A historic opportunity for Africa
Last November, the gas was on the verge of being banned, with many voices calling for the reduction of subsidies granted to its production at the COP26 climate forum. Three months later, at the beginning of February, the European Commission enshrines gas, which emits twice as much greenhouse gas as coal and 30% less than oil, as “transition energy”, and qualifies it as “green”. » for the needs of gas-fired power plants. investments in power plants under certain conditions.
Three weeks later, Russia launched a full-scale invasion of Ukraine, drawing worldwide condemnation and destabilizing energy markets. With Russia supplying 40% of the EU’s gas needs, the power source has found itself at the center of diplomatic wrangling, fueled by repeated threats from Moscow to cut off supplies.
European countries reacted differently to the impending threat.
A varied response
While Germany suffered weeks of domestic political turmoil over its dependence on Russia, Italy was quicker to respond, immediately looking south for an alternative to eastern gas. The Mediterranean nation, which gets 45% of its gas from Russia, has already signed supply deals with Algeria, Egypt, the Republic of Congo and Angola to try to limit that amount.
Gas financing, which had become scarce in recent years, is suddenly finding its way to Africa. Even before this reversal, a study by the Norwegian firm Rystad Energy published last February estimated that the continent, whose coasts are rich in natural gas deposits, could see its double production from 1.3 million to 2.7 million barrels of oil equivalent by 2030.
The European volte-face on gas holds great promise for Africa but is also a further reminder of the continent’s potential in the process of energy transition and the fight against climate change. Its main asset consists of mining resources such as cobalt, copper, graphite, nickel, aluminum or lithium, which constitute the basic elements of an energy transition that is particularly heavy on metals. A solar power plant requires three times as much metal as a gas turbine to produce one terawatt of electricity, while a wind farm uses four times as much. From Guinea to Tanzania, via Gabon, South Africa and Zambia, these “green” metals, which are also essential components in the manufacture of batteries for electric vehicles, are present in abundance.
Best foot forward
Then there is its hydrogen production potential. Reasonable land costs, sunshine and proximity to Europe with its growing demand should in theory allow it to ensure large-scale hydrogen production at a competitive price. There are already a dozen green hydrogen projects under development in countries like Egypt, Namibia and Mauritania. Admittedly, hydrogen is still years away from becoming a profitable and sufficient energy carrier, but a new window is opening.
These new places, however, are not the “new pathways to African prosperity” that organizations like the Africa CEO Forum are calling for. If this promised windfall is good news at the end of a period that has strongly affected the continent’s public finances, Africa must not repeat the mistakes of the past by betting its future on raw materials. The global market for electric vehicles, which are particularly heavy on cobalt, could represent more than 1,300 billion dollars by 2030, or just under a third of the GDP of Africa as a whole in 2021. Governments and Economic leaders must seize the opportunity of this emerging industry. and reflect on the best strategy to capture part of this added value on African soil. Although ambitious, such a plan is far from impossible.
According to UNECA, producing batteries in the DRC would cost 30% less than in the United States, and 20% less than in China. South Africa and Morocco have already embarked on the production of electric vehicles. According to different estimates, Africa would need more than 2 million trucks to make the African Continental Free Trade Area (AfCFTA) effective. “Why wouldn’t these trucks be electric trucks produced in Africa? recently wondered Dr. Vera Songwe, Secretary-General of ECA. Similarly, the strong comeback of African gas in world politics must serve the electrification of the continent. African leaders can now ensure that this local dimension exists in gas projects; rather than committing to projects that ignore the socio-economic impact, international financiers could grant preferential conditions to more virtuous ambitions.
Finally, Africa must defend its interests and make its voice heard to fight against the establishment in Europe and the United States of new tariff barriers in the name of the environment. These protectionist strategies, perceived by some in Brussels and Washington as easy ways to wash the Western conscience, only hinder the investment capacity of African companies and make the transition even more difficult.
In these battles, the development of the infrastructures essential to the emergence of regional markets of sufficient size will be key. Resolute and continued political leadership will also be essential. In a recent development on this front, the DRC and Zambia signed a cooperation agreement last April which aims to facilitate the development of the electric battery value chain on their soil.
This global green transition is a multifaceted generational opportunity for Africa, a historic opportunity. Its mineral, gas, renewable energy, green hydrogen and forest heritage resources must contribute to the industrial transformation that it has not yet achieved. The process is expected to continue to accelerate, in part due to the increased accessibility of cutting-edge technological breakthroughs available worldwide.
COP27 will take place next November in Cairo and presents itself as a perfect opportunity for the continent to move forward in this direction and contribute to reconciling energy transition and economic transformation. It is up to the continent, especially its pan-African investors and national champions, to find a delicate balance: make green transformation a source of growth and industrial transformation, and make its deposits the source of local and regional development. After two years of a pandemic that has destabilized economies, and as a raging war has put economic sovereignty back in the spotlight, the continent’s ambition to create new paths to prosperity is strong.