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EMPOWERING AFRICA:
AN EXAMINATION OF U.S. AND CHINESE ELECTRIFICATION EFFORTS
IN SUB-SAHARAN AFRICA
Robert Avakian, Heaven Fekadu, Keith Gentry, Lauren Hovis, Briana Huggins, Kaela
Mananquil, Simon Muller, John Nielsen, Ana Reed, Elise Voorhis
China in Africa Practicum
American University, SIS 793
December 4, 2015
i
Table of Contents
Abbreviations ________________________________________________________________ii
Executive Summary___________________________________________________________iii
Introduction__________________________________________________________________1
Research Design ______________________________________________________________2
Background__________________________________________________________________4
Examination of Electrification
Projects in Sub-Saharan Africa__________________________________________________6
Comparative Analysis_________________________________________________________11
Africa in 2020:
Chinese-African Economic Ties_________________________________________________17
Implications for U.S. Foreign
Policy Objectives in Africa_____________________________________________________19
Strategy and Recommendations ________________________________________________23
Conclusion__________________________________________________________________25
Endnotes ___________________________________________________________________26
Bibliography ________________________________________________________________29
ii
List of Abbreviations
ACEF U.S.-Africa Clean Energy Finance Initiative
CPTDA China Petroleum Technology and Development Corporation
CSR Corporate Social Responsibility
DoC U.S. Department of Commerce
DoE U.S. Department of Energy
DoS U.S. Department of State
EIA U.S. Energy Information Administration
ENR Bureau of Energy Resources
Exim Export-Import Bank
FCS Foreign Commercial Service
FDI Foreign Direct Investment
FY Fiscal Year
GDP Gross Domestic Product
GW Gigawatt
INDC Intended Nationally Determined Contributions
IPP Independent Power Producer
KWh Kilowatt-hours
LTWP Lake Turkana Wind Power
MCC Millennium Challenge Corporation
MtCO2e Metric Tons of Carbon Dioxide Equivalent
MW Megawatt
MWh Megawatt-hours
ODA Official Development Assistance
OECD Organization for Economic Cooperation and Development
OPIC Overseas Private Investment Corporation
PHCN Power Holding Company of Nigeria
PPP Public-Private Partnership
PV Photovoltaics
SE4ALL Sustainable Energy for All Initiative
SECC Special Envoy on Climate Change
SSA Sub-Saharan Africa
TANESCO Tanzania Electric Supply Company
TWh Terawatt-hours
UNFCCC United Nations Framework Convention on Climate Change
USAID U.S. Aid and International Development Agency
USD United States Dollar
USG United States Government
USTDA U.S. Trade and Development Agency
iii
Executive Summary
Since the early 2000s China has pursued a “going-out” policy, which has dramatically increased
Chinese foreign investment around the world, particularly electrification in Sub-Saharan Africa
(SSA). Over half of the people in SSA do not have access to electricity, and as a result, African
economic growth and development continue to be stymied. The United States has a national
interest in empowering Africa, yet China has outpaced the United States in terms of putting
megawatts on the ground and providing energy financing in SSA. China has also gained a
reputation for engaging in checkbook diplomacy by implementing projects with little regard for
good governance or social and environmental costs. Given that good governance relates to
political and social stability, the effects of these electrification efforts may be detrimental to the
overall U.S. goal of strengthening democratic institutions in SSA. As such, we have examined
the effects of Chinese electrification in SSA, and what the United States can do to ensure that
African electrification not only bolsters economic development but also fosters good governance.
To assess China’s effects in SSA, we conducted a comparative qualitative and quantitative
analysis of Chinese and U.S. electrification projects in SSA from 2000 to the present. We
estimate that China has contributed over 36,000 MW through approximately 160 projects - over
a quarter of SSA’s total energy needs. These projects have been predominantly hydroelectric,
which has supported global clean energy goals. However, the Chinese presence has been met
with some backlash, including concern over displacement of people, lack of job creation for
Africans, and contribution to greenhouse gas emissions from fossil fuel projects. By contrast,
U.S. electrification efforts have contributed over 8,000 MW through approximately 70 projects.
Whereas China continues to invest in all energy resources, 79 percent of U.S. projects are
renewable energy-based, emphasizing the U.S. global commitment to mitigate climate change.
Furthermore, our analysis shows that China invests in electrification projects indiscriminately,
while the United States only invests in countries with particular governance standards or
favorable business climates. Lastly, the prevalence of Chinese turnkey projects stands in sharp
contrast to U.S. initiatives, which largely prioritize capacity-building and technical training.
Despite these differences, Chinese electrification projects can be complementary to U.S. goals in
SSA by promoting overall economic development. Where China has fallen short in aiding good
governance and programs for local populations, the United States can help strengthen SSA
business climates and democratic institutions, while still adding megawatts on the ground. To
meet Power Africa goals of 30 GW and 60 million connections, we recommend that over the
next five years, the United States 1) strengthen U.S. commitment to multilateral energy
initiatives, 2) increase the presence of Foreign Commercial Service Officers, 3) increase the
number of trade missions to SSA and focus capacity building on areas with existing Chinese
infrastructure projects, 4) encourage African governments to consider resiliency and long-term
costs in policy formulation, 5) partner with African governments to meet mitigation goals and
promote clean technology, and 6) expand off-grid and mini-grid solutions. These
recommendations not only promote U.S. private investment, but also provide technical assistance
through best practices. This short-term strategy will help the United States realize its long-term
goals of fostering sustainable economic development and strengthening democratic institutions
in SSA.
1
Introduction
Sub-Saharan Africa (SSA) has the potential to be a regional economic powerhouse, which is why
the global economy is directing nearly $42.2 billion in foreign direct investment (FDI) into SSA
each year.i
However, the region’s limited infrastructure, especially in electricity generation, is
one of the main hurdles limiting the impact of these investments and hampering sustainable
economic growth and prosperity. Before businesses can boom and populations can prosper,
infrastructure such as roads, buildings, and electricity must be established.
The multiplier effect of electricity access is far-reaching; a household with access to electricity
can enhance their education with proper lighting, reduce the negative health effects caused by
burning biomass or kerosene, and charge their cell phones which have become the most
prominent way of transferring money and conducting business in SSA (i.e. mobile money).ii
Electricity is a key developmental necessity to promote economic and social growth.
China is the most impressive example of a country “leapfrogging” energy development and
experiencing rapid economic growth as a result. Twenty years ago, China had around 220
gigawatts (GW) of installed electricity generating capacity and was the 8th largest economy in
the world.iii
Today, China beats the U.S. with 1,505 GWiv
, almost 400 GW more installed
capacity than in the United States, and is the 2nd largest economy behind the U.S.1
And China is
now helping SSA do the same thing.
By adding more megawatts, spending more money, and winning more bids than the United
States, China is playing a formidable part in advancing SSA’s economic future to gain a strategic
foothold. While the motivations behind China’s heavy investment in energy in SSA are complex,
none are clearer than its economic motive. This has raised concerns, among many in the
academic and policy fields, that unfettered Chinese investment in SSA is propping up
authoritative regimes, perpetuating the “resource curse,” and potentially preventing the U.S.
from achieving its strategic and economic development goals on the sub-continent.
The U.S. Department of State has a significant role to play in the future of SSA’s economic
development, especially if actions are taken during this time of energy expansion. The next five
years will be critical in addressing Africa’s access to electrification, especially as economic
relationships change between SSA, China, and the United States.
This report will be broken up into seven parts:
1) Research Design
2) Brief background on the energy situation in SSA
3) Examination of China’s and the United States’ energy projects in SSA
4) Comparative qualitative analysis of U.S. and China’s projects through case studies
5) Projections of Chinese-African relations in the next five years and analysis of the
implications associated with electrification development
6) List of actionable recommendations and ways of implementation
7) Conclusion
1
Refer to Table 1.
2
Research Design
This study seeks to identify the effects of Chinese investment in African electrification projects
on the local economies, evaluate its impact on U.S. national interests, and provide short and
medium term (1-5 years) recommendations for U.S. electrification investment and development
policy in SSA.
This study uses both a data driven quantitative methodology and a case study based qualitative
approach to examine the implications of electrification in SSA. Our data collection process is
outlined first, followed by our qualitative study approach and the limitations of our methods. The
two units of analysis in our study are states and electrification projects. The target population of
the study focuses on forty-one countries within continental SSA, and Madagascar. With the term
electrification we refer to projects involving electricity production, transmission, storage,
management equipment, as well as technical and governance training.
Data Collection
Data of Chinese and U.S. electrification projects and financial commitments was compiled using
information and datasets obtained from AidData, Bloomberg Data, the World Bank, the U.S.
Energy Information Administration, the U.S. Power Africa initiative, the World Resources
Institute, proprietary research from the John Hopkins SAIS China-Africa Initiative, official
foreign government documents and press releases, news media, and internet sources. Interviews
were conducted with representatives from the U.S. Department of Energy, the U.S. Trade and
Development Agency, Johns Hopkins SAIS, the Brookings Institution, the U.S. Department of
Treasury, and an American Chamber of Commerce representative in Tanzania.
Electrification project data was limited to projects that were completed, under implementation, at
the contractor-bidding phase or had concrete financing commitments between 2000 and 2015.
The time range was determined based on the period of substantive Chinese engagement in
African electrification efforts. Projects at the feasibility study or memorandum of understanding
(MoU) stages were not included as these are not reliable indicators of eventual project
implementation.
Projects were categorized by country, electricity generation, source fuel type, installed capacity
in megawatts, financing source and type, and the companies involved in project implementation.
Electricity generation and source fuel types were categorized as hydropower, solar, wind, coal,
fuel oils, biomass, and natural gas. The limited number of combined-cycle power plants were
listed as natural gas plants. Projects that did not add generation capacity but were directly related
to electrification efforts, like electric grid expansions, were listed under training, governance
building or electricity transmission.
Financing commitments were defined as signed or officially announced loans, grants, and export
credits (measured in USD 2011). Financing sources included any government agencies,
international institutions and private companies involved in the financing of the projects.
3
Empirical Analysis
SSA electricity demand growth calculations were based on current total installed capacity and
the projected demand in SSA for the next five years. The calculations were used to estimate the
number of power plants needed to fulfill the demand and associated hypothetical emissions by
2020. This was done using the following calculations, which assume a minimum of 250 kilowatt-
hours per person per year as determined by the International Energy Agency’s energy access
models,v
as well as a 40 percent average capacity factor for all energy resources and a 20 percent
reserve load capacity.vi
Greenhouse gas emissions were calculated in MtCO2e based on the
Environmental Protection Agency formula for oil, gas, and coal power plants.
The study uses comparative data analysis to evaluate U.S. and Chinese engagement across the
areas of electrification, environmental, governance and socioeconomic impact. The qualitative
analysis draws on the case study method common to social science research. Nigeria, South
Africa, Tanzania, and Ghana are chosen as case studies due to substantial U.S. and Chinese
investments and electrification projects. The Nigeria case study examines heavy Chinese
engagement while the South Africa case study illustrates heavy U.S. engagement. The case
studies of Tanzania and Ghana analyze the sub-national impact of U.S. and Chinese firms in
Africa. Comparing the impact of both U.S. and Chinese FDI within the same country allows us
to hold constant the geographic, social, macroeconomic, regulatory, and natural resource
conditions, while our particular variables of interest such as finance and type of power projects
vary.
Limitations of Design
Our empirical approach has data limitations common to studies analyzing Chinese foreign
investment information, corporate project financing, bidding, and implementation in developing
countries. Inconsistent reporting in local news media as well as datasets using non-standardized
project designations and financial accounting can also distort project-level information. We
remain confident, however, in the larger trends suggested by our analysis.
4
Background: Energy Situation in Sub-Saharan Africa
According to 2012 U.S. Energy Information Administration (EIA) data, SSA has a total of 81.4
GW of installed grid-based electricity capacity. However, more than half of this capacity was
installed in South Africa alone (44.5 GW).vii
Compared to the United States, SSA accounts for
only 8 percent of America’s total installed capacity. This means that, on average, each person in
SSA can only consume about 512 kilowatt-hours (kWh) a year, whereas a citizen in the United
States can consume close to 11,000 kWh a year.viii
This is the quintessence of energy poverty
(see figure 1).
Figure 1: Relationship between Electricity Consumption and GDP per capita
There is a positive correlation between increased electricity consumption and GDP per capita.
Current electricity demand in SSA is estimated at 135 GW (473 TWh). Because there is only
81.4 GW of installed capacity, there is a shortfall of 54 GW.2
Installed capacity will need to
double in order to meet the projected demand of 207 GW (725 TWh) in 2020.ix
In other terms,
nearly 250 power plants with an operating capacity of 500 MW will need to be constructed
within five years to meet SSA’s current demand projections. However, demand will double again
by 2030, which means SSA will need an additional 500 power plants. The consulting firm
McKinsey estimates that if every country built enough power plants to meet demand, SSA would
2
See equation in “Research Design” section
5
require about $490 billion in capital for new generating capacity, plus another $345 billion for
transmission and distribution.x
While these numbers are comparable in scale to other global
developing countries, SSA as a whole faces a number of issues beyond that of a single country.
These numbers provide the electrification context that China and the United States must address,
but do not delineate the risks that a Chinese presence may pose to U.S. national interests. The
following sections will delve in more detail into China’s development in SSA and how the U.S.
should proceed in the future.
Table 1: Energy capacity and consumption in the U.S., SSA, and China
There is huge disparity between the United States, SSA, and China in all aspects of energy.
Total Electricity United States Sub-Saharan
Africa
China
Installed Capacity 1,164 GW 81.4 GW 1,505 GW
Total Generation (TWh) 4,093 TWh 473 TWh 5,126 TWh
Electricity Consumption
(kWh per capita
per year)
10,932 kWh 512 kWh 3,475kWh
Total Power
Plants/Generators
19,243 power plants unknown unknown
MtCO2e Emissions from
Energy
5,396 million MtCO2e 916 million MtCO2e 8,650 million
MtCO2e
Sources: Energy Information Administration (2015), World Resources Institute (2015), CIA (2015), World Bank
(2014), McKinsey (2015).
6
Examination of Electrification Projects in Sub-Saharan Africa
Chinese Engagement in Electrification
To date, there are few studies that examine Chinese electrification efforts from a sub-continental
perspective. Most studies focus on China’s engagement in a particular country or on a specific
mode of energy production in SSA. As seen in Table 1, China outpaces the United States and
SSA in its own installed capacity. This domestic success, combined with the Chinese narrative
about solidarity among developing nations, greatly attracts partnerships from SSA leaders
striving for similar growth. Unlike the United States, China is able to use this narrative of a
common development path to promote its electrification footprint in SSA.
Recently, however, China’s presence in Africa has faced criticism in Western and African media,
who argue that frequent use of resource-backed loans is reminiscent of colonial exploitation.
However, an October 2015 brief and econometric analysis released by AidData argued that
Chinese aid in Africa was not exclusively linked to African states with poor governance issues,
nor is it “motivated by natural resource acquisition interests.”xi
Rather, the study notes that
Chinese official development assistance (ODA) flows are more “strongly oriented toward poorer
countries,” implying that Beijing may consider humanitarian needs when making aid decisions,
and thus, could bear some resemblance to Washington and other Western governments.xii
The
potential positive impact the Chinese could have on electrification in Africa cannot be ignored.
Thus, this section examines China’s engagement in SSA by assessing its ODA flows and the
range of energy projects both started and completed in Africa with the goal of understanding
their effects on jobs, public health, the environment, and economic growth.
Using our compiled data mentioned in the Research Design section, from 2000-2015, China has
had over 166 energy generation projects in SSA. Using these figures, China has contributed an
estimated total of 60 billion USD held in constant 2011 USD.3
Projects receiving this funding
have added 36,282 MW to address the demand of 135,000 MW, about 27 percent of total
electrification needs for Africa. Overall, Chinese projects have been mostly implemented in the
Southern African region due to the vast number of transmission projects in Angola, but the most
megawatts have been added to the East African region. The five countries that have received the
greatest number of implemented or completed electrification projects are Angola (26), Ethiopia
(13), the Sudans (13), Tanzania (11), and Kenya (10). In terms of added MW, the top 5 countries
are Tanzania (6,923 MW), Nigeria (5,585 MW), Ethiopia (3,729 MW), Zimbabwe (3,200 MW),
and the Sudans (2,950 MW). Furthermore, Chinese funded electrification projects have been
predominantly hydropower, accounting for roughly 33 percent of total projects and 50 percent of
total added megawatts. This has greatly contributed to the total amount of clean energy on the
sub-continent. Moreover, Chinese investment in Africa has also borne some societal benefits.
While Chinese companies in Africa are commonly portrayed as limiting their employment to
primarily Chinese workers, the Johns Hopkins China-Africa Research Initiative has compiled a
list of projects, including electrification, that help to debunk that myth. These projects include
Gabon’s Grand Poubara Dam which employed 700 African workers and 300 Chinese, the 2010
3
Analysis of projects is based on the compiled research in our database, and for some projects there was no data on
financing available.
7
Imboulou Dam which employed 2,000 Congolese and 400 Chinese, and the 2008 Bui Dam
which employed 2600 Ghanaians and 400 Chinese.xiii
However, the Chinese presence has also been met with some backlash, particularly due to social,
environmental, and geopolitical concerns. For example, when the Ethiopian government sought
out investment projects on the Omo River, major financiers such as the World Bank and African
Development Bank declined due to concerns over the displacement of locals, and the effects on
agriculture and fisheries. The Chinese, however, approved a loan for the Gibe III Dam, which
threatens to displace “indigenous peoples of the Lower Omo Valley and Lake Turkana,” who
have a recent history of conflict among communities in the region, thus potentially threatening
the stability of the region.xiv
Additionally, though the Gibe III Dam will produce 2,000 MW for
the people of Ethiopia and Kenya, there is concern that the dam’s construction will worsen
poverty for the most vulnerable, creating a new class of “internal refugees.”xv
Furthermore, although hydroelectric dams are generally considered a form of clean energy,
China’s significant support of these projects has had detrimental environmental and social
impacts. For example, in Ghana, the Bui Dam flooded about 20 percent of the adjacent national
park, threatening the native, endangered black hippopotamus population there. The Merowe Dam
in Sudan that was built in 2003 has reportedly displaced up to 50,000 people living along the
Nile River.xvi
When revisited in 2005, even though the government helped irrigate the land
where they were relocated, 20 percent of it had not been cleared for production. Moreover, even
with irrigation, the quality of soil is so poor that farmers cannot sell their product on the
market.xvii
Apart from hydroelectric investments, projects that are not considered clean energy
also pose a problem. These projects have added more than 36 million metric tons of greenhouse
gas emissions (MtCO2e) annually. As an emerging power, China must consider the added
responsibility of having a greater international presence and its Zou Chuqu, or “going-out”
policy which seeks to increase Chinese foreign investment and commercial presence.xviii
Case Study: Chinese Electrification in Nigeria
Nigeria has been identified as having the greatest power projection potential in Africa in the
coming decades, and China is positioning itself to be a primary partner in developing this
potential. Nigeria has maintained diplomatic relations with China for the last 44 years, and
through to 2009 was the second highest African destination for Chinese FDI. With regard to
Nigeria’s electrification efforts, at the outset of China’s “Going Out” policy in 2000, Nigeria’s
electrification rate was 44.9 percent. By 2010, it was 48 percent, and in 2012 it was 55.6 percent.
Nigeria’s first loan came from the China Exim Bank in 2005 to construct three gas-fired power
plants: Papalanto (335 MW), Omotosho (335 MW), and Geregu (138 MW). SEPCO of China
assumed construction for Papalanto, with a loan deal of $300 million and oil-backed assurances
for a period of one year. For hydropower, in July 2011 Power Holding Company of Nigeria
(PHCN), Sinohydro, and Harbin Electricity Corporation signed a contract to rehabilitate the
Kainji hydropower station in Rivers state. It was funded by the World Bank, with a cost of $282
million and is forecasted to add 340 MW.xix
At present, the Mambilla scheme (2,600 MW) in
Nigeria is China’s largest hydropower commitment project on the sub-continent. However,
political turmoil has delayed the project, which is expected to be completed in 2018.xx
On the
social front, the Chinese government claims Chinese companies operating in Nigeria employ
8
30,000 local workers. However, considering the 350,000 manufacturing jobs that labor unions
say are lost because of Chinese imports, some Nigerians question how beneficial Chinese
investment is for their country.xxi
Looking forward, the Nigerian power sector will see continued
privatization due to a plan to accelerate energy sector reform from producing 3,000 MW in 2009
to a target of 40,000 MW by 2020.xxii
These developments in privatization are significant
because China is also shifting from a policy of resource-backed loans to one that increasingly
pursues direct acquisitions. This has implications for further Chinese-funded electrification
projects in Nigeria and elsewhere in SSA.
U.S. Engagement in Electrification
Recent U.S. engagement in electrification in SSA has been markedly different from Chinese
investment, where clean energy creation and sustainable economic development are U.S.
priorities. Concern for electrification has spiked in the last 15 years not just in mitigating
development gaps but also in addressing sustainability and climate change. Advancing the
development of sustainable energy through supporting initiatives such as the African Clean
Energy Corridor, SE4ALL, Power Africa, and the U.S.-Africa Clean Energy Finance Initiative
(ACEF) is critical to addressing climate change in a consequential and sustainable way and of
which should remain a priority for foreign policy and development assistance.xxiii
According to our data analysis of energy investment in Sub-Saharan Africa from 2000-2015, the
U.S. contributed about 20 billion USD4
held in constant 2011 USD towards the implementation
of 74 energy generation and supply projects in 22 countries. When all U.S. projects are
completed, they will contribute a total of 8,330 MW of power, addressing about 6 percent to the
continent’s current demand of 135,000 MW. The United States has the largest concentration of
electrification projects occurring in one of the region’s greatest economic centers, South Africa,
which boasts a total of 18 projects. In addition to South Africa, the countries that have received
the greatest number of implemented or completed electrification projects are Kenya (12),
Tanzania (7), Uganda (4), and Nigeria (4) for a combined supply of 7,439 MW of power. In
comparison, the top 5 recipients of the greatest added MW are Nigeria (2,551 MW), Kenya
(1,303 MW), Ethiopia (1,000 MW), Tanzania (925 MW), and South Africa (790 MW) for a
combined supply of 6,569 MW.
A characterization of U.S. investment in electrification is the provision of clean and renewable
energy sources that collectively supply 4,079 MW of power. Almost 42 percent of total U.S.
projects are in solar power. In the time period analyzed, the U.S. has added no coal-fired power
plants. The U.S. is directly involved in 4 major geothermal projects, with Corbetti Caldera in
Ethiopia as the largest and expected to produce 1,000 MW of power once fully online. Although
the sub-continent has vast geothermal potential, development of this energy source has been
slow. In addition to direct investment in geothermal projects, the United States is also leading
coordination between various institutions and donors to facilitate more efficient development of
geothermal capabilities, which will increase the rate at which this energy source is produced.xxiv
While projects implemented by the United States are subject to certain socio-economic criteria,
sometimes, these issues cannot be avoided. This is evident from the contentious development of
4
This is an estimation based on our data compiled and funds committed by Power Africa.
9
the Lake Turkana Wind Power (LTWP) project. Located in one of the poorest districts in Kenya,
the LTWP station, financed by OPIC, Power Africa, and Google, was a source of initial concern
for the local community with respect to their involvement in negotiations and local employment
levels.xxv
In 2011, community leaders argued that involvement in the project negotiations were
limited to the elite, and the project only employed 25 locals. However, as of June 2015,
conflicting reports stated that the project actually provided approximately 560 jobs for the
Loyangalani community. Furthermore, The Winds for Change foundation, a corporate social
responsibility (CSR) initiative of LTWP, was established with community input and has already
installed boreholes, a water filtration system, classrooms and a community store.xxvi
This largely
demonstrates the value of CSR programs that are incorporated into such U.S. projects, along
with monitoring and evaluation, which is necessary to ensure that these projects are sustainable
and beneficial to the communities where they are taking place.
While large-scale projects were the primary focus of initial energy investment on the continent,
smaller scale off-grid projects are attracting an increasing amount of attention. Shorter
timeframes to reach implementation and ease of dissemination, especially for rural communities,
which have been largely underserved by larger projects, make these projects an ideal
complement to larger-scale projects. Investment in technology has significantly driven down
costs, which has spurred business models that attract more credible financing from U.S.-based
financial institutions and private investors. For example, a $6.8 million OPIC loan will be used to
back Powerhive’s Cloverfield Project in Kenya, which will build 100 solar-powered micro-grids
to reach about 20,000 households. OPIC further committed $15 million to Txtlight Power
Solutions to finance the delivery of 70,000 rooftop solar panel kits. Moreover, U.S. private
investment has also facilitated access to mobile-pay home solar panel systems, which have
connected over 65,000 customers in Kenya and employed over 700 independent local retailers in
2014.xxvii
U.S. investment has made considerable progress towards the goal of increasing access to
electricity to spur economic growth, development, and increased investment. However, the
framework for investment is heavily dependent on the private sector and the leveraging of
multinationals. This poses concern if the interests of such stakeholders contrast with the broad
aims of U.S. policy such as promoting sustainability and economic growth in accordance with
African objectives of job and wealth creation.
Criticisms
Compared to other donor nations, the United States has been slow to engage with Africa as an
economic partner in trade and investment opportunities. Even with the recent acceleration of
engagement on the sub-continent, the United States falls behind China in FDI flows to
Africa.xxviii
There is concern among the U.S. private business community working in Africa that
Power Africa is not doing enough to reach the 30,000 MW goal by 2018.xxix
Added to this worry
is the continuity of the Exim Bank, a strategic source of export credit in supporting U.S. firms as
they secure African bids. The Exim Bank lapse in reauthorization by Congress has prevented the
U.S. financing of new projects in 2015, and could further delay Power Africa’s goals since these
commitments are largely dependent on finance from the Exim Bank.
10
Power Africa has struggled in moving the discussion from potential projects to tangible actions.
Many proposed projects have yet to start (particularly projects in Nigeria and the Democratic
Republic of the Congo), due to the delays in negotiations of independent power producers (IPPs),
public-private partnerships (PPPs), and reaching financial close. Most of Power Africa’s
progress reported in its annual reports has been measured by signed deals rather than projects
breaking ground.
Additionally, Power Africa commitments have been private sector-led, and as such, the pace of
commitments depend on the variable nature of the economic conditions of countries and the
openness of emerging markets.xxx
While the U.S. is actively seeking to promote investment of
U.S.-based firms in Africa, this effort will need to be more aggressive in order to meet the energy
goals in SSA. Promoting joint ventures and public to private partnerships, in particular, will help
enhance the entrepreneurial, job, and wealth creation aspects of SSA’s development priorities.
Case Study: U.S. Electrification Engagement in South Africa
Economic exchange and trade ties with the United States and South Africa is one of the strongest
on the continent, thanks in part to the formation of the South Africa-U.S. Bilateral Cooperation
Forum. Additionally, while South Africa was not an initial focus country for the Power Africa
initiative, it remains a country of large U.S. electrification investment, with a particular focus on
the country’s renewable sector that promotes a switch to cleaner energy. The U.S. Government
(USG) agencies providing assistance in South Africa includes USAID, OPIC, EXIM, USTDA,
DoS, DoC, and the DoE. The USTDA and OPIC have had strong engagement in South Africa
through technical support, feasibility studies, and project implementation. Through its Reverse
Trade Missions, USTDA creates access for U.S. and South African business partnerships. For
example, South African officials travelled to the United States to learn about energy efficient
building solutions. This resulted in South African retailer Pick ’n Pay purchasing U.S.-
manufactured technology.xxxi
Along with USTDA, OPIC has had a history of supporting initiatives in South Africa, including
solar power projects.xxxii
OPIC granted $250 million to South Africa’s Standard Bank to fund
power generation throughout SSA and has directly approved $400 million for the construction of
a 100 MW solar plant in the Northern Province.xxxiii
California-based SolarReserve will
collaborate with Saudi Arabia’s ACWA Power on this project, making this the company’s fourth
solar power project in the country. The Jasper Solar Power Project, commissioned in October
2014, produces 180,000 megawatt-hours of energy annually, enough for approximately 80,000
homes.xxxiv
The U.S. has had a positive impact in contributing to South Africa’s switch to clean
energy, which could help mitigate the common problem of blackouts due to an unstable power
supply.
11
Comparative Analysis
In examining the discrepancies between U.S. and Chinese investment in electricity production in
SSA, the main points of divergence are the quantity of projects, the varying countries of focus,
and the types of electrification projects within those countries (whether they are hydro, solar,
gas, geothermal, wind, coal, biofuel, diesel or transmission). The quantity of projects follows the
overall trend of Chinese FDI discussed in previous sections: profit-driven with minimal
standards of governance.xxxv
The reasons for investment in particular countries and the types of
electricity projects in those countries are more complex. Using the data aggregated for this study,
this section will address the latter two issues and provide case studies of Chinese and U.S. energy
projects within the same countries on the sub-continent.
Why Particular Countries?
The majority of energy investment in terms of the number of projects and the percentage of total
projects implemented by China or the United States can be found below in the chart. Overall,
China is invested in every country in which the United States is invested. For countries like
Namibia and Liberia, where China has few electrification projects, the majority of their FDI is
focused on mineral extraction, transport, education and health sectors.xxxvi
However, there are 17
countries where China is invested that the United States is not currently invested, excluding
feasibility studies. They include Zimbabwe, the Sudans, Somalia, Sierra Leone, Niger,
Mozambique, Madagascar, Guinea-Bissau, Gabon, Eritrea, Equatorial Guinea, Djibouti,
Democratic Republic of the Congo, Republic of Congo, Chad, and Central African Republic.
More noteworthy is the fact that Angola, the Sudans, and Zimbabwe are countries with the
highest amount of Chinese investment and no U.S. investment (outside of feasibility studies in
Angola). The lack of U.S. investment in the Sudans and Zimbabwe is due to their instability and
human rights violations, which does not deter China, whose investment is based on increasing
the amount of energy it can help produce. Angola has had little U.S. energy investment because a
lot of foreign energy investment focuses on oil extraction for export, not electrification.
Table 2: Number of projects in SSA by U.S. and China
United States China
Country Total Number of Projects
(Percentage*)
Country Total Number of Projects
(Percentage**)
South Africa 18 (24.3%) Angola 26 (15.6%)
Kenya 12 (16.2%) Ethiopia 13 (7.8%)
Tanzania 7 (9.5%) The Sudans 13 (7.8%)
Nigeria 4 (5.4%) Tanzania 11 (6.6%)
Uganda 4 (5.4%) Kenya 10 (6.%)
Ghana 3 (4%) Zimbabwe 9 (5.4%)
Note: * Percentage as a share of total U.S. projects, ** Percentage as a share of total Chinese projects.
12
Tanzania and Kenya, on the other hand, are countries with high investment from both the United
States and China. For the United States, these Power Africa countries provide better investment
climates for private business than other countries on the sub-continent (such as the Democratic
Republic of the Congo or Sierra Leone who were recently a part of an International Finance
Corporation program to reform business laws).xxxvii
In fact, every U.S. foreign policy and
development assistance initiative focused in SSA flows through Kenya and Tanzania. From the
Chinese perspective, they are two countries with histories of significant engagement with China
since their independence in the 1960s. Additionally, while China does have heavy investment in
countries where the United States does not, it is important to note that they have
undiscriminating investment across the entire sub-continent. This is why they are engaging with
countries like Zimbabwe along with those that have favorable relations with the United States
like Kenya and Tanzania. The graphic below illustrates U.S. and Chinese energy production
presence on the sub-continent.
Figure 2: Map of U.S. and Chinese Electrification Investment in SSA
13
The following case study provides an example a particular comprehensive project in Tanzania
that involves engagement from both the United States and China. It suggests that there may be
areas of complementarity between U.S. and Chinese energy financing.
Case Study: Tanzania Gas Production- An Area of U.S.-China Complementarity?
Tanzania is home to a large amount of both Chinese and U.S. investment in energy. According to
Power Africa data, only 24 percent of the entire population has access to electricity while just 10
percent of people living in rural areas have access to power. Currently, Mtwara province is a
large focus of electrification efforts in the country due to recent gas discoveries off of the coast.
In 2012, the China Petroleum Technology and Development Corporation (CPTDC) began
constructing the China Exim Bank-financed Mtwara-Dar es Salaam gas pipeline project, which
cost approximately $1.2 billion.xxxviii
This major 532-kilometer project, which completed its
initial phases in October of 2015, will carry gas that should result in the capacity to produce
3,900 MW of electricity. After construction of the pipeline began, widespread protests erupted
from people living in Mtwara who were frustrated that their gas was not being processed in their
region to benefit the people. Skepticism over the source of the conflict (some cited the protests
were initiated by people living in foreign countries) temporarily paused the construction of the
pipeline.xxxix
While the protests simmered, tension remained over control and distribution of gas
from the pipeline in the region until the United States became involved.
A year after the initial construction of the pipeline and subsequent protests, the Millennium
Challenge Corporation (MCC), with the support from the Power Africa initiative, signed an
agreement with American company Symbion, to begin construction of the Mtwara gas-fired
power plant. Symbion and TANESCO, the Tanzania Electric Supply Company, have entered
into a PPP, the first energy investment under the Tanzanian Public Private Partnership Act of
2010.xl
TANESCO acting managing director, Felchesmi Mramba, said that this plant will,
“involve increasing the existing capacity in Mtwara to meet the growing demand in the southern
regions of Lindi and Mtwara.”xli
This $396 million plant will use the gas transported in the
Chinese-constructed pipeline to produce 600 MW of electricity for domestic use and possible
export.
These projects present two interesting policy implications. First, one area of complementarity
between the U.S. and China energy investment could be through comprehensive, multi-faceted
projects like the ones under construction in Mtwara, Tanzania. While the Chinese financed the
pipeline that carries gas to processing plants outside of Mtwara, the United States is investing in
a larger plant that processes the pipeline’s gas within the region. If U.S. companies have a
particular expertise that complements a Chinese company’s construction, this could be an area of
mutually beneficial cooperation within extensive energy projects. Another interesting piece
about the Mtwara example is that the U.S. agreement helped appease the protests and violence
that arose from the construction of the Chinese pipeline because the U.S. project is planned to
benefit people in the region. This may be another mechanism for the United States to foster
goodwill in the areas where it invests, especially if alternate or additional energy investment can
appease the grievances of protesters. In the long run, African governments may favor U.S.
investment due to goodwill companies have nurtured in the past.
14
Why Particular Projects?
Hydropower and solar projects have seen significant investment from both China and the United
States, though in rather different proportions. China’s engagement in electrification has focused
primarily on hydropower, the type of energy investment that requires large-scale infrastructure
development, while the United States has focused more on solar projects, a smaller-scale, more
versatile type of energy investment. Since 2000, China has funded, at various levels, 55
hydropower projects, which account for just over 33 percent of total projects receiving Chinese
financing. During the same period, the United States has provided funding for 31 solar projects,
comprising over 42 percent of total U.S. financed electrification projects.
Africa accounts for approximately 12 percent of the world’s hydropower potential, but currently
produces only about 3 percent of the global supply of hydropower produced energy.xlii
This large
gap helps explain why there has been such a significant level of investment in development of
hydropower projects across the continent. The scale of hydropower projects has likely attracted
such high levels of Chinese investment for several reasons. First, China is the world’s largest
producer of hydropower (with installed generating capacity of approximately 282 GW).xliii
Second, the intensive development of China’s domestic hydropower sector has produced several
large Chinese companies with significant experience in the various stages of hydropower
development,xliv
but as the market for large-scale projects becomes over-saturated domestically,
overseas projects become increasingly attractive. Finally, hydropower projects fit perfectly into
China’s practice of developing large-scale infrastructure that can be built and turned over to
authorities with little post-project involvement.
There is also great potential for successful production of solar power in Africa, which is why this
sector has also seen significant investment since 2000. Solar is important to the development of
Africa’s energy sector because it provides the best option for increasing generating capacity with
minimal negative impacts on the environment. The effects of climate change have been acutely
15
felt in many parts of SSA through desertification, droughts, and rising temperatures.
Additionally, solar provides exceptional flexibility in scaling to fit a variety of needs, from large-
scale solar farms to small, off-grid community projects. Solar can aid both urban and rural areas.
These characteristics have drawn a significant level of U.S. investment because they fit into the
larger USG objective to increase access to electricity and build capacity in Africa necessary to
develop business climates.xlv
The following case study illustrates the difference between Chinese and U.S. investment in
Ghana, a country of priority for both governments.
Case Study: United States and China in Ghana
Ghana has been more successful than many other SSA countries in developing its energy sector,
but 28 percent of the population still does not have access to electricity. Currently, Ghana has an
installed generation capacity of 2,450 MW. Since construction of the Akosombo dam and power
plant in the 1960s, hydropower has been Ghana’s primary source of electricity – today,
hydropower accounts for approximately 54 percent of output. The Ghanaian government has set
the ambitious goal of increasing their generation capacity to 5,000 MW by 2016.xlvi
This effort to
double electrical output has attracted investment from both the United States and China in recent
years. However, their respective approaches to addressing Ghana’s energy shortfalls have been
starkly different.
In the past, over dependence on hydropower has resulted in power shortages and rationing of
electricity during drought periods. In 1998, the 912 MW Akosombo power plant was forced to
cut generating capacity to approximately 300 MW after extended lack of rainfall caused the
dam’s reservoir to drop by 74 meters.xlvii
Despite realizing the vulnerabilities of relying too
heavily on hydropower, Ghana has moved forward with several new hydropower projects over
the last decade. From 2007 to 2013, the Chinese hydroelectric power construction firm
Sinohydro built the nearly $625 million, 400 MW Bui Dam, which was primarily funded by the
Chinese Exim Bank.xlviii
And in November 2014, the Ghanaian Ministry of Energy and
Petroleum signed a $307 million engineering, procurement, and construction contract with the
China International Water and Electric Corporation to build a new 60 MW hydropower project
on the Pra River in the western region of Ghana.xlix
U.S. activity in Ghana’s energy sector has taken a much broader approach and aims to build
professional capacity as much as generation capacity. In August 2014, MCC signed a five-year,
$498.2 million power compact with the Ghanaian government. The MCC compact, the largest
single transaction to date under the Power Africa initiative, aims to transform Ghana’s power
sector to meet current and future needs of households and businesses, and to stimulate private
investment in the economy.l
The U.S.-Ghana power compact is divided into six components that
will help build capacity: access to energy improvement, financial and operational turnaround of
the Electricity Company of Ghana, energy efficiency and demand side management, financial
and operational turnaround of the Northern Electric Distribution Company, power generation
sector improvement, and regulatory strengthening and capacity building.li
These efforts will test
multiple approaches so that strategies can be developed to solve Ghana’s most systemic
problems, particularly relating to access to electricity.
16
The Bui Dam is Ghana’s second largest hydropower plant. Construction of the dam resulted in
the submergence of approximately 20 percent of the Bui National Park in the resulting reservoir,
and displaced at least 1, 216 people.lii
Numerous complaints arose during construction of the
dam, ranging from failure to follow through on promises to rebuild communities on a one-to-one
building ratio to accusations of non-compliance with Ghanaian employment regulations.liii
When
the dam was completed, Sinohydro turned the dam over to Ghanaian authorities, and Chinese
involvement in the project, including mitigating any disputes, effectively ended. While it is not
possible to assess the joint MCC-Power Africa projects in Ghana since they are just now getting
off the ground, the entire design of the compact is aimed at avoiding many of the shortfalls that
China’s form of assistance has produced.
In summary, China invests in energy production indiscriminately across the subcontinent while
the United States only invests in countries that have particular governance standards in place and
who provide beneficial frameworks for business development. This demonstrates why China is
much more heavily and diversely invested in SSA. The United States also limits the type of
projects its initiatives implement in order to promote clean energy while China invests in both
clean and dirty energy. While China’s investment and project types vary, they do not prioritize
capacity building or skills sharing like the United States emphasizes in its projects. This is
because the overall trend of electrification projects analyzed in our database focus on
construction, not post-project maintenance and evaluation. This weakness in China’s energy
investment serves as a strategic inroad for the United States and should be maintained for future
U.S. projects. The next section will further address these future projections and implications.
17
Africa in 2020: Chinese-African Economic Ties
Despite the economic downturn in China, Chinese economic expansion and investment on the
sub-continent will likely continue. At face value, this investment will net African countries with
thousands of megawatts of energy, particularly in areas with intermittent electricity. By 2020, the
African continent will consume approximately 725 terawatt-hours of electricity – double the
2010 consumption.liv
The effects on the continent’s GDP, urbanization, electrical access, and
population growth will be substantial. However, in order to develop a more nuanced appreciation
for how Chinese energy investments may affect U.S. policy, it is necessary to examine the
indirect effects.
Projection 1: Diversity and Durability of Investment
China will not favor any particular region on the continent or sector for investment. Nor does
China discriminate between resource-rich or poor countries. We expect that China will be even
more invested in SSA than they are at present. This widespread and diverse approach to
investment diminishes Chinese financial risk over the near term as moderate fluctuations in
economic forecasts or downturns in specific sectors occur.
However, by 2020, China could become a victim of its own successes. In terms of aggregate
energy investment, China will be the dominant supplier and financier of energy projects in
Africa. As the continent’s electrical grid becomes more complex and individuals’ purchasing
power increases, Chinese companies will be pressured to provide more sophisticated and
effective technical components, and training to assume operation.lv
If China fails to do this, they could lose their market share to Western firms.lvi
In order to
capitalize on this, the United States will need to continue exporting high quality, specialized
energy technology and training that Africa is demanding to expand further into maturing African
markets.lvii
Ideally, these products will be superior alternatives to the mineral intensive
components that maturing African infrastructures currently demanded.
Projection 2: Environmental Impacts
China recently signaled intent to take a more responsible approach to environmental concerns in
their investments. In 2013, the Chinese Ministry of Commerce and the Ministry of
Environmental Protection established guidelines for companies investing overseas. These
guidelines encouraged companies to follow local regulations, assess risks, analyze environmental
impacts, and comply with international principles. However, adherence to these guidelines is
purely voluntary and no firm has been punished in China for any type of environmental
malfeasance in Africa.lviii
Due to continuing domestic pollution problems in China, there will
most likely be a rise in “exporting pollution” abroad. Most African governments have been
reluctant to address environmental concerns with either Chinese firms or the Chinese
government, often for fear of damaging the bilateral relationship.lix
However, there are several notable exceptions. In August of 2014, Chad shut down all Chinese
oil operations over pollution concernslx
while Niger has openly criticized Chinese firms for
overcharging.lxi
In order to avoid the risk of losing market share due to increasing criticism from
18
SSA governments, and additionally, to maintain their commitments to the United Nations to cut
pollution, China will have to address their practices concerning clean energy. Furthermore,
because the United States has maintained consistent messaging regarding the need for sound
environmental policies, the USG should find its voice increasingly welcome in African capitals
as pollution and other environmental concerns grow in the face of climate change.
We project that by 2020, China needs to make substantial reforms to how their firms operate
internationally or risk providing fodder to the accusation that China is yet another irresponsible
colonizer
19
Implications for U.S. Foreign Policy Objectives in Africa
Evaluating the effect of China’s electrification efforts in SSA on U.S. national interests must be
done in accordance with the four pillars of the U.S. Strategy Towards Sub-Saharan Africa:
strengthening democratic institutions; spurring economic growth, trade, and investment;
advancing peace and security; and promoting the opportunity for development. Looking at
China’s investment in electrification projects and the implications this has for the four pillars will
help foreign policy officials differentiate the effects of Chinese electrification investment from
other forms of Chinese investment. While contract wins for Chinese firms along with other
Chinese loans, grants, and other aid for electrification efforts may undermine one aspect of U.S.
policy objectives and influence, there is a significant amount of evidence to show that any net
gain in access to more reliable power on the African continent will support U.S. policies in other
ways. This section will weigh both the positive and negative implications that China’s
investment in Africa’s electrification has on U.S. policy objectives, and will largely drive the
policy recommendations in the concluding section.
Strengthen Democratic Institutions
A number of foreign policy experts have voiced their concern that the absence of improvement
in governance and human rights regulations in China’s investments throughout SSA will have a
grave effect on U.S. efforts to support strong democratic institutions. Yun Sun of the Brookings
Institution argues that China’s funding to SSA offers a “no strings attached” policy that
undermines U.S. efforts to provide principled development assistance that will address SSA’s
systematic and institutional defects.lxii
If China’s easy loans and indiscriminate FDI effectively removes the incentive to improve
governance and human rights, which is mandated the United States and other multilateral lending
institutions, many fear that recent trends towards democratization in Africa may be reversed.
Additionally, this could allow authoritarian leaders to remain defiant against calls for reform,
buoyed by infrastructure development and cheap Chinese imports.
China is largely able to do this because of its state-owned, policy-oriented commercial banks.
The sources of China’s foreign investment policies are the China Development Bank and the
Export-Import Bank of China. Despite the banks being politically controlled, Chinese FDI is
largely focused on long-term development and market access. According to a RAND
Corporation Report on Chinese development in Africa, “the majority of China’s financial flows
into Africa are profit-seeking rather than geopolitically motivated. Beijing generally eschews
attaching political, human rights, or corruption-related stipulations to finance, with the exception
that the recipient must honor Beijing’s ‘One China’ policy regarding Taiwan.”lxiii
With the
exception of China’s ‘One China’ policy and economic governance issues that could affect
Chinese investments, China has shown little appetite for exerting the type of political influence
that the U.S. typically shows in its investments in Africa.
Growth in Africa has fueled increasing demand for foreign investment in electrification
development. As long as the United States and others continue to offer loans with conditions that
support improved governance and human rights, China will outpace the West in terms of
investment in electrification and infrastructure as a whole. While the U.S. maintains an
20
advantage in certain sectors like energy efficient technology, China’s lax loan conditions may
continue to entice SSA countries that would have chosen the U.S. as an investor. This, however,
may not be as detrimental to supporting strong democratic institutions as it appears. When a
country with a poor human rights record and an authoritarian history forgoes a Western loan for
a Chinese one, the U.S. can maintain its moral opposition to supporting that regime while the
financial risks for the investments that are desperately needed are assumed by someone else,
mainly China. Far from ideal, this can be beneficial in two ways. First, it is no secret that the rest
of the world keeps track of U.S. verbal commitments. Hypocrisy is the illiberal world’s first line
of defense against U.S. pressure in an international field. While it may hurt in the short-run,
maintaining these convictions may pay dividends in political capital in the future. Second, Africa
will not lack the investment it needs. While there are a number of issues that can result from
Chinese lending practices to African nations, any electrification development can promote
progress for the people on the continent. Investment projects may not be up to the quality the
U.S. would like, and the benefits may not be distributed as widely as justice demands, but every
capacity increase in electrification will assist in Africa’s development.
On the surface, it appears that the success of Chinese electrification investment in Africa will
undermine U.S. objectives of supporting democratic institutions. However, as discussed in the
next section, “Spurring Economic Growth,” there are possible benefits that may advance other
pillars of the U.S. strategy. The recommendation section will include several measures the State
Department can take to shape the conditions in countries that receive ‘no strings attached’
electrification loans from China, and utilize its externalities to support aspects of democratic
institutions like supporting the development of local rule of law and improving government
processes to limit corruption.
Spur Economic Growth, Trade, and Investment
As one would expect, the greatest impact China’s electrification efforts are having on U.S. policy
in SSA fall under the pillar of “Economic Growth, Trade, and Investment.” There are significant
differences in the way the U.S. and China invest in Africa. According to the Rand Corporation,
only 3.6 percent ($228 million) of the total FY 2013 U.S. aid request for Africa was dedicated to
economic growth initiatives other than agricultural and environmental programs, such as trade,
investment, finance, infrastructure, and private sector competitiveness. In contrast, investment,
infrastructure, and trade dominate China’s spending in Africa.lxiv
In essence, the United States
focuses its assistance efforts on human development to a much greater degree than China, which
emphasizes economic growth and commercial activity.
With respect to electrification, the World Bank expands on this trend showing that “Non-OECD
donors [like China] tend to focus on productive infrastructures, mainly power (in particular
hydroelectric schemes) and railways while Western donors tend to focus on public goods.”lxv
This has created concerns among policymakers and analysts that China’s investments may not be
serving the best interest of the African host nations and may be undermining U.S. objectives.
Barring environmental concerns, Africa’s energy deficit is so severe and detrimental to the sub-
continent’s economic development that any electrification investment will benefit the host
country.lxvi
Therefore, while some forms of infrastructure investments are more beneficial
towards development than others, any investment from China can increase GDP.
21
One of the greatest fears from China’s infrastructure investment in Africa is that it will cripple
the growth of African economies through resource-backed loans. Resource-backed loans are
used for countries that cannot provide adequate financial guarantees to back their loan
commitments so they pair natural resource extraction with infrastructure development.lxvii
Many
are worried by the scale of resource-backed loans China has dealt in Africa and fear that China is
limiting U.S. access to resources while giving unfair deals to SSA. According to a World Bank
report on China’s role as an infrastructure investor in SSA, “Chinese banks have extended
resource-backed loans to at least seven African states, totaling more than $14 billion. Chinese
state-owned enterprises are the dominant recipient of Chinese export credits for business in
Africa, but Beijing has announced a $1 billion fund to support private firms.”lxviii
However, a
majority of the resources procured in these loan schemes are fungible, and therefore, only
increase global supply. Further, it is often the best option for the host nation to secure the
development needed. lxix
In the short run, these deals could make SSA dependent on resource
exports and undermine U.S. policy objectives. In the long run, African countries cannot develop
other industries and diversify their economies without the amount of investment coming from
China. Ultimately, these loan schemes only undermine U.S. policy objectives if they are focused
on supporting Chinese industries in Africa instead of making significant improvements in
providing stable access to the population.
Advance Peace and Security
Africa has no shortage of triggers for instability and conflict. Africa’s infrastructure deficit,
specifically in the electrification and power generation sectors is undoubtedly contributing to
general instability on the continent. John Banks of the Brookings Institution argues, “Energy
poverty undermines economic development, fueling political instability and the creation of failed
states that can harbor our enemies and threaten our allies. Indeed, there is a strong correlation
between political stability and electrification rates.”lxx
The lack of access to reliable power can contribute to instability in several ways. As Banks
mentions, poor electrification rates can hinder development and employment, perpetuating the
conditions that can feed insurgencies and conflicts. Unreliable and poorly regulated access to
power can also fuel illicit economies and ‘dark networks,’ allowing criminal networks to usurp
authority from legitimate forms of governance. These criminal networks are often linked to
armed groups or even violent extremist organizations and can funnel funding from a population
to the elements that seek to destroy that population.
The United States has demonstrated its willingness to combat extremist groups and engage in
capacity building for SSA through national and multilateral (UN and African Union) security
forces, but this has done little to address the drivers of insecurity. This failure is reflected in the
allocation of U.S. government resources. As of 2014, the United States had a military presence in
thirteen African countries.lxxi
Additionally, there are Defense Attaché Offices in roughly 38 U.S.
Embassies in Africa (including Northern Africa).lxxii
However, when it comes to actual
investment in Africa, as of 2013, the Foreign Commercial Service (FCS) has had a diminished
presence in SSA.lxxiii
In comparison, “China has an estimated 155 commercial attaches in the
region - more than three per country in SSA. Other countries, such as Brazil, India, Russia and
Turkey, have dramatically increased their commercial presence on the continent as well.”lxxiv
Without dramatic shifts in the allocation of U.S. efforts, the United States will continue to foot
22
the bill to combat instability and conflict through force while China and others profit from
investments that can help prevent such instability from occurring.
Promote Opportunity and Development
China’s greatest investment in electrification projects in Africa has been in hydropower, but this
has had mixed effects. In one respect, hydropower is a positive step towards clean energy and
supports U.S. goals of promoting low-emissions growth and sustainable development. However,
climate change is a major factor affecting African hydroelectric production. The increasing
frequency of droughts has plagued hydroelectric dams around the continent. This severely
diminishes their capacity, such as the Akosombo Dam example cited the in Ghana case study of
the comparative analysis section. Past research indicates that neither Chinese nor African
counterparts have developed safeguards or backup measures for resiliency in the face of water
shortages. This growing African dependence on hydropower for electricity leaves countries
economically vulnerable and undermines U.S. interests in promoting sustainable outcomes. In
the same vein, this economic vulnerability provides an opportunity for the United States in SSA
to promote diversification of African country energy portfolios and further introduce U.S.
companies to the region as viable alternatives to large-scale hydropower projects.
In comparing the two countries, some purport that China is doing more to address constraints to
SSA growth than the United States. The argument is that although President Obama has
emphasized a focus on expanding equal partnerships through revitalized trade and closing big
investment deals, the numbers for China and the United States indicate otherwise. For example,
after President Obama’s visit to East Africa, General Electric, with the support of OPIC signed a
$155 million deal to build a 100-megawatt wind-power station in Kenya, increasing Kenya’s
current energy production by about 5 percent. However, China is currently providing a $1.2-
billion loan to help construct a 1,000 MW coal-fired plant in Kenya.lxxv
Aside from the type of
energy projects being implemented, it is evident that China’s financing in Kenya alone is worth
more than six times that of all the Power Africa projects in the country. And the energy arena on
the entire sub-continent represents an even broader disparity.
African leaders are increasingly aware that they should not be so heavily dependent on one
source of income and welcome more diversified global investments. However, despite this drive
for engagement, the biggest perceived difference between the United States and China is that the
United States still plays the role of advisor and dispenser of foreign aid while China approaches
countries on the sub-continent as business partners.
23
Strategy and Recommendations
At first glance, the increased Chinese presence in SSA has undermined democratic institutions
and good governance on the continent, but this does not show the full picture. China has used
their large presence to aid in economic development by adding electricity capacity and
increasing grid connectivity. Accordingly, in order for the United States to help mitigate SSA’s
electrification needs, it is paramount that the United States continue to focus on reaching Power
Africa’s goals of 30,000 MW and 60 million connections by 2018. Additionally, it is imperative
to U.S. national interests that policies promote good governance and sustainable energy practices
in SSA. Based on our analysis, we recommend a three-tiered strategy on a regional, national, and
subnational level that not only promotes U.S. private investment in adding capacity, but also
provides technical assistance and education in best energy policy practices. This short-term
strategy will help the United States realize its long-term goals of fostering economic
development in a sustainable, capacity-building way that provides assistance to democratic
institutions in SSA.
REGIONAL:
● Utilize multilateral energy initiatives including the International Renewable Energy
Agency’s Africa Clean Energy Corridor and the United Nations Sustainable Energy
for All (SE4ALL) Initiatives as a forum for cooperation with China: By increasing
U.S. funding to these initiatives and entering into negotiations with China, the United
States can complement China on electrification in SSA and enhance US-China
cooperation. On a regional level, the U.S. can help provide transmission connections and
capacity building through the framework of the Eastern, Western, and Southern Power
Pools as China continues to build power plants in these regions. Moreover, use recent
bilateral cooperation with China on climate change and clean energy to expand into a
multilateral agreement to provide clean energy to developing countries, in particular in
SSA.lxxvi
NATIONAL:
● Increase Foreign Commercial Service Officer (FCSO) presence in each region:
Expanding the number of current FCSOs in SSA enables the U.S. government to promote
more American private investment, as well as more effectively market the Power Africa
Initiative or the Millennium Challenge Corporation by establishing a more visible
American presence on the ground.5
We recommend the addition of FCSOs in South
Africa, Uganda, Ghana, Rwanda, and Liberia.6
● Increase the number of trade missions to SSA: Along with expanding the presence of
FCSOs, increasing the number of trade missions will provide technical assistance or
capacity building that is necessary to promote energy policy reforms and utility
restructuring. This can be done by inviting high-level government officials, as well as
national utility representatives, to the United States to see how the U.S. national grid is
5
There are currently FCSOs in Angola, Ethiopia, Mozambique, Kenya, Tanzania, and Nigeria.
6
According to Bloomberg New Energy Finance’s Climatescope 2014 report, South Africa, Kenya, Uganda,
Ethiopia, Tanzania, and Nigeria scored the highest in providing enabling policy frameworks, financing and
investment incentives, and greenhouse gas mitigation targets. These countries provide a fertile opportunity for U.S.
clean energy engagement.
24
structured. This is also a way to demonstrate best practices of energy technology
standards. For example, invite utilities like South Africa’s Eskom, Angola’s Empresa
Nacional de Distribuição de Electricidade (ENDE), Nigeria’s Power Holding Company,
and Uganda’s Electricity Generation Company Limited.
● Encourage African governments to consider resilience and life-cycle costs in energy
policy formulation: By bringing to light consideration for potential desertification, water
shortage, or other costs, the U.S. government can promote sustainable energy policy that
can further advance economic development, and can provide a platform for marketing of
U.S. renewable energy technology. This can be done by increasing technical experts on
the ground in SAA to provide information to energy ministries about technology life-
cycle costs and factor in environmental damages.
● Partner with African governments to meet their mitigation goal and promote clean
technology: The U.S. is in a unique position to aid SSA in strengthening each country's
clean energy policies based off the Intended Nationally Determined Contributions
(INDCs) which 43 of the 48 Sub-Saharan countries submitted this year to the United
Nations Framework Convention on Climate Change (UNFCCC). The U.S. is a world
leader in developing clean energy technologies and techniques, providing a niche
opportunity for the Africa Bureau to work with the Special Envoy on Climate Change
(SECC) and the Bureau of Energy Resources (ENR) on developing clean energy policies
and projects in SSA.
SUBNATIONAL:
● Expand off-grid and mini-grid solutions: The current rate of implementation for U.S.
utility scale projects is too slow to meet Power Africa’s 2018 goal of 30 GW and 60
million connections or SSA’s projected energy demand of 207 GW by 2020. The use of
off-grid and mini-grid solutions based on renewables, like solar PV panels, can be used as
a platform in preparation for the long-term development of a national grid system. This
can be done through a number of ways, but in particular, a partnership with Peace Corps
or the U.S. Military Civil Affairs would allow for the dissemination of technology and
capacity building through a U.S.-sponsored initiative already on the ground in SSA. A
partnership with the Peace Corps was already established in Latin America in 2010.lxxvii
This recommendation also poses as an area of complementarity with China. Where
Chinese mega-projects aid urban areas, American small-scale projects can help rural
areas.
25
Conclusion
It is important to remember that the purposes of this study were not simply to critique China’s
presence in Africa. Rather, this study assessed how these practices either helped or hindered U.S.
strategic interests in the region. Our analysis shows that Chinese electrification projects in Africa
can be complementary to the U.S. goal of economic development. However, this is not to say
that Chinese investment has been entirely positive, and as demonstrated by our case studies,
these projects often undermine the U.S. goal of strengthening democratic institutions. As such,
these recommendations serve not only to add capacity that fosters growth and development in the
short term, but also encourages sustainable policy that promotes good governance in the long
term.
Additionally, we believe further research is needed to paint a more detailed picture of both the
Chinese and U.S. electrification presence in Africa. We suggest studies of 1) effects of Chinese
electrification in rural versus urban African regions; 2) the security impact of the widening
electricity gap; 3) the impact of droughts and other effects of climate change on large utility-
scale projects such as hydropower; 4) increasing urbanization in Africa and the implications for
political security in the region; and 5) the extent of the Chinese shift from resource-backed loans
to direct acquisitions. Overall, this study and future related ones contribute to the nascent
literature on Chinese and U.S. electrification in Africa, and will serve to provide a
comprehensive assessment of the role both the United States and China can play in developing
African energy.
26
End Notes
i
James Zhan et al. “World Investment Report 2015.” UNCTAD, 2015.
http://unctad.org/en/PublicationsLibrary/wir2015_en.pdf
ii
“Why does Kenya lead the world in mobile money?”. Economist. May 27, 2013,
http://www.economist.com/blogs/economist-explains/2013/05/economist-explains-18
iii
“International Energy Statistics”. Energy Information Administration, 2015.
http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=2&pid=2&aid=7
iv
“The World Factbook: China”. Central Intelligence Agency, Last updated October 28, 2015.
https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html
v
International Energy Agency, “Defining and Modelling Energy Access”, OECD/IEA, 2015,
http://www.worldenergyoutlook.org/resources/energydevelopment/definingandmodellingenergyaccess/
vi
Todd Moss and Madeleine Gleave, “How Much Power Does Power Africa Really Need?” Center for Global
Development, October 10, 2013, http://www.cgdev.org/blog/how-much-power-does-power-africa-really-need
vii
“International Energy Statistics”. Energy Information Administration, 2015.
http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=2&pid=2&aid=7
viii
“World Bank Development Indicators”. World Bank. OECD/IEA: 2014.
http://data.worldbank.org/indicator/EG.USE.ELEC.KH.PC
ix
Antonio Castellano et al, “Brighter Africa”. McKinsey & Company, February 2015,
http://www.mckinsey.com/insights/energy_resources_materials/powering_africa
x
Antonio Castellano et al, “Brighter Africa”. McKinsey & Company, February 2015,
http://www.mckinsey.com/insights/energy_resources_materials/powering_africa
xi
Axel Dreher, Andreas Fuchs, Bradley Parks, Austin M. Strange, and Michael J. Tierney, “Apples and Dragon
Fruits: The Determinants of Aid and Other Forms of State Financing from China to Africa,” (AidData, 2015),
<http://aiddata.org/sites/default/files/wps15_apples_and_dragon_fruits.pdf>.
xii
Ibid.
xiii
Deborah Brautigam, Jyhjong Hwang, and Lu Wang, “Chinese-Financed Hydropower Projects in Sub-Saharan
Africa,” (The China Africa Research Institute at Johns Hopkins University, 2015),
<https://saiscari.files.wordpress.com/2015/11/sais-cari-brief-8-april-2015-website.pdf>.
xiv
Peter Bosshard, “How Chinese Loans Could Fuel Regional Conflict in East Africa,” (International Rivers, 2013),
<http://www.internationalrivers.org/blogs/227/how-chinese-loans-could-fuel-regional-conflict-in-east-africa>.
xv
Ed McKenna, “Ethiopia’s Indigenous Excluded from Rapid Growth,” (Interpress Service News Agency, Nov.
2013), <http://www.ipsnews.net/2013/11/ethiopias-indigenous-excluded-from-rapid-growth/>.
xvi
Peter Bosshard, “New Chinese Dam Project Fuels Ethnic Conflict of Sudan,” (International Rivers, 2011)
<https://www.internationalrivers.org/blogs/227/new-chinese-dam-project-fuels-ethnic-conflict-in-sudan>
xvii
Firoze Manji, African perspectives on China in Africa, 6.
xviii
Lloyd Thrall, “China’s Expanding African Relations: Implications for U.S. National Security,” (RAND
Corporation, 2015)
<http://www.rand.org/content/dam/rand/pubs/research_reports/RR900/RR905/RAND_RR905.pdf>.
xix
“China in Africa”, (Institute of Developing Economies- Japan External Trade Organization)
<http://www.ide.go.jp/English/Data/Africa_file/Manualreport/cia_10.html>
xx
“Mambilla Hydroelectric Dam”, (AidData, 2013), <http://china.aiddata.org/projects/1990>.
xxi
Zheng Qi, Margaret Egbula, “China and Nigeria: A Powerful South-South Alliance”, West African Challenges,
November 2011, <http://www.oecd.org/china/49814032.pdf>.
xxii
“Sub-Saharan Africa Power Outlook”, (KPMG Africa, 2014), 22.
xxiii
“U.S. Support for the Sustainable Energy for All Global Action Agenda”, (Department of State, 2012),
<http://www.state.gov/r/pa/prs/ps/2012/06/193500.htm>.
xxiv
“Power Africa”, USAID, July 2014, <http://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-
Documents/USAID_-_Power_Africa_Annual_Report.pdf>
xxv
Evelyn Kahungu, “Wind Promises to Power Kenya’s Growth” Our World, United Nation University, Oct. 28,
2011, <http://ourworld.unu.edu/en/wind-powers-kenyas-growth>
xxvi
“Lake Turkana Wind Power Project- Fact Sheet”, Lake Turkana Wind Power, June 2015,
<http://www.ltwp.co.ke/the-project/overview>
27
xxvii
Katie Fehrenbacher, “How M-KOPA unlocked pay as you go solar in rural Kenya”, GIGAOM, Apr. 10, 2014,
https://gigaom.com/2014/04/10/how-m-kopa-unlocked-pay-as-you-go-solar-in-rural-kenya
xxviii
John Mukum Mbaku,“Fighting and Improving Human Development in Africa”, U.S.-Africa Relations from
Clinton to Obama, Lexington Books, Editor Veney, C.R., 2014, p.35-73
xxix
“AllAfrica.com: Africa: Power Projects Take Time But Access to Electricity is Spreading – Paul Hinks”,
Symbion-Power.com, August 15, 2015, http://www.symbion-power.com/about/events/article/all-africa-power-
projects
xxx
Ron Nixon, “Obama’s ‘Power Africa’ Project is off to a Sputtering Start”, NY Times, July 21, 2015,
http://www.nytimes.com/2015/07/22/world/africa/obamas-power-africa-project-is-off-to-a-sputtering-
start.html?_r=0
xxxi
“Reverse Trade Missions”, export.gov, Dec.29, 2010, <http://www.export.gov/reee/guide/eg_main_022190.asp>
xxxii
“OPIC in Action”, OPIC.gov, accessed Nov. 14, 2015, <https://www.opic.gov/opic-action/power-africa# >
xxxiii
James Macharia, “U.S. investment agency to fund $400 mln S.Africa solar power plant”, Reuters.com, Sept.
21, 2015, http://www.reuters.com/article/2015/09/21/safrica-power-
idUSL5N11R2OF20150921#pQcQx1l11d1jJAId.97
xxxiv
“Jasper”, SolarReserve.com, accessed Nov. 14, 2015, http://www.solarreserve.com/en/global-projects/pv/jasper
xxxv
Wenjie Chen, David Dollar, and Heiwai Tang, “Why is China investing in Africa? Evidence from the firm
level,” Brookings Institute, August 2015, http://www.brookings.edu/~/media/research/files/papers/2015/08/why-
china-is-investing-in-africa/why-is-china-investing-in-africa.pdf.
xxxvi
“Chinese investment in Namibia grows to 4.6b,” China News Daily, March 15, 2015,
http://www.chinadaily.com.cn/business/2015-03/15/content_19813452.htm.
xxxvii
International Finance Corporation, “Simplifying Business Law Across 16 African Countries OHADA’s
Business Law Reform Program,”
https://www.wbginvestmentclimate.org/publications/upload/OHADA_FINAL_A4.pdf.
xxxviii
“Mtwara-Dar es Salaam Natural Gas Pipeline Inaugurated,” Tanzania Invest, October 15, 2015,
http://www.tanzaniainvest.com/energy/president-jakaya-kikwete-inaugurates-usd-1-23-billion-mtwara-dar-natural-
gas-pipeline.
xxxix
“The Untold Story of Mtwara Gas riots,” The Guardian Tanzania, June 30, 2013,
http://www.ippmedia.com/frontend/?l=56502.
xl
“Tanzania: Symbion Embarks On Independent 600MW Power Project in Tanzania,” All Africa, February 11,
2014, http://allafrica.com/stories/201402111416.html.
xli
“Tanzania: Construction On Mtwara Gas Plant Project Starts,” All Africa, July 7, 2013,
http://allafrica.com/stories/201307080115.html.
xlii
David Appleyard, “Africa’s Hydropower Future,” HRW - Hydro Review Worldwide, January 1, 2014,
http://www.hydroworld.com/articles/print/volume-22/issue-1/regional-profile/africa-s-hydropower-future.html.
xliii
“China,” International Hydropower Association, https://www.hydropower.org/country-profiles/china.
xliv
Yun Sun, “China in Africa,” (lecture to China in Africa practicum class, October 29, 2015).
xlv
“FACT SHEET: Power Africa,” The White House, July 25, 2015, https://www.whitehouse.gov/the-press-
office/2015/07/25/fact-sheet-power-africa.
xlvi
“What Power Africa Means for Ghana,” USAID, https://www.usaid.gov/powerafrica/partners/african-
governments/ghana.
xlvii
“Ghana balances hydro and thermal,” International Water Power & Dam Construction Magazine, March 14,
2006, http://www.waterpowermagazine.com/news/newsghana-balances-hydro-and-thermal.
xlviii
“Ghana’s cocoa to help pay China for building 400-MW Bui,” HydroWorld.com, September 7, 2007,
http://www.hydroworld.com/articles/2007/09/ghanas-cocoa-to-help-pay-china-for-building-400-mw-bui.html.
xlix
Michael Harris, “Chinese firm signs EPC deal for Ghana’s 60-MW Hemang hydropower plant,”
HydroWorld.com, November 21, 2014, http://www.hydroworld.com/articles/2014/11/chinese-firm-signs-epc-deal-
for-ghana-s-60-mw-hemang-hydropower-plant.html.
l
“Ghana Power Compact,” Millennium Challenge Corporation, https://www.mcc.gov/where-we-
work/program/ghana-power-compact.
li
“Ghana Power Compact,” Millennium Challenge Corporation,
https://www.mcc.gov/where-we-work/program/ghana-power-compact.
28
lii
Clement Otu-Tei, “Broken Promises: Ghana’s Bui Dam Resettlement,” International Rivers, March 19, 2014,
https://www.internationalrivers.org/resources/broken-promises-ghana-s-bui-dam-resettlement-8269.
liii
Oliver Hensengerth, “Interaction of Chinese Institutions With Host Governments in Dam Construction,”
Discussion Paper, German Development Institute, March 2011.
liv
Brighter Africa, McKinsey Global Institute,
http://www.mckinsey.com/insights/energy_resources_materials/powering_africa.
lv
Nicola Jones, Environment 360: A Scarcity of Rare Metals Is Hindering Green Technologies, New Haven: Yale,
2015. 138.
lvi
Marc Humphries, China’s Mineral Industry and U.S. Access to Strategic and Critical Minerals: Issues for
Congress, Washington: CRS, 2015, 13.
lvii
Lucy Corkin, "China’s Role in the Development of Africa’s Infrastructure," SAIS Working Papers in African
Studies, 2008, 8-11.
lviii
David Shinn, “The Environmental Impact of China’s Investment in Africa,”
http://www.internationalpolicydigest.org/2015/04/08/the-environmental-impact-of-china-s-investment-in-africa.
lix
Ibid.
lx
Al Jazeera, “Chad withdraws Chinese exploration permits,” http://www.aljazeera.com/news/africa/2014/08/chad-
withdraws-chinese-exploration-permits-2014810124614151839.html.
lxi
Armin Rosen, An oil dispute in Niger is exposing big problems with Chinese investment in Africa,”
http://www.businessinsider.com/niger-oil-and-chinese-investment-in-africa-2015-9.
lxii
Yun Sun, “Top Five Reason Why Africa Should be a Priority for the United States” Brookings, March 2013, 6-7.
lxiii
Lloyd Thrall, “China’s Expanding African Relations: Implications for U.S. National Security,” RAND
Corporation, 2015, 3.
lxiv
Larry Hanauer, Lyle J. Morris, “Chinese Engagement in Africa: Drivers, Reactions, and Implications for U.S.
Policy,” RAND Corporation, 2014, 96
lxv
“Building Bridges: China’s Growing Role as Infrastructure Financier for Sub-Saharan Africa” The World Bank,
2009, 73.
lxvi
Brighter Africa, McKinsey Global Institute,
http://www.mckinsey.com/insights/energy_resources_materials/powering_africa, 8
lxvii
Building Bridges, xvii.
lxviii
Ibid, 88.
lxix
Ibid.
lxx
John Banks “Top Five Reason Why Africa Should be a Priority for the United States” Brookings, March 2013. 8-
9.
lxxi
Adam Taylor, “MAP: The U.S. military currently has troops in these African countries,” The Washington Post.
May 21, 2014. https://www.washingtonpost.com/news/worldviews/wp/2014/05/21/map-the-u-s-currently-has-
troops-in-these-african-countries/
lxxii
United States Africa Command, http://www.africom.mil/about-the-command
lxxiii
Witney Schneidman, “Top Five Reason Why Africa Should be a Priority for the United States” Brookings,
March 2013, 12-13.
lxxiv
Ibid.
lxxv
Charles Kenny, “Obama Teaches Africa to Fish.” The Atlantic, July 29, 2015.
http://www.theatlantic.com/international/archive/2015/07/obama-africa-investment-kenya-ethiopia/399851/
lxxvi
“U.S.-China Joint Presidential Statement on Climate Change,” September 25, 2015.
https://www.whitehouse.gov/the-press-office/2015/09/25/us-china-joint-presidential-statement-climate-change
lxxvii
Kevin Eber. “Peace Corps to Tackle Grassroots Energy Issues”. Renewable Energy World. September 1, 2010.
http://www.renewableenergyworld.com/articles/2010/09/peace-corps-to-tackle-grassroots-energy-issues.html
29
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China in Africa Practicum Research Paper

  • 1. EMPOWERING AFRICA: AN EXAMINATION OF U.S. AND CHINESE ELECTRIFICATION EFFORTS IN SUB-SAHARAN AFRICA Robert Avakian, Heaven Fekadu, Keith Gentry, Lauren Hovis, Briana Huggins, Kaela Mananquil, Simon Muller, John Nielsen, Ana Reed, Elise Voorhis China in Africa Practicum American University, SIS 793 December 4, 2015
  • 2. i Table of Contents Abbreviations ________________________________________________________________ii Executive Summary___________________________________________________________iii Introduction__________________________________________________________________1 Research Design ______________________________________________________________2 Background__________________________________________________________________4 Examination of Electrification Projects in Sub-Saharan Africa__________________________________________________6 Comparative Analysis_________________________________________________________11 Africa in 2020: Chinese-African Economic Ties_________________________________________________17 Implications for U.S. Foreign Policy Objectives in Africa_____________________________________________________19 Strategy and Recommendations ________________________________________________23 Conclusion__________________________________________________________________25 Endnotes ___________________________________________________________________26 Bibliography ________________________________________________________________29
  • 3. ii List of Abbreviations ACEF U.S.-Africa Clean Energy Finance Initiative CPTDA China Petroleum Technology and Development Corporation CSR Corporate Social Responsibility DoC U.S. Department of Commerce DoE U.S. Department of Energy DoS U.S. Department of State EIA U.S. Energy Information Administration ENR Bureau of Energy Resources Exim Export-Import Bank FCS Foreign Commercial Service FDI Foreign Direct Investment FY Fiscal Year GDP Gross Domestic Product GW Gigawatt INDC Intended Nationally Determined Contributions IPP Independent Power Producer KWh Kilowatt-hours LTWP Lake Turkana Wind Power MCC Millennium Challenge Corporation MtCO2e Metric Tons of Carbon Dioxide Equivalent MW Megawatt MWh Megawatt-hours ODA Official Development Assistance OECD Organization for Economic Cooperation and Development OPIC Overseas Private Investment Corporation PHCN Power Holding Company of Nigeria PPP Public-Private Partnership PV Photovoltaics SE4ALL Sustainable Energy for All Initiative SECC Special Envoy on Climate Change SSA Sub-Saharan Africa TANESCO Tanzania Electric Supply Company TWh Terawatt-hours UNFCCC United Nations Framework Convention on Climate Change USAID U.S. Aid and International Development Agency USD United States Dollar USG United States Government USTDA U.S. Trade and Development Agency
  • 4. iii Executive Summary Since the early 2000s China has pursued a “going-out” policy, which has dramatically increased Chinese foreign investment around the world, particularly electrification in Sub-Saharan Africa (SSA). Over half of the people in SSA do not have access to electricity, and as a result, African economic growth and development continue to be stymied. The United States has a national interest in empowering Africa, yet China has outpaced the United States in terms of putting megawatts on the ground and providing energy financing in SSA. China has also gained a reputation for engaging in checkbook diplomacy by implementing projects with little regard for good governance or social and environmental costs. Given that good governance relates to political and social stability, the effects of these electrification efforts may be detrimental to the overall U.S. goal of strengthening democratic institutions in SSA. As such, we have examined the effects of Chinese electrification in SSA, and what the United States can do to ensure that African electrification not only bolsters economic development but also fosters good governance. To assess China’s effects in SSA, we conducted a comparative qualitative and quantitative analysis of Chinese and U.S. electrification projects in SSA from 2000 to the present. We estimate that China has contributed over 36,000 MW through approximately 160 projects - over a quarter of SSA’s total energy needs. These projects have been predominantly hydroelectric, which has supported global clean energy goals. However, the Chinese presence has been met with some backlash, including concern over displacement of people, lack of job creation for Africans, and contribution to greenhouse gas emissions from fossil fuel projects. By contrast, U.S. electrification efforts have contributed over 8,000 MW through approximately 70 projects. Whereas China continues to invest in all energy resources, 79 percent of U.S. projects are renewable energy-based, emphasizing the U.S. global commitment to mitigate climate change. Furthermore, our analysis shows that China invests in electrification projects indiscriminately, while the United States only invests in countries with particular governance standards or favorable business climates. Lastly, the prevalence of Chinese turnkey projects stands in sharp contrast to U.S. initiatives, which largely prioritize capacity-building and technical training. Despite these differences, Chinese electrification projects can be complementary to U.S. goals in SSA by promoting overall economic development. Where China has fallen short in aiding good governance and programs for local populations, the United States can help strengthen SSA business climates and democratic institutions, while still adding megawatts on the ground. To meet Power Africa goals of 30 GW and 60 million connections, we recommend that over the next five years, the United States 1) strengthen U.S. commitment to multilateral energy initiatives, 2) increase the presence of Foreign Commercial Service Officers, 3) increase the number of trade missions to SSA and focus capacity building on areas with existing Chinese infrastructure projects, 4) encourage African governments to consider resiliency and long-term costs in policy formulation, 5) partner with African governments to meet mitigation goals and promote clean technology, and 6) expand off-grid and mini-grid solutions. These recommendations not only promote U.S. private investment, but also provide technical assistance through best practices. This short-term strategy will help the United States realize its long-term goals of fostering sustainable economic development and strengthening democratic institutions in SSA.
  • 5. 1 Introduction Sub-Saharan Africa (SSA) has the potential to be a regional economic powerhouse, which is why the global economy is directing nearly $42.2 billion in foreign direct investment (FDI) into SSA each year.i However, the region’s limited infrastructure, especially in electricity generation, is one of the main hurdles limiting the impact of these investments and hampering sustainable economic growth and prosperity. Before businesses can boom and populations can prosper, infrastructure such as roads, buildings, and electricity must be established. The multiplier effect of electricity access is far-reaching; a household with access to electricity can enhance their education with proper lighting, reduce the negative health effects caused by burning biomass or kerosene, and charge their cell phones which have become the most prominent way of transferring money and conducting business in SSA (i.e. mobile money).ii Electricity is a key developmental necessity to promote economic and social growth. China is the most impressive example of a country “leapfrogging” energy development and experiencing rapid economic growth as a result. Twenty years ago, China had around 220 gigawatts (GW) of installed electricity generating capacity and was the 8th largest economy in the world.iii Today, China beats the U.S. with 1,505 GWiv , almost 400 GW more installed capacity than in the United States, and is the 2nd largest economy behind the U.S.1 And China is now helping SSA do the same thing. By adding more megawatts, spending more money, and winning more bids than the United States, China is playing a formidable part in advancing SSA’s economic future to gain a strategic foothold. While the motivations behind China’s heavy investment in energy in SSA are complex, none are clearer than its economic motive. This has raised concerns, among many in the academic and policy fields, that unfettered Chinese investment in SSA is propping up authoritative regimes, perpetuating the “resource curse,” and potentially preventing the U.S. from achieving its strategic and economic development goals on the sub-continent. The U.S. Department of State has a significant role to play in the future of SSA’s economic development, especially if actions are taken during this time of energy expansion. The next five years will be critical in addressing Africa’s access to electrification, especially as economic relationships change between SSA, China, and the United States. This report will be broken up into seven parts: 1) Research Design 2) Brief background on the energy situation in SSA 3) Examination of China’s and the United States’ energy projects in SSA 4) Comparative qualitative analysis of U.S. and China’s projects through case studies 5) Projections of Chinese-African relations in the next five years and analysis of the implications associated with electrification development 6) List of actionable recommendations and ways of implementation 7) Conclusion 1 Refer to Table 1.
  • 6. 2 Research Design This study seeks to identify the effects of Chinese investment in African electrification projects on the local economies, evaluate its impact on U.S. national interests, and provide short and medium term (1-5 years) recommendations for U.S. electrification investment and development policy in SSA. This study uses both a data driven quantitative methodology and a case study based qualitative approach to examine the implications of electrification in SSA. Our data collection process is outlined first, followed by our qualitative study approach and the limitations of our methods. The two units of analysis in our study are states and electrification projects. The target population of the study focuses on forty-one countries within continental SSA, and Madagascar. With the term electrification we refer to projects involving electricity production, transmission, storage, management equipment, as well as technical and governance training. Data Collection Data of Chinese and U.S. electrification projects and financial commitments was compiled using information and datasets obtained from AidData, Bloomberg Data, the World Bank, the U.S. Energy Information Administration, the U.S. Power Africa initiative, the World Resources Institute, proprietary research from the John Hopkins SAIS China-Africa Initiative, official foreign government documents and press releases, news media, and internet sources. Interviews were conducted with representatives from the U.S. Department of Energy, the U.S. Trade and Development Agency, Johns Hopkins SAIS, the Brookings Institution, the U.S. Department of Treasury, and an American Chamber of Commerce representative in Tanzania. Electrification project data was limited to projects that were completed, under implementation, at the contractor-bidding phase or had concrete financing commitments between 2000 and 2015. The time range was determined based on the period of substantive Chinese engagement in African electrification efforts. Projects at the feasibility study or memorandum of understanding (MoU) stages were not included as these are not reliable indicators of eventual project implementation. Projects were categorized by country, electricity generation, source fuel type, installed capacity in megawatts, financing source and type, and the companies involved in project implementation. Electricity generation and source fuel types were categorized as hydropower, solar, wind, coal, fuel oils, biomass, and natural gas. The limited number of combined-cycle power plants were listed as natural gas plants. Projects that did not add generation capacity but were directly related to electrification efforts, like electric grid expansions, were listed under training, governance building or electricity transmission. Financing commitments were defined as signed or officially announced loans, grants, and export credits (measured in USD 2011). Financing sources included any government agencies, international institutions and private companies involved in the financing of the projects.
  • 7. 3 Empirical Analysis SSA electricity demand growth calculations were based on current total installed capacity and the projected demand in SSA for the next five years. The calculations were used to estimate the number of power plants needed to fulfill the demand and associated hypothetical emissions by 2020. This was done using the following calculations, which assume a minimum of 250 kilowatt- hours per person per year as determined by the International Energy Agency’s energy access models,v as well as a 40 percent average capacity factor for all energy resources and a 20 percent reserve load capacity.vi Greenhouse gas emissions were calculated in MtCO2e based on the Environmental Protection Agency formula for oil, gas, and coal power plants. The study uses comparative data analysis to evaluate U.S. and Chinese engagement across the areas of electrification, environmental, governance and socioeconomic impact. The qualitative analysis draws on the case study method common to social science research. Nigeria, South Africa, Tanzania, and Ghana are chosen as case studies due to substantial U.S. and Chinese investments and electrification projects. The Nigeria case study examines heavy Chinese engagement while the South Africa case study illustrates heavy U.S. engagement. The case studies of Tanzania and Ghana analyze the sub-national impact of U.S. and Chinese firms in Africa. Comparing the impact of both U.S. and Chinese FDI within the same country allows us to hold constant the geographic, social, macroeconomic, regulatory, and natural resource conditions, while our particular variables of interest such as finance and type of power projects vary. Limitations of Design Our empirical approach has data limitations common to studies analyzing Chinese foreign investment information, corporate project financing, bidding, and implementation in developing countries. Inconsistent reporting in local news media as well as datasets using non-standardized project designations and financial accounting can also distort project-level information. We remain confident, however, in the larger trends suggested by our analysis.
  • 8. 4 Background: Energy Situation in Sub-Saharan Africa According to 2012 U.S. Energy Information Administration (EIA) data, SSA has a total of 81.4 GW of installed grid-based electricity capacity. However, more than half of this capacity was installed in South Africa alone (44.5 GW).vii Compared to the United States, SSA accounts for only 8 percent of America’s total installed capacity. This means that, on average, each person in SSA can only consume about 512 kilowatt-hours (kWh) a year, whereas a citizen in the United States can consume close to 11,000 kWh a year.viii This is the quintessence of energy poverty (see figure 1). Figure 1: Relationship between Electricity Consumption and GDP per capita There is a positive correlation between increased electricity consumption and GDP per capita. Current electricity demand in SSA is estimated at 135 GW (473 TWh). Because there is only 81.4 GW of installed capacity, there is a shortfall of 54 GW.2 Installed capacity will need to double in order to meet the projected demand of 207 GW (725 TWh) in 2020.ix In other terms, nearly 250 power plants with an operating capacity of 500 MW will need to be constructed within five years to meet SSA’s current demand projections. However, demand will double again by 2030, which means SSA will need an additional 500 power plants. The consulting firm McKinsey estimates that if every country built enough power plants to meet demand, SSA would 2 See equation in “Research Design” section
  • 9. 5 require about $490 billion in capital for new generating capacity, plus another $345 billion for transmission and distribution.x While these numbers are comparable in scale to other global developing countries, SSA as a whole faces a number of issues beyond that of a single country. These numbers provide the electrification context that China and the United States must address, but do not delineate the risks that a Chinese presence may pose to U.S. national interests. The following sections will delve in more detail into China’s development in SSA and how the U.S. should proceed in the future. Table 1: Energy capacity and consumption in the U.S., SSA, and China There is huge disparity between the United States, SSA, and China in all aspects of energy. Total Electricity United States Sub-Saharan Africa China Installed Capacity 1,164 GW 81.4 GW 1,505 GW Total Generation (TWh) 4,093 TWh 473 TWh 5,126 TWh Electricity Consumption (kWh per capita per year) 10,932 kWh 512 kWh 3,475kWh Total Power Plants/Generators 19,243 power plants unknown unknown MtCO2e Emissions from Energy 5,396 million MtCO2e 916 million MtCO2e 8,650 million MtCO2e Sources: Energy Information Administration (2015), World Resources Institute (2015), CIA (2015), World Bank (2014), McKinsey (2015).
  • 10. 6 Examination of Electrification Projects in Sub-Saharan Africa Chinese Engagement in Electrification To date, there are few studies that examine Chinese electrification efforts from a sub-continental perspective. Most studies focus on China’s engagement in a particular country or on a specific mode of energy production in SSA. As seen in Table 1, China outpaces the United States and SSA in its own installed capacity. This domestic success, combined with the Chinese narrative about solidarity among developing nations, greatly attracts partnerships from SSA leaders striving for similar growth. Unlike the United States, China is able to use this narrative of a common development path to promote its electrification footprint in SSA. Recently, however, China’s presence in Africa has faced criticism in Western and African media, who argue that frequent use of resource-backed loans is reminiscent of colonial exploitation. However, an October 2015 brief and econometric analysis released by AidData argued that Chinese aid in Africa was not exclusively linked to African states with poor governance issues, nor is it “motivated by natural resource acquisition interests.”xi Rather, the study notes that Chinese official development assistance (ODA) flows are more “strongly oriented toward poorer countries,” implying that Beijing may consider humanitarian needs when making aid decisions, and thus, could bear some resemblance to Washington and other Western governments.xii The potential positive impact the Chinese could have on electrification in Africa cannot be ignored. Thus, this section examines China’s engagement in SSA by assessing its ODA flows and the range of energy projects both started and completed in Africa with the goal of understanding their effects on jobs, public health, the environment, and economic growth. Using our compiled data mentioned in the Research Design section, from 2000-2015, China has had over 166 energy generation projects in SSA. Using these figures, China has contributed an estimated total of 60 billion USD held in constant 2011 USD.3 Projects receiving this funding have added 36,282 MW to address the demand of 135,000 MW, about 27 percent of total electrification needs for Africa. Overall, Chinese projects have been mostly implemented in the Southern African region due to the vast number of transmission projects in Angola, but the most megawatts have been added to the East African region. The five countries that have received the greatest number of implemented or completed electrification projects are Angola (26), Ethiopia (13), the Sudans (13), Tanzania (11), and Kenya (10). In terms of added MW, the top 5 countries are Tanzania (6,923 MW), Nigeria (5,585 MW), Ethiopia (3,729 MW), Zimbabwe (3,200 MW), and the Sudans (2,950 MW). Furthermore, Chinese funded electrification projects have been predominantly hydropower, accounting for roughly 33 percent of total projects and 50 percent of total added megawatts. This has greatly contributed to the total amount of clean energy on the sub-continent. Moreover, Chinese investment in Africa has also borne some societal benefits. While Chinese companies in Africa are commonly portrayed as limiting their employment to primarily Chinese workers, the Johns Hopkins China-Africa Research Initiative has compiled a list of projects, including electrification, that help to debunk that myth. These projects include Gabon’s Grand Poubara Dam which employed 700 African workers and 300 Chinese, the 2010 3 Analysis of projects is based on the compiled research in our database, and for some projects there was no data on financing available.
  • 11. 7 Imboulou Dam which employed 2,000 Congolese and 400 Chinese, and the 2008 Bui Dam which employed 2600 Ghanaians and 400 Chinese.xiii However, the Chinese presence has also been met with some backlash, particularly due to social, environmental, and geopolitical concerns. For example, when the Ethiopian government sought out investment projects on the Omo River, major financiers such as the World Bank and African Development Bank declined due to concerns over the displacement of locals, and the effects on agriculture and fisheries. The Chinese, however, approved a loan for the Gibe III Dam, which threatens to displace “indigenous peoples of the Lower Omo Valley and Lake Turkana,” who have a recent history of conflict among communities in the region, thus potentially threatening the stability of the region.xiv Additionally, though the Gibe III Dam will produce 2,000 MW for the people of Ethiopia and Kenya, there is concern that the dam’s construction will worsen poverty for the most vulnerable, creating a new class of “internal refugees.”xv Furthermore, although hydroelectric dams are generally considered a form of clean energy, China’s significant support of these projects has had detrimental environmental and social impacts. For example, in Ghana, the Bui Dam flooded about 20 percent of the adjacent national park, threatening the native, endangered black hippopotamus population there. The Merowe Dam in Sudan that was built in 2003 has reportedly displaced up to 50,000 people living along the Nile River.xvi When revisited in 2005, even though the government helped irrigate the land where they were relocated, 20 percent of it had not been cleared for production. Moreover, even with irrigation, the quality of soil is so poor that farmers cannot sell their product on the market.xvii Apart from hydroelectric investments, projects that are not considered clean energy also pose a problem. These projects have added more than 36 million metric tons of greenhouse gas emissions (MtCO2e) annually. As an emerging power, China must consider the added responsibility of having a greater international presence and its Zou Chuqu, or “going-out” policy which seeks to increase Chinese foreign investment and commercial presence.xviii Case Study: Chinese Electrification in Nigeria Nigeria has been identified as having the greatest power projection potential in Africa in the coming decades, and China is positioning itself to be a primary partner in developing this potential. Nigeria has maintained diplomatic relations with China for the last 44 years, and through to 2009 was the second highest African destination for Chinese FDI. With regard to Nigeria’s electrification efforts, at the outset of China’s “Going Out” policy in 2000, Nigeria’s electrification rate was 44.9 percent. By 2010, it was 48 percent, and in 2012 it was 55.6 percent. Nigeria’s first loan came from the China Exim Bank in 2005 to construct three gas-fired power plants: Papalanto (335 MW), Omotosho (335 MW), and Geregu (138 MW). SEPCO of China assumed construction for Papalanto, with a loan deal of $300 million and oil-backed assurances for a period of one year. For hydropower, in July 2011 Power Holding Company of Nigeria (PHCN), Sinohydro, and Harbin Electricity Corporation signed a contract to rehabilitate the Kainji hydropower station in Rivers state. It was funded by the World Bank, with a cost of $282 million and is forecasted to add 340 MW.xix At present, the Mambilla scheme (2,600 MW) in Nigeria is China’s largest hydropower commitment project on the sub-continent. However, political turmoil has delayed the project, which is expected to be completed in 2018.xx On the social front, the Chinese government claims Chinese companies operating in Nigeria employ
  • 12. 8 30,000 local workers. However, considering the 350,000 manufacturing jobs that labor unions say are lost because of Chinese imports, some Nigerians question how beneficial Chinese investment is for their country.xxi Looking forward, the Nigerian power sector will see continued privatization due to a plan to accelerate energy sector reform from producing 3,000 MW in 2009 to a target of 40,000 MW by 2020.xxii These developments in privatization are significant because China is also shifting from a policy of resource-backed loans to one that increasingly pursues direct acquisitions. This has implications for further Chinese-funded electrification projects in Nigeria and elsewhere in SSA. U.S. Engagement in Electrification Recent U.S. engagement in electrification in SSA has been markedly different from Chinese investment, where clean energy creation and sustainable economic development are U.S. priorities. Concern for electrification has spiked in the last 15 years not just in mitigating development gaps but also in addressing sustainability and climate change. Advancing the development of sustainable energy through supporting initiatives such as the African Clean Energy Corridor, SE4ALL, Power Africa, and the U.S.-Africa Clean Energy Finance Initiative (ACEF) is critical to addressing climate change in a consequential and sustainable way and of which should remain a priority for foreign policy and development assistance.xxiii According to our data analysis of energy investment in Sub-Saharan Africa from 2000-2015, the U.S. contributed about 20 billion USD4 held in constant 2011 USD towards the implementation of 74 energy generation and supply projects in 22 countries. When all U.S. projects are completed, they will contribute a total of 8,330 MW of power, addressing about 6 percent to the continent’s current demand of 135,000 MW. The United States has the largest concentration of electrification projects occurring in one of the region’s greatest economic centers, South Africa, which boasts a total of 18 projects. In addition to South Africa, the countries that have received the greatest number of implemented or completed electrification projects are Kenya (12), Tanzania (7), Uganda (4), and Nigeria (4) for a combined supply of 7,439 MW of power. In comparison, the top 5 recipients of the greatest added MW are Nigeria (2,551 MW), Kenya (1,303 MW), Ethiopia (1,000 MW), Tanzania (925 MW), and South Africa (790 MW) for a combined supply of 6,569 MW. A characterization of U.S. investment in electrification is the provision of clean and renewable energy sources that collectively supply 4,079 MW of power. Almost 42 percent of total U.S. projects are in solar power. In the time period analyzed, the U.S. has added no coal-fired power plants. The U.S. is directly involved in 4 major geothermal projects, with Corbetti Caldera in Ethiopia as the largest and expected to produce 1,000 MW of power once fully online. Although the sub-continent has vast geothermal potential, development of this energy source has been slow. In addition to direct investment in geothermal projects, the United States is also leading coordination between various institutions and donors to facilitate more efficient development of geothermal capabilities, which will increase the rate at which this energy source is produced.xxiv While projects implemented by the United States are subject to certain socio-economic criteria, sometimes, these issues cannot be avoided. This is evident from the contentious development of 4 This is an estimation based on our data compiled and funds committed by Power Africa.
  • 13. 9 the Lake Turkana Wind Power (LTWP) project. Located in one of the poorest districts in Kenya, the LTWP station, financed by OPIC, Power Africa, and Google, was a source of initial concern for the local community with respect to their involvement in negotiations and local employment levels.xxv In 2011, community leaders argued that involvement in the project negotiations were limited to the elite, and the project only employed 25 locals. However, as of June 2015, conflicting reports stated that the project actually provided approximately 560 jobs for the Loyangalani community. Furthermore, The Winds for Change foundation, a corporate social responsibility (CSR) initiative of LTWP, was established with community input and has already installed boreholes, a water filtration system, classrooms and a community store.xxvi This largely demonstrates the value of CSR programs that are incorporated into such U.S. projects, along with monitoring and evaluation, which is necessary to ensure that these projects are sustainable and beneficial to the communities where they are taking place. While large-scale projects were the primary focus of initial energy investment on the continent, smaller scale off-grid projects are attracting an increasing amount of attention. Shorter timeframes to reach implementation and ease of dissemination, especially for rural communities, which have been largely underserved by larger projects, make these projects an ideal complement to larger-scale projects. Investment in technology has significantly driven down costs, which has spurred business models that attract more credible financing from U.S.-based financial institutions and private investors. For example, a $6.8 million OPIC loan will be used to back Powerhive’s Cloverfield Project in Kenya, which will build 100 solar-powered micro-grids to reach about 20,000 households. OPIC further committed $15 million to Txtlight Power Solutions to finance the delivery of 70,000 rooftop solar panel kits. Moreover, U.S. private investment has also facilitated access to mobile-pay home solar panel systems, which have connected over 65,000 customers in Kenya and employed over 700 independent local retailers in 2014.xxvii U.S. investment has made considerable progress towards the goal of increasing access to electricity to spur economic growth, development, and increased investment. However, the framework for investment is heavily dependent on the private sector and the leveraging of multinationals. This poses concern if the interests of such stakeholders contrast with the broad aims of U.S. policy such as promoting sustainability and economic growth in accordance with African objectives of job and wealth creation. Criticisms Compared to other donor nations, the United States has been slow to engage with Africa as an economic partner in trade and investment opportunities. Even with the recent acceleration of engagement on the sub-continent, the United States falls behind China in FDI flows to Africa.xxviii There is concern among the U.S. private business community working in Africa that Power Africa is not doing enough to reach the 30,000 MW goal by 2018.xxix Added to this worry is the continuity of the Exim Bank, a strategic source of export credit in supporting U.S. firms as they secure African bids. The Exim Bank lapse in reauthorization by Congress has prevented the U.S. financing of new projects in 2015, and could further delay Power Africa’s goals since these commitments are largely dependent on finance from the Exim Bank.
  • 14. 10 Power Africa has struggled in moving the discussion from potential projects to tangible actions. Many proposed projects have yet to start (particularly projects in Nigeria and the Democratic Republic of the Congo), due to the delays in negotiations of independent power producers (IPPs), public-private partnerships (PPPs), and reaching financial close. Most of Power Africa’s progress reported in its annual reports has been measured by signed deals rather than projects breaking ground. Additionally, Power Africa commitments have been private sector-led, and as such, the pace of commitments depend on the variable nature of the economic conditions of countries and the openness of emerging markets.xxx While the U.S. is actively seeking to promote investment of U.S.-based firms in Africa, this effort will need to be more aggressive in order to meet the energy goals in SSA. Promoting joint ventures and public to private partnerships, in particular, will help enhance the entrepreneurial, job, and wealth creation aspects of SSA’s development priorities. Case Study: U.S. Electrification Engagement in South Africa Economic exchange and trade ties with the United States and South Africa is one of the strongest on the continent, thanks in part to the formation of the South Africa-U.S. Bilateral Cooperation Forum. Additionally, while South Africa was not an initial focus country for the Power Africa initiative, it remains a country of large U.S. electrification investment, with a particular focus on the country’s renewable sector that promotes a switch to cleaner energy. The U.S. Government (USG) agencies providing assistance in South Africa includes USAID, OPIC, EXIM, USTDA, DoS, DoC, and the DoE. The USTDA and OPIC have had strong engagement in South Africa through technical support, feasibility studies, and project implementation. Through its Reverse Trade Missions, USTDA creates access for U.S. and South African business partnerships. For example, South African officials travelled to the United States to learn about energy efficient building solutions. This resulted in South African retailer Pick ’n Pay purchasing U.S.- manufactured technology.xxxi Along with USTDA, OPIC has had a history of supporting initiatives in South Africa, including solar power projects.xxxii OPIC granted $250 million to South Africa’s Standard Bank to fund power generation throughout SSA and has directly approved $400 million for the construction of a 100 MW solar plant in the Northern Province.xxxiii California-based SolarReserve will collaborate with Saudi Arabia’s ACWA Power on this project, making this the company’s fourth solar power project in the country. The Jasper Solar Power Project, commissioned in October 2014, produces 180,000 megawatt-hours of energy annually, enough for approximately 80,000 homes.xxxiv The U.S. has had a positive impact in contributing to South Africa’s switch to clean energy, which could help mitigate the common problem of blackouts due to an unstable power supply.
  • 15. 11 Comparative Analysis In examining the discrepancies between U.S. and Chinese investment in electricity production in SSA, the main points of divergence are the quantity of projects, the varying countries of focus, and the types of electrification projects within those countries (whether they are hydro, solar, gas, geothermal, wind, coal, biofuel, diesel or transmission). The quantity of projects follows the overall trend of Chinese FDI discussed in previous sections: profit-driven with minimal standards of governance.xxxv The reasons for investment in particular countries and the types of electricity projects in those countries are more complex. Using the data aggregated for this study, this section will address the latter two issues and provide case studies of Chinese and U.S. energy projects within the same countries on the sub-continent. Why Particular Countries? The majority of energy investment in terms of the number of projects and the percentage of total projects implemented by China or the United States can be found below in the chart. Overall, China is invested in every country in which the United States is invested. For countries like Namibia and Liberia, where China has few electrification projects, the majority of their FDI is focused on mineral extraction, transport, education and health sectors.xxxvi However, there are 17 countries where China is invested that the United States is not currently invested, excluding feasibility studies. They include Zimbabwe, the Sudans, Somalia, Sierra Leone, Niger, Mozambique, Madagascar, Guinea-Bissau, Gabon, Eritrea, Equatorial Guinea, Djibouti, Democratic Republic of the Congo, Republic of Congo, Chad, and Central African Republic. More noteworthy is the fact that Angola, the Sudans, and Zimbabwe are countries with the highest amount of Chinese investment and no U.S. investment (outside of feasibility studies in Angola). The lack of U.S. investment in the Sudans and Zimbabwe is due to their instability and human rights violations, which does not deter China, whose investment is based on increasing the amount of energy it can help produce. Angola has had little U.S. energy investment because a lot of foreign energy investment focuses on oil extraction for export, not electrification. Table 2: Number of projects in SSA by U.S. and China United States China Country Total Number of Projects (Percentage*) Country Total Number of Projects (Percentage**) South Africa 18 (24.3%) Angola 26 (15.6%) Kenya 12 (16.2%) Ethiopia 13 (7.8%) Tanzania 7 (9.5%) The Sudans 13 (7.8%) Nigeria 4 (5.4%) Tanzania 11 (6.6%) Uganda 4 (5.4%) Kenya 10 (6.%) Ghana 3 (4%) Zimbabwe 9 (5.4%) Note: * Percentage as a share of total U.S. projects, ** Percentage as a share of total Chinese projects.
  • 16. 12 Tanzania and Kenya, on the other hand, are countries with high investment from both the United States and China. For the United States, these Power Africa countries provide better investment climates for private business than other countries on the sub-continent (such as the Democratic Republic of the Congo or Sierra Leone who were recently a part of an International Finance Corporation program to reform business laws).xxxvii In fact, every U.S. foreign policy and development assistance initiative focused in SSA flows through Kenya and Tanzania. From the Chinese perspective, they are two countries with histories of significant engagement with China since their independence in the 1960s. Additionally, while China does have heavy investment in countries where the United States does not, it is important to note that they have undiscriminating investment across the entire sub-continent. This is why they are engaging with countries like Zimbabwe along with those that have favorable relations with the United States like Kenya and Tanzania. The graphic below illustrates U.S. and Chinese energy production presence on the sub-continent. Figure 2: Map of U.S. and Chinese Electrification Investment in SSA
  • 17. 13 The following case study provides an example a particular comprehensive project in Tanzania that involves engagement from both the United States and China. It suggests that there may be areas of complementarity between U.S. and Chinese energy financing. Case Study: Tanzania Gas Production- An Area of U.S.-China Complementarity? Tanzania is home to a large amount of both Chinese and U.S. investment in energy. According to Power Africa data, only 24 percent of the entire population has access to electricity while just 10 percent of people living in rural areas have access to power. Currently, Mtwara province is a large focus of electrification efforts in the country due to recent gas discoveries off of the coast. In 2012, the China Petroleum Technology and Development Corporation (CPTDC) began constructing the China Exim Bank-financed Mtwara-Dar es Salaam gas pipeline project, which cost approximately $1.2 billion.xxxviii This major 532-kilometer project, which completed its initial phases in October of 2015, will carry gas that should result in the capacity to produce 3,900 MW of electricity. After construction of the pipeline began, widespread protests erupted from people living in Mtwara who were frustrated that their gas was not being processed in their region to benefit the people. Skepticism over the source of the conflict (some cited the protests were initiated by people living in foreign countries) temporarily paused the construction of the pipeline.xxxix While the protests simmered, tension remained over control and distribution of gas from the pipeline in the region until the United States became involved. A year after the initial construction of the pipeline and subsequent protests, the Millennium Challenge Corporation (MCC), with the support from the Power Africa initiative, signed an agreement with American company Symbion, to begin construction of the Mtwara gas-fired power plant. Symbion and TANESCO, the Tanzania Electric Supply Company, have entered into a PPP, the first energy investment under the Tanzanian Public Private Partnership Act of 2010.xl TANESCO acting managing director, Felchesmi Mramba, said that this plant will, “involve increasing the existing capacity in Mtwara to meet the growing demand in the southern regions of Lindi and Mtwara.”xli This $396 million plant will use the gas transported in the Chinese-constructed pipeline to produce 600 MW of electricity for domestic use and possible export. These projects present two interesting policy implications. First, one area of complementarity between the U.S. and China energy investment could be through comprehensive, multi-faceted projects like the ones under construction in Mtwara, Tanzania. While the Chinese financed the pipeline that carries gas to processing plants outside of Mtwara, the United States is investing in a larger plant that processes the pipeline’s gas within the region. If U.S. companies have a particular expertise that complements a Chinese company’s construction, this could be an area of mutually beneficial cooperation within extensive energy projects. Another interesting piece about the Mtwara example is that the U.S. agreement helped appease the protests and violence that arose from the construction of the Chinese pipeline because the U.S. project is planned to benefit people in the region. This may be another mechanism for the United States to foster goodwill in the areas where it invests, especially if alternate or additional energy investment can appease the grievances of protesters. In the long run, African governments may favor U.S. investment due to goodwill companies have nurtured in the past.
  • 18. 14 Why Particular Projects? Hydropower and solar projects have seen significant investment from both China and the United States, though in rather different proportions. China’s engagement in electrification has focused primarily on hydropower, the type of energy investment that requires large-scale infrastructure development, while the United States has focused more on solar projects, a smaller-scale, more versatile type of energy investment. Since 2000, China has funded, at various levels, 55 hydropower projects, which account for just over 33 percent of total projects receiving Chinese financing. During the same period, the United States has provided funding for 31 solar projects, comprising over 42 percent of total U.S. financed electrification projects. Africa accounts for approximately 12 percent of the world’s hydropower potential, but currently produces only about 3 percent of the global supply of hydropower produced energy.xlii This large gap helps explain why there has been such a significant level of investment in development of hydropower projects across the continent. The scale of hydropower projects has likely attracted such high levels of Chinese investment for several reasons. First, China is the world’s largest producer of hydropower (with installed generating capacity of approximately 282 GW).xliii Second, the intensive development of China’s domestic hydropower sector has produced several large Chinese companies with significant experience in the various stages of hydropower development,xliv but as the market for large-scale projects becomes over-saturated domestically, overseas projects become increasingly attractive. Finally, hydropower projects fit perfectly into China’s practice of developing large-scale infrastructure that can be built and turned over to authorities with little post-project involvement. There is also great potential for successful production of solar power in Africa, which is why this sector has also seen significant investment since 2000. Solar is important to the development of Africa’s energy sector because it provides the best option for increasing generating capacity with minimal negative impacts on the environment. The effects of climate change have been acutely
  • 19. 15 felt in many parts of SSA through desertification, droughts, and rising temperatures. Additionally, solar provides exceptional flexibility in scaling to fit a variety of needs, from large- scale solar farms to small, off-grid community projects. Solar can aid both urban and rural areas. These characteristics have drawn a significant level of U.S. investment because they fit into the larger USG objective to increase access to electricity and build capacity in Africa necessary to develop business climates.xlv The following case study illustrates the difference between Chinese and U.S. investment in Ghana, a country of priority for both governments. Case Study: United States and China in Ghana Ghana has been more successful than many other SSA countries in developing its energy sector, but 28 percent of the population still does not have access to electricity. Currently, Ghana has an installed generation capacity of 2,450 MW. Since construction of the Akosombo dam and power plant in the 1960s, hydropower has been Ghana’s primary source of electricity – today, hydropower accounts for approximately 54 percent of output. The Ghanaian government has set the ambitious goal of increasing their generation capacity to 5,000 MW by 2016.xlvi This effort to double electrical output has attracted investment from both the United States and China in recent years. However, their respective approaches to addressing Ghana’s energy shortfalls have been starkly different. In the past, over dependence on hydropower has resulted in power shortages and rationing of electricity during drought periods. In 1998, the 912 MW Akosombo power plant was forced to cut generating capacity to approximately 300 MW after extended lack of rainfall caused the dam’s reservoir to drop by 74 meters.xlvii Despite realizing the vulnerabilities of relying too heavily on hydropower, Ghana has moved forward with several new hydropower projects over the last decade. From 2007 to 2013, the Chinese hydroelectric power construction firm Sinohydro built the nearly $625 million, 400 MW Bui Dam, which was primarily funded by the Chinese Exim Bank.xlviii And in November 2014, the Ghanaian Ministry of Energy and Petroleum signed a $307 million engineering, procurement, and construction contract with the China International Water and Electric Corporation to build a new 60 MW hydropower project on the Pra River in the western region of Ghana.xlix U.S. activity in Ghana’s energy sector has taken a much broader approach and aims to build professional capacity as much as generation capacity. In August 2014, MCC signed a five-year, $498.2 million power compact with the Ghanaian government. The MCC compact, the largest single transaction to date under the Power Africa initiative, aims to transform Ghana’s power sector to meet current and future needs of households and businesses, and to stimulate private investment in the economy.l The U.S.-Ghana power compact is divided into six components that will help build capacity: access to energy improvement, financial and operational turnaround of the Electricity Company of Ghana, energy efficiency and demand side management, financial and operational turnaround of the Northern Electric Distribution Company, power generation sector improvement, and regulatory strengthening and capacity building.li These efforts will test multiple approaches so that strategies can be developed to solve Ghana’s most systemic problems, particularly relating to access to electricity.
  • 20. 16 The Bui Dam is Ghana’s second largest hydropower plant. Construction of the dam resulted in the submergence of approximately 20 percent of the Bui National Park in the resulting reservoir, and displaced at least 1, 216 people.lii Numerous complaints arose during construction of the dam, ranging from failure to follow through on promises to rebuild communities on a one-to-one building ratio to accusations of non-compliance with Ghanaian employment regulations.liii When the dam was completed, Sinohydro turned the dam over to Ghanaian authorities, and Chinese involvement in the project, including mitigating any disputes, effectively ended. While it is not possible to assess the joint MCC-Power Africa projects in Ghana since they are just now getting off the ground, the entire design of the compact is aimed at avoiding many of the shortfalls that China’s form of assistance has produced. In summary, China invests in energy production indiscriminately across the subcontinent while the United States only invests in countries that have particular governance standards in place and who provide beneficial frameworks for business development. This demonstrates why China is much more heavily and diversely invested in SSA. The United States also limits the type of projects its initiatives implement in order to promote clean energy while China invests in both clean and dirty energy. While China’s investment and project types vary, they do not prioritize capacity building or skills sharing like the United States emphasizes in its projects. This is because the overall trend of electrification projects analyzed in our database focus on construction, not post-project maintenance and evaluation. This weakness in China’s energy investment serves as a strategic inroad for the United States and should be maintained for future U.S. projects. The next section will further address these future projections and implications.
  • 21. 17 Africa in 2020: Chinese-African Economic Ties Despite the economic downturn in China, Chinese economic expansion and investment on the sub-continent will likely continue. At face value, this investment will net African countries with thousands of megawatts of energy, particularly in areas with intermittent electricity. By 2020, the African continent will consume approximately 725 terawatt-hours of electricity – double the 2010 consumption.liv The effects on the continent’s GDP, urbanization, electrical access, and population growth will be substantial. However, in order to develop a more nuanced appreciation for how Chinese energy investments may affect U.S. policy, it is necessary to examine the indirect effects. Projection 1: Diversity and Durability of Investment China will not favor any particular region on the continent or sector for investment. Nor does China discriminate between resource-rich or poor countries. We expect that China will be even more invested in SSA than they are at present. This widespread and diverse approach to investment diminishes Chinese financial risk over the near term as moderate fluctuations in economic forecasts or downturns in specific sectors occur. However, by 2020, China could become a victim of its own successes. In terms of aggregate energy investment, China will be the dominant supplier and financier of energy projects in Africa. As the continent’s electrical grid becomes more complex and individuals’ purchasing power increases, Chinese companies will be pressured to provide more sophisticated and effective technical components, and training to assume operation.lv If China fails to do this, they could lose their market share to Western firms.lvi In order to capitalize on this, the United States will need to continue exporting high quality, specialized energy technology and training that Africa is demanding to expand further into maturing African markets.lvii Ideally, these products will be superior alternatives to the mineral intensive components that maturing African infrastructures currently demanded. Projection 2: Environmental Impacts China recently signaled intent to take a more responsible approach to environmental concerns in their investments. In 2013, the Chinese Ministry of Commerce and the Ministry of Environmental Protection established guidelines for companies investing overseas. These guidelines encouraged companies to follow local regulations, assess risks, analyze environmental impacts, and comply with international principles. However, adherence to these guidelines is purely voluntary and no firm has been punished in China for any type of environmental malfeasance in Africa.lviii Due to continuing domestic pollution problems in China, there will most likely be a rise in “exporting pollution” abroad. Most African governments have been reluctant to address environmental concerns with either Chinese firms or the Chinese government, often for fear of damaging the bilateral relationship.lix However, there are several notable exceptions. In August of 2014, Chad shut down all Chinese oil operations over pollution concernslx while Niger has openly criticized Chinese firms for overcharging.lxi In order to avoid the risk of losing market share due to increasing criticism from
  • 22. 18 SSA governments, and additionally, to maintain their commitments to the United Nations to cut pollution, China will have to address their practices concerning clean energy. Furthermore, because the United States has maintained consistent messaging regarding the need for sound environmental policies, the USG should find its voice increasingly welcome in African capitals as pollution and other environmental concerns grow in the face of climate change. We project that by 2020, China needs to make substantial reforms to how their firms operate internationally or risk providing fodder to the accusation that China is yet another irresponsible colonizer
  • 23. 19 Implications for U.S. Foreign Policy Objectives in Africa Evaluating the effect of China’s electrification efforts in SSA on U.S. national interests must be done in accordance with the four pillars of the U.S. Strategy Towards Sub-Saharan Africa: strengthening democratic institutions; spurring economic growth, trade, and investment; advancing peace and security; and promoting the opportunity for development. Looking at China’s investment in electrification projects and the implications this has for the four pillars will help foreign policy officials differentiate the effects of Chinese electrification investment from other forms of Chinese investment. While contract wins for Chinese firms along with other Chinese loans, grants, and other aid for electrification efforts may undermine one aspect of U.S. policy objectives and influence, there is a significant amount of evidence to show that any net gain in access to more reliable power on the African continent will support U.S. policies in other ways. This section will weigh both the positive and negative implications that China’s investment in Africa’s electrification has on U.S. policy objectives, and will largely drive the policy recommendations in the concluding section. Strengthen Democratic Institutions A number of foreign policy experts have voiced their concern that the absence of improvement in governance and human rights regulations in China’s investments throughout SSA will have a grave effect on U.S. efforts to support strong democratic institutions. Yun Sun of the Brookings Institution argues that China’s funding to SSA offers a “no strings attached” policy that undermines U.S. efforts to provide principled development assistance that will address SSA’s systematic and institutional defects.lxii If China’s easy loans and indiscriminate FDI effectively removes the incentive to improve governance and human rights, which is mandated the United States and other multilateral lending institutions, many fear that recent trends towards democratization in Africa may be reversed. Additionally, this could allow authoritarian leaders to remain defiant against calls for reform, buoyed by infrastructure development and cheap Chinese imports. China is largely able to do this because of its state-owned, policy-oriented commercial banks. The sources of China’s foreign investment policies are the China Development Bank and the Export-Import Bank of China. Despite the banks being politically controlled, Chinese FDI is largely focused on long-term development and market access. According to a RAND Corporation Report on Chinese development in Africa, “the majority of China’s financial flows into Africa are profit-seeking rather than geopolitically motivated. Beijing generally eschews attaching political, human rights, or corruption-related stipulations to finance, with the exception that the recipient must honor Beijing’s ‘One China’ policy regarding Taiwan.”lxiii With the exception of China’s ‘One China’ policy and economic governance issues that could affect Chinese investments, China has shown little appetite for exerting the type of political influence that the U.S. typically shows in its investments in Africa. Growth in Africa has fueled increasing demand for foreign investment in electrification development. As long as the United States and others continue to offer loans with conditions that support improved governance and human rights, China will outpace the West in terms of investment in electrification and infrastructure as a whole. While the U.S. maintains an
  • 24. 20 advantage in certain sectors like energy efficient technology, China’s lax loan conditions may continue to entice SSA countries that would have chosen the U.S. as an investor. This, however, may not be as detrimental to supporting strong democratic institutions as it appears. When a country with a poor human rights record and an authoritarian history forgoes a Western loan for a Chinese one, the U.S. can maintain its moral opposition to supporting that regime while the financial risks for the investments that are desperately needed are assumed by someone else, mainly China. Far from ideal, this can be beneficial in two ways. First, it is no secret that the rest of the world keeps track of U.S. verbal commitments. Hypocrisy is the illiberal world’s first line of defense against U.S. pressure in an international field. While it may hurt in the short-run, maintaining these convictions may pay dividends in political capital in the future. Second, Africa will not lack the investment it needs. While there are a number of issues that can result from Chinese lending practices to African nations, any electrification development can promote progress for the people on the continent. Investment projects may not be up to the quality the U.S. would like, and the benefits may not be distributed as widely as justice demands, but every capacity increase in electrification will assist in Africa’s development. On the surface, it appears that the success of Chinese electrification investment in Africa will undermine U.S. objectives of supporting democratic institutions. However, as discussed in the next section, “Spurring Economic Growth,” there are possible benefits that may advance other pillars of the U.S. strategy. The recommendation section will include several measures the State Department can take to shape the conditions in countries that receive ‘no strings attached’ electrification loans from China, and utilize its externalities to support aspects of democratic institutions like supporting the development of local rule of law and improving government processes to limit corruption. Spur Economic Growth, Trade, and Investment As one would expect, the greatest impact China’s electrification efforts are having on U.S. policy in SSA fall under the pillar of “Economic Growth, Trade, and Investment.” There are significant differences in the way the U.S. and China invest in Africa. According to the Rand Corporation, only 3.6 percent ($228 million) of the total FY 2013 U.S. aid request for Africa was dedicated to economic growth initiatives other than agricultural and environmental programs, such as trade, investment, finance, infrastructure, and private sector competitiveness. In contrast, investment, infrastructure, and trade dominate China’s spending in Africa.lxiv In essence, the United States focuses its assistance efforts on human development to a much greater degree than China, which emphasizes economic growth and commercial activity. With respect to electrification, the World Bank expands on this trend showing that “Non-OECD donors [like China] tend to focus on productive infrastructures, mainly power (in particular hydroelectric schemes) and railways while Western donors tend to focus on public goods.”lxv This has created concerns among policymakers and analysts that China’s investments may not be serving the best interest of the African host nations and may be undermining U.S. objectives. Barring environmental concerns, Africa’s energy deficit is so severe and detrimental to the sub- continent’s economic development that any electrification investment will benefit the host country.lxvi Therefore, while some forms of infrastructure investments are more beneficial towards development than others, any investment from China can increase GDP.
  • 25. 21 One of the greatest fears from China’s infrastructure investment in Africa is that it will cripple the growth of African economies through resource-backed loans. Resource-backed loans are used for countries that cannot provide adequate financial guarantees to back their loan commitments so they pair natural resource extraction with infrastructure development.lxvii Many are worried by the scale of resource-backed loans China has dealt in Africa and fear that China is limiting U.S. access to resources while giving unfair deals to SSA. According to a World Bank report on China’s role as an infrastructure investor in SSA, “Chinese banks have extended resource-backed loans to at least seven African states, totaling more than $14 billion. Chinese state-owned enterprises are the dominant recipient of Chinese export credits for business in Africa, but Beijing has announced a $1 billion fund to support private firms.”lxviii However, a majority of the resources procured in these loan schemes are fungible, and therefore, only increase global supply. Further, it is often the best option for the host nation to secure the development needed. lxix In the short run, these deals could make SSA dependent on resource exports and undermine U.S. policy objectives. In the long run, African countries cannot develop other industries and diversify their economies without the amount of investment coming from China. Ultimately, these loan schemes only undermine U.S. policy objectives if they are focused on supporting Chinese industries in Africa instead of making significant improvements in providing stable access to the population. Advance Peace and Security Africa has no shortage of triggers for instability and conflict. Africa’s infrastructure deficit, specifically in the electrification and power generation sectors is undoubtedly contributing to general instability on the continent. John Banks of the Brookings Institution argues, “Energy poverty undermines economic development, fueling political instability and the creation of failed states that can harbor our enemies and threaten our allies. Indeed, there is a strong correlation between political stability and electrification rates.”lxx The lack of access to reliable power can contribute to instability in several ways. As Banks mentions, poor electrification rates can hinder development and employment, perpetuating the conditions that can feed insurgencies and conflicts. Unreliable and poorly regulated access to power can also fuel illicit economies and ‘dark networks,’ allowing criminal networks to usurp authority from legitimate forms of governance. These criminal networks are often linked to armed groups or even violent extremist organizations and can funnel funding from a population to the elements that seek to destroy that population. The United States has demonstrated its willingness to combat extremist groups and engage in capacity building for SSA through national and multilateral (UN and African Union) security forces, but this has done little to address the drivers of insecurity. This failure is reflected in the allocation of U.S. government resources. As of 2014, the United States had a military presence in thirteen African countries.lxxi Additionally, there are Defense Attaché Offices in roughly 38 U.S. Embassies in Africa (including Northern Africa).lxxii However, when it comes to actual investment in Africa, as of 2013, the Foreign Commercial Service (FCS) has had a diminished presence in SSA.lxxiii In comparison, “China has an estimated 155 commercial attaches in the region - more than three per country in SSA. Other countries, such as Brazil, India, Russia and Turkey, have dramatically increased their commercial presence on the continent as well.”lxxiv Without dramatic shifts in the allocation of U.S. efforts, the United States will continue to foot
  • 26. 22 the bill to combat instability and conflict through force while China and others profit from investments that can help prevent such instability from occurring. Promote Opportunity and Development China’s greatest investment in electrification projects in Africa has been in hydropower, but this has had mixed effects. In one respect, hydropower is a positive step towards clean energy and supports U.S. goals of promoting low-emissions growth and sustainable development. However, climate change is a major factor affecting African hydroelectric production. The increasing frequency of droughts has plagued hydroelectric dams around the continent. This severely diminishes their capacity, such as the Akosombo Dam example cited the in Ghana case study of the comparative analysis section. Past research indicates that neither Chinese nor African counterparts have developed safeguards or backup measures for resiliency in the face of water shortages. This growing African dependence on hydropower for electricity leaves countries economically vulnerable and undermines U.S. interests in promoting sustainable outcomes. In the same vein, this economic vulnerability provides an opportunity for the United States in SSA to promote diversification of African country energy portfolios and further introduce U.S. companies to the region as viable alternatives to large-scale hydropower projects. In comparing the two countries, some purport that China is doing more to address constraints to SSA growth than the United States. The argument is that although President Obama has emphasized a focus on expanding equal partnerships through revitalized trade and closing big investment deals, the numbers for China and the United States indicate otherwise. For example, after President Obama’s visit to East Africa, General Electric, with the support of OPIC signed a $155 million deal to build a 100-megawatt wind-power station in Kenya, increasing Kenya’s current energy production by about 5 percent. However, China is currently providing a $1.2- billion loan to help construct a 1,000 MW coal-fired plant in Kenya.lxxv Aside from the type of energy projects being implemented, it is evident that China’s financing in Kenya alone is worth more than six times that of all the Power Africa projects in the country. And the energy arena on the entire sub-continent represents an even broader disparity. African leaders are increasingly aware that they should not be so heavily dependent on one source of income and welcome more diversified global investments. However, despite this drive for engagement, the biggest perceived difference between the United States and China is that the United States still plays the role of advisor and dispenser of foreign aid while China approaches countries on the sub-continent as business partners.
  • 27. 23 Strategy and Recommendations At first glance, the increased Chinese presence in SSA has undermined democratic institutions and good governance on the continent, but this does not show the full picture. China has used their large presence to aid in economic development by adding electricity capacity and increasing grid connectivity. Accordingly, in order for the United States to help mitigate SSA’s electrification needs, it is paramount that the United States continue to focus on reaching Power Africa’s goals of 30,000 MW and 60 million connections by 2018. Additionally, it is imperative to U.S. national interests that policies promote good governance and sustainable energy practices in SSA. Based on our analysis, we recommend a three-tiered strategy on a regional, national, and subnational level that not only promotes U.S. private investment in adding capacity, but also provides technical assistance and education in best energy policy practices. This short-term strategy will help the United States realize its long-term goals of fostering economic development in a sustainable, capacity-building way that provides assistance to democratic institutions in SSA. REGIONAL: ● Utilize multilateral energy initiatives including the International Renewable Energy Agency’s Africa Clean Energy Corridor and the United Nations Sustainable Energy for All (SE4ALL) Initiatives as a forum for cooperation with China: By increasing U.S. funding to these initiatives and entering into negotiations with China, the United States can complement China on electrification in SSA and enhance US-China cooperation. On a regional level, the U.S. can help provide transmission connections and capacity building through the framework of the Eastern, Western, and Southern Power Pools as China continues to build power plants in these regions. Moreover, use recent bilateral cooperation with China on climate change and clean energy to expand into a multilateral agreement to provide clean energy to developing countries, in particular in SSA.lxxvi NATIONAL: ● Increase Foreign Commercial Service Officer (FCSO) presence in each region: Expanding the number of current FCSOs in SSA enables the U.S. government to promote more American private investment, as well as more effectively market the Power Africa Initiative or the Millennium Challenge Corporation by establishing a more visible American presence on the ground.5 We recommend the addition of FCSOs in South Africa, Uganda, Ghana, Rwanda, and Liberia.6 ● Increase the number of trade missions to SSA: Along with expanding the presence of FCSOs, increasing the number of trade missions will provide technical assistance or capacity building that is necessary to promote energy policy reforms and utility restructuring. This can be done by inviting high-level government officials, as well as national utility representatives, to the United States to see how the U.S. national grid is 5 There are currently FCSOs in Angola, Ethiopia, Mozambique, Kenya, Tanzania, and Nigeria. 6 According to Bloomberg New Energy Finance’s Climatescope 2014 report, South Africa, Kenya, Uganda, Ethiopia, Tanzania, and Nigeria scored the highest in providing enabling policy frameworks, financing and investment incentives, and greenhouse gas mitigation targets. These countries provide a fertile opportunity for U.S. clean energy engagement.
  • 28. 24 structured. This is also a way to demonstrate best practices of energy technology standards. For example, invite utilities like South Africa’s Eskom, Angola’s Empresa Nacional de Distribuição de Electricidade (ENDE), Nigeria’s Power Holding Company, and Uganda’s Electricity Generation Company Limited. ● Encourage African governments to consider resilience and life-cycle costs in energy policy formulation: By bringing to light consideration for potential desertification, water shortage, or other costs, the U.S. government can promote sustainable energy policy that can further advance economic development, and can provide a platform for marketing of U.S. renewable energy technology. This can be done by increasing technical experts on the ground in SAA to provide information to energy ministries about technology life- cycle costs and factor in environmental damages. ● Partner with African governments to meet their mitigation goal and promote clean technology: The U.S. is in a unique position to aid SSA in strengthening each country's clean energy policies based off the Intended Nationally Determined Contributions (INDCs) which 43 of the 48 Sub-Saharan countries submitted this year to the United Nations Framework Convention on Climate Change (UNFCCC). The U.S. is a world leader in developing clean energy technologies and techniques, providing a niche opportunity for the Africa Bureau to work with the Special Envoy on Climate Change (SECC) and the Bureau of Energy Resources (ENR) on developing clean energy policies and projects in SSA. SUBNATIONAL: ● Expand off-grid and mini-grid solutions: The current rate of implementation for U.S. utility scale projects is too slow to meet Power Africa’s 2018 goal of 30 GW and 60 million connections or SSA’s projected energy demand of 207 GW by 2020. The use of off-grid and mini-grid solutions based on renewables, like solar PV panels, can be used as a platform in preparation for the long-term development of a national grid system. This can be done through a number of ways, but in particular, a partnership with Peace Corps or the U.S. Military Civil Affairs would allow for the dissemination of technology and capacity building through a U.S.-sponsored initiative already on the ground in SSA. A partnership with the Peace Corps was already established in Latin America in 2010.lxxvii This recommendation also poses as an area of complementarity with China. Where Chinese mega-projects aid urban areas, American small-scale projects can help rural areas.
  • 29. 25 Conclusion It is important to remember that the purposes of this study were not simply to critique China’s presence in Africa. Rather, this study assessed how these practices either helped or hindered U.S. strategic interests in the region. Our analysis shows that Chinese electrification projects in Africa can be complementary to the U.S. goal of economic development. However, this is not to say that Chinese investment has been entirely positive, and as demonstrated by our case studies, these projects often undermine the U.S. goal of strengthening democratic institutions. As such, these recommendations serve not only to add capacity that fosters growth and development in the short term, but also encourages sustainable policy that promotes good governance in the long term. Additionally, we believe further research is needed to paint a more detailed picture of both the Chinese and U.S. electrification presence in Africa. We suggest studies of 1) effects of Chinese electrification in rural versus urban African regions; 2) the security impact of the widening electricity gap; 3) the impact of droughts and other effects of climate change on large utility- scale projects such as hydropower; 4) increasing urbanization in Africa and the implications for political security in the region; and 5) the extent of the Chinese shift from resource-backed loans to direct acquisitions. Overall, this study and future related ones contribute to the nascent literature on Chinese and U.S. electrification in Africa, and will serve to provide a comprehensive assessment of the role both the United States and China can play in developing African energy.
  • 30. 26 End Notes i James Zhan et al. “World Investment Report 2015.” UNCTAD, 2015. http://unctad.org/en/PublicationsLibrary/wir2015_en.pdf ii “Why does Kenya lead the world in mobile money?”. Economist. May 27, 2013, http://www.economist.com/blogs/economist-explains/2013/05/economist-explains-18 iii “International Energy Statistics”. Energy Information Administration, 2015. http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=2&pid=2&aid=7 iv “The World Factbook: China”. Central Intelligence Agency, Last updated October 28, 2015. https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html v International Energy Agency, “Defining and Modelling Energy Access”, OECD/IEA, 2015, http://www.worldenergyoutlook.org/resources/energydevelopment/definingandmodellingenergyaccess/ vi Todd Moss and Madeleine Gleave, “How Much Power Does Power Africa Really Need?” Center for Global Development, October 10, 2013, http://www.cgdev.org/blog/how-much-power-does-power-africa-really-need vii “International Energy Statistics”. Energy Information Administration, 2015. http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=2&pid=2&aid=7 viii “World Bank Development Indicators”. World Bank. OECD/IEA: 2014. http://data.worldbank.org/indicator/EG.USE.ELEC.KH.PC ix Antonio Castellano et al, “Brighter Africa”. McKinsey & Company, February 2015, http://www.mckinsey.com/insights/energy_resources_materials/powering_africa x Antonio Castellano et al, “Brighter Africa”. McKinsey & Company, February 2015, http://www.mckinsey.com/insights/energy_resources_materials/powering_africa xi Axel Dreher, Andreas Fuchs, Bradley Parks, Austin M. Strange, and Michael J. Tierney, “Apples and Dragon Fruits: The Determinants of Aid and Other Forms of State Financing from China to Africa,” (AidData, 2015), <http://aiddata.org/sites/default/files/wps15_apples_and_dragon_fruits.pdf>. xii Ibid. xiii Deborah Brautigam, Jyhjong Hwang, and Lu Wang, “Chinese-Financed Hydropower Projects in Sub-Saharan Africa,” (The China Africa Research Institute at Johns Hopkins University, 2015), <https://saiscari.files.wordpress.com/2015/11/sais-cari-brief-8-april-2015-website.pdf>. xiv Peter Bosshard, “How Chinese Loans Could Fuel Regional Conflict in East Africa,” (International Rivers, 2013), <http://www.internationalrivers.org/blogs/227/how-chinese-loans-could-fuel-regional-conflict-in-east-africa>. xv Ed McKenna, “Ethiopia’s Indigenous Excluded from Rapid Growth,” (Interpress Service News Agency, Nov. 2013), <http://www.ipsnews.net/2013/11/ethiopias-indigenous-excluded-from-rapid-growth/>. xvi Peter Bosshard, “New Chinese Dam Project Fuels Ethnic Conflict of Sudan,” (International Rivers, 2011) <https://www.internationalrivers.org/blogs/227/new-chinese-dam-project-fuels-ethnic-conflict-in-sudan> xvii Firoze Manji, African perspectives on China in Africa, 6. xviii Lloyd Thrall, “China’s Expanding African Relations: Implications for U.S. National Security,” (RAND Corporation, 2015) <http://www.rand.org/content/dam/rand/pubs/research_reports/RR900/RR905/RAND_RR905.pdf>. xix “China in Africa”, (Institute of Developing Economies- Japan External Trade Organization) <http://www.ide.go.jp/English/Data/Africa_file/Manualreport/cia_10.html> xx “Mambilla Hydroelectric Dam”, (AidData, 2013), <http://china.aiddata.org/projects/1990>. xxi Zheng Qi, Margaret Egbula, “China and Nigeria: A Powerful South-South Alliance”, West African Challenges, November 2011, <http://www.oecd.org/china/49814032.pdf>. xxii “Sub-Saharan Africa Power Outlook”, (KPMG Africa, 2014), 22. xxiii “U.S. Support for the Sustainable Energy for All Global Action Agenda”, (Department of State, 2012), <http://www.state.gov/r/pa/prs/ps/2012/06/193500.htm>. xxiv “Power Africa”, USAID, July 2014, <http://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic- Documents/USAID_-_Power_Africa_Annual_Report.pdf> xxv Evelyn Kahungu, “Wind Promises to Power Kenya’s Growth” Our World, United Nation University, Oct. 28, 2011, <http://ourworld.unu.edu/en/wind-powers-kenyas-growth> xxvi “Lake Turkana Wind Power Project- Fact Sheet”, Lake Turkana Wind Power, June 2015, <http://www.ltwp.co.ke/the-project/overview>
  • 31. 27 xxvii Katie Fehrenbacher, “How M-KOPA unlocked pay as you go solar in rural Kenya”, GIGAOM, Apr. 10, 2014, https://gigaom.com/2014/04/10/how-m-kopa-unlocked-pay-as-you-go-solar-in-rural-kenya xxviii John Mukum Mbaku,“Fighting and Improving Human Development in Africa”, U.S.-Africa Relations from Clinton to Obama, Lexington Books, Editor Veney, C.R., 2014, p.35-73 xxix “AllAfrica.com: Africa: Power Projects Take Time But Access to Electricity is Spreading – Paul Hinks”, Symbion-Power.com, August 15, 2015, http://www.symbion-power.com/about/events/article/all-africa-power- projects xxx Ron Nixon, “Obama’s ‘Power Africa’ Project is off to a Sputtering Start”, NY Times, July 21, 2015, http://www.nytimes.com/2015/07/22/world/africa/obamas-power-africa-project-is-off-to-a-sputtering- start.html?_r=0 xxxi “Reverse Trade Missions”, export.gov, Dec.29, 2010, <http://www.export.gov/reee/guide/eg_main_022190.asp> xxxii “OPIC in Action”, OPIC.gov, accessed Nov. 14, 2015, <https://www.opic.gov/opic-action/power-africa# > xxxiii James Macharia, “U.S. investment agency to fund $400 mln S.Africa solar power plant”, Reuters.com, Sept. 21, 2015, http://www.reuters.com/article/2015/09/21/safrica-power- idUSL5N11R2OF20150921#pQcQx1l11d1jJAId.97 xxxiv “Jasper”, SolarReserve.com, accessed Nov. 14, 2015, http://www.solarreserve.com/en/global-projects/pv/jasper xxxv Wenjie Chen, David Dollar, and Heiwai Tang, “Why is China investing in Africa? Evidence from the firm level,” Brookings Institute, August 2015, http://www.brookings.edu/~/media/research/files/papers/2015/08/why- china-is-investing-in-africa/why-is-china-investing-in-africa.pdf. xxxvi “Chinese investment in Namibia grows to 4.6b,” China News Daily, March 15, 2015, http://www.chinadaily.com.cn/business/2015-03/15/content_19813452.htm. xxxvii International Finance Corporation, “Simplifying Business Law Across 16 African Countries OHADA’s Business Law Reform Program,” https://www.wbginvestmentclimate.org/publications/upload/OHADA_FINAL_A4.pdf. xxxviii “Mtwara-Dar es Salaam Natural Gas Pipeline Inaugurated,” Tanzania Invest, October 15, 2015, http://www.tanzaniainvest.com/energy/president-jakaya-kikwete-inaugurates-usd-1-23-billion-mtwara-dar-natural- gas-pipeline. xxxix “The Untold Story of Mtwara Gas riots,” The Guardian Tanzania, June 30, 2013, http://www.ippmedia.com/frontend/?l=56502. xl “Tanzania: Symbion Embarks On Independent 600MW Power Project in Tanzania,” All Africa, February 11, 2014, http://allafrica.com/stories/201402111416.html. xli “Tanzania: Construction On Mtwara Gas Plant Project Starts,” All Africa, July 7, 2013, http://allafrica.com/stories/201307080115.html. xlii David Appleyard, “Africa’s Hydropower Future,” HRW - Hydro Review Worldwide, January 1, 2014, http://www.hydroworld.com/articles/print/volume-22/issue-1/regional-profile/africa-s-hydropower-future.html. xliii “China,” International Hydropower Association, https://www.hydropower.org/country-profiles/china. xliv Yun Sun, “China in Africa,” (lecture to China in Africa practicum class, October 29, 2015). xlv “FACT SHEET: Power Africa,” The White House, July 25, 2015, https://www.whitehouse.gov/the-press- office/2015/07/25/fact-sheet-power-africa. xlvi “What Power Africa Means for Ghana,” USAID, https://www.usaid.gov/powerafrica/partners/african- governments/ghana. xlvii “Ghana balances hydro and thermal,” International Water Power & Dam Construction Magazine, March 14, 2006, http://www.waterpowermagazine.com/news/newsghana-balances-hydro-and-thermal. xlviii “Ghana’s cocoa to help pay China for building 400-MW Bui,” HydroWorld.com, September 7, 2007, http://www.hydroworld.com/articles/2007/09/ghanas-cocoa-to-help-pay-china-for-building-400-mw-bui.html. xlix Michael Harris, “Chinese firm signs EPC deal for Ghana’s 60-MW Hemang hydropower plant,” HydroWorld.com, November 21, 2014, http://www.hydroworld.com/articles/2014/11/chinese-firm-signs-epc-deal- for-ghana-s-60-mw-hemang-hydropower-plant.html. l “Ghana Power Compact,” Millennium Challenge Corporation, https://www.mcc.gov/where-we- work/program/ghana-power-compact. li “Ghana Power Compact,” Millennium Challenge Corporation, https://www.mcc.gov/where-we-work/program/ghana-power-compact.
  • 32. 28 lii Clement Otu-Tei, “Broken Promises: Ghana’s Bui Dam Resettlement,” International Rivers, March 19, 2014, https://www.internationalrivers.org/resources/broken-promises-ghana-s-bui-dam-resettlement-8269. liii Oliver Hensengerth, “Interaction of Chinese Institutions With Host Governments in Dam Construction,” Discussion Paper, German Development Institute, March 2011. liv Brighter Africa, McKinsey Global Institute, http://www.mckinsey.com/insights/energy_resources_materials/powering_africa. lv Nicola Jones, Environment 360: A Scarcity of Rare Metals Is Hindering Green Technologies, New Haven: Yale, 2015. 138. lvi Marc Humphries, China’s Mineral Industry and U.S. Access to Strategic and Critical Minerals: Issues for Congress, Washington: CRS, 2015, 13. lvii Lucy Corkin, "China’s Role in the Development of Africa’s Infrastructure," SAIS Working Papers in African Studies, 2008, 8-11. lviii David Shinn, “The Environmental Impact of China’s Investment in Africa,” http://www.internationalpolicydigest.org/2015/04/08/the-environmental-impact-of-china-s-investment-in-africa. lix Ibid. lx Al Jazeera, “Chad withdraws Chinese exploration permits,” http://www.aljazeera.com/news/africa/2014/08/chad- withdraws-chinese-exploration-permits-2014810124614151839.html. lxi Armin Rosen, An oil dispute in Niger is exposing big problems with Chinese investment in Africa,” http://www.businessinsider.com/niger-oil-and-chinese-investment-in-africa-2015-9. lxii Yun Sun, “Top Five Reason Why Africa Should be a Priority for the United States” Brookings, March 2013, 6-7. lxiii Lloyd Thrall, “China’s Expanding African Relations: Implications for U.S. National Security,” RAND Corporation, 2015, 3. lxiv Larry Hanauer, Lyle J. Morris, “Chinese Engagement in Africa: Drivers, Reactions, and Implications for U.S. Policy,” RAND Corporation, 2014, 96 lxv “Building Bridges: China’s Growing Role as Infrastructure Financier for Sub-Saharan Africa” The World Bank, 2009, 73. lxvi Brighter Africa, McKinsey Global Institute, http://www.mckinsey.com/insights/energy_resources_materials/powering_africa, 8 lxvii Building Bridges, xvii. lxviii Ibid, 88. lxix Ibid. lxx John Banks “Top Five Reason Why Africa Should be a Priority for the United States” Brookings, March 2013. 8- 9. lxxi Adam Taylor, “MAP: The U.S. military currently has troops in these African countries,” The Washington Post. May 21, 2014. https://www.washingtonpost.com/news/worldviews/wp/2014/05/21/map-the-u-s-currently-has- troops-in-these-african-countries/ lxxii United States Africa Command, http://www.africom.mil/about-the-command lxxiii Witney Schneidman, “Top Five Reason Why Africa Should be a Priority for the United States” Brookings, March 2013, 12-13. lxxiv Ibid. lxxv Charles Kenny, “Obama Teaches Africa to Fish.” The Atlantic, July 29, 2015. http://www.theatlantic.com/international/archive/2015/07/obama-africa-investment-kenya-ethiopia/399851/ lxxvi “U.S.-China Joint Presidential Statement on Climate Change,” September 25, 2015. https://www.whitehouse.gov/the-press-office/2015/09/25/us-china-joint-presidential-statement-climate-change lxxvii Kevin Eber. “Peace Corps to Tackle Grassroots Energy Issues”. Renewable Energy World. September 1, 2010. http://www.renewableenergyworld.com/articles/2010/09/peace-corps-to-tackle-grassroots-energy-issues.html
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