“A Marshall Plan for Africa” - Eddie O'Connor at the Africa Energy Forum 2016 (AEF2016)
Ladies and Gentlemen, “It is indefensible that Africa’s poorest people are paying among the world’s highest prices for energy. A woman living in a village in northern Nigeria spends around 60 to 80 times per unit more for her energy than a resident of New York City, or of London.” Not my words, but those of Kofi Annan, in his introduction to last year’s report from the Africa Progress Panel on energy use in Africa. That report sets out in stark terms the challenge facing the continent as it struggles to bring basic levels of electrification to its peoples. Today, two out of three people across sub-Saharan Africa have no reliable access to electricity. The total grid in sub-Saharan Africa is 90GW, with 45GW in South Africa. This is only a bit larger than Britain���s national grid.
A Comprehensive StrategyTo answer the challenge set by the Africa Progress Panel, we need a comprehensive strategy based on a global partnership between the US and Europe, on the one hand, and Africa, on the other. Here are the ingredients of a grand strategy for Africa. I begin with the world as it is. To me the most striking feature of our contemporary world is the contrast between Europe and the US, which are awash with savings, and Africa, which is chronically short of investment capital, between a developed world sunk in what economists call secular stagnation and an African continent unable to realise its vast economic potential. Secular stagnation is an expression used by economists, like Larry Summers, the former US Secretary of the Treasury, to describe a period of prolonged economic stagnation,
- a period of low demand, low investment, low inflation but high unemployment;
- an economic system impervious to all the conventional economic instruments that governments have traditionally used to stimulate demand;
- an economic malaise that has led to a glut of savings throughout the developed world, to zero and even negative interest rates, to huge risk adversity on the part of business and, above all, to a universal reluctance to invest in the future.
Solution to Secular StagnationI want to propose a solution to secular stagnation that simultaneously solves Africa’s shortage of capital. I want to do so based on our experience of the past. When the Great Depression struck the United States in the 1930's, President Roosevelt launched massive public works programmes to stimulate demand, notably through the Rural Electrification Act and the establishment of the Tennessee Valley Authority. The focus of these great initiatives was electrification, which President Roosevelt rightly described as the key to modernising the economy and transforming society. The other precedent from the past is the Marshall Plan, officially known as the European Recovery Program. It was an American initiative to aid Western Europe in the immediate aftermath of the Second World War. Under the Plan, the United States gave the equivalent of $120 billion in economic support to help rebuild Western European economies after the end of the War. Europe was in ruins. The United States took on the responsibility of saving Europe. But in rebuilding this shattered continent it stimulated so much demand for American goods and services that the US economy grew at unprecedented rates for over the next thirty years. And so did Europe. The Marshall Plan provides a template for a similar type of partnership; this time between the developed economies of the West and the nations of Africa. The capital is there, estimated to be around $70 trillion, stashed away in savings that are not being put to use. The project is there. It is the electrification of Africa. What is not there, as yet, is the political vision to come up with a New Marshall Plan, this time for Africa. The good news is that there has been a start. I welcome the President Obama’s Power Africa plan and also the UK Government’s Energy Africa strategy. They are true public-private partnerships which share the vision first outlined by General Marshall. The aim is to add 30,000MW of new electric power across the continent of Africa by 2030. That is a noble goal, worthy of a new Marshal Plan. But, I believe we can go further still.
Marshall Plan TwoCall it the Marshall Plan Two, or even a New Deal for Africa. Through an enhanced Power Africa project we can deliver what Africa so badly needs and which, so far, has eluded us. And that is electricity for all, electricity that is reliable, clean and cheap. We all know that without electricity there can be no real economic enterprise and without the proper infrastructure there can be no sustained growth. The question that my company is asking, and which under-pins the partnership with the IFC and others that we are announcing today, is how can we get international capital to invest in the transformation of Africa to deliver similar results to those achieved through the original Marshall Plan? How can we build the same foundations in Africa that will not only deliver growth and prosperity but at the same time revitalize the stagnant economies of the West? [caption id="attachment_6343" align="alignleft" width="150"] Jeffreys Bay wind plant (138 megawatts) - South Africa: developed and constructed by Mainstream.[/caption] We start with an indisputable fact. Africa possesses some of the best resources for generating electricity on the planet, the power of the wind, and the power of the sun. Some of the lowest cost wind and solar power projects throughout the world are being delivered in Africa. From Morocco to South Africa new renewable energy power plant is being built for a fraction of the cost of new fossil or nuclear generation. In South Africa, wind energy is one third the cost of new coal power. The speed with which new plant can be built is far faster than any competitor technology. We can use the extraordinary advances in wind and solar technology to deliver clean, constant and cheap electricity to Africa. And with it a new life for those millions who live off-grid and struggle, literally in the darkness, to provide for their families and their neighbours. If we can mobilise the balance sheets of the West to provide the capital and if governments can de-risk investments in renewables then we can start on a Marshal Plan for Africa.
The Big IdeasSo, my thinking about that task is as follows. There is great potential for bringing three big ideas together:
- a solution for secular stagnation,
- a Marshall Plan for Africa and,
- the electrification of Africa by 2030.
- Policy Risk
- Bureaucratic Risk
- Regulatory Risk
- Cultural Risk
- Land Risk, and
- Currency Risk.