Africa’s state-owned electricity generation and distribution companies need partial or full privatisation to make the region’s energy market a lot more efficient, according to the African Energy Chamber, the trade association that represents oil and gas companies throughout Africa. The Johannesburg-based body says it upholds a results-focused business environment for companies operating in the continent’s energy industry.
Reduction in barriers of entry in the energy sector has ushered in more opportunities for new players to profit from the resource-rich continent. African nations should focus on developing a natural gas market that will serve as the foundation of Africa’s energy industry, it argues.
Here, N J Ayuk, executive chairman of the African Energy Chamber, discusses the future of the region’s oil and gas industry, whether oil and gas are a ”curse” and about why the private sector should play a bigger role in Africa’s energy market. Originally from Cameroon, he is also chief executive officer of Centurion Law Group, a Johannesburg-based law firm.
Jason Mitchell (JM): Should African countries be allowed to exploit their oil and gas resources or should they be putting their focus on renewable energy?
N J Ayuk (NJA): I think African countries have to exploit oil and gas further at the moment. The crisis we have seen in Europe with an energy deficit and the war in Ukraine reminds us that we still need a lot more oil and gas in the market.
Today, demand is around 100 million barrels of oil and gas combined globally; we do not have enough. There is a big deficit in oil and gas supply. If you look at the African continent, there are issues around energy poverty and a lack of industrialisation. Especially heavy industry, you cannot run that with the new technologies we have today or will have during the next ten years, not with wind or solar.
That does not mean that we should not super-drive wind and solar but, when you look at Africa today, governments and business need affordable, abundant, cheap energy to drive industrialisation, create jobs, to prevent the mass migration of young people to Europe and Dubai, for example, and to deal with the most critical needs [such as] 600 million people with no access to electricity [and] 900 million people with no access to clean cooking technologies, most of [whom are] women.
We cannot hope to meet the UN’s sustainable development goals without energy access. We must exploit oil and natural gas. South Africa is the region’s biggest coal user but it has abundant natural gas offshore. To say that Africans should rely on wind and solar, is not just unfair, unjust, it is dishonest, because the same countries that are saying you should do that are now turning to coal.
JM: What do you think of the argument that oil and gas resources have not really helped Africa, and that they have been a curse?
NJA: That is true. In some states, oil has been a curse. But also in some states it has been a blessing. You have these countries that came to independence with massive issues, then they had oil wealth. It was not properly managed in some cases.
But then you have to look also at the role played by big multi-national companies. When they came to Africa, they were not interested in exploiting oil and gas for the development of Africa; they wanted it for European and American refineries. Bad governance, an assortment of crazy military dictators and coup d’états after coup d’états have not helped a lot of African countries.
That is yesterday but when you look at today and the future, you ask, “how do we get it right?”. We have what is going on in the Niger delta [and] what is happening in the Pemba area of northern Mozambique; we must get the host communities to be part of the industry. Maybe there should be community trust funds, in which a percentage of the revenues goes to creating projects around education, infrastructure, healthcare.
There must also be local content. We must move away from relying on government. The biggest issue – which sometimes the international community and even the oil companies do not realise – has been the partnership with the state and with the government. No, that is wrong. You must have partnerships with the private sector.
JM: Do you think it would be better if African governments considered partially privatising their electricity generating and distributing companies?
NJA: Absolutely, they should be looking at 80%, if not 90%, privatisation. Free market, limited government, individual liberty, that really drives markets up. Today, there is not one African public utility that is turning out profits. Eskom [South Africa’s public electricity utility] used to be a AAA-rated company 20 to 30 years ago. Today, we are having black outs every over hour.
When you privatise the public utilities in Africa, you take control of how you use gas and a ‘just’ energy transition because private power utilities are not in the hold of politicians, governments and corrupt bureaucrats. You see a tsunami going around the world today, markets are changing; we have to listen to markets. These market forces are the biggest enemy to politicians.
Capital is no longer prepared to go into bankrupt, corrupt state-run entities; capital wants to partner with well-run private organisations. There will not be any ‘stranded’ assets. This is a continent with 1.4 billion people. There is a massive need for energy. This is gas that will be used in Africa; there is a market, there is a need, the continent must industrialise.
Yes, there are restrictions when it comes to investing in African oil and gas. That is what I find a little bit hypocritical. Today, the European Union says that gas is ‘green’. I was at COP26 last year, they said gas is bad, nobody should invest in gas. I don’t know what witchdoctor they consulted that told them that gas is now great. You can invest in gas, in fossil fuels in Europe but not in Africa. That sends the wrong message. What are they doing?