What We’re Losing: Energy, Growth, and Power Africa

Evidence is mounting on the devastating effects of the destruction of USAID on global humanitarian assistance, health, and food security. Let’s take a look at another less commented upon, but still critical, aspect of the damage: US support for energy access in Africa.

Since 2013, USAID has coordinated a path-breaking public-private partnership called Power Africa, which has been a whole-of-government effort to expand electricity access for households, farms, health providers, and businesses in a continent where about 600 million people still lack reliable access. The idea was to use Power Africa funds to catalyze much greater volumes of finance for increasing power generation, transmission, and distribution. It received the bipartisan endorsement of Congress through passage of the Electrify Africa legislation in 2016.

But in the current context of intense pressure to cut aid, let’s first conduct a thought experiment on the optimal allocation of increasingly scarce grant resources. Others have made the compelling moral and self-interested case for aid that keeps people alive. Let’s consider the question of aid that promotes growth in countries that we want to be rapidly expanding markets for US goods and services in the 21^st century.

Support for growing and stable US markets was the central motivation for large-scale aid programs in the mid-20^th century: the Marshall Plan in Europe and aid for South Korea and Taiwan. The massive returns on those investments are obvious. But it’s equally obvious that the scale of such aid as a share of US GDP will not be reproduced in this century. So how should we think about growth-promoting investments in the 21^st century? Let’s consider a few principles that might be useful in this context.

• Aid should target the most important obstacle(s) to growth.
• Aid should target countries with high growth potential as US markets.
• Aid should be deployed strategically to help the US counter China’s market dominance.
• Given tight constraints on aid, grants need to maximize “bang for the buck” through catalyzing multiples of finance from others.
• Aid should open opportunities for US business.
• Aid should be deployed in ways that create synergies across US agencies and break down unproductive silos.

Let’s see how Power Africa measures up to these principles.

Constraints to growth. Many factors are important for sustained growth. Some stand out, however, as necessary, even if not sufficient. Power is among those. The evidence that reliable power access drives growth (and that growth drives energy demand) is compelling. As this report notes, there are no low-energy, rich countries. And Africa is the region where the energy constraint is most binding: 80 percent of people without access to electricity live in sub-Saharan Africa.

High-growth potential. Perceptions that all African economies are stagnating or shrinking are wrong. In fact, 12 of the top 20 fastest-growing countries in the world in 2024 were in Africa. Africa is also home to the most rapidly growing population and the fastest-growing middle class in the world. The middle class has been projected to grow to more than 1 billion people in 2060, 42 percent of the African population. That buying power opens up whole new possibilities for the continent’s importance as a US market.

Countering China. China already dominates external sources of finance for infrastructure in Africa, but growing discontent with unsustainable debt to China and low infrastructure quality offer opportunity to the US in power and other sectors—if the US has the tools to offer a scalable finance model. Power Africa deploys such tools through: funding advisors to build transactions that are both commercially viable and productive, sharing project risk, expanding power transmission networks (often a key bottleneck), spreading cost-efficient off-grid technologies, and connecting national power grids to boost regional power trade.

Bang for the buck. From the start, the aim of Power Africa was not to maximize its own finance for energy infrastructure, but rather to attack the obstacles that prevent the flow of finance from others. That ethos is evident in a comparison of Power Africa costs to its benefits. Since 2013, direct budget allocation for Power Africa has cumulatively totaled $1.2 billion, deployed in 42 countries. That finance has helped catalyze a cumulative $29 billion in power project finance from others—a 24x mobilization ratio. By 2029, the mobilization ratio was expected to be 31x ($50 billion investment mobilized from $1.6 billion budget allocation). With Power Africa support, over 150 power projects have reached financial close, which will add 15,498 megawatts to power generation in Africa. Most important, 216 million users gained access to electricity with support from Power Africa—or just 5.5 Power Africa dollars per new user connected.

Opportunities for US business. Responding to bipartisan interest in creating opportunities for US firms, Power Africa projects have been structured to include over 100 US companies. Before its shuttering, Power Africa was supporting US companies in $26.4 billion worth of deals and tracking an additional $21 billion in upcoming projects. Bipartisan support has also been dependent on an “all-of-the-above” energy approach, combining grid and off-grid investments, and renewable and fossil fuel investments. Power Africa supports all of these. About 46 percent of the 15,498 megawatt generation capacity supported by Power Africa is from natural gas, and some came from heavy fuel oil and peat. At the same time, Power Africa has provided critical support for clean energy generation and access to a continent with vast renewable energy potential: those investments so far have avoided 45 million tons of carbon emissions.

Whole greater than the sum of parts. Power Africa was a groundbreaking initiative that was built on an innovative whole-of-government approach—the first ever launched in the history of US support for global development. It is a model that the first Trump Administration continued and then replicated in its Prosper Africa initiative, which the Biden Administration continued. Power Africa’s work with other agencies, including DFC and MCC, has been routine, intentional, and force-multiplying, not ad hoc. 70 percent of the transactions supported by Power Africa have involved collaboration with other US agencies. The average transaction involved over three USG and private sector partners.

Time to rethink

Secretary of State Marco Rubio has declared that US aid should make the US stronger, safer, and more prosperous. In an era of extremely tight fiscal constraints, aid also has to be efficient and effective. I would argue that, by any reasonable standard, Power Africa meets these criteria. It focuses on a central constraint to growth in a region that likely has the greatest potential for growth as a market for US goods and services by the middle of this century and as a major source for critical mineral inputs. It directly counters China in a region where it is outcompeting the US. Power Africa’s limited resources effectively crowd in others, including the US private sector, and it multiples the reach and results of other US agencies. If the Administration is serious about applying its own criteria, it should restore Power Africa.