Kola Ibrahim argues that Africa is being tricked by global climate change politics, the same people who claim to be fighting climate change are the ones promoting fossil fuels. The reality is that Africa has become a new frontier for fossil fuel development. This is being carried out by global finance capital, multinational corporations, governments of developed economies, and worse still multilateral organizations that claim to be spearheading the funding for climate actions. Ibrahim exposes the reality of the green transition in Africa.
By Kola Ibrahim
While Africa is being conned by global climate change politics, the same people who claim to be fighting climate change are the ones promoting fossil fuels, globally and in particular, in Africa. Indeed, Africa has become a new frontier for fossil fuel development. This is being carried out by global finance capital, multinational corporations, governments of developed economies, and worse still multilateral organizations that claim to be spearheading the funding for climate actions. Of course, this is done with the active connivance of the African political elite and big business class, which serves as local junior partner.
While the Paris Agreement was reached in 2015 and put into effect in 2016, investments in oil, gas and coal development increased across Africa, especially between 2016 and 2021. A research report by a group of NGOs, found that there are 964 fossil fuel projects in Africa, 782 of which are currently in operation or were under construction (as at 2022), and 111 others approved. The report also noted that, out of over US$132 billion that was committed to 58 fossil fuel projects and 24 fossil fuel companies in Africa, 54.8% came from Global North countries (Australia, Europe, and North America), while 31.4% came from Asia (mainly China).
In fact, the top 10 of the 24 national financial institutions providing finance for fossil fuel development in Africa between 2016 and 2021 were located in China, the United States, Japan, Korea and the United Kingdom. These ten institutions were responsible for 94.6% (US$23.7 billion) of fossil fuel funding in Africa by national financial institutions. Also, 81.4% (US$16.8 billion) of the US$20.4 billion committed by private financial companies (banks and financial businesses) to 58 fossil fuel projects in Africa came from North American, European and Asian companies. Furthermore, 88.8% of over US$44.4 billion general financing of 24 biggest fossil fuel companies in Africa comes from European, American, Australian, and Asian multinational financial companies, with only 10.8% from African companies (mostly South African companies). Yet, between 2016 and 2019, G-20 public financial institutions and multilateral organizations only committed US$13 billion to investment in renewable energy in Africa.
Indeed, nine multilateral institutions committed US$4.8 billion to fossil fuel investment between 2016 and 2021, with the African Development Bank (AfDB), World Bank Group and Africa Ex-Im Bank contributing the lion share (63%). Interestingly, AfDB and World Bank currently have different programmes and projects on clean energy and climate mitigation and adaptation in Africa. Yet, they are committing more and more resources to fossil fuel. This underscores the reality that these institutions of global finance capital are serving the interests of global corporates whose main aim is to maximise profits at all costs. They are not prepared to commit much needed capital and resources to transition to clean and climate friendly energy and production systems. It is important to note that oil exploration financing in Africa increased from US$3.4 billion in 2020 to US$5.1 billion in 2022, while 18 out of 45 countries where oil and gas are being prospected are frontier-countries, i.e., countries where oil and gas in being produced for the first time.
Half of the 20 companies developing the largest oil and gas upstream projects (12.27 billion barrel of oil equivalent BBOE) are from China, Japan, United Kingdom, France, United States and Italy. These companies, together hold 6.56 BBOE, (53%). Even those projects being developed by African state-owned companies like Nigeria’s NLNG, Algeria’s Sonatrach, Libya’s NOC, Mozambique’s ENH and Ghana’s Springfield, are mostly jointly owned or have foreign debt, or equity funded. Between 2021 and 2022, new projects have been added which include the Tanzania LNG Liquefaction Project (US$30 billion), Rovuma (Mozambique) LNG Terminal Project (US$30 billion), Etan and Zabazaba (Nigeria) oil fields (US$13.5 billion), Algeria’s Berkine Basin Gas development (US$4 billion). Twenty-five percent of the TotalEnergies’ fossil fuel production in 2021 came from Africa, while its new discovery in Namibia has fossil fuel reserve of 3 billion. The French multinational, which has been branding itself as promoter of the energy transition, is adding 2.27 billion barrels of oil equivalent to its investment in Africa in the short term.
The increasing investment in fossil fuel will increase Africa’s carbon emission and raise the share of Africa’s contribution to global climate change. In 2021, Africa contributed 3.9% (1.45 billion tonnes of CO2 eq.) of global carbon dioxide emission from fossil fuels and industry. According to a report by a group of NGOs, if the largest upstream oil and gas projects worth 12.27 BBOE come on stream, it will add 4.54 billion tonnes of CO2 equivalent (tCO2eq); more than three-time Africa’s 2021 emissions. New coal projects are expected to add 105,000 tonnes of CO2 equivalent. Furthermore, some seven million BBOE/day will be produced in Africa in 2025, which will add 3.01 million tCO2 eq per day (or 1.08 billion tCO2eq per year). It will subsequently increase global emission and make it difficult to reverse climate change and its terrible consequences. This is dangerous for Africa, which already is bearing disproportionate impacts of climate change, a situation that will become ultimately irreversible if the global temperature rises to 1.50C or 20C.
Besides, large scale oil exploration and production is associated with environmental degradation and pollution: the destruction of natural forests, air and ocean pollution and the displacement of indigenous people. Several reports have highlighted various impacts on health, livelihood and environment in Africa.
Moreover, the economic implication of fossil fuel production puts the continent on the road of another round of economic crises. This is because some of the oil and gas projects will turn oil producing Africa countries, whose main public revenues come from fossil fuel production to be more oil-wealth dependent. This will mean that the global transition to clean energy, even on the basis of the current slower scale, will lead to serious strain, if not collapse, of the economies of these countries. Seven African countries (Nigeria, Angola, Equatorial Guinea, Algeria, Gabon, Libya and Republic of Congo), depend on oil and gas as source of revenue for between 35% to 82% of their governments’ revenues; while the oil and gas share of GDP of at least eight countries (Nigeria, Ghana, Republic of Congo, Algeria, Chad, Angola, Gabon and Libya) ranges between 10% to 64%. A fall in oil and gas price and demand will seriously affect their revenues and GDP. This will lead to a new debt burden, the introduction of austerity, and a social crisis. It will also make it difficult for them to exit the fossil economy. This will also impact on their ability to withstand and adapt to climate events, which are expected to amplify the climate emergency in the coming period.
Furthermore, oil and gas investments in Africa pose serious financial risks for the countries of the continent. Some of the finances for oil and gas projects are secured by national governments, especially those sponsored by governments themselves. Some of these projects have a tendency to be abandoned, especially when the crude oil price falls. This was witnessed during the Covid-19 period and led to a steep fall in crude oil and gas prices, and to fiscal and balance of payments problems for many oil exporting countries (lower revenues, higher debts, foreign exchange crisis, etc.). The Covid-19 economic crisis led to a downgrade of Africa’s oil and gas growth from a 32% increase to a 24% decrease. It also led to a capital loss of US$25 billion in the sector, as some of the projects on stream were cancelled or postponed.
A specific example is that of the Dangote oil refineries in Nigeria, conceived and started in 2013, expected to be completed in three years, but extended to 2023, and now not fully operational until 2025. The delay was occasioned by a series of global and local economic crises including two national economic recessions. The project cost increased from US$9 billion to US$20 billion and will possibly increase further in the coming years for the refineries to fully come on stream. Though partly funded locally by banks and Dangote businesses, the Nigerian government insured the projects and had to commit billions of dollars in public funds to support it, including a US$2.76 billion commitment as equity in the refinery (obviously to save the company from a liquidity problem). Yet the majority of Nigerians still pay heavily for fuel, while only about 54% of the population have access to the very unstable power supply. The state-owned refineries under the Nigerian National Petroleum Corporation (NNPC) have been grounded owing to corruption, deliberate sabotage, and mismanagement and are only able to refine less than 10% of their installed capacity.
If the political pressure on climate change mounts on governments of developed economies, and compels a shift towards renewable energy, this will affect oil prices and lead to collapse of some, if not all, of the many oil and gas projects in Africa. This will have serious impact on finance of African countries, which include but are not limited to the loss of revenue, capital, the increasing cost of borrowing and debt overhang. About US$245 billion of gas investments on stream until 2030 are at risk of becoming stranded assets, even if minimal efforts are taken towards climate change. Even for projects that are not abandoned, an increased shift towards renewable energy may affect access to capital for such projects, which will lengthen their completion time and increase the size of loans incurred for them.
Beyond the financial and fiscal problems to be unleashed by the oil and gas projects and investments in Africa, is the adverse impact on the transition towards clean energy and climate stability. With increased oil investments, oil and gas producing countries are locked into the fossil economy. This will make a transition towards clean energy difficult. Given also that most of the oil and gas projects in Africa are owned and controlled by global energy corporations and financial institutions, with governments of developed economies and multilateral organizations playing key roles in securing these projects, it is expected that clean energy and climate action policies in Africa will be undermined and sabotaged.
The continuous investment in fossil fuel again knocks a big hole in the purported and much touted climate action commitments of developed economies, multilateral institutions representing global finance capital, and global multinational corporations. Their climate funding in Africa, is grossly inadequate. Yet, their commitment to fossil fuel remains strong. Therefore, it will be self-delusion to expect global finance capital, developed countries and their multilateral agencies, genuinely to play any serious role in climate sustainability in Africa. Rather, they will use climate change to exploit Africa’s resources even further, and plunge the countries of the continent into deeper debt and underdevelopment.
Further reading:
Isabelle Geuskens and Henrieke Butjin, Locked out of a just transition – fossil fuel financing in Africa (2002).
Bronwen Tucker and Nikki Reisch, The sky’s the limit – the case for a just energy transition from fossil fuel production in Africa (2021).
Hannah Ritchie, Pablo Rosado and Max Roser, Green house gas emissions (2020).
Kola Ibrahim, an author and scholar-activist, is a public intellectual and climate justice researcher and campaigner. He can be reached at: kmarx4life@gmail.com.
This blogpost is an edited excerpt from Kola Ibrahim’s new book, Climate Imperialism in Africa (2023). A full review of Ibrahim’s book will appear in the forthcoming ROAPE climate emergency special issue.
Featured Photograph: An oil exploration rig waiting to be loaded onto a ship bound for Mozambique (5 August 2019).
