Clear transition strategies and enhanced regulatory frameworks consolidate Africa’s attractiveness as an investment destination
Amid supply challenges and efforts to diversify imports, Africa has emerged a highly strategic investment opportunity for many European countries and companies. The continent’s abundant resource base and untapped opportunities have already begun to attract players from across the bloc, and new market dynamics offer the chance for African countries to take tangible actions to advance the continent’s attractiveness for foreign investment.
The upcoming Invest in African Energy Forum in Paris from May 14-15 is a testament to the efforts being made to promote investment into the African energy sector. By promoting investment opportunities and examining efforts to attract foreign capital, the forum redefines the Africa-Europe relationship by connecting players and catalyzing development.
Energy Master Plans Define Growth Opportunities
With the resources available, many African countries – either oil producers or those on the verge – have begun implementing strategies to define a long-term vision for the sector. These master plans not only outline opportunities but reassure foreign investors on risk while detailing strategies for maximizing returns on investment.
Masterplans have already proven effective for burgeoning oil and gas producers. For example, Senegal and Mauritania – both of which will start gas production in 2024 – have used masterplans such as the Plan Sénégal Émergent and the Gas Master Plan, respectively, to secure capital and partnerships. These long-term development agendas grant investor clarity, identify fiscal policies while encouraging collaboration and investment.
Establishing energy masterplans is also a strategy for mature producers to diversify their energy sectors by attracting investment in alternative industries such as renewables, power and infrastructure. This is the case in Nigeria with the Renewable Energy Master Plan, which aims to increase the supply of renewable electricity to 36% of the energy mix by 2030. In South Africa, the Renewable Energy Independent Power Producer Procurement program focuses on leveraging demand for renewable energy and storage technologies to unlock industrial and inclusive development.
Enhanced Regulatory Frameworks Clarify Terms
Clear and well-defined legal frameworks are a strategic way to boost European investment in Africa while developing or revitalizing existing value chains. On a contractual basis, such frameworks identify fiscal terms and outline processes while helping to reduce project negotiation times and providing assurance in case of disputes. Regulatory frameworks serve as guides for investors, laying the foundation for strong and mutually beneficial partnerships.
In Mozambique, the energy ministry has created an attractive environment for foreign firms with corporate taxes as low as 21%. Royalty rates and clear regulations have enticed several major players, including ExxonMobil, TotalEnergies, Eni and more. In Egypt, following the discovery of the offshore Zohr field, the government introduced a new oil and gas contract that allows investors to control their production share. Further incentives to enhance the country’s attractiveness are poised to attract a fresh slate of investment. Another nation that is banking on the power of its Hydrocarbon Law is the more established gas producer, Equatorial Guinea, which has become Africa’s third largest oil exporter in the last decade owing to its Gas Mega Hub initiative and respective regulation.
Supply-Demand Integration Enhances Project Scope
By prioritizing projects that integrate both supply and demand dynamics, African countries can attract the investment needed to develop large-scale energy projects while ensuring domestic needs are met. Such projects not only reduce overall costs and shorten the time taken from project to market, but demonstrate market viability and long-term potential. Notably, integrated projects bridge the gap between supply and demand, showcasing profitability and sustainability while offering long-term potential for growth and development. Such projects also tend to be more resilient to market fluctuations, diversifying focus beyond extraction and reducing overall investment risk.
An example of such a project is the Eni-led Structures A&E project, an $8 billion gas development in Libya that utilizes existing pipelines and treatment facilities to supply gas to southern Europe. In addition to exports, the project will produce gas to supply the domestic market, spurring job creation while meeting local demand.
Local Capacity Unlocks Competitive Workforce
With the youngest population globally – 70% of which are under the age of 30 – Africa’s workforce contributes to its attractiveness as an investment destination, particularly for European project developers. Many petroleum and mineral-producing countries are implementing policies to develop local capacity in the energy industry, a strategy which benefits both European companies seeking a skilled workforce with knowledge of the market and African governments aiming to retain qualified labor and ultimately improve the economic well-being of their citizens.
Notably, Ghana has implemented programs such as the Ghana Upstream Sector Internship and Associated Oil and Gas Capacity Building to train youths, while Angola focuses on advancing local content through capacity building initiatives to strengthen domestic capabilities and foster industry partnerships and collaboration. These programs enhance technical, managerial, and operational skills, promoting industry best practices for more efficient operations.