African ministers representing around two-thirds of the continent’s energy consumption, 60% of GDP and nearly half of its population met with global energy leaders via videoconference on 30 June 2020. As Africa’s energy sector faces the dual impacts of the Covid-19 pandemic and global economic recession, participants agreed that sound government policies and enhanced investment are more important and necessary than ever to enhance the continent’s economic transformation; ensure sufficient, affordable, reliable energy for all citizens; and drive inclusive, just and sustainable, energy transitions.
2020 started as a year of optimism across Africa’s energy sector. But continued energy progress is now uncertain, as Africa – like the rest of the world – faces the wide-ranging impacts of the Covid-19 crisis. The International Monetary Fund expects sub-Saharan Africa to enter into recession for the first time in 25 years as a result of the coronavirus crisis, with growth falling to -3.2% in 2020 from 3.1% in 2019. Many African economies also have limited fiscal capacity and are heavily indebted, undermining their ability to absorb these economic shocks. The energy sector has not been spared.
Electricity – Participants welcomed the good progress made in many African countries in recent years, including accelerating growth in renewable energy and increasing access to electricity, but expressed concern that the Covid-19 pandemic and global economic shocks are testing the resilience of the energy sector in countries across Africa. The Covid-19 crisis has severely impacted progress on energy access and lockdown measures have put off-grid developments at risk and weakened the financial health of decentralized service providers. Confinement policies and the consequent drop in energy demand in some countries is increasing pressure on power systems, calling into further question the financial health of state-owned utilities that were already under financial stress.
Oil and Gas – Participants also noted that the disruption to global oil and gas markets has delivered a sudden and sharp drop in export revenue, increasing fiscal pressures on key producer economies across the continent. As a result, new investments may face delay or cancellation in the post Covid-19 global and energy sector financial environment. Continued uncertainty could create new risks, compounding security and sustainability challenges in the longer term. At the same time, lower oil prices could make access to clean fuels and modern cooking ones more affordable, as liquid petroleum gas prices (LPG) are 40% lower that 2019, but also considerably more volatile. Expansion of LPG services could create new jobs in manufacturing, transport, bottling, distribution as well as retail. Also, the importance of securing the African energy supply through modern and larger storage capacities over the continent was noted.
Sustainable, Inclusive Transitions – Participants also underscored the importance of supporting Africa’s energy transitions. This includes strengthening the enabling environment for investment, both in infrastructure and all relevant technologies, and continuing to prioritise attainment of the Sustainable Development Goals while ensuring just and inclusive outcomes. The importance of strengthening and developing local capacity and capabilities, especially through training, was also largely emphasized by many Ministers. Finally, participants welcomed the IEA sustainable recovery plan to help guide governments – including in Africa — through and beyond the crisis.
Key conclusions – Participants stressed the following top recommendations going forward:
- An efficient secure, affordable and sustainable power sector is vital to Africa’s economic recovery and transformation, and its ability to enhance resiliency to other challenges over time.
- Enhancing investments in new grids, (national and mini-grids) and in the off-grid sector as well as in generation facilities are essential to ensure a resilient and reliable power sector that can drive economic recovery.
- Setting bold energy sector priorities and plans today can enable much-needed investments to stimulate broader economic growth tomorrow, including creating employment opportunities, supporting new skill development, unleashing the creativity of African entrepreneurs across the African continent and creating wealth.
- Africa’s oil and gas exporters, who have been severely impacted by the crisis, can seize the opportunity to re-evaluate their strategies to generate the most value and jobs across their economies and to promote broader economic diversification.
- To secure energy supplies and development in many Africa countries, increase oil storage capacities and product stocks; upgrade refineries to produce higher quality products that are less polluting; and build local capacity and skills through training.
- Low oil prices, in particular liquid petroleum gas (LPG), could open the door to advance clean cooking access; LPG services could also create jobs.
- Maintaining focus on universal access to electricity and modern cooking is essential, especially in Africa; African governments and other partners should continue to work together to ensure progress toward SDG7.
- Enhanced regional and international cooperation can play an important role in helping to build robust, affordable, sustainable and resilient energy systems across the continent.
The outcomes of this ministerial roundtable will be shared with key global decision-makers, governments, international financial institution, business leaders including for the IEA Clean Energy Transitions Summit on 9 July 2020 and AUC-IEA Ministerial Forum in South Africa in November 2020. The outcomes will also help guide and inform the IEA’s increasing efforts in Africa, including helping to inform key decision-makers from governments, companies, investors and organizations.