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February 21, 2012

US Companies Look to Invest in African Electricity Generation

by Scott Stearns

U.S. companies are looking to invest in projects to boost electricity in Africa, which has long been one of the biggest impediments to broader economic growth on the continent.  

U.S. Deputy Assistant Secretary of State William Fitzgerald says an energy trade mission to Ghana, Nigeria, Tanzania, and Mozambique showed vast potential for American firms to invest in African energy projects.

In Nigeria, Fitzgerald says U.S. firms will be among those who bid on the privatization of power plants and power distribution networks.  Bids are due by June for contracts expected to be announced by October in a country where estimated demand tops 10,000 Megawatts but regular supply is less than 4,000 Megawatts.

“Thirty-nine hundred megawatts is a woefully small amount, and the Nigerian government realizes to promote - certainly to diversify the economy - to bring the manufacturers back on line they need to boost power," said Fitzgerald.

In Ghana, Fitzgerald says many U.S. firms are interested in offshore oil and natural gas, especially if Ghana and Ivory Coast resolve differences over the location of their maritime border.

“It is an exciting time to be in the energy sector in Ghana," he said. "And I think what you are seeing is very much of a commitment on the part of the Ghanian government to embrace private sector companies to come in and do the work.  You are going to see employment levels increasing and reaching record heights.  Part and parcel of that you will also see education improving, health sector clinics improving.”

In Tanzania, Fitzgerald says a U.S. firm operating an off-grid, renewable energy program has helped create 1,000 jobs for people growing sugar cane and bamboo to fuel the plant.  He says there is great interest in using that same technology in Nigeria and Ghana.

But for all the interest U.S. investors have about Africa, Fitzgerald says there must continue to be progress on lowering trade barriers to create a positive business climate.

“The American companies that are going to invest in Africa need to make a reasonable rate of return," he said. "They are not doing it for development.”

Fitzgerald says U.S. foreign direct investment in Africa has grown from about $14 billion in 2006 to nearly $25 billion in 2010.  Total U.S. trade with Africa last year was about $83 billion.  That is behind the European Union's $150 billion and China's $90 billion in total trade.