Three of the trends embodied by the BUILD Act and what impact they may have in its early stages of implementation.
The Overseas Private Investment Corporation (OPIC) was established in 1971 to serve as the U.S. Government’s development finance institution (DFI), working in tandem with aid organisations like the U.S. Agency for International Development (USAID) to advance American foreign policy in developing countries. But as global industrial and financial trends have shifted over the last five decades, so too has the relative need for aid and finance in impoverished countries.
In an effort to improve U.S. development finance strategy, Congress passed the Better Utilization of Investments Leading to Development (BUILD) Act in early October. Signed into law by President Donald Trump on October 5th, the BUILD Act will transition the American aid agency from OPIC to a new US International Development Finance Corporation (USIDFC). Additionally, it the BUILD Act will double the new agency’s lending Dececap to $60 billion.
The new investment priorities of the American government—several years in the making—will lead to concrete changes on the ground in developing regions like Sub-Saharan Africa. Here are three of the trends embodied by the BUILD Act and what impact they may have in its early stages of implementation:
1. Emphasis on Finance
Recognising the increased wealth and substantial natural resources of developing nations, the growing USIDFC will establish new partnerships to deliver investment, jobs, and expertise to evolving regions. In return, these efforts will help to establish markets for American goods and services in emerging countries, potentially delivering a valuable return on investment both economically and geopolitically.
2. Increased Resources
While the BUILD Act defines a new structure for decades-old OPIC, equally important is the infusion of new money into the development finance institution. USIDFC’s $60 billion budget will enable the agency to increase its partnerships with initiatives like Power Africa, as well as with agile corporations able to maximise the impact of U.S. development dollars in emerging regions. The BUILD Act should serve as a call to arms for corporate and institutional investors looking to increase their presence in developing nations; the support and expertise of the U.S. federal government will play a key role in bringing projects to successful completion.
A recent example of the impact of OPIC investment can be seen in Central Africa, as OPIC recently announced a $100 million investment into Africell, a cellular communications company. The investment is expected to have a particular impact in Uganda and the Democratic Republic of the Congo, leading to expanded internet and mobile telephone services.
3. Focused and Flexible
The establishment of new USIDFC tools will allow the agency to work with more speed and flexibility. The appeal of emerging markets and developing nations has led to healthy competition between U.S., European and Chinese entities - both corporations and government agencies. The BUILD Act empowers the United States with new tools to compete for these investment opportunities. Most recently, OPIC seized the opportunity to invest in Sub-Saharan Africa, committing $6 million in debt financing to an investment fund for commercial and solar energy. The agreement with CrossBoundary Energy will help to fund six solar projects in Ghana, Kenya and Rwanda.
The BUILD Act is still in its infancy, and its implications for the USIDFC remain to be seen. However, the U.S. commitment to financing, rather than aid, represents a marked improvement for the investment climate in developing countries. Those investors which are able to take advantage of these new resources will find their efforts supported by the full energy of the U.S. Government.
OPIC are confirmed to speak at the upcoming Powering Africa: Summit from 25-27 February in Miami. Download the brochure to access the full Summit programme