Energy governance in Africa is going nowhere…

For the World Bank Africa’s infrastructure is the most deficient and costly in the entire developing world. Today only a quarter of Africa’s Sub-Saharan (SSA) population has access to electricity, as opposed to 50% in other developing regions such as South Asia. While power tariffs in most parts of the developing world vary between US$ 0.04 and US$ 0.08 per kilowatt-hour; the prices in SSA are up to three times higher – and this on a continent that is privileged to be endowed with an abundance of resources; from oil, gas, and coal to renewable resources such as hydro-power, solar and geothermal. SSA also has 30% of the global mineral reserves lying at its feet; waiting to be mined.

So what’s wrong with Africa’s energy, infrastructure and mining sectors? Why have they failed to harness their natural resources as the basis for economic growth they so urgently need?

To many of us, it doesn’t come as a surprise: sustainable development is still hard to sell in Africa today. With a history of resource plundering, the continent is riddled with challenges – poverty, diseases, conflicts, bad governance and poor infrastructure – and is rightfully seen by many non-Africans as a wasteland, despite its untapped opportunities.

On September 26, Kofi Annan, former UN Secretary General and an author of the Millennium Report, today still regarded as the universal blueprint for sustainable development globally, gave a remarkable opening speech at the inauguration of the ‘Maison de la Paix’. This new campus of the Graduate Institute in Geneva, where the Ghana-born Annan once studied, is entirely dedicated to international relations. This offered a ideal stage from which to address the multitude of issues that threaten sustainable development in his home-continent.

Starting exactly on time in the Swiss fashion, he claimed that Africa’s governance has always been, and still, is a big problem and that the continent’s natural energy and mineral resources could transform the region towards prosperity if its citizens were not constantly being robbed by corruption and rising inequality. He sees the lack of infrastructure and energy, and the mismanagement of Africa’s incredible natural wealth, as the main enemies of the continent’s downward spiral. These, he believes, are also the main reasons why Africa will not achieve any of the eight Millennium Development Goals on time and why they are even further out of reach for Africa today than ever before.

Annan went on to share some examples. In oil-rich Equatorial Guinea, the economy has grown by 17% a year on average over the last decade. Corruption, theft and lack of transparency are still common practice in that country just as it was in 2008, when its government stripped Rio Tinto of half of its rights to mine the enormous iron ore deposits, selling them to another company many time cheaper than they were worth. All of this only to learn that this same company two years later sold 50% of its rights to a Brazilian company at an estimated profit of more than 3000% over two years. And this in a country where three-quarters of the population still live in abject poverty and child death rates are amongst the highest in the world.

 

Does this make sense at all?

 

Sadly, it may get worse. If the governance of energy and mining is already a major challenge; while frustration and anger over corruption and unresponsive government is growing with resultant dangerous social and political pressures, what is there to say for future developments such as the exploitation of shale gas, where other and higher stakes may be involved? As reported in a recent study by the African Development Bank the opportunities are already there. The US Energy Information Administration (EIA) in 2011 and again in 2012 produced a study estimating global and African gas reserves. A lot of it was reported, especially in Algeria, Libya, Tunisia, Morocco and Mauritania.

According to National Geographic, South Africa is believed to have the fifth largest volume of shale gas in the world, estimated at some 7.3% of the global total. It will only be a matter of time before fracking really starts off. African Governments and civil society groups are only just learning of the potential presence of shale gas reserves and they are likely be uncertain about the environmental risks, the infrastructure challenges, implications on energy prices and the costs and benefits of shale gas exploitation. Issues such as the large-scale use of water required for fracking in areas suffering severely from water scarcity, water contamination, the venting and flaring of gas and, who knows, the triggering for seismic events, all call for urgent involvement by Governments who have experience with regulations and monitoring required for unacceptable environmental and economic risks. In this debate, the African Development Bank promotes itself as an ‘honest broker’, giving advice to Governments that wish to explore shale gas. Whether they will be directly involved in such projects or not is not clear. Let’s all hope that African citizens will be spared the disastrous consequences on the environment and economies, that would inevitably follow if shale gas exploitation were approached in an African ‘business as usual’ fashion.

Why is Africa repeatedly struggling when it comes to resources governance? Much of the bad behaviour of African Government officials and businesses are facilitated by the existing legal and normative frameworks. As long as governments fail to put transparency and accountability at the heart of their energy and natural resources policies, Africa will struggle to achieve the economic growth than it so clearly needs.

World leaders such as Kofi Annan, despite all that is happening, also see progress, and he claims that the trend towards transparency slowly but steadily gains momentum month by month. This progress is probably due to initiatives such as the Extractive Industries Initiative (EITI) , a worldwide coalition of governments, companies and civil society, working together to improve openness around revenues from natural resources. This will, for the first time, give citizens a right to see how much their governments receive from these resources.

Signs indicate that this is starting to work; countries like Ghana, Guinea and Liberia now publish their oil, gas and mining contracts online and some 12 African countries are today compliant with the Transparency Initiative Standards. At the same time, however, EITI’s annual report also reveals less positive information, especially on African countries such as the Democratic Republic of Congo, still suffering from terrible conflicts and governance problems, where the government officially receives less than US$ 13 per person per year from its rich mineral resources. Focussed initiatives such as EITI offer a good start and they deserve more attention. This is clearly the key area where the international community can make a difference through strong, credible and effective multilateral responses to abusive behaviour. However, for this to happen on a larger scale in Africa, attitudes will have to change significantly.

 

Critics claim that with all its natural resources, Africa should not be in need of all the international development assistance it currently gets; the continent must determine its own route to self-sufficiency. The question is: will it have the means to manage its resources wisely? Will less developed African countries adopt national strategies built on honest and transparent terms? Will they solve their problems working together with multinational corporations and with the international community? Only then will the continent be able to meet the crucial Sustainable Development Goals (SDGs) that will pave the way to a better world.

In the meantime, Africa has little choice but to try. And maybe – who knows – with a lot of effort and a little help from their friends.

 

Only the future will tell…

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