08/09/2014 02:38 pm ET Updated Oct 09, 2014

Power Up

PAUL J. RICHARDS via Getty Images

U.S. president Barack Obama invited nearly 50 Africa heads of state to Washington D.C. this week, for an unprecedented summit aimed at forging a stronger relationship with the continent. A series of private-sector events ran on the sidelines of the official summit, with the CEOs of General Electric, Coca Cola and Walmart attending, alongside well-heeled executives from private equity firms like Blackstone and Caryle. Lionel Richie sang to the invited African leaders at the White House on Tuesday evening as they nibbled on cappuccino fudge cake. The three-day summit was, most agreed, a success. But what was the point?

The American business community is waking up to something their Chinese counterparts have known for some time: Fast economic growth in Africa will bring high rewards to those who invest there early. The continent will be the second fastest-growing region in the world over the next decade, outpaced only by Asia. Six of the 10 quickest growing economies in the world this year will be in Africa. This week, Mr. Obama used his pulpit to help American firms gain access to these expanding markets. That it has taken the U.S. so long to realize Africa's potential is met with bemusement by some. Mo Ibrahim, the Sudanese telecom billionaire who sponsors an annual $5 milion prize to African heads of state who democratically hand over power, captured this sentiment at an Africa Ascending event hosted by General Electric and The Economist on Monday:

"Wherever you go in Africa there is Chinese business people, there is Brazilian business people. None of us went to Brazil or to India and China to tell them to come and invest in Africa. They find out themselves and they come and invest. Why must we come and inform this misinformed American business? You guys invented Google, invented all these media platforms. Use it, please."

An African Legacy

Like his predecessors, Mr. Obama wants to leave a legacy in Africa, something more impressive-sounding and humane than helping U.S. businesses increase their profits abroad. Bill Clinton signed the African Growth and Opportunity Act (AGOA) into law, a trade deal granting poor African countries preferential access to U.S. markets. George W. Bush devised the President's Emergency Plan for AIDs Relief (PEPFAR), the largest health initiative by one country to tackle a disease. Well into his second term as president, Mr. Obama has finally come up with his silver bullet: electricity.

His choice is judicious. The woefully inadequate electricity supply across Africa is a bottleneck to economic development and poverty reduction. The continent sits on almost 10 percent of the world's oil and gas reserves but nearly 70 percent of the population is not connected to a power grid. The 48 countries in sub-Saharan Africa, population 800m, generate the same amount of power as Spain, population 45m. Even so, economic growth has managed to average an impressive 5.5 percent each year for the past five years, with almost no electricity to speak of. With an expanded and more reliable electricity supply, growth would be in double digits -- the kind of rates that helped China lift hundreds of millions of people out of destitution in the fastest reduction of poverty in the history of mankind.

Show Me The Money

The sentiment behind Mr. Obama's initiative is sound, but Africa has suffered enough at the hands of naive outsiders to know that good intentions are never sufficient. The money backing the project suggests that it could make a significant impact, however. The IEA estimates that $385 billion in investment is required to provide access to electricity at a continent-wide level by 2030. Power Africa will plug some of this shortfall. The U.S. government has pledged $7 billion and the private sector commitment under Power Africa is just over $20 billion. This should be enough, the U.S. government says, to expand electricity access to 60 million households, or around 10 percent of those currently unconnected.

The other main question mark is over the type of energy which will be used to power these street lights, televisions and fridges. Some African energy ministers visibly bristled this week when asked about how the expansion of electricity will effect climate change, given Africa's negligible carbon footprint. Coal power plants will be a key part of plans to expand energy access. Large reserves of natural gas, the lowest carbon-emitting fossil fuel, will also be tapped to fill much of the power deficit. In the case of Mozambique, which has made the largest gas reserve discovery of the past decade, its offshore gas reserves are worth about four times as much as the country's entire economy. The ingredients are there.

Carbon Footprint?

The governments of the world's largest economies (and, not coincidentally, the world's largest polluters) will put pressure on African governments to skip the dirtiest of fossil fuels and go straight to more renewable sources. Certainly there is no lack of sun, wind and water on the continent, and all of these renewable sources are becoming more price-competitive compared to traditional energy sources like kerosene. Equally, there is vast potential: Africa has currently tapped less than 10 percent of its hydroelectric potential and less than 1 percent of its wind potential.

Africa has an opportunity to leapfrog the fossil fuel dependency endured by other countries as they industrialised. Some inspiration came this week from Ugandan entrepreneur Ashish Thakkar, one of the youngest billionaires on the continent. When asked if Africa will eventually catch up with the rest of the world, he responded "it will never catch up, it will lead".