Will Obama’s Power Africa Initiatives Survive New Congress?

Will Obama’s Power Africa Initiatives Survive New Congress?

When the new Republican-led 114th Congress convenes in January, it will be tasked with dealing with some important legislation – all harbingers of U.S.-Africa relations for 2015 – and further into the decade.

The Energize Africa Act has been waiting for Senate action since this past summer; the U.S. Export-Import Bank’s temporary authorization runs out in June 2015; and the African Growth and Opportunity Act (AGOA) is up for re-authorization in Sept. 2015. The latter was passed in 2000 and Africa has changed a lot since then.

“On those kinds of legislation – Ex-Im Bank, AGOA and the Energize Africa Act – and just Africa in General, I think there is a sense that you’ve got a new crop of people coming in that may not know the debates that have gone on; from who Africa may not be a big priority,” Jennifer Cooke, director of the Center for Strategic and International Studies’ Africa program, told AFKInsider.

“I think it is too early to tell,” Steven Hayes, president and CEO of the Corporate Council on Africa – the private sector coordinator for “Power Africa” and “Trade Africa,” told AFKInsider. “I think there’s a lot of play on Africa right now and I’m not sure what direction it’s going to go.”

One thing is for sure, Republicans are not known for being supportive of foreign aid programs.

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“They’re not, but in these particular cases there is remarkably little tax payer money that goes into it,” John Campbell, a Senior Fellow for Africa Policy Studies at the New York-based Council on Foreign Relations and U.S. ambassador to Nigeria from 2004 to 2007, told AFKInsider.

“What it is, is authorizing financial institutions to do things, as opposed to appropriating ‘X’ millions of dollars for aid, and that doesn’t go over well unless its tied to a specific emergency like Ebola,” says Campbell.

The center of the Administration’s Strategy for Sub-Saharan Africa is the White House Power Africa initiative, which encourages private investment in Africa’s electric power sector with the administration initially committing up to $7 billion in public or publicly guaranteed funds.

The bulk of the funding for the Power Africa countries of Kenya, Tanzania, Ethiopia, Nigeria, Ghana and Liberia comes from the Overseas Private Investment Corporation (OPIC) and the U.S. Export-Import Bank (Ex-Im), two government agencies that face hesitant reauthorization prospects in Congress.

The U.S. Agency for International Development (USAID) coordinates President Obama’s Power Africa Initiative activities of all the agencies involved, including the U.S. African Development Foundation’s Power Africa Off-Grid Energy Challenge. But it is the Overseas Private Investment Corporation that provides a considerable amount of the financing.

Established in 1971, OPIC helps U.S. businesses gain a foothold in new, emerging markets by providing investors with financing, guarantees, and something extremely relevant today in Africa: political risk insurance.

“I would stress that the claims are paid from a fund, just to dismiss the myth that OPIC Political Risk Insurance is a direct line to the U.S. general fund,” Charles Stadtlander, Media Relations at Overseas Private Investment Corporation, told AFKInsider.

“Basically, it’s not the tax payers paying the claims, its OPIC paying it from a fund fed into by the premiums of other insurance policies.”

The Overseas Private Investment Corporation’s re-authorization is tied to what ever version of the Electrify or Energize Africa Act emerges from the new Congress.

“It was passed by the House as the Electrify Africa Act, and then a version was taken up by the Senate as the Energize Africa Act, where it hasn’t come to a vote yet,” Stadtlander told AFKInsider.

“The most current information I’ve been hearing is that the prospects for [Electrify Africa Act] passage are quite strong.” Ben Leo, senior fellow at the Center for Global Development and the director of the Rethinking U.S. Development Policy initiative, told AFKInsider.

But Leo and his colleagues at the Center have argued that Congress should unleash OPIC, which they believe has been constrained by “outdated authorities and inadequate resources.”

In an effort to avoid congressional hassles, the Obama Administration formulated Power Africa without formal congressional support, but rather as a Presidential Initiative as a way to get it launched quickly. Since then, Power Africa has been executed by a variety of government organizations on an individual transaction-by-transaction basis. And when a new president takes office in 2016, there are questions as to whether it will survive despite what seems to be bipartisan support for the program.

Some members of Congress are seeking to adjust that reality.

Energize or Electrify Africa?

The House passed the Electrify Africa Act in May, while the Senate Foreign Relations Committee approved the Energize Africa Act on June 24, sending it to the Senate where it lingers waiting for a full vote.

Both versions contain a multi-year reauthorization for OPIC in order to remove the uncertainty that has discouraged some private sector partners from entering into long-term deals. The Senate Energize Africa Act would reauthorize OPIC for five years through 2019, while the House Electrify Africa Act contains a three-year reauthorization.

Both bills require OPIC to increase its loan, guarantees, insurance programs and financial commitments in sub-Saharan Africa while streamlining the application and approval processes.

Both bills also require the President to submit an annual report on the progress of prioritizing the energy sector of sub-Saharan African countries with respect to agencies such as the United States Agency for International Development, Trade and Development  Agency, United States African Development Foundation, World Bank Group and the African Development Bank.

The African Growth and Opportunity Act 

The African Growth and Opportunity Act (AGOA) was signed into law by President Clinton in May 2000 and expires Sept 30, 2015. Operating through the U.S. Department of Commerce’s International Trade Administration, AGOA’s objective is to expand U.S. trade and investment with sub-Saharan Africa as well as encourage sub-Saharan Africa’s integration into the global economy.

Fifteen years later, the question now is just how much tweaking AGOA needs to bring it up to speed to meet the current realities of doing business in Africa in 2015 and beyond as the U.S. deepens its commitment with countries in sub-Saharan Africa.

“There have been debates on ‘should the U.S. re-authorize AGOA largely as is, or are there changes that need to be made given the changing context within Africa; should more weight be given to trade facilitation? Should there be a graduation program so that countries like South Africa – that are probably in a different category than many other African countries – get somewhat different terms,” Cooke told AFKInsider.

“There was a lot of debate and writings on this last year before the U.S.-Africa Summit in Washington. And since then, there’s been very little conversation at all, which is troubling,” says Cooke.

The African Growth and Opportunity Act also gives trade preferences that allow goods produced in AGOA-eligible countries to enter the U.S. duty-free.

Congress requires the President to verify annually which sub-Saharan African countries are suitable for AGOA benefits based on progress made meeting certain criteria, including establishment of a market-based economy, rule of law, policies to reduce poverty, protection of worker rights, and efforts to combat corruption.

As of August 2014, 41 sub-Saharan African countries were certified eligible for AGOA benefits.