Energy sector key to unlocking Sub-Saharan Africa’s economic growth

14 October 2014

Sub-Saharan Africa’s energy resources are more than sufficient to meet the needs of its population, but because they are largely under-developed the region is struggling to reach its potential, according to a new International Energy Agency (IEA) report

The Africa Energy Outlook report states that 30% of global oil and gas discoveries were made in sub-Saharan Africa over the last five years and, already, the region is home to several major energy producers including Nigeria, South Africa and Angola. On the renewable energy front, the region is endowed with huge renewable energy resources, including excellent and widespread solar and hydro potential, as well as wind and geothermal.

In line with Africa’s impressive economic growth over the past years, investment in the sub-Saharan energy supply has also recorded an increase. Unfortunately, two- thirds of the total investment since 2000 has been aimed at developing resources for export. In addition, grid-based power generation capacity continues to fall very far short of what is needed, with half of it located in one country – South Africa.

Growing energy demand

The region has potential to develop. The report foresees the sub-Saharan economy quadrupling in size by 2040, the population nearly doubling to over 1.75- billion and energy demand growing by 80%.

“Power generation capacity also quadruples: renewables grow strongly to account for nearly 45% of total sub-Saharan capacity, varying in scale from large hydropower dams to smaller mini- and off-grid solutions, while there is greater use of natural gas in gas-producing countries,’ states the report.

By 2040, Nigeria will be producing the bulk of the 230-billion cubic metres of natural gas in the region, whilst Mozambique, Tanzania and Angola will increase output. The region will up oil production to exceed six million barrels a day in 2020, before falling back to 5.3-million barrels a day in 2040. Adding, the report states coal supply will grow by 50%, with South Africa the leading producer.

Energy outlook bittersweet

On the capacity and efficiency of the region’s energy system, the reports draws a mixed picture. It sees the energy system growing as does demand placed upon it.

“In 2040, energy consumption per capita remains very low, and the widespread use of fuelwood and charcoal persists. The outlook for providing access to electricity is bittersweet: nearly one billion people gain access to electricity by 2040 but, because of rapid population growth, more than half a billion people remain without it. Sub- Saharan Africa also stands on the front line when it comes to the impacts of climate change, even though it continues to make only a small contribution to global energy- related carbon dioxide emissions.’

The huge number of people without electricity in the region – 620-million people or two-thirds of the population – is a main challenge for African countries. But there are solutions to sub-Saharan Africa’s energy conundrum. African countries can increase access to modern forms of energy as a way to unlock faster economic growth and social development, according to the report.

Energy solutions

“A better functioning energy sector is vital to ensuring that the citizens of sub- Saharan Africa can fulfil their aspirations. The energy sector is acting as a brake on development, but this can be overcome and the benefits of success are huge,’ comments IEA Executive Director Maria van der Hoeven.

IEA Chief Economist Fatih Birol says: “Economic and social development in sub- Saharan Africa hinges critically on fixing the energy sector. The payoff can be huge; with each additional dollar invested in the power sector boosting the overall economy by $15′.

The report suggests three actions that can boost the sub-Saharan economy by a further 30 % and deliver an extra decade’s worth of growth in per-capita income by 2040.

These actions are:

  • An additional $450 billion in power sector investment, reducing power outages by half and achieving universal electricity access in urban areas
  • Deeper regional co-operation and integration, facilitating new large-scale generation and transmission projects and enabling a further expansion in cross-border trade
  • Better management of energy resources and revenues, adopting robust and transparent processes that allow for more effective use of oil and gas revenues

Besides boosting economic growth, the actions above will help bring electricity to an additional 230-million people by 2040, according to the report.

“They result in more oil and gas projects going ahead and a higher share of the resulting government revenues being reinvested in key infrastructure. More regional electricity supply and transmission projects also advance, helping to keep down the average cost of supply.’

However, these actions will have to be accompanied by broad governance reforms for sub‑Saharan Africa to achieve more rapid path to a modern, integrated energy system for all, warns the report.

SAinfo reporter