailable, several of them could face cancellation. 

• African governments are increasing their investments in energy infrastructure, but domestic resources alone are insufficient. Many of them are stuck in debt cycles, relying on foreign borrowing to meet their budget expenditure, which further limits their ability to invest in energy.

• Despite these challenges, there are potential solutions. Private sector participation has been successful in financing large projects, such as Kenya's 310 MW Lake Turkana Wind Power project. Several countries have also developed policies that allow public-private partnerships (PPPs) in the energy sector, which is crucial for large-scale projects where governments face capital constraints. Countries like South Africa, Kenya, Morocco, Zambia, Côte d'Ivoire, Ghana, Nigeria, Senegal, Tanzania, and Uganda are leading the way in PPP adoption.

• Multilateral institutions also offer a potential avenue for support. Just last month, the African Development Bank (AfDB), together with the World Bank, committed $40 billion to provide electricity to 300 million Africans by 2030. This initiative aims to de-risk and catalyse investments in renewable energy, particularly in 12 selected countries, including Tanzania, Malawi, and Nigeria.

• Alternatively, Africa could seek increased engagement with China, which is already expanding its presence in the continent's energy sector. China controls approximately 80% of the solar panel market exports to Africa and could play a larger role in supporting Africa's energy development. They have previously participated in and financed multi-million dollar infrastructural projects in Africa and also providing technical skills where needed.

• However, relying solely on China could bring the same risk that Power Africa faced. Over-reliance on any single partner can create dependencies and limit Africa's ability to shape its own energy future. Though China have proven to be reliable in infrastructure projects, the speed at which it can replace Power Africa's activities remains uncertain.

Our take

• If the project could continue with its funding, based on data, it would connect more than 100 million people by 2029. This would have significantly closed the energy access gap. Instead, its termination leaves a big void. But who will step up to fill this gap?

• Africa could seek engagement with China. But any partnership with China must prioritise equitable terms, technology transfer, and local capacity building. It could alternatively explore the option of funding from AfDB and the World Bank.

• However, the responsibility for developing Africa's energy sector lies with Africa itself. Countries must strengthen their capacity to attract diverse sources of funding, including domestic capital markets and regional development banks. This requires creating a more attractive investment climate through policy reforms, streamlined regulations, and regional cooperation.