Positioning Africa as an Intra-Regional Trade Hub: African Energy Week in Cape Town to Hold a Real Conversation on the Challenges and Opportunities Presented by the AfCFTA

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African Energy Week 2021 urges African countries to take advantage of the benefits brought about by the African Continental Free Trade Agreement, using cross-border trade opportunities to enhance resource monetization and scale up industrialization in a move to alleviate energy poverty.

Africa has all the ingredients to be a globally competitive energy and industry leader, and with policies such as the African Continental Free Trade Agreement (AfCFTA) serving as a key driver of intra-African trade, the continent is well-equipped to accelerate economic development and enhance industrialization. However, even with the right policies and available resources, the continent has been slow to take advantage of these new and improved trade opportunities. Therefore, African Energy Week (AEW) 2021 in Cape Town has placed a focus on driving regional trade deals, urging countries to leverage the AfCFTA as a catalyst for enhanced cross-border cooperation, driving continent wide poverty alleviation and industrialization.

The AfCFTA was implemented in January 2021 and serves to significantly increase intra-African trade through the reduction in tariffs and red tape, the simplification of customs procedures, and the introduction of progressive policies that will enable the free flow of goods, capital and information across borders in Africa. The agreement provides the backbone to enhanced regional trade and will be fundamental for the continent as countries move to expand energy networks and increase industrialization. According to the Worldbank, out of the $450 billion in income gains from the AfCFTA, $292 billion will come from stronger trade facilitation with tariff liberalization alone boosting the continents income by 0.2%. By making it easier for African businesses to integrate into global supply chains, and simplifying cross border trade, the agreement will increase commercial activities, alleviating poverty on a significant scale.

With regards to Africa’s energy sector, the agreement offers valuable opportunities to expand regional trade and enhance intra-African collaboration. Notably, in addition to international exports, emerging natural gas economies across Africa can redirect their attention to regional exports, boosting industrialization through the consistent supply of petrochemicals and Liquified Natural Gas (LNG). By establishing regional supply networks, Africa can construct and position fertilizer plants, manufacturing facilities, and gas-to-power projects in key locations, boosting economic development, job creation and energy access continent wide.

There has already been some success in this area with cross border projects such as the Grand Tortue Ahmeyim (GTA) development – jointly developed by Senegal and Mauritania. These two countries successfully resolved disputes and have established a world class, competitive project that will bring significant regional economic benefits. Despite the associated benefits, unless African countries take advantage of these new trade opportunities, the AfCFTA will prove ineffective. Regional players need to come together, just as Senegal and Mauritania have, and develop resources collaboratively. Gabon and Equatorial Guinea, for example, need to address long-term disputes over maritime rights, focusing on collaboration rather than competition.

With regards to regional trade, one of the most notable challenges has been foreign exchange (forex) barriers. Uncertain and unproductive forex policies have not only restricted regional trade, but have essentially limited both national and international oil company activities. In order for countries to fully exploit the benefits of the AfCFTA, there is a need for central banks to create an enabling financial climate for business, stimulating economic activities by independent companies – such as Springfield and Afentra -, international investors, and regional stakeholders. The AfCFTA has presented the opportunity for regional governments to create an enabling environment for foreign investors, and by removing forex challenges that plagued regional trade before its implementation, the agreement will drive investment and development across a regional base.

“There is no reason that African countries cannot establish regional trade networks especially with energy. Regional players should not delay, but rather, they should capitalize on the significant opportunities presented by the AfCFTA. This is not the time for resource nationalization. By scaling up regional integration, enhancing collaboration among key players, and taking advantage of the post-AfCFTA opportunities, Africa can outcompete global trade networks. AEW 2021 in Cape Town will not just present AfCFTA opportunities, but will drive a real conversation on implementation and the challenges in Africa, addressing key issues and providing solutions in order to accelerate cross border energy deals and grow businesses that bring opportunity to so many in the continent. In the end it has to be about free markets, limited regulations, enabling environment and jobs and jobs and jobs,” stated NJ Ayuk, Executive Chairman of the African Energy Chamber.  

There are significant opportunities for regional energy trade in Africa that the AfCFTA will only enhance. For example, with Equatorial Guinea looking to establish a gas mega hub, talks with Nigeria and Cameroon are underway for the monetization of regional stranded gas and the development of the Yoyo-Yolanda field – bordering Cameroon – which could lead to the construction of a second LNG train. With a new Petroleum Industry Bill in Nigeria and regional ambitions to drive natural gas utilization, cross border partnerships could be significant for all participating countries if leaders are pragmatic and cut out bureaucracy. Additionally, Floating Liquified Natural Gas (FLNG) technology in Cameroon could create opportunities for countries such as Angola – which is aiming to monetize stranded gas and establish a domestic gas market. By focusing on trade initiatives, Africa can drive energy growth.

AEW 2021 will place a key emphasis on the opportunities presented by the AfCFTA. As Africa’s premier energy event, AEW 2021 has prioritized making energy poverty history by 2030, an objective that will only be achieved through the utilization of the AfCFTA. By inviting industry leaders, key stakeholders, and international investors to its interactive conference and networking event on the 9th-12th of November 2021, AEW 2021 provides the best platform for engagement deal making, enhancing intra-African partnerships. AEW 2021 is committed to African people, African energy, and African businesses, and will use the AfCFTA as a basis for further regional integration.

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