Alex Thier is USAID’s assistant to the Administrator for Policy, Planning, and Learning (PPL).
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Our ambitious goals require a new model of development
USAID's Alex Thier blogs for our financing progress series on the Power Africa initiative, which sets out to bring electricity to those without it on the continent, using it as an example of a development model that brings together 'accountable local ownership, innovation and an intense focus on results' alongside a fresh approach to financing and partnerships.
Ending extreme poverty. Converging global life expectancy to the level of the most developed countries. Creating universal access to clean energy, basic education and health care. The world can, for the first time in human history, see a realistic path to achieving these ambitious goals. That path requires a new model for development that brings together accountable local ownership, innovation, and an intense focus on results. It also requires an approach to partnership and financing that will leverage the significant resources required.
President Obama’s Power Africa initiative, launched in 2013, is a manifestation of this approach. For most of the world, electricity allows businesses to flourish, clinics to store vaccines, and students to study long after dark. But for 600 million people across Africa, these opportunities simply do not exist, with the lack of access to electricity stifling the growth of economies and the hopes of citizens.
The energy sector in Africa has suffered for decades from underinvestment, archaic regulations and poor governance. Although we have seen tremendous progress, power projects often take so long to complete that investors lose money, country leaders change, commitment to reform weakens and a sense of hopelessness builds.
Power Africa is not just about electricity. It is about leading the fight to end extreme poverty. We focus on completing individual energy transactions efficiently by attracting private investment and helping countries to make energy sector reforms. In November, we closed a deal to build one of the largest wind power generation farms in sub-Saharan Africa. By 2017, 38 powerful turbines built by General Electric (GE) will capture wind energy coursing through the plains of central Kenya and add 60 megawatts of power to the national grid – enough to power 150,000 Kenyan homes. Since the supply of energy from wind farms fluctuates, Power Africa is helping local Kenyan officials learn how to manage this intermittency and integrate it into their national grid. For every dollar that the U.S. Government has committed to Power Africa, the private sector has committed two – over $14 billion so far. All told, less than a year since launching, Power Africa has either funded or planned projects to provide nearly 8,000 megawatts of power – enough to light more than 10 million homes in six countries across Africa.
This approach has its challenges, but we must work through them if our efforts are to match the scale of our ambition. We are gathering evidence on what works and where, and developing new policies and tools to become better partners. We need to better understand the added value of additional stakeholders and how to limit transaction costs. We need to demand accountability from local partners, to ensure that corruption, lack of political will, or weak institutions do not undermine our shared goals. We must also get past outdated notions of corporate social responsibility and meet the private sector on their playing field to craft economically sustainable solutions.
The world of development finance has changed, and we must change with it. Overseas development assistance (ODA) continues to rise, and is a critical driver or catalyst of investment. Preliminary figures show 2013 saw the largest ODA figures ever: $134.8 billion. But it is no longer (by a long shot) the biggest source of financing. Many new and innovative sources of development finance are available. In 1960, external public financing accounted for 71% of financial flows to the developing world. Today, ODA stands at 9% of external flows. For every dollar of official US aid spent in 2010, developing countries received $3 in remittances from migrants in the US, $5 from US private capital flows and $1 from US private philanthropy. Most importantly, domestically mobilised resources in developing countries have tripled since 2000, and are in the trillions. Making the raising and spending of domestically-generated revenues effective and transparent is the ultimate path to sustainability and will build the social contract between accountable governments and empowered citizens.
The new model builds on the comparative advantages of key stakeholders, including local governments, civil-society organisations (CSOs) and other in-country partners to achieve long-term sustainable results. With a focus on innovation, efficiency and a bottom-line mentality, the private sector is critical to this approach. By working through such multi-stakeholder alliances, USAID and other development agencies are more likely to spur game-changing innovations and create the means and capacity to take them to scale.
Power Africa is just one example of this new model. The US and other G8 nations launched the New Alliance for Food Security and Nutrition in 2012. This commitment between donors and local governments aims for inclusive and sustainable agricultural growth to raise 50 million people out of poverty in the next decade through improved farming and access to markets. To date, it has encouraged reforms in 10 African countries with more than 160 companies (two-thirds African) and more than $7 billion in planned investments. With the private sector in at the ground floor, these combined investments are more likely to lead to a sustainable path of inclusive economic growth driven by fair and accessible markets – including connecting emerging farmers to the global supply chain.
We have also invested in the Global Partnership for Effective Development Cooperation (GPEDC), uniting a diverse group of development actors including CSOs, foundations, trade unions, businesses, parliamentarians and donors to provide a convening space for global and national debates on development cooperation. GPEDC is country-driven and inclusive, seeking to ensure that all relevant development voices are represented. As the discussion on the resources needed to achieve the post-2015 development goals intensifies, we need such to review, analyse and promote what works.
As President Obama said in 2013, the United States is joining with its partners to eradicate extreme poverty in the next generation. We believe this is possible, and are starting to understand the new tools and partnerships it will take to achieve this ambition. If we combine our spirit of innovation, an available pool of global capital, a demand for results and accountability and the pent up energy of millions of people worldwide to realise their own potential, we may well get there.