Africa is at an energy crossroad. On one hand, the most talented, better educated, most entrepreneurial and competitive generation the continent has ever had is rising and taking on leadership positions that will propel African companies to become more competitive.
After many turbulent decades, most corners of the continent have found the necessary political and economic stability to strategise for a better future, making use of their natural resources and wealth.
Nowhere else on planet Earth are economies and populations expected to grow faster than on the mother-continent.
After such a long time dealing with the problems of the past, Africans can look to the future with the promise of a better life. After all, when it comes to natural resources such oil, gas, coal, diamonds, rare earths, woods, or agricultural potential and legacy-free technological development, there is no place like Africa.
Over the last decade, most of the world’s biggest oil and gas discoveries took place on the African continent, and rapidly developing indigenous companies are ensuring these resources serve Africans and African economies more than they ever did before, resources that will power industries, light homes and create wealth.
I have had the chance to witness this with my own eyes. From Equatorial Guinea to SA, from Angola to Mozambique and from Kenya to Senegal, the energy industry is revolutionising life.
Political leaders are willing to learn from the mistakes of the past to improve resource management, contract negotiations and environmental protection policies.
Most of all, they have developed local content policies that potentiate the participation of Africans in these industries.
Oil and gas training programmes and university degrees that cater to the industry, like engineering, are now more common than ever.
These programmes are educating and giving opportunities for numerous Africans to find work in the industry and further, to start their own companies within the industry’s supply chain.
While the drive to strengthen the integration of the energy sector and other extractive industries with the rest of the economic system is far from complete, it has certainly been fundamental in developing Nigeria’s indigenous upstream sector or in building a truly native gas industry in Equatorial Guinea.
In Nigeria, for example, this critical mass of local talent has been instrumental in the establishment of regional energy giants like Seplat Petroleum, Sahara Energy, Atlas Petroleum International Ltd and Shoreline Natural Resources, whose influence is felt more and more beyond Nigeria’s borders.
Local content clauses in contracts are the way African leaders assure that the exploitation of the local natural resources has a trickle-down effect on the local economy, through job-creation and increasing local participation in the value chain the industry brings with it.
Furthermore, most recent localisation strategies for the oil and gas sector have been successful in developing truly native associated industries, particularly within the natural gas supply chain.
As the Africa Energy Chamber has advocated since its establishment, we are finally seeing petrochemical plants, fertiliser plants and gas-fired power plants popping up across the continent. An African natural gas economy is growing where before the plague of flaring stood unmatched.
Intra-African trade in both natural gas and Liquefied Natural Gas (LNG) is also likely to rise significantly, on the back of rapid urbanisation and development across the continent, which is set to increase energy consumption on the continent by more than 50% before 2040.
After the oil price crash of 2014, many countries across Africa have sought to reposition themselves to attract investment into their energy sectors through the introduction of varying incentives.
These incentives range from granting tax breaks to potential investors to reducing bureaucracy affecting the sector.
On the other hand, the recent global climate change discourse which has also intentionally sought to demonise and simply hinder investments into Africa’s oil and gas sector, poses a new challenge.
An energy transition is necessary to tackle the effects of CO² emissions on a planetary scale.
While Africa has contributed only a minuscule part of those emissions, it stands to suffer the most from the effects of this change, and must prepare for a progressive shift in its energy structure.
In many ways, the channelling of natural gas for power generation and the upgrading of oil and gas infrastructure and equipment to improve efficiencies and reduce the industry’s carbon footprint are already going a long way to achieve that.
New renewable energy projects from Kenya to SA will also help balance out the continent’s energy matrix as it expands its electrification rates to reach every African in every corner of the continent.
Many international and foreign institutions have already started to share their expertise and support with African governments and many foreign investors have started to develop their own projects on the mother-continent.
Wind farms, solar parks, geothermal drilling, hydropower plants, and so on, are taking advantage of each region’s available resources.
Here too, these renewable resources must be used for the benefit of Africans.
It is fundamental that these new technologies and sources of energy suit the communities which they are meant to serve. Climate concerns cannot sideline discussions over local content and localisation strategies.
[The continent must also] take advantage of synergies that different regions and industries can offer.
Already, we see examples of gas-poor countries like SA investing in natural gas and LNG projects in gas rich Mozambique with the aim of reducing their growing energy deficit.
The African Continental Free Trade Zone is an ideal platform to promote the development of an intra-African natural gas trade that will promote widespread economic growth and access to power.
Again, it is fundamental these developments are pegged to well implemented local content policies, so Africans can truly benefit from the exploitation of their continent’s resources.
This article first appeared in Dispatch Live in April 2020.
Verner Ayukegba is senior vice-president of the African Energy Chamber
