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May 08 2014

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Pass the Electrify Africa Act

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A Solvable Problem, a Conservative Action Plan...

A Solvable Problem, a Conservative Action Plan…

 With a renewed focus on foreign policy in the public square of late, the question arises regarding what a conservative foreign policy initiative would look like?

The Big Idea: a conservative initiative would seek to solve problems, not by addressing the symptoms, but rather by focusing on a root cause. It would be strategic, impactful and tangibly measurable. It would have multiple, positive, reinforcing impacts.

Reflect our Values and Principles: America has been one of the most generous nations in history. When there is a natural disaster somewhere in the world, we are there to help, no questions asked. It is a reflection of our basic decency and commitment to human dignity. A conservative initiative would build on that, to embrace the promise of liberty and to promote economic opportunity that has the power to transform lives and enrich societies. It would do more than provide a temporary hand out – it would enable a permanent hand up.

Advance American Foreign Policy: we live in a dangerous world where poverty, intolerance and dictatorship are the seeds of radicalism that represent long-term threats to US security. Other large nations compete with the US for influence and access to resources. We cannot – and should not – solve all the world’s problems, but a conservative initiative would address the underlying threads of radicalism, and confidently compete with other Great Powers, firm in our conviction that free governments and free markets represent the best path to growth and opportunity.

Cost Effective: we live in a time of financial austerity, where the American public is suspicious of new initiatives, particularly foreign initiatives.  But a bold conservative initiative, focused on big results, need not break the bank. Innovative conservative policy would naturally leverage the power of the private sector, to mobilize its capital, experience and skills to complement US government policy.

An initiative that incorporates all these elements exist today in the Electrify Africa Act of 2014 (HR-2548). The bill deserves conservative support.

This landmark legislation supports nothing short of the foundational electrification of sub-Saharan Africa.

Why is this important?

What we in the US take for granted on a daily basis – climate controlled homes, power for lights,  entertainment and cooking – is a daily struggle for a staggering number of people.  Nearly 70 percent (600 million people) of sub-Saharan Africa lacks access to affordable and reliable electricity. To understand the true scale here, that figure is just short of double the population of the United States.

The result of this massive energy shortfall is a series of cascading social and economic impacts. Indoor air pollution from wood burning stoves kill more than three million people per year – more than AIDS and malaria combined. Without power, there is simply no way to build the infrastructure of a modern economy. There are no reliable means of refrigeration; no means to create and sustain a business; no means for hospitals and doctors to take advantage of modern medical  equipment. No means to access the Internet, the great knowledge equalizer.

 The Electrify Africa Act sets out to tackle this massive challenge. The goals are bold, calling for the  installation of at least an additional 20,000 megawatts of electrical power in sub-Saharan Africa by 2020 to support poverty reduction, promote development outcomes, and drive economic growth. The bill seeks to provide first-time, direct access to electricity for at least 50,000,000 people in sub-Saharan Africa by 2020.

Sounds expensive, right?

But it’s not.

Chairman Ed Royce, who holds the gavel for the House Foreign Affairs Committee, has structured a bill based on the innovative paradigm of public-private partnerships.

Instead of the US government appropriating billions of dollars for government-to-government grants – which too often failed to achieve results in the past – the Electrify Africa bill seeks to mobilize the private sector, the international community, African regional economic communities, philanthropies, civil society, and other governments, to leverage financial and technical resources to help meet the ambitious electrification targets.  Due to the bill’s structure, which utilizes existing US government agency expertise in trade, exports and investment, the bill will have no net cost to US taxpayers. Indeed, the Electrify Africa Act would return $86 million to the US Treasury.

That’s right. These ambitious goals, enabled by government action, actually return funds to the Treasury.  More on that below.

True to the goal to do all that is possible as quickly as possible, the bill does not stipulate or discriminate against energy resources. This is an “all of the above” approach that takes advantage of Africa’s enormous, indigenous energy resources, as well as renewables, clean coal and other sources. Indeed, we would be lucky if we could get such an energy neutral policy here at home.

The bill is not only good development policy for the US, it also represents  a smart  investment in future markets for our goods and services. Marginal assistance today can dramatically increase energy production in sub-Saharan Africa, helping unlock the region’s potential for economic growth and prosperity. As a result, it will also assist in the development of a marketplace of 900 million consumers, open to US goods and services.

And of course, as African countries grow, the need for direct foreign aid will decline, achieving two conservative goals at once.

The Electrify Africa Act also represents hard-nosed foreign policy. For too long, China has dominated the Africa energy market with nearly $2 billion in projects. However, these projects represent China’s unique mercantilism, where the investments are designed to gain a foothold in developing local resources that will ultimately be controlled for China’s exclusive use.

The Royce approach is a free market approach, promoting African energy capability for Africans, by focusing on an economic sector with huge opportunity for anyone willing to take on the challenge and do the hard work. To that end, to address business climate issues, the Royce bill couples the energy expansion with institutional, regulatory and policy infrastructure necessary to ensure transparent and efficient operations that serve as many people as possible.

The bill is  a strong American cultural, economic and political counter-point to a Chinese policy that locks up resources for Chinese benefit alone.

With so much promise, and adhering to clearly conservative principles, why would conservatives object to the bill?

The Electrify Africa Act contains provisions to extend the authorization for the Overseas Private Investment Corporation (OPIC), which is an integral part of the plan. For all the robust intellectual passion in the conservative movement, the conservative critique of OPIC as an agency that provides “corporate welfare” – a critique also applied to OPIC’s sister agency, the Export Import Bank of the US – is heartfelt but ultimately misinformed.

Founded in 1969, OPIC helps mobilize US private capital for social and economic development in over 150 countries. Over its history, the agency has supported more than $200 billion in investment in 4,000 projects worldwide. It has also supported tens of thousands of jobs in the US as well as billions in US exports.

The cost for all that?

Zero. Actually less than zero. By charging interest on its loans and fees for its insurance, OPIC operates at no net cost to taxpayers. The original seed funding provided by Congress was paid back in 1986 in an East Room ceremony attended by President Reagan.  Since then, OPIC has run a surplus every year, returning money to the US Treasury.

Running a profit is not, by itself, a reason to reauthorize an agency, of course.  Fannie Mae ran profits for decades until the 2008 financial crisis required a colossal bailout.  But it is important to recognize that OPIC is not Fannie.

First, OPIC has built up significant reserves against projects that turn bad.  But historically it has not been necessary to call upon those reserves as OPIC’s political risk insurance has been able to recover roughly 90 percent of claims paid out.

But more important than reserves or historical recovery is OPIC’s superior risk mitigation  culture. OPIC is not financial “do-gooderism.” OPIC supported projects go through a very thorough screening process that is unsparing in its balance sheet assessment. The projects need to make sense financially, and the agency’s highly talented team uniquely structures each transaction to minimize risk to the agency and taxpayer, while providing crucial support which catalyzes investment that serves important national interests.

While Congress was approving multiple bailouts in 2008 – including a very large bailout for Fannie – OPIC was returned funds to the Treasury, which it has continued to do until the present day. That represents a strong vote of confidence in management and mission.

OPIC’s unique mission and structure allows the agency to create financially sound  projects that mitigate risk and leverage private sector investment capital in emerging markets in a time sensitive manner. OPIC accomplishes this through public-private partnerships which are beneficial both to  businesses, as well as the US government, as they advance US development goals and standards  in environmental, worker rights, and human rights standards.

 Nimble and flexible, OPIC  inhabits a unique space at the crossroads of development policy, private sector led economic growth and foreign policy, with the ability to respond to dynamic foreign policy changes in real-time with tangible support that creates jobs and economic growth.

Simply put, no other agency has the resources and authority to enable such large-scale deployments of private capital in so many diverse regions of the world, so quickly.

This unique combination of experience and skills makes OPIC the natural choice to help realize the goals of the Electrify Africa Act. Far from “corporate welfare” OPIC’s compact team of 200 highly skilled professionals, located at only one office, represents the kind of lean, pro-active,  results-oriented and accountable government that conservatives consistently espouse.

The Electrify Africa Act is a bold, bipartisan vision that is rooted in clear conservative principles. It advances American interests, showcases American altruism, addresses core social development objectives for social progress, promotes free markets and economic growth, leverages the private sector, and achieves all this without cost to the taxpayers.

Criticism is important in any democracy – the give and take that sorts and prioritizes ideas. But criticism is not a governing agenda. At some point, there must be an alternative. The Electrify Africa Act is that alternative in US development policy. Bold, clear and determined, it is a bill that unites both parties, NGOs and the US Chamber. It is legislation that conservatives should not only support but embrace.

 

 

 

 

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