US foreign aid cutback threatens African energy progress

Multinational

The Trump administration plans to close the Millennium Challenge Corporation (MCC), a key driver of energy development in Africa that has channelled more than USD 9 billion into the continent.

The shuttering of the agency is poised to leave a significant vacuum in energy development across Africa, with billions in clean energy infrastructure and electrification initiatives now facing an uncertain future.

A DRIVER OF AFRICA’S ENERGY AMBITIONS: Since its founding in 2004, the MCC has committed more than USD 9 billion to African countries, with a strong emphasis on supporting energy access, climate resilience and power infrastructure development. These compacts were performance-based, often contingent on governance reforms and project outcomes. Notably, the USD 391-million Benin Power Compact aimed to overhaul the nation’s electricity distribution systems and enable private-sector participation in the grid, a move hailed as a model for blended financing in West Africa.

Other examples include Ghana’s second MCC compact, worth USD 498 million, which supported the restructuring of the power sector by unbundling distribution services and introducing private capital. The reform was designed to reduce chronic inefficiencies that had hampered electrification and reliability.

ENERGY ACCESS AND CRITICAL MINERALS: Energy access will likely be the most visible casualty of the agency’s closure. MCC compacts often focused on rural electrification and grid upgrades in regions that have historically struggled with underinvestment. In Malawi, for instance, the USD 350.7-million compact included the construction of substations and new transmission lines, which are now threatened with underfunding or cancellation.

The move also undercuts US efforts to position itself as a strategic partner in Africa’s energy transition, at a time when global powers such as China and Russia are stepping up investment in the continent’s critical mineral supply chains. MCC compacts could have helped African nations build energy infrastructure around mining projects for cobalt, graphite and rare earths, strengthening US supply chain resilience in the process.

A number of key energy-related compacts with African governments now face an uncertain future.

MOZAMBIQUE COMPACT: The Mozambique Connectivity and Coastal Resilience Compact is a USD 537-million programme signed in 2023 between the MCC and the Republic of Mozambique to tackle the impacts of climate change and poor connectivity, particularly in the coastal Zambezia province. It focuses on restoring degraded coastal ecosystems, enhancing resilience against extreme weather events, improving rural road and bridge networks, and promoting agricultural investment and reform.

The compact’s three projects – the Coastal Livelihoods and Climate Resilience Project, the Connectivity and Rural Transport Project, and the Promoting Reform and Investment in Agriculture Project – aim to boost economic opportunity, social services access, and gender equality. The programme is significant as it directly addresses Mozambique’s climate vulnerabilities while strengthening its rural economy and transportation infrastructure.

SENEGAL POWER COMPACT: The Senegal Power Compact is a USD 600-million programme funded by the MCC and the Senegalese government, aims to address constraints in Senegal’s power sector that limit economic growth.  It focuses on improving the enabling environment for electricity, expanding access in rural and peri-urban areas, and modernising Senelec’s transmission network. Launched in 2021, the initiative was expected to benefit millions by strengthening institutional frameworks, extending the grid to underserved regions, and upgrading critical infrastructure to integrate renewable energy and private-sector-led generation.

SIERRA LEONE COMPACT: The Sierra Leone Compact, a USD 480-million programme signed in 2024 between the MCC and Sierra Leone, targets one of the country’s greatest barriers to economic growth: the insufficient availability of affordable, reliable electricity. With only 30% of the population — and just 5% in rural areas — having access to electricity, the compact focuses on strengthening the energy sector through investments in transmission and distribution infrastructure, developing a robust enabling environment for independent power producers, and building capacity within key sector institutions. Three major projects — the Distribution and Access Project, Power Sector Reform Project, and Transmission Backbone Project — aim to improve grid reliability, expand access, and lower energy costs.

This programme is highly significant for Sierra Leone’s future, laying the foundation for a more sustainable, efficient, and inclusive energy sector. By upgrading networks, fostering private sector participation, and improving regulatory and financial performance, the compact is designed to drive economic growth, enable new investment, and expand opportunities for businesses and households alike. It also supports Sierra Leone’s integration into regional power markets and prepares the national grid to better incorporate renewable energy sources, helping to secure long-term resilience.

PRIVATE SECTOR AND GOVERNANCE SETBACKS: Beyond energy infrastructure, MCC-funded projects have played a significant role in improving the business environment for foreign investors in energy and infrastructure. In countries like Côte d’Ivoire and Senegal, MCC grants supported legal reforms, improved metering systems and tariff restructuring. These measures were critical in lowering perceived investment risk.

“The private sector will lose one of its most effective US allies in emerging markets,” a senior MCC advisor said in response to the closure announcement. “We’re not just cutting aid – we’re closing the door on market-based energy partnerships that took years to build.”

GEOPOLITICAL VACUUM AND FUTURE OUTLOOK: By dismantling the MCC, Washington risks not only losing its development leverage in Africa, but also weakening soft power tools that have been critical in countering the influence of China’s Belt and Road Initiative and state-backed resource-for-infrastructure deals.

While some stakeholders in Washington are pushing for reform or the creation of a successor agency, the immediate gap left by the MCC threatens to derail upcoming energy auctions and PPP projects across sub-Saharan Africa, particularly in Mozambique, Kenya and Niger.

The shutdown also casts doubt over pending MCC negotiations with Sierra Leone and Lesotho, which included clean energy development components worth over USD 500 million collectively.

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