Commodities, Emerging Markets, Energy, Frontier Markets

How Can Africa Fulfill Its Potential For Energy Production?

By Martin Ganda

Africa OilSouth Africa’s City Press reports that Turkish company Karadeniz Energy Group has offered to help to solve South Africa’s power problems by supplying its Powerships.

Some African countries, like Ghana, get electricity from Powerships; floating power stations that connect to the grid and are powered by oil or gas.

If this demonstrates anything, it is how Africa’s power scarcity is frustrating and stifles development; the shortages can be so relentless that they almost become normal, with people re-organising their lives around having no electricity  – indeed, a country like Nigeria (amazingly) managed to become Africa’s biggest economy while producing only 1.5% of the power it needs.

But looking at the numbers involved brings the disheartening scarcity into sharp relief – and also shows the continent’s immense latent potential.

A single American football stadium in Dallas, Texas, uses the same amount of power during a match as the entire country of Liberia uses in one day.

In sub-Saharan Africa, 75% of the population and 30% of health facilities, including hospitals and laboratories, do not have electricity. Less than 2% of the rural populations in Chad, Ethiopia, Malawi, and Niger have access to electricity.

Eight five percent of rural Africans must burn biomass – like firewood and charcoal – for fuel, threatening their own health and the health of the environment. By some estimates, women expend 40% of their daily calorie intake looking for fuel and water, and the cumulative effect of having to spend all that time collecting fuel means puts a brake on education and self-empowerment.

These numbers are depressing, but there are others that give hope, particularly in green energy. Africa’s potential for wind power is enormous – Sudan’s wind alone could provide the power to supply 90% of the country’s energy needs.

The Great Rift Valley in East Africa could generate 9,000 MW in geothermal energy. Many areas in sub-Sahara Africa feature daily solar radiation between 4kWh and 6kWh per square meter – anything above 3kWh is clear skies and intense sunshine, considered high potential for solar photovoltaic generation. Only 5% of Africa’s hydropower potential is exploited.

It puts Africa in a unique place to be on the cutting edge of the green energy revolution, from hydroelectricity to solar and wind power.

Demand for electricity is likely to increase six-fold by 2050, both as a result of population growth and increased urbanisation, but also because “pent-up demand” is released. Africa accounts for just 4% of the world’s electricity demand, but that’s largely because people have learned to live without it, and so their demand is suppressed. But the more of it becomes available, the more of it people will use.

Africa produces 11% of the world’s oil, 6% of its natural gas, and 4% of its coal. Six of the top 30 energy producers call Africa home.

But much of this energy is exported rather than used to fuel Africa; 90% of Nigerian oil is exported to non-African countries, while Nigeria imports about 70% of the processed oil products it needs to meet domestic requirements.

The country currently has four oil refineries with the total capacity to process about 445,000 barrels/day, but they operate below capacity. Regional power trade would save Africa $2 billion a year, and make it more self-reliant in energy.

But changing Africa’s dismal story will require visionary leadership, for both government and business. In Europe and America, entrepreneurs took a risk and put their money in electricity, railroads and fibre optics, and – supported by government – lay the infrastructural foundation to spur their economies to prosperity. The same kinds of public-private partnerships are needed in Africa.

The funding deficit is huge. Africa requires more than $300 billion in investment capital to achieve universal electricity access by 2030. Still, very little goes a very long way in Africa – according to an African Development Bank report, if the continent were to reinvest just 5% of oil and coal export revenues every year, that would be enough money to build the infrastructure to power every home on the continent.

Zimbabwe-born Martin Ganda is an Africa focused investor, advisor, strategist, and is a contributor at Thomson Reuters Foundation.

Courtesy of World Economic Forum


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