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Could renewables tank Africa’s financial system?

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One of the biggest industries across the whole of African continent is the energy sector. It is one of the major revenue generators on the continent.

Naturally, not every country takes part in this industry as much as some of them do, but the fact that it acts as a major economic instrument for the betterment of the region is already reason enough to pay more attention to it.

The current leaders regarding the energy sector in Africa are the following countries:

  • Nigeria
  • Angola
  • Algeria
  • Libya
  • Egypt

However, we need to consider the fact that this information is based on oil production and not the overall energy sector in the region. However, considering that oil is the leading commodity in this industry, it’s safe to say that these 5 countries are the biggest contributors to this particular sector.

Why are they the biggest contributors? Well, based on research done by the International Energy Agency, the demand that has been rising for oil in the region, are only being met by these particular countries in terms of production. What this means is that these countries are the only ones able to export their oil to neighboring countries and foreign partners.

But this is not the whole energy sector we’d like to talk about, there are similar sectors within the industry as well, especially when we talk about natural gas. Let’s take a look at the 3 most economically powerful countries within this region and try to dissect as much as possible about their energy industry.

South Africa

Based on information gathered from a “compilation” done by the Department of Minerals and Resources of South Africa, we can clearly see that the country is not as dependent on gas and oil, leaning more towards things like coal.

Based on the same research, South Africa was able to produce around 930,000 tonnes of natural gas which accounted for less than 1.5% of the total needed energy supply, while the coal industry accommodates nearly 69% of the country’s required energy resources.

This is one of the main reasons why South Africa’s economy is quite “bouncy” so to speak. The sheer dominance of a resource that is quickly becoming obsolete could weigh down hard on South Africa’s economy.

In fact, based on comments received from ForexBrokersList South Africa, a local financial media outlet, the country could face horrible issues regarding inflation, should coal suddenly receive a hit in production.

And why would they receive a hit? Because South Africa is slowly realizing that switching to renewables is much more important than it was before. Currently, it’s riding a sinking ship, where every new batch of coal mined underground, is basically like a bucket of water being added to the hull.

But this is just one country on the list, we need to now move to the economic powerhouse of the African continent.

Nigeria

Nigeria is the oil machine of the African continent. The country produces around 2.5 million barrels a day, which is nowhere near what the US produces but is still quite significant considering the requirements from the local population.

According to metrics, Nigeria was consuming around 763 kgs of oil per capita. So if we try to calculate, 1 barrel of oil is around 159 liters, meaning that Nigeria produces around 397.5 million liters of oil per day.

Based on all of this information, we can say that Nigeria is producing oil that is enough for around 190 million people. However, Nigeria has almost 196 million people at the moment, meaning that it’s in a bit of a deficit.

However, we do see a significant amount of what Nigeria produces being directed towards the export market, while other energy sectors try to shore up the shortcoming of Nigeria’s oil industry.

In order for this country to move to renewable energy, it would need to completely focus on exporting the excess oil it produces at the moment. This is most definitely impossible at the moment, as the country will have to wait years until it has what it takes to fully move to renewables.

A sustainable plan could push the country forward on abandoning natural resources and focusing on renewable energy, but that will have to take so much lobbying that it’s nearly unattainable.

Regardless of the situation though, Nigeria is in the most comfortable situation when it comes to switching to renewable energy as it won’t take THAT much of a hit.

Egypt

According to the United States Energy Information Administration, 95% of Egypt’s energy consumption was accommodated by oil and natural gas, meaning that the country does not devote any resources to coal and other non-renewable energy sources.

Furthermore, after digging a bit, we’ve found out that, no matter how stable the situation looks with Egypt’s oil industry due to its pricing, the country is actually in a deficit, consuming much more than it is producing.

According to 2017 metrics, Egypt was averaging around 666,000 barrels per day, whilst consuming 877,000 in 2016 alone. This is likely to have continued in 2020 as well, meaning that the country is importing oil which accounts for nearly half of its energy consumption if we go with the EIA’s estimates.

This puts a humongous strain on the government should the oil shipments stop wherever they may be coming from.

And in fact, it opens a perfect opportunity for renewable energy. Egypt is one of the few countries in Africa, that could easily fill its deficit in oil requirements with renewable energy, which would stop importation, thus save enough funds to further develop the renewable energy sector.

Once that has been accomplished, the country can simply focus its efforts on exporting its excess oil to try and target a complete switch to renewables from both oil and natural gas.

Overall, the future for Egypt looks promising in regards to energy production, but only if they take action in this regard.

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