By NJ Ayuk, Executive Chairman, African Energy Chamber (https://EnergyChamber.org).

For more than a year, the African Energy Chamber (AEC) has been pushing back against steadily building pressure to halt new foreign investments in Africa’s oil and gas industry.

To prevent catastrophic climate change, environmental organizations, financial organizations, and governments across Europe and North America have insisted that developing nations, including those in Africa, must immediately transition from fossil fuel production and usage to renewable energy sources like solar, wind, and hydrogen. Mind you, the majority of those making these demands are based in industrialized nations that were built on fossil fuels — oil and gas fueled their economic engines — yet they are unwilling to allow less developed nations to use fossil fuels to the same end. Even more troubling, the countries these groups are taking aim at have a wealth of natural resources under their feet, resources that can be monetized and used to build a better future.

We have explained, over and over, why African countries, businesses, and communities still need support from international oil companies (IOCs), foreign governments, and investment institutions for oil and gas projects. IOCs, for example, play an important role in knowledge sharing and helping Africans build valuable job skills. What’s more, foreign oil and gas investments create opportunities for revenue that can be used to build and improve energy infrastructure — for both fossil fuels and renewables. And, by supporting natural gas projects, investors create a path for gas-to-power projects that help minimize the continent’s widespread energy poverty.

In July 2021, when it became apparent that reasoning was not yielding results, the chamber went so far as to employ the same tactics the international community used against our members. We called for boycotts against financial institutions that discriminated against the African oil and gas industry.

But the calls to stop financing African oil and gas have only grown louder and more insistent. Most recently, during the 2021 United Nations Climate Change Conference (COP26) in Glasgow, more than 20 countries and financial institutions pledged to stop public financing for overseas fossil fuel projects. Europe then decided that gas was clean for Europe so it will be financed but for Africa, gas is dirty and will receive no funding. The United Kingdom and the European Union have also reportedly joined in the chorus of voices demanding a ban against developed nations providing subsidies for fossil fuels.

Other expectations for this year’s conference include calls for member states to formally commit to triple their renewable energy capacity and double their energy efficiency across the board by 2030.

The thread tying all these pledges together, with respect to our work at the AEC, is that none of them bode very well for any future success stories from the African energy economy.

For those of us who care about Africa’s oil and gas industry, it’s time to face facts: We need to find a way to save it ourselves. The AEC is calling upon African states and the private sector to fund the African Energy Bank, an institution which is focused on funding African energy projects. The African Petroleum Producers Organization (APPO) and the African Export-Import Bank (Afreximbank) have paved the way. The idea is to create funding sources for all types of African energy — from oil and gas exploration to solar and hydrogen operations — so that projects will not be dependent on foreign support.

We can do this, and we must. Too much is at stake. We can’t afford not to capitalize on recent discoveries such as the light oil found offshore Angola, the oil in Namibia's Orange Basin, the shale gas in South Africa’s Karoo Basin, or the oil and natural gas off the coast of Côte d'Ivoire. Those are only a few of the important discoveries that occurred recently, and each represents critical opportunities for everyday Africans.

You may be wondering if African energy banks are a realistic goal. How can a continent that is struggling to bring many of its people out of poverty raise capital for energy projects? I believe it can be done. To begin with, African governments can set aside a percentage of their oil and gas revenues for new project funding. In its report, Africa Energy Outlook 2021, Rystad Energy projected that African governments’ earnings from royalties, profit oil, and other taxes in 2021 would reach USD 100 billion. Even 1% of that amount would produce USD 1 billion dollars.

We can also raise capital by investing African pension funds in African energy projects. According to Cape Town-based investment firm, RisCura, local pension funds collectively manage around USD 450 billion of assets in sub-Saharan Africa, and they are actively looking for new places to invest. Why not encourage them to add oil, gas, and renewables projects to their list? Investing pensions in the energy sector is hardly a new practice. Some of America’s largest pension funds are invested in fossil fuel producers, and an increasing amount of pension funds around the globe are investing in green energy projects.

Our options for raising capital don’t end there. We should also seek the support of wealthy Africans who want to invest in a better African future. As of December 2023, total private wealth in Africa totaled approximately USD 2.3 trillion. That’s not even including the African diaspora.

In May 2022, Afreximbank signed an agreement with APPO on the joint establishment of a special multi-lateral financial institution (MFI) – the African Energy Bank – to provide support for the shift away from fossil fuels. The agreement calls for APPO’s member states to provide equity for the new institution and serve as its founding members, with Afreximbank acting as co-investor and providing organizational support.

The new bank will be able to reach more countries than either APPO or Afreximbank could do on their own, as their rosters are not identical: APPO has 15 member states, while Afreximbank has 51 and there is a significant amount of overlap, as Algeria and Libya are the only APPO members that are not also Afreximbank members. But the point remains that if the two institutions join forces, their combined efforts will go further.

Professor Benedict Oramah, the President of Afreximbank, explained it as follows in May 2022: “For us at Afreximbank, supporting the emergence of [the Africa Energy Bank] will enable a more efficient and predictable capital allocation between fossil fuels and renewables. It will also free human and other resources at Afreximbank that will make it possible to support its member countries more effectively in the transition to cleaner fuels.”

Not only do we have pathways for raising capital, we also have an example of the kind of banks Africa needs to finance its own energy projects, one that goes back decades.  I’m talking about Afreximbank. In 1993, African governments worked with public and private investors to create a bank that would finance, promote, and expand intra- and inter-African trade. They succeeded. In 2020, Afreximbank received the Africa-America Institute’s (AAI’s) Institutional Institution of Excellence Award for its commitment to the creation and implementation of the African Continental Free Trade Agreement and its ongoing dedication to investing in education. AAI noted that between 2015 and 2019 alone, Afrieximbank disbursed more than $30 billion in support of African trade, including more than $15 billion for the financing and promotion of intra-Africa trade.

I say, let’s build on Afreximbank’s model. And not only that, let’s cultivate a pool of investors who recognize and appreciate the importance of oil and gas to Africa. Capital from foreign countries and companies will always be welcome — as long as it isn’t predicated on phasing out fossil fuels on their timeline. If they’re pushing a rush to renewables, they’re not going to be part of our solution.

With the support of one or more African energy banks, local oil and gas companies will have the financing necessary to acquire assets. They’ll have the financing to build crude and gas pipelines across Africa and to facilitate the use of natural gas (including LNG) to power Africa, minimizing energy poverty and driving industrialization.

And African states and entrepreneurs will be able to finance the development of renewable energy operations, particularly blue, green, and grey hydrogen operations that create additional opportunities for Africans. Africa already has emerging green hydrogen operations in Mali, Namibia, Niger, and South Africa, and with the proper funding, could become a major green hydrogen exporter.

The AEC will support the energy bank initiative and work to bring potential participants together. Creating our own institutions to finance energy projects will send a clear signal to the marketplace that Africans are seeking to become leaders in scaling up private capital. It will show that we are advancing natural gas development and infrastructure while supporting low-carbon investments.

With the financing in place, not only will African companies be able to produce oil and gas, but they will also support local community development, develop green energy markets, and create jobs.

For many African countries, the oil and gas industry represents our best shot at giving millions of Africans the kind of jobs, living standards, and stability that developed countries have enjoyed for well over a century. We must hold fast to these goals and do what it takes to achieve them.