Powering Africa Summit
As prepared for delivery
Chairman Fred P. Hochberg
Jan 29, 2015 – Washington, DC
Good morning. It’s a pleasure to be here with you all today.
Not long ago, I was discussing Power Africa in Cincinnati with an American business owner. We were talking about why this initiative was so important, and she summed it up in a way that stuck with me. What she said was: “bad things happen in the dark.”
And what she meant was: power creates opportunity. Without electricity, health systems fail. Education systems deteriorate. Job prospects for young people grow scarce. Without power, the future is dimmed. That’s what we’re here to talk about today.
In 1967, when I was 15 years old—yes, I’ll do the math for you: I’m 62 today—I boarded a freighter headed from New York to Africa. We made our way around the Cape of Good Hope, making a number of stops along the way.
I visited Namibia, which at the time was still called South-West Africa. I visited Angola. I visited Maputo, which was then known as Lourenço Marques. Of course, I had no idea at the time that I’d ever be back in Mozambique, let alone as a U.S. government official. But 45 years later, I was there again—this time to encourage partnerships between the U.S. and Africa to meet the continent’s power needs.
In fact, I’ve been to sub-Saharan Africa five times in the five years I’ve served as Chairman of the Ex-Im Bank.
I know that many of you are familiar with Ex-Im—but for those who aren’t, our mission is to finance the export of made-in-America goods. We support businesses small and large in their efforts to create jobs here at home and spark commercial engagement with overseas markets. And we’ve been engaged in this work for more than 80 years.
As part of our mission to support U.S. job growth, Ex-Im has long played a role in strengthening the foundations of African economies by connecting them with quality, innovative American goods and services. Our first transaction with Ethiopia was in 1944, when we financed $500,000 to support recovery projects stemming from World War II. We’ve been working with Nigeria since 1961, when we financed $1.3 million to support construction of a flour mill. And in Ghana, one of our earliest projects supported the construction of the Akosombo Dam on the Volta River.
So we’re not newcomers. And today, we’re open for business across the continent, and committed to financing transactions that create jobs both here and there, while positioning Africa for enduring growth.
That commitment culminated in a record-breaking 2014, which saw us authorize more than $2 billion to finance U.S. exports to sub-Saharan Africa.
We’re proud of that progress. But we also know how much more there is to be done.
Last year, more than 400,000 new companies were born in Africa. The continent is home to seven of the world’s ten fastest-growing economies. The median age of Africa’s population is slightly younger than 20—and, by the way, that population is projected to double by 2040.
Those numbers are stunning—they portend a bright future, one of limitless possibilities. But they also carry with them a sense of urgency. They make it clear that Africa stands at a crossroads.
There is no longer any question that growth is on the horizon. But how Africa’s nations choose to develop their institutions and seize the opportunities that accompany growth will determine exactly how bright Africa’s economic future will be. The population of 2040 will flourish or flounder as a direct result of the investments that Africa makes today.
So where do we start? Well, as President Obama has said, “we must start with a simple premise that the future of Africa is up to the Africans.”
While it’s the job of African governments to foster enabling environments, it is up to America to engage with African markets and build relationships of trust. We know that if America doesn’t engage, other countries offering inferior products and aggressively subsidized financing will. And no one wins when the foundations of Africa’s long-term growth are cracked.
Nowhere is that engagement more important than in the power sector.
Right now, more than two-thirds of sub-Saharan Africa is without electricity. That’s 600 million people deprived of the full power to secure their financial future, to build a business, or to communicate with the world. And for those who do enjoy access to electricity, the costs can be three-and-a-half times that of other emerging areas such as South Asia.
That’s why Power Africa is bringing together partners from throughout the government and private sectors with the goal of doubling access to electricity.
It’s also redefining what public-private partnerships can be. Never before has an effort like this one pursued success so holistically. In order to spur private investment, government partners have been on the ground in African nations, working hand-in-hand with African leaders to prime the topsoil for investment and growth.
Their focus revolves around four core pillars: planning, financing, governance, and building human and institutional capacity. Everybody knows the opportunities that exist in Africa. But, like so much of the African population itself, many of Africa’s democracies are young—full of tremendous potential, but without entrenched traditions when it comes to some of the most important elements that promote investment. Rule of law, tariff policies, and greater transparency are just a few of the areas where organizations like USAID can be a resource to African governments as their institutions mature and their foundations grow stronger.
As for Ex-Im’s role, we’ve committed up to $5 billion in financing for U.S. exports over the next four years.
Those efforts are already underway. We’ve signed a $1.5 billion MOU with Nigeria’s Ministry of Power, a $1 billion MOU with Angola’s Ministry of Finance, and a $2 billion Declaration of Intent to support South Africa’s Integrated Resource Plan.
One recent $23 million transaction financed the sale of Dow Chemical’s heat-transfer fluid for new solar power plants in South Africa—helping that country go beyond conventional energy sources. A loan guarantee for the West African Development Bank is financing the export of U.S. power-generation equipment to the Azito Power Plant in Côte d’Ivoire. And another deal which predates Power Africa is supporting $340 million for rural electrification in Ghana.
By the way, that Azito plant is a $400 million project, of which we’re financing $17 million—we don’t need to finance an entire project to make an impact for U.S. exporters.
We’ve got even more projects on the horizon, ranging from geothermal in East Africa to solar in South Africa to wind in Ethiopia, gas projects in Nigeria and Angola, and we’re in discussions to support Ghana’s promising hydro power ambitions. These represent a great start. But when it comes to Africa’s electricity needs, the scope of the demand cannot be overstated.
Those of us who work in the world of finance spend a lot of time thinking about risk. We think about management risk, financial risk—all sorts of risks that inform our decision making, and rightly so. But we don’t spend enough time thinking about another kind of risk—the gravest risk of all. And that is the risk of allowing 600 million people to live their lives without power. It’s the risk posed by 1.6 billion people living in extreme poverty worldwide. Nothing threatens our mutual growth or our prospects for a better future more than that. It’s a risk we cannot afford to take. And so it is in the interests of Africans and Americans alike for U.S. firms to step up to meet this challenge.
As Africa girds itself for the opportunities and challenges of its economic emergence, we have plenty of reasons to be optimistic. I’ve been encouraged by many of the decisions being made by African power ministries—and here are four trends I’m keeping an eye on.
First: more and more, we’re seeing countries seek out regional solutions. I traveled to several African countries in June with Secretary Moniz, as well as Lee Zak, Paul Hinks, and others who are participating today. In Mozambique, we discussed some of the benefits that come from regional power solutions. By refusing to go it alone, countries are developing more integrated—and therefore more durable—economies. More power-rich nations can see their energy exports grow. The Azito project I mentioned earlier is a great example of that sort of cooperation across borders.
Second: at the same time, countries like Angola are also beginning to diversify away from merely being oil-based economies. Right now, oil represents somewhere around 40 percent of Angola’s GDP, and 90 percent of its exports—but all of their food is imported. That creates a tenuous economic position. But they recently signed an agreement with GE to develop their infrastructure and bring in American locomotives. That’s an encouraging step. As you know, infrastructure and transportation are critical building blocks for a thriving energy sector and larger growth. I met with President dos Santos last year to sign an MOU—we are ready to move on projects in Angola; all we need is for American companies to step up to the plate.
The third trend to follow is the recognition that there are many options for powering the continent sustainably as Africa’s middle class grows. Many countries are well-positioned to achieve climate-resilient energy security. That includes impressive gas potential in parts of the continent, as well as a growing capacity for renewables. This is another area where active, engaged public-private partnerships can be instrumental in working together with nations as they chart smart energy courses.
The fourth trend to remember is that we also need to encourage plans for growth that lift up everyone. That includes Africa’s vibrant small business communities, as well as its growing population of female entrepreneurs—many of whom I had the chance to speak with personally on my most recent visit.
More and more, Africans and Americans are recognizing how much we each stand to gain from working together. Some of the savviest American companies are already moving forward. Last fall, Coca-Cola announced that they would commit to investing an additional $5 billion in Africa; IBM, Marriott, and others have followed suit. More exporters are going to follow—and, in many cases, Ex-Im will be there to fill financing gaps to make these private sector investments happen.
We want to continue facilitating the export of quality, innovative U.S. goods and services to buyers in Africa. We have a mandate from Congress to get it done. By contributing to the bedrocks of growth in Africa, we’ll be adding quality jobs here at home even as we forge critical economic relationships for the long term.
But none of that can happen without U.S. companies engaging and pursuing projects. So talk to us. Our Vice Chair, Wanda Felton, has been a leader in moving this work forward. Rick Angiuoni and Ben Todd are here from our African Business Development office. They want to hear from you. Not to put too fine a point on it, but Rick’s e-mail is R-I-C-K-dot-A-N-G-I-U-O-N-I-at-Exim.gov. And he never, ever sleeps.
As important as DFI is, commercial engagement is a huge part of the equation when it comes to strengthening both Africa and America. That’s the part that we at Ex-Im are here to play. And we are working every day to secure a long-term reauthorization from Congress—one that will bring certainty to American firms and their employees as well as to African buyers—and I am confident that we will get that done.
Already, there are hundreds of U.S. exporters, large and small, serving the needs of sub-Saharan populations. And my hope is that the years ahead will see us connect even more American businesses with African partners to meet the staggering demand before us—to spark new jobs on both of our shores, and to build quality, dependable, resilient relationships on the foundation of quality, dependable, resilient products.