African Energy Atlas 2020/21

Executive Summary

The outlook for Africa was unusually positive when the last edition of the African Energy Atlas was published in 2018. “Peaceful political transitions, an upturn in natural resources prices and a broader range of investors entering electricity supply and other industries all point to the emergence of a more dynamic, mature continental economy,” the introduction asserted, marking the Atlas’s second decade of publication. Maps and graphics in this new edition similarly chart positive trends in politics, economic management, technological change and sustainable investment – not least the number of renewable energy schemes now under way – but even before the Covid-19 pandemic locked down the global economy, the trends recorded in Atlas 2020/2021 were far from a celebration of good news across the continent.

Africa’s needs remain huge and daunting: the African Development Bank calculates that upgrading the continent’s infrastructure needs some $130bn-$170bn/yr; the financing gap is $68bn-$108bn/yr (see Finance).There has been an upturn in private equity and some other investment, but they are nowhere near the levels that can start to address infrastructure shortfalls and lack of access to sustainable clean energy.

Governance remains spotty, with some advances but also backward steps. Benin and Zambia were among the first countries to replace autocracy with democracy in 1991, as a bonus from the end of the Cold War, but are now ranked only ‘partly free’ by Freedom House. Indeed, the US advocacy group now ranks only five African polities in its highest ‘free’ category; by this metric some 20 states are still ‘not free’ at all.

Short-term problems may be exacerbated by underlying weaknesses. As Atlas 2020/2021 was published, the coronavirus epidemic was spreading worldwide, while crude oil prices had hit record low levels, below even those of the 2007-08 global financial crisis. Coronavirus highlights global vulnerabilities that can floor interconnected economies. Even if Europe and the US have erected ever more barriers to migration, the outbreak has shown how walls alone cannot solve global problems.

Africa’s rural exodus has created megacities like Lagos, Cairo and Kinshasa, whose populations live between extreme wealth and grinding poverty. Providing adequate services has become a defining political issue of the decade, as urban and peri-urban populations demand higher standards of education, health and access to energy from often creaking state bodies.

Enlightened governments are seeking to rise to this challenge, by accelerating moves to create more investor-friendly and innovative environments. Countries like Ghana and Kenya have dramatically raised access levels; Egypt, Morocco and South Africa (at least until its governance crisis) have developed structures to attract investment in solar power and other renewable energies. Mozambique’s efforts to work with IOCs mean its natural gas exports are set to take off while its northern neighbour Tanzania’s resources remain in the ground.

Governance moves

The trend towards improved governance has continued its slow upward trajectory. Some of Africa’s old-school tyrants have departed – Zimbabwe’s Robert Mugabe died in 2019 and Egypt’s Hosni Mubarak in February 2020 – and a few leaders have been elected without drawing on traditional constituencies, such as Tunisia’s President Kais Saied. The removal of Jacob Zuma and his replacement as president by Cyril Ramaphosa helped stem a disastrous trend towards state capture in South Africa. In Nigeria, President Muhammadu Buhari can claim a few wins against the kleptocracy that so undermines Africa’s most populous country.

But much remains to be done: South Africa is a better place after Zuma, but Ramaphosa has yet to reverse a decline that has taken Eskom from being one of the world’s top four power companies to the edge of collapse. Nigerian reforms have failed to make any impact on the oil industry and other drivers of extreme graft. A number of elderly rulers hang on after decades in power. While francophone West African countries are looking to mark their improving economic performance with a transition from the CFA franc to a new currency, the eco, their Central African counterparts remain mired in problems.

Stability is a prized commodity, with violence involving jihadist militias wracking the Sahel – undermining hard-earned investment efforts by Burkina Faso and Mali, among others – and making Central African Republic all but ungovernable. Political transitions in Algeria and Sudan have yet to prove that established structures can be overthrown by popular movements, despite the creation of a civilian/military transitional government in Khartoum. Reforms since Abiy Ahmed became Ethiopia’s prime minister impressed sufficiently to win him the 2019 Nobel Peace Prize, but questions have emerged about the trajectory of change.

On the resources front, major minerals and hydrocarbons plays have until now been driven by demand from China, and other industrialised nations. Africa played an important role in Beijing’s rise to global power status, with China providing unprecedented levels of finance and infrastructure developments, in parallel with its appetite for natural resources. This means China now serves as the prism through which other nations define their relations with Africa.

Growing strategic competition has become apparent during Donald Trump’s presidency, but involves more than just the US, China and former colonial powers. Newer players like Turkey, the UAE and Russia are making a mark on African conflicts and investment plays, while governments are increasingly realising they can use this competition to their advantage.

Carbon in transition

The 2014 oil price crash caused havoc in many resource producers. Covid-19 and conflict between key producers – wrecking the historic 2016 deal between Opec states, led by Saudi Arabia, and non-Opec countries, led by Russia – floored the market in March 2020, just as oil-dependent economies like Republic of Congo were claiming some recovery. These developments could have long-term ramifications for oil prices and for the industry itself. Resources developers face longer-term problems in a world looking to tackle climate change by transiting out of carbon. While many producer governments are still in denial, their prized oil and coal reserves may never be developed. Many will be left with stranded assets, even if global oil consumption remains at around 100m b/d.

As the carbon transition accelerates, rising electric car sales in wealthier economies will lead more oil giants to become renewables-focused – a trend already under way at majors such as BP, Eni, Shell and Total. Gas producers seem in a better position, as they supply the transition fuel necessary to balance electricity grids. However, even that could change as renewable technologies are increasingly supported by storage infrastructure, allowing surplus solar and wind to be used at night or during calm periods.

Next-generation natural resource plays will be a feature of this changing market, even before hydrogen and other fuels emerge to further challenge hydrocarbons. Increased dependence on lithium batteries, cobalt, helium and other raw materials for new technologies will accentuate the growing competition between global corporations, China and other players for rare minerals. These are present in countries like Democratic Republic of Congo that have been wracked by resource wars in previous decades. While global industries enter a period of accelerated change, African governments will have to move prudently to avoid the same old problems re-emerging.

• African Development Bank
• Africa50
• Africa GreenCo
• Anadarko
• BP
• Chevron
• CI-Energies
• Electricidade de Moçambique (EdM)
• Eni
• Eskom
• Genser Energy
• Gigajoule Energy
• Greenville LNG
• Hyundai Engineering & Construction
• International Finance Corporation (IFC)
• International Monetary Fund (IMF)
• Kenya Power
• KfW
• Kosmos Energy
• Mubadala Petroleum
• NamPower
• Nigerian National Petroleum Corporation (NNPC)
• Noble Energy
• Office National de l’Electricité et de l’Eau Potable (ONEE)
• PayGas
• Perenco
• Sahara Group
• Savannah Petroleum
• Shell
• Siemens
• Sonatrach
• Sound Energy
• Total
• Tullow Oil
• Victoria Oil & Gas
• Vitol
• Woodside Energy
• World Bank
• Zesco