[Column] NJ Ayuk: Why we need African energy banks now
For more than a year, the African Energy Chamber has been pushing back against steadily building pressure to halt new foreign investments in Africa’s oil and gas industry.
To prevent catastrophic climate change, environmental organizations, financial organizations, and governments across Europe and North America have insisted that developing nations, including those in Africa, must immediately transition from fossil fuel production and usage to renewable energy sources like solar, wind, and hydrogen. Mind you, the majority of those making these demands are based in industrialized nations that were built on fossil fuels — oil and gas fueled their economic engines — yet they are unwilling to allow less developed nations to use fossil fuels to the same end. Even more troubling, the African countries these groups are taking aim at have a wealth of natural resources under their feet, resources that can be used to deliver reliable power, to grow economies, and to build a better future.
These are a few of the reasons that the Secretary General of the African Petroleum Producers' Organization, Dr. Omar Farouk Ibrahim, has rightly pointed out that it would be a mistake for Africans to abandon their abundant petroleum resources. Turning our backs on approximately 130 billion barrels of proven crude oil reserves and over 15 trillion standard cubic meters of natural gas, to pursue expensive, unreliable energy sources, would not be a wise course of action.
The African Energy Chamber has stated, over and over, that Africa still needs its oil and gas sector. And, we’ve tried to explain the important role that international oil companies (IOCs), foreign governments, and investment institutions play in building the kind of oil and gas sector that will truly benefit Africans. IOCs, for example, engage in knowledge sharing and provide opportunities for Africans to build valuable job skills. What’s more, foreign oil and gas investments generate revenue that can be used to build and improve energy infrastructure — for both fossil fuels and renewables. And, by supporting natural gas projects, investors create a path for gas-to-power projects that help minimize the continent’s widespread energy poverty.
In July 2021, when it became apparent that reasoning was not yielding results, the chamber went so far as to employ the same tactics the international community used against our members. We called for boycotts against financial institutions that discriminated against the African oil and gas industry.
But the calls to stop financing African oil and gas have only grown louder and more insistent. Most recently, during the 2021 United Nations Climate Change Conference (COP26) in Glasgow, more than 20 countries and financial institutions pledged to stop public financing for overseas fossil fuel projects.
For those of us who care about Africa’s oil and gas industry, it’s time to face facts: We need to find a way to save it ourselves. The African Energy Chamber is calling upon African states and the private sector to establish energy banks focused on funding African energy projects. The idea is to create funding sources for all types of African energy — from oil and gas exploration to solar and hydrogen operations — that will not depend on foreign support. No more begging for aid that only would be awarded on the condition that we abandon fossil fuels.
We can do this, and we must. Too much is at stake. We can’t afford not to capitalize on such recent discoveries as the light oil found offshore Angola, the oil in Namibia's Kavango Basin, the shale gas in South Africa’s Karoo Basin, or the oil and natural gas off the coast of Côte d'Ivoire. Those are only a few of the important discoveries that occurred in 2021, and each represents critical opportunities for everyday Africans.
Pressing Needs Call for Definitive Action
The call for Africa to save its oil and gas industry alive is not based on greed, on making money for an elite few. We’re not placing economic objectives above our people or the climate. On the contrary, we are convinced that harnessing our oil and gas is the best way to meet some of our people’s most pressing needs. And we believe that pursuing our oil and gas opportunities is not the environmental catastrophe that some have suggested it is.
As OPEC Secretary General Mohammad Sanusi Barkindo has said, addressing energy poverty in Africa is an urgent matter that must take priority over abandoning oil and gas. Barkindo described the devastating impacts of energy poverty during African Energy Week in Cape Town. (Incidentally, that meeting was organized after London-based Hyve Group/ Africa Oil Week moved from Capetown to Dubai. Imagine talking about African energy somewhere other than in Africa? Seems like that’s another example of the West holding our energy industry in low regard.)
“The unfortunate reality for developing countries is that a staggering 759 million people worldwide did not have access to electricity in 2019, with around 79% of them located in Africa,” Barkindo said. “Moreover, there were roughly 2.6 billion people or 34% of the global population who did not have access to clean cooking fuels and technologies — and this includes a massive 70% of Africans who have no access, exposing them to high levels of household air pollution.
“The energy poverty numbers for Africa are stark,” Barkindo continued “And to add in one further number, Africa accounts for only around 3% of global emissions.”
As the chairman of the African Union, President Macky Sall of Senegal, has said, African states are open to embracing renewable energy sources: The problem comes when we are bullied into giving up our fossil fuels, and the opportunities they represent, on others’ timetables.
“Our countries cannot achieve an energy transition and abandon the polluting patterns of the industrialised countries without a viable, fair and equitable alternative,” Stated Sall . “Our countries, which are already shouldering the crushing weight of unequal trade, cannot bear the burden of an unfair energy transition.”
President Sall is right and so is South African President Cyril Ramaphosa, who said, “We must contend not only with these primary dangers (of climate change), but also with potential economic and social damage should the global community fail to deal with the crisis in a way that works for developing as well as developed markets.”
Developing African energy banks is a way to protect our countries from those social and economic dangers. China might be a credible partner to Africa in building these unique financial infrastructure.
We Can Do This
You may be wondering if African energy banks are a realistic goal. How can a continent that is struggling to bring many of its people out of poverty raise capital for energy projects? I believe it can be done. To begin with, African governments can set aside a percentage of their oil and gas revenues for new project funding. In our report, Africa Energy Outlook 2021, the African Energy Chamber projected that African governments’ earnings from royalties, profit oil, and other taxes in 2021 would reach USD 100 billion. Even 5% of that amount would produce $5 billion that could be leveraged for exploration, development, or infrastructure.
We can also raise capital by investing African pension funds in African energy projects. According to Capetown-based investment firm RisCura, local pension funds collectively manage around USD 350 billion of assets in sub-Saharan Africa, and they are actively looking for new places to invest. Why not encourage them to add oil, gas, and renewables projects to their list? Investing pensions in the energy sector is hardly a new practice. Some of America’s largest pension funds are invested in fossil fuel producers and pension funds around the globe are investing in green energy projects. This would not be a giveaway: Investing in fossil fuels, especially gas projects and developing marginal fields, provides a large return on investment. And millions of Africans would be participating in our growth and our future.
Our options for raising capital don’t end there. We also should seek the support of wealthy Africans who want to invest in a better African future. As of December 2020, total private wealth in Africa totaled approximately USD 2 trillion. That’s not even including the African diaspora. Imagine what can be done if we just unite.