If Africa is to avoid missing out on gains from the imminent transition toward more sustainable sources of fuel, its key stakeholders must develop and implement an energy plan that takes into consideration the continent’s peculiarities while working toward funding the transition from domestic sources.
This is the consensus of a panel of experts who were speaking on the subject ‘The future of petroleum Industry Investment’ at the maiden Africa Energy Conference organised by the B&FT.
They argued that with foreign investment likely to dry-up as the Global North withdraws from financing projects with fossil fuels, there is a need to ramp-up domestic funding – since the continent contains huge deposits of the resources it desperately needs to utilise for its industrial drive.
Energy Economist Dr. Theophilus Acheampong, while acknowledging the scope and scale of investment required, said the continent’s sovereign wealth funds (SWFs) are capable to meeting some of the financing needs and minimising dependence on other parties.
“We must be looking to our sovereign wealth funds on the continent. If you look at the data, quite a number of our SWFs invest most of their funds outside the continent… the argument could be made, and I support it, that some of that funding should be re-channelled to fund the necessary infrastructure,” he explained.
According to data available from the World Bank and PriceWaterHouseCoopers (PwC), African SWFs managed a cumulative US$300billion in Assets Under Management (AUM) in 2020; up 76 percent from the previous year, as the number of investors increased by 54 percent.
Also, a report by the International Renewable Energy Agency (IRENA) in 2019 stated sub-Saharan Africa (SSA) will require investments in the region of US$70billion annually for the transition toward renewable energy sources by 2030.
In addition to mostly domestically-sourced financing, Dr. Acheampong said measures must be taken to ensure the harmonisation of policies and regulation across the continent’s different regional blocs.
He noted that a concerted effort from key stakeholders would allow for the continent to benefit from a stronger collective bargaining position.
In similar vein, Lawyer and Oil and Gas sector Chairman at the Association of Ghana Industries (AGI), Kwame Jantuah, said domestic policies must be designed to ensure that the gains from minerals and extractive industries are used to finance the transition.
He believes the revenue generated by the industry, if channeled properly into the financial sector, will allow local business persons to partake in funding the energy transition.
“For far too long we have been on the receiving end. If, for instance, we made it mandatory for all major foreign parties engaging in the extractive sector to set up processing plants and the money from that passes through our banks, they would be more liquid and businesses would be able to access funds and take part in what we are talking about,” he remarked.
Mr. Jantuah stated that recent geopolitical events – which have led the likes of Germany to fire-up redundant coal plants and the European Union to outline plans of cutting Russian-supplied gas by up to 90 percent by end-2022 – have reiterated the need for further conversation around an exclusive renewables-driven landscape.
He added that Africa is capable of utilising its existing rich fossil resources to accelerate development, while calling for increased investment in rail and shipping transportation to take advantage of the opportunities presented by the African Continental Free Trade Area (AfCFTA).
Also on the panel – which was moderated by the Head of Department, Water Resources and Sustainable Development, University of Environment and Sustainable Development, Dr. Michael Tuffuor – Managing Partner at Amoakwa-Boadu & Osei Mensah Law Consults, Kingsley Amoakwa-Boadu, said it would be unrealistic to expect domestic parties to fund the transition.
He called for partnerships between stakeholders while remembering that the transition is a fairly lengthy process.
He also called for a review of local content policies to focus on enhanced development of Human Resources.
“We should be looking at much more of increasing our human capital, and that takes a bit of time. We should expand those avenues which increase our human capital, so that even if we are not going to attract the trillions of dollars into our industry we should be able to get some the low-hanging fruit around; and the multiplier-effect of that will enhance our ability to benefit from those industries, and with time we can look at solely African investors,” he said.
The continent is one of the least-exploited regions for fossil fuel, with the estimated 61 billion-barrel oil equivalents (BOEs) discovered over the last 10 years suggesting there is much more to be found.
It is for this reason that Africa is responsible for only 3.8 percent of global CO2 emissions, while it remains largely under-industrialised and underdeveloped.