The African Power Sector: A Bright Spot for U.S. companies

By Ida Richter Gade, ISI Consultants, and Sandra Collazo, U.S. Commercial Service

SUB SAHARAN Africa’s power generation sector is expanding at an astonishing rate, and there has never been a better time for American companies to participate in this marketplace and be a part of its remarkable growth.

 Home to six of the world’s ten fastest growing economies and with the world’s fastest growing middle class, demand for electricity across Africa is at an all-time high, and rising. Africa’s rapidly urbanizing population of 1.2b people is set to double by 2050, and its terawatt hour consumption is set to quadruple to 1,600 by 2040.

To support this growth and keep pace with the demand, governments across Africa have been reforming their regulatory and business environments to attract more private sector participation from international companies. One such example is the widespread adoption of the Independent Power Producer (IPP) model which accounts for the fastest-growing source of finance for Africa’s power sector (over 120 active IPPs in 2016 alone valued at over $25b).

The continent’s abundant natural resources, including coal, gas, hydro, solar, wind, bio-mass, geo-thermal, coupled with the political will to ensure its energy future, have led to increased cooperation between governments, finance institutions and the private sector. As a result, the majority of infrastructure investment in Africa is focused on power projects, encompassing projects of all types and sizes, from small-scale off-the-grid solutions, to major generation plants, and sophisticated grid and transmission solutions.

While it is no surprise that companies from around the world are being drawn to the continent by the sheer number and scale of the opportunities, the demand for the latest technology, solutions, and skills presents a distinct advantage for American companies whose products and services are very highly regarded. However, many American companies have been slow to approach Africa’s power sector. This is in large part due to a lack of information around the opportunities, a lack of regional knowledge, and an outsized perception of the risks involved in operating on the continent.

Companies hoping to enter or expand their market presence in the African power sector need to look at a variety of factors, from commercial considerations, to legal, political and regulatory environments, as well as financial risks and requirements. Given Africa is notorious for its lack of widely available and reliable data sources, and many African markets are unfamiliar to American companies, those who are active across the continent rely on advisors with local knowledge and expertise to support and guide them, especially on market entry.

A 2018 report by ISI Consultants, a firm specializing in helping American companies grow their business in Africa and the Middle East, highlights the latest generation, transmission, and distribution trends, and discusses many of the risks and bottlenecks companies must prepare for. According to Ian Oliver, Client Services Director at ISI Consultants, “Companies don’t need to go it alone when looking at African markets. In addition to specialist consultants like us, there are a number of government resources available to help American companies.” One example that he cites is the US Department of Commerce which, in addition to its network of Trade Specialists spread across 106 U.S. cities, has 50 staff based in 12 countries across Africa offering a variety of services to assist US companies. “We recently engaged the Advocacy Center at the Department of Commerce on behalf of a client bidding on a local government tender” says Oliver “and it really makes a difference.” Sandra Collazo, Trade Specialist, at the US Department of Commerce explains “The Advocacy Center works tirelessly on behalf of U.S. companies who are bidding on public-sector contracts with overseas governments and government agencies to enhance their chances through a variety of services. This includes activating their network of international commercial offices and diplomatic missions to speak directly to those local governments, including deploying the Ambassador to endorse a company’s product or service and to help ensure fair and equal treatment for US companies in those competitive bids.” In addition, the Commercial Service has Liaisons at the multilateral banks, including the Africa Development Bank, who counsel companies interested in pursuing projects with these international funding organizations.

The power generation sector in Africa is becoming more and more accessible to international companies. Increased private sector participation, more transparent business environments, and a hunger for the latest products and know-how present an opportunity to American companies of all sizes. With the right advisors and the full suite of resources available through the US Department of Commerce, those companies who expand in Africa now will be well-positioned in a sector with a growth trajectory that has no end in sight.

For additional information on U.S. Department of Commerce — Commercial Services programs, go to: http://www.export.gov