Africa’s Role in the Future of the Global Energy Sector

Africa-energy-150x150As the developed world struggles with decisions concerning fossil fuels and their availability and cost, businesses in Africa and globally have started to think more about how extensive the continent’s capability in that sector might be.

While roadblocks still exist, panelists at a Wharton Africa Business Forum said that with patience and an emphasis on the right niches, Africa could be a major player in the world’s energy future.

Nigeria and Angola already produce more than two million barrels of oil a day, panelists noted, and countries including Equatorial Guinea, Chad, Gabon, Cote d’Ivoire and Ghana have found some reserves. Nigeria also leads the continent in production of natural gas, having produced more than 23 billion cubic meters of natural gas per year since 2009. Other countries have started to develop reserves as well, particularly Mozambique, South Africa, Cote d’Ivoire, Gabon and Senegal.

With 170 million people — the largest population in Africa — Nigeria in many ways is the focus of energy activity on the continent, panelists said, but the nation also presents a microcosm of the challenges that the energy production and distribution sectors face there.

“Seven years ago, [the Nigerian government] had a natural gas master plan,” said Lolu Adubifa, CEO of Lavayo Energy, a power generation and oil and gas industry development and advisory firm based in Lagos, Nigeria’s capital. “Where they are today — well, there has not been much progress.”

Adubifa noted that he has learned to be patient but that it “takes a while to get that mindset.” Many entrepreneurs, he added, think that they can quickly move a project from being 20% completed to 80%. “But in this industry and in Africa, you have to reset your mind to [viewing] 20% to 22% [as significant progress] because it takes so long to get government policy right and to push the industry forward.”

Often it is difficult to even figure out what the regulations really are, especially when it comes to energy production, which panelists said many government officials see as a path to riches. “The regulations are just not well thought-out. You are never sure why they are pushing in certain ways,” noted Yomi Jemibewon, a principal at CardinalStone Partners, which invests primarily in Nigeria in the energy sector. “It takes a long time to get an answer. As a capital provider, you have to find out what game they are playing…. Regulators need to figure out what they want and stick to it or they will not get the investment.”

Originally Published July 12, 2013 by Knowledge@Wharton

Read the Rest of the Article