When South Africa is on the brink of an energy crisis, with the threat of Stage 8 load shedding and total blackouts looming, you may be wondering why you should bother investing in Africa’s energy sector. State-owned enterprises (BUMN) are in a state of flux, but the private energy sector is booming, and Africa is a prime candidate for alternative energy sources. The growing renewable energy sector is a good investment decision.
Africa is rich in natural resources
It is known that Africa is one of the most resource-rich continents in the world, with gold, coal, mineral resources and natural gas as some of its gifts. Sasol, one of South Africa’s largest private energy companies, owns several coal mines across the country and processes coal into liquid fuels such as petroleum and diesel. If you want to invest in a JSE top 40 company, Sasol would be a good bet.
In the latter half of the year, Nigeria will start the Bonga North Deepwater project to re-establish itself as the top oil producer in Africa. The project can extract a potential of 525 million barrels of crude oil from the North Bonga region when launched.
Ghana is also forecast to double its oil production capacity by the end of 2023, with the discovery of a new deepwater field in the Cape Three Points Tan Block, and ongoing extensive development at each site.
These examples are just the tip of the iceberg. Africa is primed to show the world it means business, and the oil, gas and natural coal sector is about to happen.
Africa has a growing renewable energy industry
Load-shedding has been an ongoing problem in South Africa since 2007, so many are turning to renewable and alternative energy sources to keep their businesses going during shutdowns. As a sun-drenched continent – known as a warm destination – Africa is an ideal candidate for renewable energy projects, and many are already underway.
In South Africa, large-scale renewable energy projects have come a long way, with independent energy producers already able to feed enough power into the main grid to replace two coal-fired power stations – the type responsible for constant breakdowns and thus, blackouts. Continued investment in solar power, onshore wind power and landfill gas projects will ensure that South Africa is less dependent on coal and scale to clean energy in the future. This is good news for businesses, which will be able to enjoy a more stable electricity grid to support growth and attract foreign investment.
As one of the sunniest countries in Africa, Namibia has great potential for solar energy production. However, what is surprising today is that almost 60% of its power is imported from other countries. This will change, as the country has the ambitious goal of launching various projects to produce 70% of energy from renewable sources by 2030. There is already a 10-hectare solar farm that produces 45MW of energy per year, and a 20 MW Solar Power Plant Khan is expected to be commissioned in early 2023.
Morocco is another country that has solar power. The country receives more than 3 000 hours of sunshine per year in urban areas and up to 3 600 hours in desert areas. In 2016, Morocco launched one of the world’s largest concentrated solar power (CSP) projects at the Quartzazate site, with the original goal of generating 560MW by 2020. By the end of 2022, they are generating 400MW of renewable energy, and more. capacity is expected for the near future.
Europe needs to diversify its energy suppliers
Before Russia’s invasion of Ukraine, Africa’s export prospects for liquefied natural gas were bleak due to strict rules on carbon emissions. However, that changed quickly when Europe realized how important it was to start diversifying its energy suppliers as its reserves dwindled. While this kind of crisis does not make countries commit to a total carbon emission policy, it also does not mean that all is lost for Africa.
Due to the large amount of development carried out in the renewable and alternative energy sector in Africa, there are many opportunities to enter the European market abroad and export excess energy as more projects come to life.
The final takeaway
With several JSE Top 40 companies operating in the energy sector, abundant renewable energy sources and huge potential to power foreign markets, Africa’s energy sector is worth investigating when looking to make your next big investment.