MCC CEO Dana J. Hyde's Remarks at the Powering Africa Summit
January 28, 2016, Washington, DC
Thank you Simon.
I am delighted to join you for this important moment in the global effort to bring power to Africa.
I want to thank EnergyNet for hosting us and leading the way in bridging the gap between the public and private sectors. And I particularly want to thank – and congratulate – Andy and his team from Power Africa for all of their work spearheading America’s efforts in the African power sector.
Our collective goals are ambitious, and the stakes are high. We all know that power is key to empowering the poor — and fueling the engine of economic growth. It will, in President Obama’s words, “plug Africa into the grid of the global economy.”
MCC and Power Africa
Many of you are familiar with Millennium Challenge Corporation and our work in Africa. Over the last decade more than 65% of MCC’s $10 billion portfolio has been invested on the continent.
More recently — over the last 18 months — the MCC Board has considered 5 compact investments totaling nearly $2 billion in U.S. grant assistance. Each of the five compacts have been with African nations – Ghana, Benin, Liberia, Tanzania & Morocco. And four of the five – over $1.5 billion in grants — have focused solely on the energy sector.
MCC’s commitment to addressing energy poverty in Africa is deep and abiding. And the data tells us we have every reason to believe these trend lines will continue.
As many of you know, MCC follows a unique model of development. We only invest in sectors and projects where the data and evidence show our intervention can have a direct impact on economic growth. And our demand-driven model means we only invest in areas where our country partners seek MCC’s assistance.
The combination of these principles often renders MCC an exceptionally poor pledging partner. Our model simply does not lend itself to upfront sector commitments and front-end initiatives.
Yet what we’ve found with respect to Power Africa is that the foundational principles of MCC — a laser focus on data, growth, and country demand – are squarely aligned with the Initiative.
Across the continent, MCC’s partner countries themselves have identified power investments as the building blocks for sustainable economic development. They know, and the data supports the proposition, that widespread access to electricity will unleash growth that will help lift people out of poverty.
Likewise, MCC’s up-front economic diagnostic tool repeatedly identifies energy poverty as a binding constraint to economic growth on the continent. Of the 7 African nations MCC has partnered with over the past 5 years, MCC’s constraints to growth analysis has identified energy poverty as a binding constraint in 6.
But it’s not just the research that suggests greater access to electricity leads to rises in educational outcomes, consumption, and income. It’s what MCC knows from our own experience.
In the early days of MCC we partnered with El Salvador and focused part of the compact on an on a project that connected rural households to the grid.
MCC asked independent evaluators to review the program and assess its impact. Their preliminary findings, which MCC is carefully reviewing, suggest that children with electricity access were more likely to study at home and spend time at school. Families were more likely to own a computer. They switched from kerosene lighting to electric lighting, reducing harmful pollutants in the home. And adults, and particularly women, were more likely to operate businesses out of their homes.
This is why the Millennium Challenge Corporation is committed to helping countries expand access to power. And this is why MCC is a natural and integral part of the Power Africa effort.
The Role of the Private Sector in Development
The Power Africa Roadmap launched today—after a brief snow delay—opens a new chapter in that effort. It is especially fitting that it was launched during this Summit, which provides a unique opportunity for public and private partners to come together. The real shift we’ve seen in the development landscape over the past decade is the growing recognition that private investment has become the cornerstone of international development.
ODA—official development assistance—not too long ago represented the majority—60 percent—of overall capital flows to sub-Saharan Africa. Today, that figure is 20 percent.
At MCC, catalyzing the private sector for development is at the core of our work. Everything about the model —from selecting countries to choosing projects to measuring results—it is all oriented around creating the right circumstances for businesses to invest.
And that same principle underlies the Roadmap. Many who have worked in development over the years have seen and heard the customary platitudes about engaging the private sector. This is different. The Roadmap recognizes and leverages our new reality in which businesses like yours are the drivers of development. It lays outs how more than 120 public and private sector partners are already accelerating energy transactions across Africa – and the potential for that dynamic to take off.
Over the next fifteen years, public and private partnerships will be critical to upholding the three pillars of the Roadmap: generation, connections, and regulatory and institutional reforms. So this afternoon I wanted to talk about three ways those partnerships are already evolving to help provide electricity to millions of people.
- Better Collaboration on Traditional Development Projects
First, we are seeing much closer collaboration on traditional donor-funded infrastructure projects. Even before donors like MCC design a project, they now turn to businesses in the market and ask, what will help you invest? Both donors and developing nations want their projects to align with private sector priorities – and we’ve seen a real shift in their willingness to do the diligence and lay the groundwork for other investors to build on.
At the same time, governments are improving the procurement process to make it easier and more transparent for the private sector. Procurement remains a central component of the relationship between the public and private sector, and guaranteeing a level playing field for all bidders — including and especially American businesses — is a core MCC commitment.
Indeed, opportunities and reforms in procurement is a topic that warrants its own session – and I’m delighted to say that there is one! I hope you will be able to attend MCC’s panel discussion tomorrow, where our senior team will host a deep-dive into our work and approach in Africa’s power sector. We have a number of specific procurement opportunities in Ghana, Benin, Malawi and Liberia — and I want folks here to know about them and take advantage of them. We also have new countries in Africa coming on line – last December the Board selected Senegal for a second compact and Cote d’Ivoire for a first – and while we are in the early stages of those engagements we are excited about the private sector opportunities with both.
- Public Private Partnerships
The second major shift in the relationship between the public and private sectors is the growing prevalence of explicit PPPs, or Public Private Partnerships. PPPs are uniquely suited to scale up investments in areas like power generation, and they are essential to achieving Power Africa’s goal of adding thirty thousand megawatts across sub-Saharan Africa.
What we hear from businesses, over and over again, is about the challenges of project preparation and paucity of funds to adequately prepare these deals. So at MCC, we are increasingly focused on helping governments improve project preparation. We are working with our partner countries to help design PPP frameworks and support appropriate legislation aimed at making PPPs fair, competitive and transparent.
In fact, this past summer we announced a $70 million commitment in our partner countries—including $52 million in Africa—to help countries prepare bankable public-private partnerships. We expect that commitment to mobilize $1 billion in private sector investments, especially in power.
One of those projects is already moving forward in Benin, where two-thirds of the country does not have access to power. MCC is making its largest investment in power generation to date, with a heavy focus on solar. The Prime Minister calls the compact the “most important envelope of investment ever in the history of Benin.”
But we are not just building power plants. MCC is working with our Benin counterparts to design a framework for PPPs that will dramatically scale up solar generation.
MCC will finance early project prep and lay the groundwork for privately funded projects. But it will be up to independent power producers like you to seize the opportunity and provide clean, reliable power to the people of Benin.
- Policy and Institutional Reform
While projects like these are critical, at the same time we know that one-off projects will not close the power gap in Africa. There is clear consensus across the continent that to unlock long-term, sustainable growth, countries must begin to make difficult policy and institutional reforms. This is the third pillar of the Roadmap, and an area ripe for collaboration between business and governments.
It is also an area where MCC is increasingly focused. I repeatedly hear from our country partners and the private sector that MCC’s ability to leverage systemic, data-driven reforms is as important — if not more important — than the dollars we bring to the table. Combining MCC and private sector voices can make the message even more compelling for governments. Together, we can support reforms and build the environment for growth.
Take MCC’s work in utilities. The subject of utilities is a conversation that we will be having in just a few minutes, and it is a subject that we at MCC are spending a lot of time on across the continent, including in Ghana, Malawi, Liberia, Sierra Leone and Benin.
In Ghana, for example, we heard from businesses that a major obstacle to investing was the uncertainty around the financial strength of ECG, the Electricity Company of Ghana. So we are now helping the government use concessions to promote private sector participation in its power sector.
By creating a financially viable power sector, MCC and Ghana are building a more attractive environment for private investment. In fact, we expect our Ghana compact to catalyze nearly $4 billion in new private investment and economic activity in the coming years, including a major investment from GE and Endeavor Energy. Those companies say the MCC-backed reforms marked important steps toward building the credit-worthy off-taker they needed.
All across Africa, the power gap is closing. Today, as President Sirleaf Johnson says, “the promise of Big Lights is close at hand.” Together, we can make that promise a reality and help the people of Africa unleash their full potential.