Downwind of Global Warming
The UN has warned that even if the world kept global warming below the ideal 2°C, Africa would be the first to feel the effect of climate change. Purely in monetary terms, it would cost Africa nearly $50 billion per year by 2050 to mitigate its consequences. The agrarian subcontinent is heavily rainfall dependent; its prevailing weather systems are complex and understudied, and there is the low institutional capacity to adapt to climate change. In the long term, climate change will impact Africa's GDP by nearly $1.4 trillion by 2023.
Despite the signing of the Paris Climate Accords, global carbon emissions have increased by 1.7 per cent in 2017 and 2.7 per cent in 2018. Africa contributes less than three per cent of the total global greenhouse emissions and endeavours to work toward the United Nations’ (UN) 17 Sustainable Development Goals (SDG).
Its underdeveloped energy sector hampers the African growth story. FDI is finally pouring into Africa in the energy sector, which will act as a booster for other industries. Environmentalists have been advocating that the growth of the energy sector in Africa should be channelised toward green energy sources rather than its vast untapped coal and natural gas reserves.
Energy Scenario in Africa
The subcontinent holds 7.6 per cent of the world's oil reserves, 3.6 per cent of the coal reserves, and 7.5 per cent of the natural gas. Africa also has a growing capacity in hydropower (350 GW), wind (110 GW) and geothermal energy (15GW) and yet, over 600 million people in Sub-Saharan Africa still do not have access to power.
South Africa leads in power production, but their historic dependence on coal production started taking a toll on the health of its citizens. Through collaboration with international organisations (IO), they were able to redistribute some of their energy requirements with solar at the helm, priced at $0.05/kilowatt-hour. Nigeria is the continent's largest oil and gas manufacturer and is predicted to become the largest refiner and exporter of these products within Africa by 2022. Angola, though less appealing from a regulatory standpoint, is the second-largest oil producer in the region, while being home to the second and fourth-largest oil and natural gas reserves respectively. Ghana is Africa's fastest-growing oil production centre and is now legislating to make its regulatory environment more conducive to exploration. Tanzania holds the second-largest natural gas resources, but it's export plans for Liquified Natural Gas (LNG) have been delayed by five years.
FDI and Governance in Managing Resources
Investors are interested in entering the African energy market, but the government needs to improve in areas of incentivising investment, reducing corruption, and developing human resources. In response to the health crisis due to coal production, the South African government put forward measures like the Carbon Tax and the Renewable Energy Independent Power Producer Procurement program. Morocco has also risen in the solar game with Noor, the world’s largest solar facility, which provides energy to 2 million Moroccans and opened up job opportunities for them. Through initiatives like Shell’s SolarNow, Uganda and Kenya have also been able to offset more than 200,000 tonnes of greenhouse gas emissions through their high-quality solar solutions.
Nigeria’s domestic issues in governance, security and corruption, led to a slowdown of FDI in the energy sector. With some regulatory reform and improved economic growth in industries like transport, domestic consumption will rise, and the new pipelines required may be an opportunity for investment. Angola, on the other hand, is receiving increasing FDI due to their 2018 reforms aimed at incentivising investments in infrastructure. Mozambique holds the largest gas reserves in the region and has seen the most significant flow of FDI in the past decade. Due to the complexity of its LNG projects, full-scale production is not possible until 2022.
Africa is in the process of trying to achieve SDG 7, and it is unclear how much positive impact it will have on its residents. For a country deeply impacted by monsoon systems and droughts, Africa is relatively understudying its weather systems. This lack of study leads to a gap in the risk assessment of the climate's impact on Africa's human and natural resources. Despite an average GDP growth rate of 4.6 per cent over 20 years, the distribution has not been even. The new largest free trade area, the Africa Continental Free Trade Area (AfCFTA), opens up the potential for a more even distribution of resources and development. Across the continent, governments are reforming policies to focus on energy development to support value-oriented manufacturing and growth through exports. Through supportive policies, Africa can have an inclusive economy with an engaged working population of 1.1 billion people in 2040, 128 million households with discretionary income and 50% of the people in African cities by 2030.
If African nations want to prioritise their economic development, they may have to separate their short term and long-term goals in the energy sector. In the short term, Africa must use whatever FDI and intra-regional resources are available to create an energy distribution network across the subcontinent. Once able to utilise their natural resources commercially, African nations must develop a matching labour supply and build a sustainable supply. Then they can focus on long term goals with clean energy. Trying to accomplish both simultaneously may leave the impoverished Africans suffering longer than necessary and also leave them unprepared for the next level of growth.
The UN has a framework for vulnerable people impacted by climate change, known as Ecosystem-based Adaptation (EbA). EbA looks at mitigation efforts in food and water security to facilitate the survival of Agri economies affected by natural disasters and other weather-based destruction of essential resources. Without reinforcing food, water and energy distribution systems for their dispersed population, it may be risky for Africa to emphasise clean energy over maximising its resources.
With the ratification of the AfCFTA, more developed African countries must focus on increasing connectivity across the continent, electrification for residential and commercial purposes, and economic development in a sustainable and evenly distributed way. Using FDI and technical assistance from IOs, essential resources must be developed with the human resource in mind.