In recent years, Africa’s oil and gas industry has encountered significant financial hurdles due to shifting policies from Western banks and financial institutions. These organizations have increasingly withdrawn support for fossil fuel projects in Africa, a move labelled by the African Energy Chamber (AEC) as “financial apartheid.” This term highlights the discrepancy in funding as similar Africa’s energy projects continue to receive support in Europe, leaving Africa’s vital energy developments in jeopardy.
Impact of Reduced Investments
The decline in Western financial support has rapidly affected Africa’s energy sector. Major oil companies like Equinor and ExxonMobil have retracted their investments, pulling out of promising projects in regions like South Africa and Ghana. This retreat is part of a broader trend, influenced by global shifts towards sustainable energy and rigorous Environmental, Social, and Governance (ESG) practices.
Statements from Industry Leaders
NJ Ayuk, the Executive Chairman of the AEC, has voiced strong opposition to the ongoing divestment, emphasizing the detrimental effects on African development and energy access. Ayuk criticizes major international entities, including the International Energy Agency (IEA), for their biased policies that favor European energy needs over African aspirations.
The IEA’s stance on halting new investments in oil and gas contrasts sharply with the treatment of natural gas in Europe, where it is promoted as a transitional ‘green’ energy source. This disparity underscores a significant contradiction in global energy policies, where African projects are sidelined despite their potential to address chronic energy shortages and foster economic growth.
At-Risk Projects and Progress Amidst Challenges
Key African energy projects such as TotalEnergies’ Mozambique LNG and Nigeria’s Train 7 LNG expansion are at risk due to the lack of financial backing. Despite these challenges, some projects like the Greater Tortue Ahmeyim (GTA) LNG project and Eni’s Coral South FLNG in Mozambique are making headway, demonstrating the potential success when investments are secured.
Several major projects across Africa face delays due to financing issues and increased environmental scrutiny. Projects like the East African Crude Oil Pipeline (EACOP) and Tanzania’s LNG project encounter resistance from financial institutions and environmental groups, further complicating development efforts.
The Financial Apartheid and Its Broader Implications
The term “financial apartheid” highlights the stark inequity in how African and European energy projects are financed. This discriminatory funding practice hampers Africa’s ability to utilize its resources effectively, exacerbating energy poverty and economic instability on the continent.
The AEC is urging global financial institutions to reconsider their approach and support African energy initiatives. By aligning investment practices with the needs of African development, financiers can play a pivotal role in ensuring energy security, enhancing economic stability, and improving living standards across Africa.
Conclusion
The ongoing financial challenges in Africa’s energy sector require a concerted effort from global stakeholders to ensure fair and equitable investment practices. Addressing the financial apartheid in Africa’s energy sector is crucial for the continent’s sustainable development and the global pursuit of equitable energy transitions.
Shaping Africa’s Future at the Energy Transition Centre
As we embark on a critical journey towards a sustainable energy future, your involvement is crucial. The Energy Transition Centre at CLG is at the forefront of transforming Africa’s energy landscape, advocating for an energy mix, including renewable energy adoption to foster economic growth and improve quality of life. We invite you to join us in this essential mission. Whether you’re an industry expert, a policy maker, or a concerned citizen, your contribution can make a significant difference. For guidance, insights, or to share your ideas, feel free to contact the Energy Transition Centre today with questions:
- Oneyka Ojogbo, Head of Energy Transition Centre: [email protected]
- Leon van Der Merwe, Head of Energy Transition Centre: [email protected]
- Brenda Wangura: [email protected]
