By NJ Ayuk, Chairman, African Energy Chamber
Ahead of the November 2022 United Nations Climate Change Conference (more commonly known as COP27) in Egypt, Dr. Benedict Oramah, president and chair of Afreximbank, authored a thoughtful and compelling commentary about the economic and social impact of divestment from the production of fossil fuels in Africa.
With fossil fuel use creating 65% of greenhouse gas (GHG) emissions, divestiture is at the heart of the global climate change agenda, and many Western banks are no longer financing investments in African oil and gas.
Dr. Oramah is not a climate science denier nor a fossil-fuels-at-all-cost advocate. In his paper, he is upfront and honest about the effect rising temperatures have already had on the continent, citing the devastation brought by extreme weather events — disastrous rainstorms on one hand, catastrophic droughts on the other. He casts a wary eye on the future, recognizing that developing parts of the world like Africa are at greater risk from climate change than are developed nations.
In his commentary, “Transiting to green growth in fossil export-dependent economies: A pathway for Africa,” Dr. Oramah acknowledges that urgent climate action is vital, that the time for foot-dragging is over. https://onlinelibrary.wiley.com/doi/full/10.1111/1758-5899.13139?campaign=woletoc
At the same time, Dr. Oramah doesn’t overlook the fact that fossil fuels financed by foreign capital have been the economic engine of many African nations. Nor does he neglect to mention that, as major oil companies find themselves on the receiving end of divestment pressure and seek “less risky” assets, investment in the continent’s oil and gas sector has fallen significantly, from $60 billion in 2013 to $22.5 billion in 2020 by African Energy Chamber estimates. One shudders to think what would happen to the continent’s major oil-exporting countries — including Algeria, Angola, Equatorial Guinea. Gabon, Congo Republic, and Nigeria, where fossil fuels represent anywhere from 7% to 37% of GDP — should the industry evaporate altogether. As Dr. Oramah notes, “divesting from fossil fuel could cut as much as $30 billion off Nigeria’s GDP and almost $190 billion off the continent’s GDP.” The social and economic repercussions — some of which are already playing out as investment has tightened — would be profound as export earnings and revenues dry up, fossil fuel-dependent factories shutter, the already limited fossil fuel-powered grid is strained further, jobs are lost, and poverty ripples even farther through even more communities.
And, of course, the backdrop to all this is the fact that nowhere else is there an electricity deficit like Africa’s. Six hundred million people still live without a reliable source of power.