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Africa Needs to Eradicate Energy Poverty—NJ Ayuk

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NJ Ayuk Energy Poverty

By Kester Kenn Klomegah

Understandably, energy is expected to drive Africa’s economic prosperity. In order to make great strides in the industrial sector and attain a high-level of sustainable development, for instance, energy is the key determining factor, argues NJ Ayuk, Executive Chairman of the African Energy Chamber, a pan-African company that focuses on research, documentation, negotiations and transactions in the energy sector.

According to him, scaling up Africa’s production capacity in order to achieve universal access to energy is a challenging task and points to the need for a transformative partnership-based strategy that aims to increase access to energy for all Africans.

He further talks about transparency, good governance and policies that could create a favourable investment climate, especially in the energy sector.

Speaking in an insightful interview with Kester Kenn Klomegah in early July 2021, NJ Ayuk unreservedly calls for strong foreign partnerships in harnessing and distribution of energy, stresses the significance of foreign investment in large-scale exploration projects in African countries.

Within the context of the newly created African Continental Free Trade Area (AfCFTA), he suggests that politicians, investors and stakeholders need to change the business perception and create an entirely new outlook into the future. Here are the interview excerpts:

What are the popular narratives about energy sources, production and utilization in Africa? In your expert view, how would you characterize energy needs in Africa?

The popular narratives are the prevalence of energy poverty on the continent. Most of the oil and gas producing countries have some kind of conflict going on in the area which affects the local people and the companies which choose to invest in these areas. For a country like Ghana, for example, we have seen the upside of the effective way of carrying out oil production, a major contribution has been its transparency and its policies.

African countries do, however, suffer from the policies they draft which take years to implement, and if implemented take long to administer the contracts for production to take effect. With that said, the effect on the upstream sector automatically affects the midstream and downstream, sectors, which essentially affects the economy of the different countries.

It’s without a doubt that energy poverty needs to be eradicated. Africa has the world’s lowest per capita energy consumption: with 16 per cent of the world’s population (1.18 billion out of 7.35 billion populations), it consumes about 3.3 per cent of global primary energy. Of all energy sources, Africa consumes the most oil (42 per cent of its total energy consumption) followed by gas (28 per cent), coal (22 per cent), hydro (6 per cent), renewable energy (1 per cent) and nuclear (1 per cent). South Africa is the world’s seventh-largest coal producer and accounts for 94 per cent of Africa’s coal production.

Africa’s renewable energy resources are diverse, unevenly distributed and enormous in quantity — almost unlimited solar potential (10 TW), abundant hydro (350 GW), wind (110 GW) and geothermal energy sources (15 GW). Energy from biomass accounts for more than 30 per cent of the energy consumed in Africa and more than 80 per cent in many sub-Saharan African countries. Sub-Saharan Africa has undiscovered, but technically recoverable, energy resources estimated at about 115.34 billion barrels of oil and 21.05 trillion cubic metres of gas.

Do African leaders see some of the controversial issues, in the same way, as you have discussed above?

In my opinion, African leaders do take heed of what has been discussed above but are too slow to tackle the issues, which eventually then build up. The effect of that is that once they have eventually tackled the first problem, they realize others have piled up and have to continue digging. Leaders also need to start bringing young people to the table who have fresher eyes and valuable contributions because of the times they live and are growing up in. A major contribution to that is the internet.

How do you assess the impact of energy deficit most especially within the context of the fourth industrial revolution? Is energy finance the determining factor here?

Firstly, we need good governance that creates an enabling environment for widespread economic growth and improved infrastructure. African leaders need an unwavering determination to make Africa work for us, even when there are missteps and things go wrong.

Without stability, projects and contracts cannot take effect. A recent example is an insurgency in Mozambique which has claimed lives but put a halt to a project which would have had a positive impact not only on Mozambique and its region but the entire continent. But now, we have to look ahead and not dwell on the shortcomings or pitfalls.

In order to change the tide and spur a post-pandemic recovery in the energy sector that will also enhance overall economic growth in Africa, African leaders must double their efforts to attract investment into their energy sectors. They must put in place timely and market-relevant strategies to deal with external headwinds like the drive to decarbonize globally and evolving demand patterns for energy internally and hydrocarbons globally. They must end restrictive fiscal regimes, inefficient and carbon-intensive production, cut bureaucracy and other difficulties in doing business that is preventing the industry from reaching its full potential.

What individual countries have set exceptional examples, at least, in offering energy and its utilization both in the urban cities and remote towns?

Consider the impact of energy deficiency. Approximately 840 million Africans, mostly in sub-Saharan countries, have no access to electricity. Hundreds of millions have unreliable or limited power at best.

Even during normal circumstances, energy poverty should not be the reality to most Africans. The household air pollution created by burning biomass, including wood and animal waste, to cook and heat homes has been blamed for as many as 4 million deaths per year. How will this play out during the pandemic? For women forced to leave their homes to obtain and prepare food, sheltering in place is nearly impossible. What about those who need to be hospitalized? Only 28 per cent of sub-Saharan Africa’s health care facilities have reliable power. Physicians and nurses can’t even count on the lights being on, let alone the ability to treat patients with equipment that requires electricity — or store blood, medications, or vaccines. All of this puts African lives are at risk.

Africa does not need social programs, even educational programs, that come in the form of aid packages. What’s more, offering Africa aid packages to compensate for a halt or slow-down of oil and gas operations will not do Africans any good. This is not the time for Africa to be calling for more aid.

Africa has been receiving aid for nearly six decades, and what good has it done? We still don’t have enough jobs. Investment creates opportunities. We, as Africans, must be responsible. Our young people should be empowered to build an Africa we all can be proud of. Relying on the same old policies of the past, relying on aid, simply isn’t going to get us there.

Do you support expert views about “energy mix” — a combination of wind, solar, hydro and nuclear power? Why nuclear is still bug down with problems in Africa?

Straightway I would like to say yes. Africa must continue to bank on all forms of energy to address its shortfall in Energy production and distribution. From country to country, access to the generating resource will differ. Therefore, countries should focus on those resources to which they have easy and affordable access. Nuclear continues to be least accessible in Africa, due to the absence of technology and the high upfront construction costs associated with building such plants.

Africa has an almost unlimited renewable energy capacity, abundant access to solar, wind, hydro, and geothermal sources; however, except for a few large-scale projects, such potential is not adequately developed. What the continent needs is to reach a balance between reaching its energy transition goals and exploiting its natural resources, particularly natural gas, to ramp up power generation, generate jobs, and as a source of revenue. Natural gas’ potential to breathe new life into struggling African economies that are still reeling from the brutal economic impacts of the COVID-19 pandemic.

Natural gas, affordable and abundant in Africa, has the power to spark significant job creation and capacity-building opportunities, economic diversification and growth. I am not saying that African nations should continue oil and gas operations indefinitely, with no movement toward renewable energy sources. I am saying that we should be setting the timetable for our own transition, and we should be deciding how it’s carried out. What I’d like to see, instead of Western pressure to bring African oil and gas activities to an abrupt halt, is a cooperative effort.

A number of foreign countries and private energy investing giants have shown interest in the energy sector. How do you assess the dynamics of their performance on the continent?

Local content is a pillar of the industry’s sustainability efforts. Sustainable development of African economies can only be attained by the development of local industry — by investing in Africans, building up African entrepreneurs and supporting the creation of indigenous companies. Oil companies have an unmatched ability, and a profound responsibility, to support countries in shaping an economy that works for all Senegalese and preserves their freedoms.

What is your view of Russia, considered as an energy giant, for instance, teaming up with China in Africa? Can both have a unified approach to collaborating on issues of energy projects in Africa?

First and foremost, Africa has already made an indelible mark in the oil and gas industry. I think Russian companies have to do more to really get involved. I always say that Africans want to get married, but Russians just want only to date. We need to change that and become more accountable. Both our compatriots expect better and more from our energy sectors.

As far as China and Russia are concerned, if both countries can avoid applying a “one size fits all” approach, so much good can come out of our oil and gas relationship with Russia. Africa has a lot to gain from Russian involvement and vice versa. Both must work towards empowering each other with concrete projects that bring benefit to investors and communities in which projects are situated. To be fair, positive developments from Russia and China don’t go unnoticed as their active presence in the continent leaves room for greater opportunities towards the energy mix.

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Africa Gets Just 12% of Climate Change Financing

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Climate Change

By Adedapo Adesanya

A new report from Climate Policy Initiative (CPI) has said that Africa is getting just 12 per cent of the finance it needs to manage the impact of climate change.

It, however, raised pressure on rich nations to do more in the run-up to global climate talks at COP27 in November.

CPI said that around $250 billion is needed annually to help African countries move to greener technologies and adapt to the effects of climate change, yet funding in 2020 was just $29.5 billion.

Wealthy countries have faced growing criticism for failing to meet a pledge made in 2009 to provide $100 billion annually to help poorer countries and the issue is likely to be central to discussions at the COP27 climate talks in Egypt.

According to the International Energy Agency, Africa has about a fifth of the world’s population but produces less than 3 per cent of its carbon dioxide emissions.

“Harnessing climate investment opportunities in Africa will require innovation in financing structures and strategic deployment of public capital to ‘crowd-in’ private investment at levels not yet seen,” the CPI report said.

It cited a lack of skills, infrastructure, data and financial markets depth, governance issues, and currency risks as holding back climate investment to varying degrees in African countries.

The barriers were most numerous in central African countries, where infrastructure and access to credit are lacking and there are high risks of political and regulatory issues hampering investment, the report said.

“While these barriers are real, the perception of risk linked to investments in the African continent is often aggravated by a limited understanding of national contexts by private investors,” it said.

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World

Australia Begins Process to Introduce Central Bank Digital Currency

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australia central bank digital currency

By Adedapo Adesanya

As more countries gravitate towards a digital currency, Australia joined the cadre as it announced the beginning of a collaborative effort to review the case for a central bank digital currency (CBDC) in the country.

The Reserve Bank of Australia (RBA), Treasury, and other agencies will oversee the research effort designed to explore the potential economic benefits of introducing such a currency in Australia, the RBA said in a statement Tuesday. The project is expected to run for about a year.

Speaking on this, the RBA’s Deputy Governor Michele Bullock said the work “is an important next step in our research on CBDC. We are looking forward to engaging with a wide range of industry participants to better understand the potential benefits a CBDC could bring to Australia.”

The central bank reiterated the research comes in the context of Australia already having “relatively modern and well-functioning payment and settlement systems.”

The RBA is collaborating with the Digital Finance Cooperative Research Centre in the project, while Treasury is participating as a member of the steering committee. The work will involve the development of a “limited-scale pilot that will operate in a ringfenced environment for a period of time.”

Over the course of the next 12 months, interested industry participants will be invited to develop specific use cases that demonstrate how the digital currency could be used to provide innovative and value-added payment and settlement services to households and businesses, the RBA added.

A report on the findings, including an assessment of the various use cases developed, will be published at the conclusion.

Central banks worldwide are acting swiftly to ensure they don’t fall behind as money edges toward its biggest reinvention in centuries with alternative concepts like cryptocurrencies taking hold.

Nigeria is one of the countries at the forefront of a CBDC with the introduction of the eNaira in 2021 with the Digital Euro still under investigation phase while Jamaica began its own testing phase in May. China’s Digital Yuan has been in testing since 2020.

Blockchain technology, as well as events like the coronavirus pandemic, are among the forces pushing consumers to go cashless.

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Mozambique Risks Economic Stability Over Russian Oil

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Mozambique Risks Economic Stability

By Kestér Kenn Klomegâh

Mozambique risks destabilizing its economy and further losing western development finance if it goes ahead to purchase sanctioned oil from Russia.

With the return of western development finance institutions such International Monetary Fund (IMF), World Bank and the USAID, and currently showing tremendous support for sustainable development projects and programmes, Mozambique would have to stay focused and stay clear of the complexities and contradictions of the Russia-Ukraine crisis.

Mozambique needs to seriously concentrate on and pursue its plans of exporting liquefied natural gas (LNG), extracted from the Coral South field, off the coast of Palma district, in the northern province of Cabo Delgado, possibly starting this October. It marks an economic turning point and opens a new chapter for its revenue sources.

According to our research, Mozambique will become the first country in East Africa to export LNG. It will be produced on a floating platform, belonging to a consortium led by the Italian energy company, Eni. The platform, built in a Korean shipyard, arrived in Mozambican waters in January and is now anchored in Area Four of the Rovuma Basin, some 40 kilometres from the mainland.

This is the first deep-water platform in the world to operate at a water depth of about two thousand meters. The Coral South project is expected to produce 3.4 million tons of LNG per year over its estimated 25-year lifespan.

A second project is planned for Area One of the Rovuma Basin, where the operator is the French company TotalEnergies. The planned LNG plants for this project, are onshore, in the Afungi Peninsula of the Palma district. The jihadists seized Palma town in March 2021, and TotalEnergies withdrew all of its staff from the district. Subsequently, the Mozambican defence and security forces and their Rwandan allies drove the terrorists out of both Palma and the neighbouring district of Mocimboa da Praia.

The current global economic situation is changing, and competition and rivalry for markets are also at their height. During the past months, Russia has cut its export of gas as a reciprocal action against European Union members and has redirected its search for new clients in the Asian region. It has already offered discounted prices to China and India, and now looking beyond Africa.

United States Special Envoy to the United Nations, Thomas-Greenfield, has made one point clear in her speeches with African leaders that “African nations are free to buy grain from Russia but could face consequences if they trade in U.S.-sanctioned commodities such as oil from Russia.”

“Countries can buy Russian agricultural products, including fertilizer and wheat,” Linda Thomas-Greenfield said. But she added that “if a country decides to engage with Russia, where there are sanctions, then they are breaking those sanctions. We caution countries not to break those sanctions because then … they stand the chance of having actions taken against them.”

Russian Ambassador to Mozambique, Alexander Surikov, after a meeting with the Confederation of Economic Associations of Mozambique (CTA), had proposed that the Mozambican authorities could buy Russian oil in roubles after Moscow presented the option to Maputo. Ambassador Surikov further expressed Russian companies’ continuing interest in investing in Mozambique. Likewise, the possibility was raised of Russia opening a bank in Mozambique focused on supporting bilateral trade and investment.

Russia previously had a VTB bank in Maputo, later involved in opaque deals. It was a financial scandal involving three fraudulent security-linked companies, and two banks – Credit Suisse and VTB of Russia, relating to illicit loan guarantees issued by the government under former President Armando Guebuza. Until today, it is popularly referred to as the “Hidden Debts” scandal involving US$2.7 billion (€2.3 million), the financial scandal that happened in 2013.

In the aftermath, financial institutions exited, projects were abandoned and this southern African country has struggled to rebound economically. Now they are returning with new financial assistance programmes that would promote sustainable and inclusive growth and long-term macroeconomic stability.

In the context of the current cereal crisis, one other issue that the ambassador raised was how Mozambican companies could have direct access to Russian wheat suppliers. In this regard, it was not clear how Russian wheat would enter the market and how it would be paid for because Mozambique uses principally the US dollar in its foreign transactions, and Russia cannot conduct transactions using the US currency due to the sanctions imposed following the invasion of Ukraine.

“The rouble and the medical are worthy currencies that do not need the benevolence of some other countries that control the international system,” the Russian diplomat explained, adding that Moscow wanted to strengthen cooperation with Maputo.

Nonetheless, Minister of Mineral Resources and Energy of Mozambique, Carlos Zacarias, admittedly the possibility of buying Russian oil in roubles. “I am sure that we will study and verify the feasibility of this offer from Russia. If it is viable, for sure Russian oil will be acquired in roubles,” Carlos Zacarias said.

Mozambique’s receptivity to the Russian proposal stems from the fact that the world is experiencing a peculiar moment, characterized by great volatility in oil prices on the international market as a result of the Russia-Ukraine war.

Mozambique was among the countries that abstained on two resolutions that were voted on by the General Assembly of the United Nations, one condemning Russia for the humanitarian crisis in Ukraine as a consequence of the war and the other suspending Moscow from the Human Rights Council.

The Mozambican Liberation Front (Frelimo, the ruling party) was an ally of Moscow during the time of the former USSR and received military support during the struggle against Portuguese colonialism and economic aid after independence in 1975.

Mozambique and Russia have admirable political relations. Mozambique has to focus on trade and economic development with external partners. According to data provided by CTA, the annual volume of economic transactions between Mozambique and Russia is estimated to be, at least, US$100 million (€98.5 million at current exchange rates).

Experts aptly point to the fact that there is a tremendous opportunity window for Mozambique. With partners including ExxonMobil Corp., China National Petroleum Corp. and Mozambican state-owned Empresa Nacional de Hidrocarbonetos, Mozambique has to move towards its own energy development. These past few years, experts have also reiterated adopting a suitable mechanism, mapping out strategies and utilizing financial support for sustainable development.

Mozambique has considerable gas resources and the right decision is to move toward both an onshore concept and an offshore concept. The ultimate goal has to establish connectivity between its resource exploration and national development. The idea is to foster economic relations based on its domestic development priorities. And consequently, it has to determine influential external investment partners ready to invest funds and, in practical terms, committed to supporting sustainable development in the country.

The Mozambique LNG offshore project, valued at around $20 billion, aims to extract about 13.12 million tonnes of recoverable gas over 25 years and generate profits of US$60.8 billion, half of which will go to the Mozambican state.

The process to achieve this task has started and would generate 14,000 possible jobs in phases – first creating 5,000 jobs for Mozambicans in the construction phase and 1,200 in the operational phase, with a plan to train 2,500 technicians and so forth. These projects also have a great capacity to create indirect jobs, with foreign labour decreasing throughout the project and Mozambican labour increasing. Most of these jobs are expected to be provided by contractors and subcontractors.

Several corporate projects came to a halt due to armed insurgency in 2017 in Cabo Delgado province. The entry of foreign troops to support Mozambican forces in mid-2021 has improved the security situation. Since July 2021, an offensive by government troops was fixed, with the support of Rwandans and later by the Standby Joint Force consisting of forces from members of the Southern African Development Community (SADC).

Cabo Delgado province, located in northern Mozambique, is rich in natural gas. Although the gas from the three projects approved so far has a destination, Mozambique has proven reserves of over 180 trillion cubic feet, according to data from the Ministry of Mineral Resources and Energy. With an approximate population of 30 million, Mozambique is endowed with natural resources. It is a member of the Southern Africa Development Community (SADC) and the African Union.

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