Two out of three people across sub-Saharan Africa have no reliable access to electricity. The most striking feature of our contemporary world is the contrast between Europe and the USA, which are awash with savings, and Africa, which is chronically short of investment capital. A developed world sunk in what economists call secular stagnation and an African continent unable to realise its economic potential.
By Eddie O’Connor, CEO, Mainstream Renewable Power
I want to propose a solution to secular stagnation in the West that simultaneously solves Africa’s lack of electricity.
When the Great Depression struck the USA in the 1930s President Roosevelt launched programmes to stimulate demand, notably the Rural Electrification Act. He described it as the key to modernising the economy. Then there was the Marshall Plan, officially known as the European Recovery Program. Under the Plan, the USA gave the equivalent of US$ 120 billion in economic support to help rebuild Europe after the end of the Second World War.
It stimulated so much demand for American goods and services that the US economy grew at unprecedented rates for the next 30 years. The Marshall Plan provides a template for a similar type of partnership; this time between the West and Africa.
The capital is there, estimated to be around US$ 70 trillion, stashed away in savings. The project is there; the electrification of Africa. What is not there is the political vision. If we can mobilise the West to provide the capital and if governments can de-risk investments in renewables, we can start a Marshall Plan for Africa.
From the perspective of potential investors in Africa the overriding need is to de-risk investments that typically take 15 years to recover the capital and make a satisfactory return. In order to transform the investment climate, the risks have to be addressed. There can be no hint of corruption and no subsidisation of fossil fuels. Then there’s currency risk. It arises from the mismatch between investments in dollars and revenues in local currencies. This mismatch is the single most important factor inhibiting inward foreign investment into African renewables. It is a matter for the governments of the investors, and international financial organisations like the World Bank.
What investors need is insurance against inflation and currency depreciation. They need certainty about the value of future revenue streams so that their capital is recovered and adequately rewarded in real terms. There is no way private sector funds will flow into Africa in the quantities required unless these two preconditions are met.
Lastly, if we are to deliver a new Marshall Plan for Africa, we need to direct investment into Africa through incentive programmes which reflect the risks for investors and the long-term societal benefits.
Governments must find ways of enticing investors to overcome risk adversity and to put that capital to work. Governments have recognised the role of tax allowances and tax reliefs in stimulating investment. Here is a clear example of a massive public benefit in the West which would accrue from mobilising unused savings for the electrification of Africa.
Let Africa be the engine that drags the rest of the world out of recession while pulling a billion people out of poverty.
I hope that this new Marshall Plan for Africa will meet that challenge with the ambition it deserves.
A Plan for Electrifying Africa
Two out of three people across sub-Saharan Africa have no reliable access to electricity. The most striking feature of our contemporary world is the contrast between Europe and the USA, which are awash with savings, and Africa, which is chronically short of investment capital. A developed world sunk in what economists call secular stagnation and an African continent unable to realise its economic potential.
By Eddie O’Connor, CEO, Mainstream Renewable Power
I want to propose a solution to secular stagnation in the West that simultaneously solves Africa’s lack of electricity.
When the Great Depression struck the USA in the 1930s President Roosevelt launched programmes to stimulate demand, notably the Rural Electrification Act. He described it as the key to modernising the economy. Then there was the Marshall Plan, officially known as the European Recovery Program. Under the Plan, the USA gave the equivalent of US$ 120 billion in economic support to help rebuild Europe after the end of the Second World War.
It stimulated so much demand for American goods and services that the US economy grew at unprecedented rates for the next 30 years. The Marshall Plan provides a template for a similar type of partnership; this time between the West and Africa.
The capital is there, estimated to be around US$ 70 trillion, stashed away in savings. The project is there; the electrification of Africa. What is not there is the political vision. If we can mobilise the West to provide the capital and if governments can de-risk investments in renewables, we can start a Marshall Plan for Africa.
From the perspective of potential investors in Africa the overriding need is to de-risk investments that typically take 15 years to recover the capital and make a satisfactory return. In order to transform the investment climate, the risks have to be addressed. There can be no hint of corruption and no subsidisation of fossil fuels. Then there’s currency risk. It arises from the mismatch between investments in dollars and revenues in local currencies. This mismatch is the single most important factor inhibiting inward foreign investment into African renewables. It is a matter for the governments of the investors, and international financial organisations like the World Bank.
What investors need is insurance against inflation and currency depreciation. They need certainty about the value of future revenue streams so that their capital is recovered and adequately rewarded in real terms. There is no way private sector funds will flow into Africa in the quantities required unless these two preconditions are met.
Lastly, if we are to deliver a new Marshall Plan for Africa, we need to direct investment into Africa through incentive programmes which reflect the risks for investors and the long-term societal benefits.
Governments must find ways of enticing investors to overcome risk adversity and to put that capital to work. Governments have recognised the role of tax allowances and tax reliefs in stimulating investment. Here is a clear example of a massive public benefit in the West which would accrue from mobilising unused savings for the electrification of Africa.
Let Africa be the engine that drags the rest of the world out of recession while pulling a billion people out of poverty.
I hope that this new Marshall Plan for Africa will meet that challenge with the ambition it deserves.