The African Energy Chamber (AEC) has been at the forefront of advocating for continued foreign investments in Africa’s oil and gas industry despite mounting pressure to transition to renewable energy sources. The pushback against foreign investments comes from environmental organizations, financial institutions, and governments in Europe and North America, who are calling for an immediate shift away from fossil fuels.
The AEC has emphasized the importance of foreign investments in the oil and gas sector for knowledge sharing, job creation, and revenue generation. These investments also play a crucial role in building energy infrastructure and addressing energy poverty on the continent. Despite these arguments, calls to halt financing for African oil and gas projects have intensified, with several countries and financial institutions pledging to stop public financing for overseas fossil fuel projects.
The recent pledges at the 2021 United Nations Climate Change Conference (COP26) in Glasgow have further highlighted the challenges facing Africa’s energy economy. European nations have differentiated between financing gas projects for Europe and Africa, further complicating the situation for African countries reliant on natural resources for economic development.
In response to these challenges, the AEC is calling for the establishment of the African Energy Bank, a financial institution focused on funding energy projects across the continent. The bank aims to provide funding for a wide range of energy projects, including oil and gas exploration, solar, and hydrogen operations, reducing dependence on foreign support.
The AEC believes that African governments can contribute to the funding of the African Energy Bank by setting aside a percentage of oil and gas revenues. Additionally, leveraging African pension funds and attracting investments from wealthy Africans can further support energy projects on the continent. The recent agreement between Afreximbank and the African Petroleum Producers Organization (APPO) to establish the African Energy Bank signifies a step towards achieving financial independence for African energy projects.
With significant discoveries of oil and gas reserves in countries like Angola, Namibia, South Africa, and Côte d’Ivoire, the need for sustainable funding for energy projects in Africa has never been more critical. The establishment of the African Energy Bank presents a promising opportunity for African countries to take control of their energy future and capitalize on their natural resources for sustainable development.
As the President of Afreximbank, Professor Benedict Oramah highlighted in May 2022, the collaboration between Afreximbank and the Africa Energy Bank could lead to a more efficient allocation of capital between fossil fuels and renewables. This partnership would not only streamline capital allocation but also enhance support for member countries in transitioning to cleaner fuels by freeing up resources at Afreximbank.
Afreximbank, established in 1993 to promote African trade, serves as a successful model for financing and expanding intra- and inter-African trade. Recognized for its commitment to the African Continental Free Trade Agreement and investment in education, Afreximbank received the Institutional Institution of Excellence Award from the Africa-America Institute in 2020. With a track record of disbursing billions of dollars to support African trade, Afreximbank sets a precedent for the kind of financial institution needed to fuel Africa’s energy projects.
Building on Afreximbank’s success, the creation of African energy banks could provide the necessary financing for local oil and gas companies to acquire assets and develop infrastructure. This funding would enable the construction of pipelines and the utilization of natural gas for powering Africa, addressing energy poverty and driving industrialization on the continent.
Furthermore, the establishment of renewable energy operations, particularly in green hydrogen production, presents additional opportunities for African states and entrepreneurs. With proper funding, Africa could emerge as a major green hydrogen exporter, contributing to the continent’s energy transition and economic growth.
The Africa Energy Chamber (AEC) supports the energy bank initiative and aims to facilitate collaboration among potential stakeholders. By creating indigenous institutions to finance energy projects, Africa signals its intent to lead in mobilizing private capital for energy development. This approach underscores a commitment to natural gas development, infrastructure expansion, and sustainable investments in low-carbon technologies.
With access to financing, African companies can not only boost oil and gas production but also drive local community development, foster green energy markets, and generate employment opportunities. The oil and gas industry holds significant potential for uplifting millions of Africans by providing jobs, raising living standards, and promoting economic stability.
As Africa pursues these goals, it is essential to cultivate partnerships, leverage existing models of success, and prioritize sustainable energy solutions. By harnessing the expertise and resources of institutions like Afreximbank and the Africa Energy Bank, Africa can chart a path towards energy security, economic prosperity, and environmental sustainability.
