Sustainable Economic Growth in the African Energy Sector and the Multifaceted Role of the AEB

Chinenyenwa Owuamalam

In navigating Africa’s journey towards energy security and economic growth, the enormous benefits of its fossil fuels remain undisputed. Africa has over 125 billion barrels of proven crude oil reserves and hundreds of trillions of cubic feet of established gas reserves, with more discoveries emerging across the continent. This natural resource continues to power industries, generate revenue, and create jobs, playing a pivotal role in the development of the continent.

Traditional fossil fuels like petroleum and gas, are crucial in powering African economies, which are largely dependent on the petroleum sector for their foreign exchange, fiscal revenues and economic growth. Africa also boasts a diverse energy mix, such as renewable energy resources including abundant sunlight, hydroelectric power, strong winds and geothermal energy. 

Approximately 60% of the world’s best solar resources are concentrated in Africa, making it a prime location for harnessing solar power. Conversely, over 600 million people in Africa currently lack electricity and the majority of Africa’s over 1.5 billion citizens live without access to basic amenities such as affordable health care, housing and clean water. This energy sector deficit greatly hinders economic growth and social development for the continent.

Africa is on the verge of a momentous energy sector transformation with the establishment of the African Energy Bank (AEB). A joint initiative of the African Export-Import Bank (Afreximbank) and the AfricanPetroleum Producers’ Organization (APPO), the AEB is established as a Pan-African financial institution designed to support investments in Africa’s energy projects and accelerate Africa’s economic development. 

In the words of Professor Benedict Oramah, the President and Chairman of the Board of Afreximbank, “…supporting the emergence of [the Africa Energy Bank] will enable a more efficient and predictable capital allocation between fossil fuels and renewables…that will make it possible to support its member countries more effectively in the transition to cleaner fuels.” 

The gains of financing clean energy technologies far outweigh the burden and the urgent need for energy access in Africa underscores the importance of this commitment. Given the far-reaching reforms it proposes to an industry which is the single most significant contributor to African wealth, the AEB is poised to address funding hitchesand the enduring inefficiencies hindering remarkable progress in the African energy sector by ensuring the equitable financing of energy projects across Africa to drive sustainable economic growth.

The AEB’s mission is highly commendable. To fullyharness the full potential of Africa’s energy landscape, the overarching purpose of the AEB should be to strike an appropriate balance between financing energy projects for economic prosperity and addressing the environmental challenges arising from the activities of the energy sector, particularly those related to environmental degradation and climate change. 

The AEB must therefore give due consideration to diversifying Africa’s energy mixthrough the integration of complementary energy solutions that address Africa’s immediate energy needs. 

The integration of sustainable practices in the African energy sector by AEB will ensure that Africa can satisfy its immediate energy needs and develop the continent, without compromising its commitment to environmental stewardship. Investments in renewable energy projects have the tendency to create millions of new jobs across Africa which materially impacts Africa’s workforce, thereby contributing to economic growth and poverty reduction. 

Studies reveal that renewable energy projects can create up to 20% more jobs per unit of electricity generated compared to traditional fossil fuel projects. In fact, it is also estimated that Africacould generate 10 terawatts of solar energy which is significantly more than its current electricity demand. 

These vast potentials offer a sustainable solution to Africa’s energy security challenges and further spotlight AEB’s vision to promote inclusive growth by ensuring that the spoils of energy development are distributed across individuals and communities in Africa, particularly, the grassroots. The AEB should therefore not only scratch the surface of conversations on sustainability but must also innovate and engage with industry stakeholders to draw up blueprints to guide and prosper the sector.

The role of law and policy in ensuring a balancebetween sustainability and energy sectordevelopment will continuously be tested. The AEB is uniquely positioned to lead transformation in the African energy sector by developing policies which align with the global and regional sustainability pactsto which its African member countries are subscribed. 

The complexity of integrating sustainable practices into the energy sector may be particularly challenging but the AEB must be primed to remain ahead of the game. As a step in the right direction, the enactment of a novel framework to embodyAfrican Sustainable Energy Principles should be effectuated by the AEB. 

The proposed Principles once implemented would sustain the social license of AEB to operate, by incorporating community and human investment programmes, especially in the oil-producing regions across Africa. 

This approach is also a business promoting opportunity, as it can enhance the reputation, public opinion, competitiveness and resilience of the AEB, without downplaying the importance of foreign investmentsand partnerships. Another corporate consideration for the AEB would be to establish from inception, avibrant in-house sustainability office comprisingexperienced and skilled professionals, driven by a shared mandate to develop groundbreaking policies on sustainability in the African energy sector. 

These guidelines will propel the AEB to become the financial anchor of the African energy sector with a robust portfolio in clean energy investments.

Though the challenge to maintain an equilibrium between energy security, affordability andsustainability remains, the AEB is presented with the golden opportunity to lead Africa into an era of unprecedented growth by pioneering the positive trajectory for sustainable economic development in the African energy sector.

 *Chinenyenwa Owuamalam is a distinguished Nigerian lawyer with extensive experience spanning fourteen years in the energy, financial, government and legal sectors