African Energy at 500: power industry fails to cope with Africa’s growing populations

18 Feb 2024 - By Jon Marks | 6 minute read

Whenever African Energy reaches a milestone, there is room for introspection and also to look forward. The newsletter’s 500th issue comes at a time when its digital offering and platforms, led by African Energy Live Data, are further evolving but, on the ground, concerns over governance and stability, along with the continuing burdens of poverty and climate change, are weighing heavy across the continent.

While some things have changed radically since African Energy was created in 1998 – not least the continent’s increasingly urbanised demographic profile, which raises major challenges as well as the opportunities a vibrant, predominantly young population can bring – other issues remain stubbornly familiar.

African Energy’s launch issue in 1998* (downloadable online) covered InterGen’s independent power project (IPP) in Egypt, a wind power investment in Morocco, controversy over a Tanzanian IPP with Malaysian-owned Independent Power Tanzania, Ghanaian efforts to deal with the drought-affected Volta River Authority’s Akosombo dam, prospects for Namibia’s Kudu gas field (then led by Shell) and a $1.5bn scheme to develop Zimbabwe’s Gokwe North coal-fired plant.

Twelve years later, in December 2010, AE 200 observed that “Hindsight shows these schemes to have had a spotty outcome.” Spotty remains one of African Energy’s favourite words.

In 2010, the issues covered by African Energy had risen up the global agenda ?to a far greater extent than had seemed likely in 1998.

“Headline-making issues from South Africa’s electricity supply crisis in 2008/09 to debate over Chinese intentions in the race to book oil and minerals reserves worldwide, to North Africa’s future role in supplying renewable energy (RE) to Europe have put African energy issues in the global mindset,” AE 200 noted.

Resources drive big power rivalry with a vengeance

If big power rivalry over strategic resources was important in 2010, it has risen further up the list of priorities since then, as the energy transition promotes investment in a wider range of minerals and technologies. That has been exacerbated since Russia’s 2022 invasion of Ukraine – whose unwelcome second anniversary falls on 24 February (AE 456).

The Ukraine crisis has increased countries’ appreciation of the extent that investment in RE can have strategic benefits, including certainty of supply and control over energy prices.

War in Europe – followed since late 2023 by fallout from the Gaza conflict, in which Yemen’s Houthis effectively closed the Red Sea for most global shippers – also confirmed the fragility of global supply chains. Those fissures had also been apparent during the Covid-19 pandemic, raising prices and causing delays that are still working their way through systems.

Large liquefied natural gas, combined cycle power and other big gas projects were important to African Energy from the start. Issue 1 covered Mozambican exploration for gas, while Issue 2 detailed how British Gas was selling to domestic Egyptian customers. By Issue 4 (July 1998), AE reported that ‘Mozambique’s gas reserves [are] powering an industrial revolution’.

In recent years, as climate policy pressures have mounted, western development finance institutions (DFIs) pulled back from financing gas and other carbon-based projects. Shifting geopolitical perspectives have led to a more nuanced approach from some DFIs of late, but financing projects involving ‘transition fuel’ gas – which is seen as essential to economies transitioning away from diesel, coal and firewood – remains problematic.

Some major oil and gas exporters are, meanwhile, making big commitments to RE investments – as with COP28 climate conference host the United Arab Emirates, whose flagship companies are making a big impact in a range of African countries (AE 487).

But there are few signs that Opec members and their Opec+ allies, led by Russia, have any intention of allowing their core source of revenues, crude oil, to disappear anytime soon (AE 497).

Maintaining output and markets is more of a struggle for Opec’s big SSA members Angola and Nigeria, whose oil and gas sectors had seemed to be accelerating towards world-leading positions 25 years ago, but whose opaque and questionable governance has led to fitful progress. The Angolan and Nigerian industries remain dominated by the deep offshore plays where the oil majors are most comfortable.

Major oil finds off Namibia, as well as Mozambique’s on/off gas boom, have excited speculation that African could re-emerge as an exploration and production hotspot – just as it was when the Gulf of Guinea boom unfolded in African Energy’s formative years (AE 9).

This may represent an about-turn in some international oil companies (IOC)’s thinking, as climate campaigners and others criticise majors like Shell for reining back on their energy transition commitments to invest more in oil and gas, in a world reshaped by the Ukraine invasion (AE 485).

IOCs are operating in a world where securing resources is once again a pressing issue for many. Big power rivalries are increasingly apparent, as can be clearly seen with the United States-backed Lobito Corridor and Chinese-led Tazara railway rehabilitation projects, and in the name of HPX Energy’s ‘Liberty Corridor’, running through Guinea and Liberia. These are classic resource extraction plays, for all the wider developmental rhetoric.

Africa’s RE potential is now a key part of its global profile, not only in terms of supplying sustainable energy to fast-growing domestic populations, but also to export markets through a number of ‘gigaprojects’. Using solar and other RE resources, such schemes focus on manufacturing the green hydrogen, green ammonia, carbon-free liquid fuels and other products seen as essential for the global energy transition (AE 480).

A fear is that these resources will, as in previous epochs, sail away from Africa in deals that favour the exporter.

This potential should be stimulating a huge influx of funds, as promised at the annual COP climate summits. COP28 in Dubai ended in mid-December on a more positive note than many had thought possible, with multi-billion-dollar commitments of climate finance and progress on the elusive Loss and Damage Fund (AE 497). But huge past commitments have yet to manifest on the ground, where many local electricity supply industries (ESIs) remain insolvent and under-equipped, and some industries are in even greater crisis than before.

In 1998, South Africa unveiled its still unfulfilled ESI unbundling and utility Eskom was considered the world’s fourth largest electricity company, with a reputation for technical competence. By 2010 Eskom’s ‘load-shedding’ crisis was an issue – but nowhere to the extent of 2024, when disillusion at power cuts is a big contributory factor in the ruling African National Congress’ likely loss of its majority at elections later this year.

Even the $8.5bn committed under South Africa’s Just Energy Transition Partnership with the G7 economies scarcely meets the pressures of overhauling its ESI.

Meanwhile, across the continent, the unwelcome return of currency crises and sovereign debt pressures – in Egypt, Ghana and Zambia among others – is a further disincentive for investment (AE 496).

A question of demographics

A constant during African Energy’s quarter-century has been the extent that governance issues and social pressures undermine the prospects for growth and investment – which too often have fallen far short of the rhetoric of political elites and their corporate partners.

Population data give perhaps the most striking perspective of all. When many states achieved independence in 1960, the SSA population was 229m. It rose to 389m in 1980 – which our African demographics graphic uses as a baseline year – and stood at 637m in 1998, when African Energy began. By 2000 there were 671m sub-Saharan citizens, in 2010 880m. The billion people mark was passed in 2015 and, by 2020, the population stood at 1.15bn.

The United Nations has estimated the entire continent’s population increased tenfold from around 140m in 1900 (then some 9% of the world total) to now stand at over 1.4bn. This growth has been “fuelled by a combination of falling mortality and some of the highest birth rates in the world”, a September 2023 International Monetary Fund (IMF) report said.

That level of population growth has meant African governments and their international and domestic partners have struggled to meet the UN sustainable development goal (SDG7) target of achieving universal energy access by 2030, while many other aspirations fall short in a continent where urban populations are often crowded into slums and basic services are failing.

Research commissioned by the Africa-EU Energy Partnership (AEEP) from African Energy’s parent company CbI in 2022-23 suggested there was still a pathway to SDG7 by 2034 – but a daunting amount of work remained if this was to be achieved (AE 479).

The UN projects that, by 2050, there will be close to 2.5bn Africans – equivalent to 26% of the global population – and while the rate of increase is forecast to slow thereafter, Africa will remain by far the largest source of world population growth. It is forecast to reach 38% of the global population – at nearly 4bn people – by 2100.

Such trends were known when African Energy was first published. But too little has been done to alleviate the resulting pressures that should have been anticipated. Introspection is one thing, quite how to effect meaningful change is quite another.

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* African Energy was launched in April 1998 as a monthly newsletter by Financial Times Energy, an arm of the London newspaper group that was subsequently sold, in 2000, to Platts (now part of the S&P Global empire). In 2003 the title was transferred, in a management buy-out, to founding editor Jon Marks and Cross-border Information.