Identifying Opportunities for U.S. Mid-Sized Companies in Africa

Large multinational companies historically take the lead in penetrating emerging markets, boasting the financial stability, manpower and network to offset new market entry risks. Today, however, extensive opportunities for small- to mid-sized enterprises have emerged globally, thanks to developments in IT, communications and broader business networks spanning overseas that remove traditional barriers to entry and high costs associated with expansion. Over the last decade, Africa has emerged as a promising investment destination for global investors across health, infrastructure, industry and consumer good sectors–especially for U.S. firms. Within the energy sector, opportunities for U.S. companies are heavily concentrated in gas and renewables, with power generation carrying substantial room for off-grid technologies.

According to the Power Africa Roadmap 2030, the total estimated investment for power project development in sub-Saharan Africa available to U.S. companies totals $175 million. In East Africa, countries like Kenya and Rwanda have pioneered large-scale solar production deployment on the continent. For mid-sized companies, mini- and micro-systems show major potential for electrification because they do not require large upfront capital investment. According to the World Bank’s Energy Sector Management Assistance Program, achieving universal access by 2030 will require the construction of more than 210,000 mini- grids, mostly solar hybrids, connecting 490 million people at an investment cost of almost $220 billion.

Meanwhile, in the Democratic Republic of the Congo, the most promising investment opportunity remains mineral extraction, specifically in meeting the growing market demand for ‘green’ batteries that have the capacity to fuel a U.S. energy transition by powering carbon-free grids, electric vehicles and green technologies. Accordingly, U.S. renewable-focused firms are well equipped to meet African demand for renewable investment because of the influx of technology, flexible capital and technical expertise they can offer, coupled with a free-market competition and reduced geopolitical and economic barriers to entry.

To help mid-sized companies develop and implement the best entry strategy as a means of business diversification, regardless of the sector, independent think tank Chicago Council on Global Affairs developed the PAL framework, summarized as, “Be Prepared, Be Adaptive and Be Local.” Laying the groundwork is fundamental to identifying which of Africa’s 54 markets are most closely aligned with a company’s strategy, and extensive due diligence is required to mitigate the level of risk and understand the opportunities, challenges and operating frameworks on the ground. Being adaptive to rapid changes in operating environment, geopolitical scenario and commodity price fluctuations is key, especially in countries with above average above-ground risk. Finally, a locally oriented mindset is necessary when it comes to selecting local partners, fostering long-term stakeholder relationships and building local capacity as a means of generating sustainable and profitable success.

In terms of political support, the Biden Administration has been vocal about its aim to boost U.S. companies’ presence on the continent, with an increased push to revamp multilateralism, improve bilateral relations and restore aid to U.N.-led programs that serve a large proportion of rural African populations. Moreover, President Biden reinstated the U.S. to the Paris climate accord in one of his first acts in office, and clean energy production initiatives in Africa and globally are set to be supported by an increased allocation of funds directed toward stimulating green business. According to the U.S. National Security Advisor Robert O’Brien, “America’s goal in [Africa] is to support locally-led problem-solving for enterprise-driven growth, inclusive societies, and transparent, accountable governance.” As African governments double down on augmented transparency and stronger legal frameworks, American and other foreign, mid-sized companies are shifting their perception of risk and growing their level of engagement on the continent.

Energy Capital & Power (ECP) – in partnership with the African Energy Chamber’s U.S.-Africa Committee – invites U.S. companies, investors and organizations to participate in the first-ever U.S.-Africa Energy Forum (USAEF) (December 9-10, 2021, Houston, Texas), introducing American companies to African opportunities. To learn more about how U.S. firms can advance the agenda of sustainable, long-term investment in African energy, please visit www.energycapitalpower.com. To sponsor, speak or attend USAEF 2021, please contact Senior Director James Chester at james@msgbcoilgasandpower.com.

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Grace Goodrich

Grace Goodrich

Grace Goodrich is a Publications Editor at Energy Capital & Power, where she writes about the intersection of energy, policy and global finance in sub-Saharan Africa's fastest-growing economies. Grace produces our Africa Energy Series investment reports in Angola and Equatorial Guinea (2019), as well as co-authored African Energy Chamber: Road to Recovery (2021).

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