Following through on G20 energy commitment to Africa (1)
Between September 4 and 5 this year, heads of 20 of the world’s wealthiest countries gathered in the southern Chinese city of Hangzhou for the annual G-20 summit. A group that collectively accounts for about 85 percent of the world’s GDP, 80 percent of world trade and two thirds of the world’s population, surely deserve more than a fleeting attention, especially as it concerns Africa’s bothersome energy challenges.
After deliberations in China, the forum came up with a communiqué agreeing to launch an initiative to support industrialisation in Africa to strengthen the continent’s inclusive growth and sustainable development potential. China, with strategic investments in Africa was at the fore-front making a case for a programme to industrialise the continent.
The forum came to the conclusion that the push towards Africa’s industrialisation will be achieved through voluntary policy options, which include supporting sustainable agriculture and agro-industry development, deepening the local production base and promoting investments in renewable energy while promoting science, technology and innovation as critical means for its industrialisation.
Being true to commitments
While this decision bodes well for Africa, scepticism abounds about the group’s ability to live up to this commitment. During the 2009 G-20 summit in Pittsburgh, the forum agreed to phase out inefficient fossil-fuel subsidies that encourage wasteful consumption and hurts the environment. But the many G-20 member countries are still subsidizing efforts to tap new coal, oil and gas reserves.
Member nations of the G-20 have also had difficulties following through on their commitments due to their diverse, sometimes, competing interests on the continent. Africa is seen as the frontier for new investments with abundant natural resources and vastly untapped human capital but all too often Africa has been on the losing end of many of such engagements.
A recent International Energy Association (IEA) report said China accounted for 30 percent of new capacity additions in sub-Saharan African power sector projects over the last five years spending about $13 billion on 200 projects purported to deliver 17 gigawatts of power yet over 600 million people in sub-Sahara Africa, according to the World Bank have no electricity.
Last year, the United States unveiled a new financing programme to boost support for a range of Africa-based initiatives aimed at expanding development of Africa’s power infrastructure. The package included an additional $1billion commitment to the US-led Power Africa initiative up to 2018 by the US Overseas Private Investment Corporation (OPIC).
It becomes a challenge harmonising the goals of these investments and drawing the line between altruistic intentions and plain exploitation. Notwithstanding, following through on agreed commitments is challenging. “In spite of G-20’s endorsement on paper, it’s quite another story to implement the group’s sustainable development agenda for Africa”, said Barry Sautman, a political scientist at the Hong Kong University of Science and Technology.
This notion is fuelled by the fact that these nations have divergent levels of interests and engage in intense competition among themselves for exploitation of Africa’s resources. It remains to be seen how they will be work together to unlock Africa’s potential.
Hiccups in keeping commitments
The G-20 forum’s inability to live up to their commitments to Africa is largely due to inability to harmonise policies and develop a coherent framework for engagement.
The first step to addressing this challenge is abandoning self-interest and work towards the larger good of the continent as Africa’s energy poverty and lack of industrialisation have grave consequences for the rest of the world. Migration and terrorism are social ills a productive populace would find less attractive.
A case-by-case and project-by-project basis has been suggested by experts as the best way to consider Africa-bound investments and following through on commitments made. A clear time-table for carrying out decisions reached, ensuring full transparency of investments and creating a mechanism to monitor compliance are factors that will help address the problem.
The United Nations Sustainable Energy for All initiatives launched in 2012 with a goal of providing universal access to modern energy services by 2030 has been constrained by huge financing gaps. To achieve its objective, substantial financial and technological investments will be required at a rate far exceeding historical levels.
Sub-Saharan Africa has about 30 percent electrification rate.Policy reform issues to improve electrification have been poorly implemented raising concern as to the possibility of the region giving power to an estimated 600million people without access to power.
Guarantying stable access to electricity for all by the year 2030will require closing the yawning financing gap as Sub-Saharan Africa faces a tough challenge attracting investments into the power sector. While a guarantee of power purchase has been shown to attract energy sector investments, guarantees of power purchases such as Feed-in Tariffs, are experiencing slow market growth in the region because of a range of technical, regulatory and financial barriers.
A recent international Conference on Financing for Development in Addis Ababa offered an opportunity for global leaders to join forces and commit to the necessary changes. The new Addis Ababa Action Agenda, a comprehensive agreement reached at the end of the Conference, provides a foundation for innovative, scaled up financing of the global sustainable development agenda, including the energy sector.
It called on African leaders to craft policies that will increase energy investment to the region from current levels of $8billion a year to the desired rate of $55billion a year until 2030. Analysts say a ten-fold increase in power generation is needed to achieve the United Nations sustainable development goal of universal access to energy by 2030; if current trends continue, the goal will not be reached until 2080.
However there are bright prospects. Among those G-20 nations; China has emerged Africa’s largest trading partner, exchanging some $200 billion-worth of goods annually. China has also been aggressive in tapping the continent’s natural resources and taking part in its infrastructure building. It is innovating smart business models to navigate the challenging business terrain. In Nigeria it even accepts payment in crude oil to finance projects.
During his visit to South Africa in December, Xi Jinping, Chinese President pledged another round of funding support to Africa, at $60 billion. The new package, which is almost twice as large as the $30 billion worth of funding announced in 2012, will cover 10 major areas including agriculture, renewable energy and infrastructure development.
But more is required especially for a continent that contributes very little to global greenhouse gas emissions but is at the receiving end of some of the worst climate change impacts. The current drive to increase renewable energy investments especially solar, wind and hydro opens new opportunities to include the millions of Sub-Saharan African nations without access to reliable power.
ISAAC ANYAOGU