African countries are among the global leaders in natural resources, including estimated reserves of 125 billion barrels of oil and 620 trillion cubic feet of natural gas. And yet the continent also contains nine of the ten countries with the lowest human development index (HDI).
With appropriate investment, Africans could be using their fossil-fuel resources to provide income and to power their economy. But traditional western backers favor renewable energy investments. This leaves potentially lucrative oil and gas projects undeveloped and Africa seeking new funding—from within and perhaps also from Gulf states.
Within the continent, a coalition of 18 oil-producing African countries—including major producers like Nigeria, Angola, and Libya—are aiming to raise $5 billion to launch the Africa Energy Bank, which would fund back projects throughout the continent.
Member countries are each being asked to contribute $83 million to the bank, raising almost $1.5 billion, according to the Financial Times. Their contributions would be matched by the African Export-Import Bank, a pan-African multilateral financial institution established in 1993 to finance, promote, and expand intra- and extra-African trade.
That leaves $2 billion that needs to be raised from outside sources, but Western funders remain hesitant. The 2015 Paris Climate Agreement has led Western investors to reduce funding for fossil fuel projects in Africa as they prioritize sustainability and renewable energy.
“The World Bank stopped financing upstream oil and gas projects in 2019 while the African Development Bank, which has the U.S. as its number two shareholder, does not put money into fossil fuel projects,” according to the Financial Times.
In lieu of western funders, Gulf states are being eyed as potential contributors to the Africa Energy Bank.
Inequity of industrialization—and GHG emissions
Africa has contributed much less to climate change than the more developed countries of the West.
Despite having 17% of the world’s population, Africa’s total contribution to greenhouse gas (GHG) emissions, the main driver of climate change is low, at about 3.5%, Al Jazeera notes. Meanwhile, only about 14% of Africa’s labor force is employed in industry (including manufacturing, mining, construction, and utilities), compared to around 20% in more developed regions.
At the nexus of these factors—inequity in fossil fuel use, inequity in industrialization, and the need for further industrialization in Africa—the continent finds itself in a troubling dilemma.
“[At] a time when the poorer countries of the world, especially on the African continent, are poised to also use energy to develop their economies and their peoples, someone remembered that fossil fuels are dangerous to humanity,” says Dr. Omar Farouk Ibrahim, Secretary General of the African Petroleum Producers Organization (APPO), which is driving the Africa Energy Bank.
The African continent—already saddled with a history of colonial era resource extraction, brain drain, and weakened political institutions—now must balance the need for economic growth with commitments to international climate agreements established by Western countries, according to the Secretary General.
“These countries sponsored scientific studies to prove what they had known for over a century, but deliberately decided to conceal because it was not in their interest to do so at that time,” he adds.
Looking to the Gulf
While the West and China have been involved in competition over investments in African resources, there is speculation that the funding to launch the Africa Energy Bank could come from another place.
“The remainder of the funds will be sought from other sources including Gulf states, banks and other institutions, sovereign wealth funds, cash-rich traders and international banks interested in taking an equity stake,” according to the Financial Times.
The Arabian Gulf, an often-overlooked player in global affairs, could provide the funding these Africa countries have been seeking. The UAE is now “going toe to toe with Beijing” for influence in Africa, according to Ken Opalo of Georgetown University.
Recently, the Emirates has emerged as one of the top four investors on the continent. A UAE official told the Financial Times that the country’s total investments in Africa have reached $110 billion, reflecting “the UAE’s commitment to facilitating sustainable development and growth across the continent.”
As the financial relationship between the Gulf continues to expand and frustration with Western imposed regulations grow, the need for investment is seemingly driving Africa to look east rather than west.
