- Thank you very much for this opportunity.
We have an exciting panel
with significant transactional experience
and we are going to try to cover as many issues as possible
at the granular level
and then open it up for questions
so that we can impart the various experiences on this panel.
I'd like to start with each one of you,
sort of opening statement to talk about your experiences,
focusing primarily on this concept
of mobilizing capital for Africa
and then we can go into key facets of your experiences.
I'll start with you, Uduak.
- Sure.
Good morning, or I guess we're moving into
afternoon, everyone.
My name is Uduak Essien.
I think I was introduced earlier but I am a director
at the Export-Import Bank of the U.S.
I'm a graduate of the MBA program here back in 2002,
so quite a while ago.
It was a good program back then,
I think it still is a great program so
I am very happy to be here today and share the dais
with my esteemed panelists, so thank you.
At first, I feel obliged to give you a little bit
of background about EXIM Bank and then just
perhaps a few general comments about the work
of EXIM Bank in Africa and my personal experiences as well.
The Export-Import Bank is a 100% owned government agency,
it's an independent agency of the U.S. government.
It's the official export credit agency of the U.S.
The whole idea behind export credit agencies,
whether you support the idea or not,
is to level the playing field
for exporters from respective countries.
My job at EXIM is to support U.S. exports,
U.S. exports around the, globally and also to Africa.
Take for example if you have a large infrastructure project
being developed in Nigeria,
a power project that's buying gas turbines from the U.S.,
we can finance that project
because it's purchasing the gas turbines from the U.S.
and how we calculate our financing is actually based on
what is actually bought from the U.S.
Our mission is to support U.S. jobs through exports.
That's what brings us to the table.
We don't compete with commercial banks.
The idea behind the export credit agency
is to kind of augment what they do.
There's certain markets where commercial banks
are not interested or they cannot provide
the type of financing that is needed,
whether it's tenor or they can't accept the risk,
and those are ideal places for export credit agencies
such as EXIM to step in and meet the gap,
so we're known as banks of last resort,
well EXIM is known as a bank of last resort,
that's the role that we play.
We as mandated, as part of our charter,
actually have a mandate to support transactions
in Sub-Saharan Africa
and so we have a senior level committee that is designed
to helps us reach our goals and to pursue initiatives
and we're very focused on that.
Me being in the power sector,
we're also very focused on energy projects.
We have renewables, initiatives,
so we're very interested in doing renewables, projects,
renewable energy projects on the continent as well.
Just one more quick comment
that I don't wanna fail to make is that
one of the things that, because I know we have
some developers and business owners here,
one of the things that I do want folks to take away is that
the U.S. government as a whole has a variety of programs
along the continuum of finance for different types
of businesses within the African marketplace.
We have upfront programs from like USTDA
with feasibility financing, pre-feasibility financing,
all the way to say an EXIM bank that comes in
at the very end when you're talking about
large infrastructure projects to finance those projects.
So you have Department of Commerce, you have USAID,
you have Power Africa that was also mentioned earlier
which has done a lot of work in creating the
or helping the enabling environment.
Then you have a bank like EXIM
that could come in when it comes to
the larger infrastructure projects
and help those projects go forward.
So I'll, go just-- - Great, thank you very much.
Tom, would you like to chime in on your perspective?
- Yeah, so I'm Tom Coogan from
the United States African Development Foundation.
I'm actually joined by my colleague here,
Michelle McKenzie, who also is with USADF.
USADF is an independent government agency,
in some ways similar to the EXIM Bank
where we have our own board of directors and we get our
appropriation directly from Congress.
What we do is we focus on African owned
and African managed organizations
for creating a pathway to prosperity
for those for underserved communities in Africa.
What does that mean?
We have a program in 20 countries, programs in 20 countries,
where we have a local partner and then we give seed capital,
generally grants, to organizations
in order to help them first develop capacity in some cases
and then expand for profitable expansion
so they can scale up what they're doing.
We look for the organization itself to be profitable
and then we look for the benefits to the grassroots members
or in other ways benefits to the grassroots.
We do this in three ways,
we work with agricultural cooperatives
financing in a value chain approach generally
and we have those programs in all 20 countries.
We're working with off-grid energy
as a member of Power Africa, we sit at the table
with EXIM Bank and others as one of the 12
inter-agency organizations working under Power Africa.
We're financing off-grid energy
in a major way in 10 countries in Africa
and then we're expanding that
and we're doing it in smaller ways,
but hoping to expand it to all 20 countries where we work.
Those take the form of that could be solar,
I'll get into that in a minute but that could,
about 2/3 of what fund is solar,
the other third, biogas, biomass, hydro, mini hydro, wind,
and other types of innovations, sometimes hybrids.
We also do youth entrepreneurship.
We have a nascent youth entrepreneurship program
in about two countries and in small ways we're doing that,
we're funding young African entrepreneurs to,
in most cases, to start up or to expand
the small businesses they're working with.
We began with the YALI program,
the Young African Leadership Initiative,
and then we've expanded beyond that
and we're continuing to do that.
We just concluded in Nairobi, Kenya at the end of February,
the Young African Entrepreneurship Summit, sorry, 2018,
and that was the first one that's been held
and we're gonna continue to do that on an annual basis.
We had about 55 young African entrepreneurs there.
We had about 100 participants including banks,
other finance institutions, other mentorship opportunities.
In that case, we're funded by Citibank
as well as using our own funding and
mentioned earlier, a public-private partnership.
We also work extensively
in the public-private partnership arena.
We have funding from some of our governments.
For example, the government of Uganda,
we have a $10 million, five year program
with the government of Uganda where they fund half,
we fund half of our projects,
they give us the money directly.
We work with corporations like Citibank or GE Africa.
GE Africa has funded us directly under
our off-grid energy initiative
since the very beginning for about the past four years.
We work with other types of organizations
and we're rapidly expanding these type of partnerships
and really doing outreach
for these type of partnership opportunities.
In the off-grid power sector, it was mentioned earlier,
over 600 billion Africans are currently without power,
have no direct access to power
and one anecdote that I like to tell is
the Dallas Cowboy's stadium on game day
uses more electricity than the country of Liberia.
It's hard to believe, and we're doing programs
in Liberia for example where we've,
doing small solar mini grids, 100 households in one case
and expanding that into other cases,
some solar home systems, we're expanding organizations
that are selling and implementing those.
We have the president, the first female president in Africa,
Ellen Sirleaf Johnson, come to our site and said
"Power Africa and USADF are actually doing something,"
and turned the lights on and it helped inaugurate
one of our sites in Central Liberia.
I wanted to talk about, and how we identify that,
also under power I would mention we're doing a
extensive Women in Energy program.
We started this a year and a half ago.
We're identifying women energy entrepreneurs in Africa.
We started with three countries,
we're expanding it this year,
where we give them seed capital for funding
to expand their enterprises and then help them
on a profitable growth and expansion trajectory.
We're also focusing on what we call
the power agricultural nexus, and what that means is
rural areas really is where there really is a power deficit
and in rural areas is also where
most of the agriculture takes place
so we've been working on innovations
and funding organizations that are doing things like
solar powered water pumping for irrigation,
solar powered grain milling where you can mill corn,
for example, right at the farm gate,
solar powered refrigeration for fish to preserve,
have less post-harvest losses,
or for vegetables, or in other ways.
We have programs there in Nigeria,
in Kenya, and other places.
We're also along the lines of a public-private capital
or public-private partnerships.
We're working with All-on which is an organization
that's basically Shell Oil but in Nigeria,
but they are the impact investment armor of Shell Oil
and that's on my mind because yesterday and this morning,
we've been approving and reviewing and approving
some projects that we're doing together
and what we're doing there is we're giving seed capital
to half of the funding to an organization in Nigeria
and All-on is giving a convertible loan and/or
a small piece of equity, we're doing this together.
They're gonna continue to work with the organization
over the years eventually so that they can move up
in kind of a mentorship role but also in a capital role
and this is, we signed this just last December
and we'll be funding those projects
within the next two months.
That's just a little sample of what we do
and I've got a lot more to talk about but
I'll stop there. - Sure.
Thank you very much Tom.
Brionne, would you like to chime in about the
U.S. Chamber of Commerce? - Thank you.
Good morning everyone, it's a thrill to be joined by
such esteemed panelists and an honor to be with you today.
I was asked to talk a little bit about my background
and what we do at the Chamber.
My bio has already been highlighted but what might be useful
is to talk a little bit about the way in which
I came to the work that I'm now doing at the U.S. Chamber
because it might be helpful in terms of
touching on some of the themes that came up
as part of the last presentation around
kind of aid and trade and the shift I think
that's rapidly underway in terms of the private sector
and private sector being leveraged
to really further development objectives.
I've spent the last two decades or so
working on the continent of Africa.
Did my undergrad in African studies at Georgetown and then
spent time both overseas and also in Washington
working in the development space with the organization
called the National Democratic Institute.
While living in South Africa,
I witnessed first hand some of the trends
that the prior speaker discussed in terms of
the growth of overseas or foreign direct investment
really overshadowing the overseas development assistance.
Also the youth bulge, a growing entrepreneurial
and young population across the continent.
And new business models that were being pioneered
by American companies looking to invest in the continent.
I went to graduate school then
to look at market-based approaches to development
and to understand better the ways
in which American companies could really tap into
the potential that exists on the continent.
Now at the U.S. Chamber of Commerce,
and I should mention also, in the intervening period
between graduate school and joining the Chamber,
I spent two years in the Obama administration
working on Power Africa, Trade Africa,
the Young African Leaders Initiative,
and worked closely with Tom on Power Africa,
and many other colleagues that were driving this change
that I mentioned in terms of leveraging private capital
to achieve development objectives
and worked at the intersection of legislation
and also the executive branch to explain the value
of tax payer investments in these new programs.
For the last year or so, I've been working
at the Chamber of Commerce and have been helping companies
navigate some of the regulatory and political risks
that they encounter when they enter emerging economies.
I wrote my thesis on Walmart's experience
entering South Africa and one of
the regulatory experiences that they encountered
that's pretty well documented was on competition.
Specifically, issues around labor, practices, and policies,
and so that's the kind of work
that we really do at the U.S. Chamber.
We help to support businesses in terms of identifying
some of the strategic risks that they might encounter
when they enter markets
but then also work to connect them
to the wide range of tools that exist
within federal government that's already been discussed,
some that are at the EXIM Bank,
the U.S. African Development Foundation if needed,
but also tapping into the resources
that exist within governments, African governments,
that also help to promote exports and imports and to ensure
that companies get access to the resources that they need
once they've entered those markets.
I look forward to conversations,
further dialogue about how our members which
basically represent three million companies,
we are a fully private sector,
we are a member-based organization,
we have a 300 million or so budget and around the world,
whether it's in Africa or here in the U.S.,
we help to protect the interest of business
and then we also in instances where needed,
advocate on behalf of the business sector
to promote trade and investment.
At the U.S. African Business Center,
we are the preeminent vehicle that's a private sector entity
promoting trade and investment across the continent.
Our members see enormous potential on the continent
and have a very long term and strategic approach
to how they look at the markets across the continent.
We're tracking many of the issues
that were highlighted by the last presenter
in terms of the African Continental Free Trade Agreement,
but also efforts that are underway here in the U.S.
in terms of consolidating some of the tools
that exist within government
such as through the BUILD Act which is looking at
financing and consolidating some of those tools that
currently exist in multiple agencies
and making sure that we're unlocking the financial assets
and resources that could assist private sector
and being more strategic in how they enter markets.
- Thank you, Brionne, it's quite interesting.
I've been given the challenge of being both
a moderator and also a pre-presenter,
so I'll try to do as best I can to manage those two.
From my perspective, about six years ago,
what was really exciting as an opportunity
was looking at global remittances
and trying to think about how do you connect
remittances to develop and finance,
particularly how do you connect
what people are sending home with the productive sector?
What we found was that you basically need to tranche out
those flows into two categories,
the professional diaspora and in migrant workers.
In cases where, parts of Africa where
the majority of the remittances
are coming from professional diaspora,
i.e. people who will rescind to grow, to study,
have gotten good jobs or sending money
back to their relatives for fees,
school fees, pharmaceuticals, et cetera,
and also building property,
those individuals are treated in a very special category
when it comes to regulatory context
in the country in which they live.
Migrant workers, which is much more of a
Asian, Germaine issue are treated also
in a very different way and therefore
how you treat those flows and how you connect those flows
and the channels that you use to connect those flows
to the productive sector are very, very different.
The third element that we discovered was the use
of crowdfunding or the phenomenon of crowdfunding
as a way of allowing all diasporans to participate,
whether they're professionals
or whether they're migrant workers,
whether they're retail investors unsophisticated in finance
or whether they are Wall Street traders,
and we discovered a wide array of tools
that could be used to make that connection.
I'm not gonna spend too much time on that,
but I'm happy to speak about some of the details
of what we've learned and we've learned a lot
on this subject over the past six years
and we're working with the African Development Bank,
with the Asian Development Bank, and with USAID
to share our experience in that field.
I wanna switch back to my moderator role.
What I'd like to do is instead of having sort of this
rotational thing, I'd like to open up
to a sort of a conversation on the issue
so that we get a lot more input from everybody.
There's a lot to cover, clearly.
What I'd like to do is first talk about a transaction,
a typical transaction, particularly one of your more
not necessarily the most successful one,
but one that's most typical to what your organizations offer
and walk us through where does it come from,
what does it focus on, how is it put together,
what are the challenges both here from a policy standpoint
and then there from a regulatory and reality standpoint?
I wanna start with you, Uduak.
Can you talk about export finance, a particular transaction,
choose whatever field you want, agriculture,
health care, what have you, and let's walk us through.
I'm gonna constrain you,
I'm gonna give you no more than two to three minutes.
I'd like you, the two of you,
to also chime in on some of the key aspects.
- Sure, I would love to do that.
I'll talk about power
since that's something that I focus on,
a large infrastructure project, right,
a power project say a 50 megawatt,
let's use renewable energy, so a solar farm in West Africa.
What I find with these transactions,
especially transactions that I'm seeing
coming from the continent versus other places
within the world is that you,
I get pitched a lot of deals that are much larger,
if I could say very diplomatically,
than they actually need to be.
I think working with developers
and having them understand that the lender pitch
is very different from the equity pitch, right?
Because they come to me, they say
"Oh we'll have"-- - What does that mean?
What is equity pitch and-- - Yeah, so they'll come to me
and say "The ROI on this particular investment is"--
- ROI standing for return on investment.
- Return on investment, thank you,
"For this particular investment is 15 to 22%"
or they give me all of these stats,
how much money I can make, and really as a lender,
lenders don't participate in the upside.
We just want our debt to be repaid, right?
And we just want to make sure that the project can be built,
can be implemented, it can be operated,
and that we can be repaid according to the schedule.
The challenge in working with developers and helping them
to know how to approach the lender institution,
what lenders are looking at, it's very different from what
venture capitalists or private equity
is looking at is very important.
With a lot of projects that I see
that come in from the continent,
a lot of early stage work is needed
and so I've been working within the bank
and we've been having conversations
as to how can we start to engage our transactions very early
while developers are really still putting things together?
When you talk about really large infrastructure projects,
they could be five to 10 years in the making
before they even get to me,
a project that can be financed, that's bankable.
A lot of work has gone into that.
What I've noticed on the continent
is that engagement a little bit earlier
really helps bring the project together
because a lot of times, the governments are involved
in the project because you're talking about power,
there's a dearth of power, power is very strategic,
hence the government is very focused on it.
A lot of times, the off taker or,
so if you have a generating plant
that's going to sell energy,
it's usually going to sell energy to a utility,
a utility is usually nationally owned,
so the government is sitting behind the utility.
Utility is probably operating in the red, many utilities do,
so they will require the support of the government,
so coming in as a lender and talking to
the federal government early and letting them know
what will be required in this documentation
in order to entice international lenders
to come to the table has been very key
in helping some of these projects come together,
so that's something that we've been doing.
- You're suggesting that projects can either
come from the continent or come from the U.S.
but you wanna get involved in the project preparation,
i.e. in the project structuring in of itself.
Is that because it's driven by constraints
within your organization as to how you make decisions
on funding or is that,
what's driving your need to get involved early on?
- It's really the project structure.
For the larger infrastructure projects,
they usually come in on a project finance project.
What project finance is in a very short nutshell,
in a nutshell is you're developing
a special purpose vehicle, an SPV,
to own an asset, it's a green field asset so
it doesn't exist, it doesn't currently have any cash flow,
but yet you want to borrow money from me
to build it and to operate it.
It's very different from coming in
and financing a business that has been in existence
for the last 10 years, 20 years
that has operating revenue that's profitable.
That's easy for me to underwrite,
and we underwrite those types of loans as well,
but the infrastructure projects,
they come in on a project finance basis
and so a lot is involved there and so there's a lot of,
there are a lot of agreements that need to be in place,
there are a lot of terms and conditions
that need to be factored into these agreements
to get us comfortable as international lenders,
and so when we come to the table early
before these agreements are signed,
we can ensure that this project,
once all of the facets are put together,
will be bankable, will be commercially reasonable.
- What are the key success factors of a large project
that you've taken in that you've successfully financed?
- I would say first of all, the project just,
it fits within the environment, right?
If you talk about renewable, let's use that as an example,
we like to see projects come in
that have been tendered through an official process.
- [Eric] Transparency.
- Transparency, so we do see sole source projects
where there's only one developer has been considered,
one sponsor has been considered,
they have been awarded a contract
and those projects can go through successfully.
Sometimes those projects have issues
because it was a bilateral negotiation,
you have a change of administration,
and all of a sudden the contracts are no longer valued
or don't want to be honored, so transparency is very key.
I'd like to see that the project can be built
because that's key, that's how I'm gonna get repaid,
is the project is actually built
and it's built on time and built on budget.
I need a contractor who can actually build it
who's done it in that environment,
who's done it in that environment or a similar environment,
who's used that technology, and also has the pockets
to stand behind the obligations of building it.
One of the challenges that I've seen on the continent
is that a local developer will come in
and not have the experience of implementing a project
and the first thing that I do is try and suggest
or to the extent that I can, is match make,
have you considered working with an international developer
who has this experience that can help
you implement this project?
Usually it's not very tasteful because when you JV like that
and you bring, joint venture, and you bring another party
to the table that's more experienced,
they're gonna want a cut, a large cut of the deal,
and usually the local developer doesn't wanna provide that.
- But that's a precondition to getting financed from you.
- You have to have the experience,
you have to demonstrate that you can build it
and that it will be built successfully
and that you can operate it.
- I'm assuming here that in addition to providing financing,
you do match making, and the idea is that if you find
a prospective joint venture entity
that adds to the credibility of the project
which facilitates the financing on your end.
- Yeah, I just wanna be clear.
Our official role is not to do the match making.
If we can, we try, and we make suggestions,
but that's really what brings the strength
to the transaction, is the sponsor, the development team,
what we call the EPC,
the engineering, procurement, and contracting.
Having that experience to actually build the thing,
make sure that it works so that
lenders will come to the table,
wanna finance it because they know
that they're gonna get repaid.
- Got it.
Tom, your involvement with Power Africa
and your interaction with EXIM Bank,
can you talk about that?
- We haven't worked directly with EXIM Bank but there are,
on that continuum of finance,
we're probably at the very beginning
where we provide seed capital
and EXIM Bank is at the, somewhat at the other end
where they're doing major projects.
- [Eric] What is the nature of the seed capital
that you're offering?
- I mentioned one where we do 50% grant
and 50% convertible loans, but generally we give,
we start with a grant and what we do,
I can walk through it very quickly,
like a process for the off-grid energy projects.
What we do is,
we do what we call Off-Grid Challenge,
so we advertise in a country,
we solicit for proposals and projects,
then we have a panel of outside judges
as well as people within USADF that score those,
review those, and then we do a selection
depending on how much,
what our budget is for that country,
sometimes three, sometimes five projects,
roughly at about $100,000 each.
What we do is, an example would be,
I'm thinking of a GVE in the Niger Delta in Nigeria.
Part of the key thing is identifying
these projects and these entrepreneurs.
They were this small organization that had done
a certain amount of off-grid energy work
in the solar field, but not a real lot.
We funded them to do a micro mini grid in a rural community
of about 100 households.
In effect, what they did is they became a mini utility,
but they showed and demonstrated that that model worked
and then they've actually been able
to expand significantly since then.
I think they're, at this point they have over
almost two million dollars in financing,
about 1.8 million in financing
where they've expanded in different states.
We do that identification, we have a local partner
that works with the organizations for implementation
to support them so that they are able to,
when they run into a problem
or as they go through the process, they can do that.
We look for very strong financial systems
so they're able to report well and track their own finances.
You asked about the challenges.
I think for our organization,
those challenges that we see with the organization,
first of all are the key success factors
maybe we would say is that,
the first one would be project design.
You have to have a very good project design.
If you don't have one, that can be fixed but--
- [Eric] Do you help with that?
- We do a limited amount of help with that I would say.
That would be kind of in a pre-application stage.
- [Eric] Do you point to a network of people
who can provide that kind of service?
- We often do that.
What we do find is we get, we do get
a great excess of well designed projects.
We focus on those and secondly, management.
The management of the organization to make this work,
a well designed project without good management
is not gonna work very well.
We support that in certain ways,
like we build capacity through training
and also through, especially through the financial systems.
Then I think thirdly key success factor
is that they have a vision
and a profitable plan for expansion and scalability.
Where are they going once they've done this
and how are they gonna profitably expand?
What's their vision for the next
two years, three years, five years?
I think with those what we've found is we've had
really good success with implementing
these kind of projects.
- [Eric] Great, Brionne you wanna chime in on your
experience and challenges? - Sure, let me say that the
U.S. Chamber of Commerce is not
directly involved in deal structuring,
but based on my experience in Power Africa
and also some of the well known challenges
as investors enter markets, one of the typical difficulties
that our members encounter is working with officials
that may not have familiarity
with these very complex financial transactions.
For example, with the Corbetti Power Project in Ethiopia,
a significant renewable energy project
with Power Africa's support,
it took well longer than anticipated
to work with government officials that really
many of whom don't even have their own bank account.
Some of the conversations that we're having here
in terms of how do you structure debt and equity
and how do you unlock the potential
that exists in a renewable power project,
it took a long time for government officials,
USAID that is spear heading some of that work
in Ethiopia to really walk the
government officials through that process.
Something that our members also look for
when they're considering investments,
apart from the business conducive environment
that has already been mentioned,
is also whether or not they'll be repaid.
Getting their capital out of the market
is another key criteria.
That's also an issue that I think a lot of our members
have encountered where they then seek support from
an organization like the Chamber to access the regulatory
tools and to get to the right people to get their finances
get repaid and also get issues that they might encounter
from a regulatory standpoint addressed.
- Chiming in from the diaspora angle,
what we've seen particularly in the case of off-grid,
and this is in the UK, unfortunately not in the U.S.,
we're DFID which is the equivalent
of the U.S. Agency for International Development,
has partnered with local crowdfunding platforms
like Lin-duh-han and Ethex, E-T-H-E-X,
to provide short term loans to the crowds,
i.e. retail investors including the diaspora to finance
companies that provide off-grid technologies in Africa.
They recently had a $20 million program
which involves partial guarantees of those loans
and they've been extremely successful.
Azuri Technologies, which is one of the providers,
was able to raise about 1.7 million pounds
over the space of two months
through crowdfunding technology in order to match
development capital provided by DFID.
Those are the kind of innovations that you're seeing
in terms of channeling funding from the retail,
from the diaspora that are well-structured, transparent,
or the issues that you mentioned,
something that could be quite transformative
if it's brought into the U.S., into the U.S. context.
I'd like to shift a little bit and talk about
some of the macro issues that are going on in Africa
and how you perceive that either as an opportunity,
as a threat, or else.
We're seeing what's called devolution,
i.e. where the central federal government
or the central government is pushing authority
both in terms of project selection
and in terms of financing to the municipalities.
We see it in Nigeria with Abuja,
we're seeing it in Kenya with the province of Nairobi,
and McKinsey itself, McKinsey Africa came up with a report
that suggests two things.
One, that investment opportunities are more focused
on municipalities, i.e. cities, and not necessarily states.
Then number two, that the future that we're gonna see
in Africa is the rapid growth of mega cities, that the
provinces around Nairobi, around Abuja, and in Ethiopia
area basically gonna be so big
that those are gonna be the major sources of growth.
How do you perceive that?
Where do you see potential opportunities there
and how would you structure your activities
in relation to that evolution?
Uduak, sorry.
- All right, good.
That's a very interesting trend.
There's one comment that I'd like to make
before I answer that and that is
EXIM Bank is actually, where I sit,
I focus a lot on the larger infrastructure projects.
We also have other products within the bank
that are more short term in nature.
What I do is long term, sometimes up to 18 year financing.
We do have short term projects
that are U.S. exporter facing,
so if you are a U.S. exporter
and you're exporting into the African market,
we do have financial products for you as well,
mostly in the form of working capital guarantees,
receivables insurance, so those products are available
as well as when you talk about the continuum of financing.
With regard to Eric's question about devolution
and municipalities and larger mega cities,
one of the places where I personally experience this
is actually in India.
When we first started financing
renewable energy projects in India,
it was really on the national level
in terms of the government support.
As the program continued to be, it continued to evolve,
that would spread out to the municipality level
and I can be honest with you from my personal experience,
it was a bit, the credit was a bit more
difficult to underwrite.
But they are moving forward,
that program generally has its challenges,
and I don't wanna focus on that here,
we're focused on Africa,
but it is a bit more challenging
because you don't have the sovereign,
you don't have the full faith in credit of the nation
sitting behind whatever obligations
that you are actually underwriting.
The projects that we tend to work on
when we see the large infrastructure projects,
they're usually located, and because of the nature,
right, it's very industrial,
so they're usually located in a remote area,
but they serve, they're situated to serve
obviously the major clusters of population.
That power will make it to Accra, will make it to Lagos,
will make it to Abuja, all of those major cities
but the one thing to consider there within that paradigm
is how does it make it there?
That's the grid, right?
That's one of the issues where we see is a problem
in terms of implementing these larger power projects is
it can, the grid, is the gris, is it sustainable?
Especially with renewable power
which tends to be intermittent power,
you don't get it 24 hours a day, it's not stable,
it's not slowed unless you have battery
or some other supplementary power,
and so can the grid be stable with the renewable power?
Can the grid support all of this new power
coming onto the grid and obviously transmission
and distribution is, you're talking about
very large networks here in the U.S.
If you just drive down the street
and take a look at the power lines,
that's a lot of infrastructure.
It takes a lot of time to build that stuff.
I sat on a panel once where someone talked about
the amount of money that it would take
to build out to the grid to where it needs to be
and I think it was hundreds of billions of dollars.
We can try and get the power projects built
which is challenging, but you also have to have
the supporting infrastructure to do that.
- Tom, you, I want you to chime on this question but you,
I'd like for you to also sort of
plug in the youth entrepreneurship element.
When you talk about mega cities,
you're potentially talking about youth employment challenges
and can you try to talk about what you guys are doing
in that space and what does it mean in this new environment?
- Yeah, it's a really, really good question.
I think devolution works both ways.
We've seen in Kenya that they've actually
pushed money out to the counties,
but as far as the rise of mega city goes,
that's happened and is happening.
Lagos is one of the largest cities in the world,
what I call the wonderful magnificent chaos
of a place like that.
Accra, we were just there, Michelle and I recently,
I had an experience where I arrived
at the edge of town just at dark,
thinking oh we're getting back to where we're going early,
and it took us three hours to get across town.
But that's important because you know, yes,
it's a concentration of resources,
it's a concentration of startup businesses and innovation,
and it's a concentration of,
all kinds of things are there
that you're really not gonna get in the rural areas.
What we do see then is, like with the youth entrepreneurs,
the real innovation we're finding is
generally in a place like Nairobi, in a place like Lagos.
Then they're actually taking those innovations
and applying those to rural areas
and we're seeing that with off-grid energy,
but we're seeing that with also our youth entrepreneurs.
One example, Brenda Katsewigye who is in Kampala,
we had funded her, she was doing a small,
what do they call, recycling, plastic recycling.
She actually then identified that,
she found that she was able to actually make eye glasses
from the plastic that she'd recycled and saw this need
and then actually has been producing those
and selling those through school.
She actually took one innovation
and then moved it into another area,
and so that includes rural areas where
sometimes they'll do testing in a school and find that
the parents never knew that the children
actually needed eye glasses and it can really change things,
and these are very low cost.
She's made a very successful business out of that.
That would be one example.
It is true that mega cities and the concentration,
and that's where you're gonna find the innovation
and that's where you're gonna find kind of the excitement
and what's going on, and that's where the,
I'm not saying that's where the youth wanna be,
but that's where we often identify
these young entrepreneurs,
but they're also moving those innovations
to the rural areas.
- [Eric] Brionne, wanna chime in?
- Sure, so I would just say that in terms of
the rapid moves that we're seeing towards devolution that
governments are also looking at their development
trajectories through the lens of job creation.
They're viewing the private sector
as a partner in creating jobs.
As a result, the opportunities
that are offered through devolution
also create new opportunities that previously hadn't emerged
in terms of reaching rural or remote populations.
I think businesses are coming up with creative models
to reach some of those rural populations and so
there are also I think some
complex regulatory challenges that also emerge,
if now you're no longer negotiating
just with federal government,
but you're negotiating with municipal government
and you have to now pay taxes at multiple levels.
That dynamic is also creating new regulatory challenges
I think for businesses that are seeking
to navigate these contexts.
There are actually, I think that presents
a really great business opportunity.
New organizations have been created
to help companies also figure out
how to be strategic as they enter.
One that comes to mind is an organization
called Fraym, F-R-A-Y-M,
which has actually pulled together
this great database of data that had in the past
been used primarily for health and educational purposes,
but use that data to actually identify where are
the highest potential for say a product that might be
a product that Proctor & Gamble might be producing,
a detergent or something,
they may look at where is the most likely demographic
of individuals located from a
kilometer to kilometer square area
to target the delivery of a product
in an area where it's most likely to be profitable.
You're seeing also I think
from the standpoint of innovation,
new sources of data being tapped to kind of create
and sort of surface these new business opportunities
that help businesses look through the lens of these markets
that are more challenging to navigate
or where you don't have as much data
that's readily accessible
a little bit more accessible and available.
I think that that's a trend that we're gonna continue to see
and then the other thing that I will just mention
in terms of innovation and jobs creation
is that you're also seeing companies
pioneering new approaches to looking at how,
for example, assist rural companies get access
to the internet, for example,
through the creation of Zoom, you know,
something that's like suspended in the air
that actually helps remote populations
get access to internet, and that also unlocks
a whole new potential that's created by the digital economy
that Microsoft, Facebook, and a number of other groups
are pioneering, or companies are pioneering.
I think that's also an opportunity
and then a third trend I would elaborate on
is just the public-private partnerships potential there.
UPS for example, in terms of delivery
of humanitarian assistance has partnered with companies
to use drones to actually deliver
health goods to remote communities.
I think that these, the devolution and what you're seeing
in terms of reaching more remote populations
is also creating and exposing new business opportunities
and forcing the development of new business models.
- Great.
I wanna end with one question before we go to lunch
which I see very hungry eyes there.
China, China clearly has made inroads into Africa
both at the national level and now at the municipal level
and even at the private sector level
where they're providing a whole range of services
and sources of finance, so retail finance,
municipal finance, as well as national finance.
Even Power Africa, when you look at the actual numbers
in the context of China's contributions, it's challenging.
Can you speak to China, its role, how are you perceiving it,
and how are you addressing it from your perspective?
- Well yeah, China's always the one topic that comes up
when you talk about working in Africa,
especially these bigger infrastructure projects.
I can only speak anecdotally from what I've seen,
what I've seen on my personal travels
and what I've seen in meetings
talking with developers, government officials.
I'm sure many of the projects are built well
and are delivering the capacity, the energy,
or whatever it is they're supposed to deliver,
but there are a number of projects that don't.
Recently I was in Nigeria and if you fly into
the International Murtala Muhammed Airport,
there's a large building standing right there
and it's been there for a year and it has not opened yet.
There are lots of issues that,
in working with Chinese contractors
but I think you need to do your due diligence
because a lot of projects are going forward,
a lot of projects are working,
but you can't be attracted by a low,
just strictly a low price.
We have to make sure that the project can be implemented
because at the end of the day, you're gonna waste more money
chasing Chinese money if you're not bringing
the right parties to the table.
- Okay, Tom?
- I think I'd make a couple comments there.
One, clearly we need to be aware that China
is being very strategic in their investments
and what they're doing and I think it's a challenge to us,
the U.S. and others, to be strategic as well
and to be able to do that in the right way.
In the off-grid energy field, we actually have,
there's American companies that compete
and that have better quality and compete on price
in things like batteries, connectors, inverters,
and things like that, on commodities not so much.
One of the things that we've been battling actually
in off-grid energy is the awareness of solar
has a very negative perception
in a lot of rural places in Africa because
the products that have come from China are very low quality,
very cheap, they've got them out there,
and then they just tend to not work and
actually they've created a very bad impression on solar,
so we've had to overcome that in a lot of ways
with higher quality products and actually things that work
and we've found with some of our projects,
we have a 99.9% uptime, you know,
a solar mini grid with proper batteries
which is better than the national grid
by a factor of two or three.
I guess those are the two things I can point out.
- [Eric] Brionne.
- Sure, so many of our members are facing
an enormous degree of competition from Chinese companies,
there's no question that American companies
have been well behind the clip that we've seen
in terms of the pace of Chinese investment.
I think a lot of that is helped by state sponsored support,
particularly in the infrastructure space if you look at
China's investments, $50 billion I think in 2014
through state sponsored financing vehicles that
really enable Chinese companies to compete for deals that
are government procurements that American investors,
for a variety of reasons, are unable to compete with,
just on the financing alone.
Then when you compound that with the fact
that the Chinese government also sees Africa
through the lens of this strategic
longterm engagement and mineral extraction
and the fact that I think for a long time,
American investors have been more risk adverse,
they also face stricter compliance
around Foreign Corrupt Practices Act
and then add to that also the fact that on cost,
American companies are also not quite as competitive.
I think that this is also why
the Chamber supports initiatives
like the global procurement initiative
which encourages countries and governments
to look at best value as opposed to best price.
Those kinds of initiatives really
I think will change the trajectory
along with some of the other reforms
that are being currently considered
through legislative proposals around financing,
the ease of accessing the tools available
through EXIM, OPEC, and other agencies.
Then also I think that we really do have an important hurdle
in terms of helping to support American companies
to understand the longterm value
and the benefits and the return on equity and investment
that exist in Africa's growth markets.
We've put forward a set of recommendations at the Chamber
to the Trump administration looking at
a wide range of different types of policy interventions
that could be helpful and supportive
in terms of growing American companies' presence
on the continent, but also we're seeing
that through direct experience,
that governments have had working with Chinese companies,
that there's also a preference
to work with American companies
and we're tapping into that as well.
- Just to add on to that,
I think that definitely does exist,
that I do see a preference to work with American companies,
I do see that in many different sectors,
but I think the lure of the low price is the issue.
One of the things that was mentioned earlier,
and one of the things that we're facing
that we don't have an answer to is
the way we operate as an export credit agency,
we've signed an agreement called the OECD arrangement,
and what it does in many other developed country,
export credit agencies have signed that agreement,
and under that agreement it provides for terms
and conditions for which you can offer your financing.
It also provides for minimum pricing so that
exports are competing in terms of price and quality
and not necessarily money being thrown at the project
or at the exports from the state sponsored entity.
So we've signed it,
and many in the European Union have signed it,
obviously China has not signed it,
and that's something, Russians have not signed it,
and that's something that we deal with every day.
They're able to do things and offer pricing that
we cannot offer because we have signed onto this agreement.
- Great, on that note what I'd like to do
in the interest of time is sort of open it up for
how many questions ...
- [Man] Couple of questions.
- Couple of questions and then we can wrap up before lunch.
Could you please identify yourself
and your organization before you ask the question?
Then if anybody on the panel
that you're directing your question to.
Thank you.
- [Joshua] Joshua Abraham with the Smith School.
The question is to the whole panel.
How do you see the Trump administration
and comments on Twitter that he makes about Africa
may affect decisions of these countries making business,
doing business with the U.S. compared to China
who will probably will treat them as equals?
Thank you.
- We'll take a couple and we'll, gonna ...
Go ahead.
- Oh, sure.
Good morning, Andrew Sanchez,
I'm from George Mason University.
The question I do have, a lot of the speakers before
talked a lot about revenue and debt.
Specifically for you, Ms. Essien,
I'm sorry if I got the name wrong,
but as a lender you talk about
getting your money back obviously,
have you seen any of the issues
that like the World Bank mentioned about debt with,
the whole issue with debt in Africa specifically?
- Okay we'll take those two questions.
Wanna start with the second one first or?
- Oh sure, I'd be happy to.
I'm glad that you did ask that question,
thank you for that question because
actually there were a lot of interesting things
in that presentation and one of them was
sustainable debt and as I laid out before,
especially when you're talking about energy projects,
energy drives the economy.
Businesses need cheap, reliable energy
in order to manufacture you've gotta run that engine,
so you really need that power and usually power
that comes from the grid versus diesel power,
but one of the things that we're seeing is a lot of times
one of the stakeholders in the structure
of the transaction is the utility,
the utility is not credit worthy.
So you look for state support.
One of the challenges that we're seeing these days is that
federal governments, governments are unable because
they may have signed on to some world bank program,
they're unable to stand behind the obligations
of the utility because that is contingent debt
that you have to disclose on your balance sheet
and you get a hit for that.
That is a challenge that we're seeing nowadays and
we have to be more innovative to come up with a structure
to ensure repayment.
One thing that I didn't talk about earlier is that
as an ECA, we're not grant making,
we're not development finance institutions,
there are a lot of different types of institutions
that sit along the continuum of finance.
We have a mandate for a reasonable assurance of repayment
so we are looking at credit worthy transactions,
we do want to get paid, we are guardians
of U.S. taxpayer dollars because
that's where we're dispersing from.
We have to come up with these structures
to make these deals credit worthy without,
in some cases, having the obligations,
the sovereign standing behind the obligations of the project
or just generally speaking.
One of the things that we've done is just kind of
limit those obligations to certain events
and sometimes that is more feasible,
that's more palatable, that can be accepted
and so that's one of the things that we've done,
but it has been very challenging
when you're talking about debt levels.
I think what was reported earlier, 70% debt levels
and lots of floats on the Eurobond market and
current payments that are coming due
and how will those payments being made,
so those are real issues.
- Any other comments on that from the rest,
from the other panelists? - Not on that.
- Not on that. - I can speak
to the first questions.
- Yeah so the second question was about the Trump effect.
Wanna focus on that?
- Everyone's looking to me.
(laughing)
I think I mentioned Trump first, so I'm happy to.
There's no question that many of the negative comments
that had been made as well as the signals
that have been said have not been helpful.
Now I do think that it's important though to look at,
I think it's still early days in some respects because
if you look historically at the ways in which
presidents have engaged the continent,
it's often in the second administration, a second term.
In some ways there's still a lot on the table,
so Secretary Ross, the head of the commerce department
will be headed to Africa at the end of June, early July,
and will be visiting Kenya, Cote d'Ivoire, Ethiopia,
and I'm missing a country. - Ghana.
- Ghana, thank you.
There will be I think quite a bit
in terms of commercial engagement.
I think it's also important to recognize
in even the commercial space,
some of the architecture of President Obama's
past initiatives have still remained in place.
Power Africa is one of them.
But then also the president's advisory council
on doing business in Africa
which is the council under which Secretary Ross
will be taking his upcoming fact finding trip.
I think also he has continued to keep a clip in terms of
assessing what are the major barriers in terms of,
and for all of you who are in the audience,
I encourage you to take a look at the report
which came out late last year.
It has nine different dimensions that were,
the council's recommendation,
or the councils actually identified obstacles to working
in Africa and now a set of recommendations is emerging.
I think we still have to see what the impact might be.
Obviously from a diplomatic standpoint,
it hasn't been helpful in terms of the overall strategy
and just the appreciation of the continent as a partner.
But I think there's also something
that is somewhat palatable in the Trump messaging
around getting the best deal.
Oddly in my anecdotal conversations
with Africans that I speak with,
there's something around kind of this notion
about whether or not there can be negotiations
under which Africa stands to get a better deal.
The concept of America first is certainly not new.
China has been looking at its approach with Africa
as China first and it's time I think
that Africans also look at their countries as Africa first.
There will be I think still discussions under way
and we're closely tracking that
and still look to what might emerge from the upcoming trip
and our members are quite active and engaging
and trying to figure out where there are opportunities.
- Thank you.
From the diaspora standpoint, on a lighter note,
I think the response is fairly evident
in the Black Panther movie gross box office numbers.
On that note, I wanna thank the panelists.
I think this has been an incredible contribution discussion
and also the Smith School, thank you.
(audience applauds)
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