In less than a month, Washington will play host to roughly 50 African heads of state, hundreds of cabinet-level ministers, and over a thousand American and African business leaders and investors. It will be a truly historic moment. More importantly, it will be an unparalleled opportunity to advance U.S. strategic interests on the African continent — spanning from Cairo to Cape Town. While President Barack Obama will be hosting this summit, in some ways, Congress will decide whether it will be a success.
African delegations are expected to deliver a unified message to U.S. policymakers — they want to attract more U.S. investment into their economies. This reflects a strong recognition that U.S. investment, technology, and innovation can help to spur greater growth and prosperity in African economies. It can also help to close a massive infrastructure gap — ranging from unreliable power to insufficient transport networks — as well as address increasing demands for gainful employment.
African leaders have a political imperative to rapidly expand access to economic opportunities. Every year, up to 15 million youth enter the job market. Over two-thirds of recently surveyed Africans cite jobs and economic prospects as their most pressing concerns. Those figures exceed 75 percent in places like Nigeria, Egypt, South Africa, and Tunisia. Leaders intimately know that the dawning demographic bulge, coupled with growing public expectations, can either become a blessing or an explosive recipe for instability. The Arab Spring, or even the vicious Boko Haram movement in northern Nigeria, are powerful reminders of this dynamic.
Central to this story are the lack of reliable power and access to financing. Take Nigeria as an example. Nearly 80 percent of Nigerian firms cite these two issues as the biggest constraints to their profitability, growth, and ability to hire more workers. On average, there are 25 power outages a month, which in turn, cut nearly 10 percent off of firms’ sales each year. Not to mention that 80 million ordinary Nigerians have no access to modern energy services. Simultaneously, only 4 percent of Nigerian firms use banks for working capital or to finance investments.
Just imagine what would be possible for Nigeria’s $500 billion economy if these issues were tackled effectively. Then consider the opportunities for US businesses in an unshackled market of 170 million consumers. While Nigeria is arguably the most striking example of this storyline, the same dynamics are unfolding across the continent. All of this illustrates the growing need for mutually beneficial relationships between America and African nations.
This is where Congress and the Energize Africa Act come in. This ambitious bill, which recently passed out of the Senate Foreign Relations Committee with strong bipartisan support, would usher in a paradigm shift for how the U.S. pursues its development and foreign policy objectives. It moves beyond the outdated model of foreign aid handouts and insists upon private sector-based solutions. Through the Overseas Private Investment Corporation — a small and nimble U.S. development agency — it would leverage the unparalleled power of U.S. investors in pursuit of U.S. strategic interests.
OPIC’s mission is simple and straightforward. It supports U.S. development objectives abroad by providing loans, guarantees, and political risk insurance to help U.S. businesses enter into frontier markets. It has an explicit mandate to only support projects where private financing is either unavailable or too short-term in nature. This is particularly critical for power generation projects, which often require patient, long-term capital. For their part, U.S. investors pay risk-based fees and interest rates on OPIC’s insurance and loan products, which instills market-based discipline. The legislation also would provide OPIC with new tools to support joint ventures between American and African firms, thereby further helping to address the lack of local financing.
Through this operating model, OPIC could not only deliver strong development results but also generate modest profits that flow back to the U.S. Treasury. This ultimately would help to reduce the federal deficit. The Energize Africa Act’s bipartisan sponsors, led by Senators Robert Menendez, D-N.J., and Bob Corker, R-Tenn., recognize the power of this approach.
The House of Representatives, with Congressmen Ed Royce, R-Calif., and Eliot L. Engel, D-N.Y., leading the way, has already passed its counterpart bill, the Electrify Africa Act. Now, it’s time for the Senate to move. Doing so would send a strong signal to the roughly 50 African leaders traveling to Washington next month that the United States is a committed, long-term partner.
Ben Leo is a senior fellow and director of the Rethinking US Development Policy initiative at the Center for Global Development.