At the first-ever U.S.-Africa Leaders Summit in Washington earlier this month, U.S. President Barack Obama announced billions in new pledges for Power Africa, his presidential initiative to double access to energy across sub-Saharan Africa. Widely seen as Obama’s marquee development program, Power Africa has drawn comparisons with the U.S. President’s Emergency Plan for AIDS Relief, arguably a success story that has defined former President George W. Bush’s global development legacy.
What is often overlooked, however, is that unlike PEPFAR, relatively little of the U.S. government money promised for Power Africa is slated to come in the form of traditional aid money or official development assistance. The Overseas Private Investment Corp., the U.S. government’s development finance institution, has pledged more than $1.5 billion in financing toward Power Africa through 2018 — five times the U.S. Agency for International Development’s $285 million commitment.
For readers who might not be familiar with DFIs, these typically donor-backed institutions provide financing for private sector firms in search of capital that will allow them to do business in developing countries. The financing instruments used by DFIs vary but they include loans, guarantees, equity and insurance. Because DFIs expect a return on their investments, which is then used to finance new projects, they generally operate at no net cost.