Carlos Lopes: Africa’s energy transition must be the number one priority

If you had a new chapter to add to your 2018 book, Africa in Transformation, to give it the necessary update in a turbulent world, what would you write?

Demographics will dominate development. During the Covid-19 pandemic, we saw the enormous importance of Africa’s population and its youth. That’s why the continent suffered less than others from a health point of view. We have also seen recently that, in a world in transition, the need for labour and certain types of immigration is difficult for some countries to accept for cultural and political reasons. Lack of access to liquidity is holding back economic development. All of these crises are having social consequences in Africa, as can be seen from the protests of all kinds.

Despite the complexity of the situation, is there any hope that Africa will be able to find the financing it needs to continue developing?

The situation is somewhat paradoxical. We are experiencing financial difficulties as a result of the global inflationary situation. And yet the IMF predicts that by 2024 half of all growth will be in Africa. We are in the process of verifying certain types of development, evaluating the economic and industrial transformation on the one hand, and on the other, the growth resulting from the demographic explosion.

How can we make the transition, in the structure of African economies, so that they are no longer dependent on development aid, and so that they can have access to financing at much more realistic interest rates?

And we must not just think in terms of growth. Some countries, like Niger, have high growth rates and high levels of poverty. So we must not delude ourselves into believing that the transition will bring about the necessary transformation of the continent. When I say that “Africa is the future of the world”, I mean it from a demographic point of view. Because the world will not be able to develop without this essential African contribution in terms of its youth. Of course, the way in which this is done can be problematic.

What should policymakers prioritise?

In reality, the number one priority for the continent is the energy transition. From there, we have dimensions that are linked to the climate, industrial transformation and technological absorption by Africans. Africa has considerable potential in this area. The world is going to have to make this transition as a matter of urgency: the move away from fossil fuels and towards renewable energies. Africa’s largest renewable energy production capacity in any field is green hydrogen.

How are countries going to tackle an issue that requires a strong commitment and a great deal of political will?

By taking the example of the world’s largest economy, the United States. Just look at the importance of these energies in their investment portfolio in Africa! In the same vein, if we look at what is happening in relation to China, there has been a considerable drop in investment in many areas, but not in energy. In most of the mineral exploitations in Africa, the Chinese presence is very much linked to the energy transition through minerals, which are essential for producing batteries or which are essential for other transformations in the industrial field.

Take a country like Germany, which is currently in crisis because it was dependent on Russian gas. For its economic model, it is now turning to Africa because that’s where it thinks it can find an alternative solution.

The most interesting aspect of all these changes is the Gulf States’ growing interest in Africa, which is absolutely essential if they are to control the speed and sequence of the energy transformation. It is well known that these countries are major producers of fossil fuels and combustibles. For these reasons, they know that they need to have a strong presence in Africa.

How do you see this transformation process working out in concrete terms?

Africa is attracting the world’s attention through visits from heads of state, world figures and international organisations… This is a way for them to put themselves on the radar of African leaders. Africa has been admitted to the G20 and we are seeing the BRICS bloc being extended to African countries. In this respect, I see more signs of respect for African diplomacy. At COP28, we had very encouraging and clear indications that a large part of the promised investments are being redirected to Africa. Of course, we can fear that all this will be achieved with the model of the past. In other words, we will continue to export raw materials. This time they will be different. They will be strategic minerals and energy, but what role will they play in the continent’s development?

Is the continent getting enough respect in international forums?

It’s always difficult with large geographical groupings to have a single, coordinated voice. It’s a real battle. And Africa is going through the same difficulties. That said, it’s true that we have a project with a strategic and fundamental dimension, the AfCFTA. If it succeeds in being set up, the free trade area will enable Africa to speak with one voice and in a coordinated fashion in a fundamental sector, trade.

As well as exporting more effectively and creating assets and mechanisms for inter-African trade to develop, African countries must also defend themselves against new protectionist measures such as the carbon tax. The latter must not enter into discussions in a disorganised way with 54 entities. If Africa remains absent and does not have a coordinated voice, it will lose out big time. Dispersal allows others to define the rules and contours in terms of standards, taxonomy, certification, and all sorts of decisions to define the rules of the game for future trade. We could have a free trade area that protects us from the outside world, but doesn’t give us the protection we need to be part of the economy of the future. An economy that will be very different from the one we know today.

Artificial intelligence is accelerating development. Is Africa still on the sidelines?

Yes, absolutely! That’s why we’re losing various battles because we’re not paying enough attention to the international regulatory dimensions. Artificial intelligence can be a great opportunity for Africa. It democratises a certain type of access, allowing all kinds of activities to be spread geographically over a wider area. However, those who will retain the added value of these different transactions will be those who define the codes and languages that will be used to set up the taxonomy… This is a dimension that Africans are in the process of experiencing without putting themselves in a position to negotiate.

In the age of the digital revolution, does the industrialisation of the continent still make sense today?

Yes, it makes sense! Because there are three areas where industrialisation still makes sense. The first is that we have a huge demand for processed food products. It’s not complicated in practical terms. It’s not like sending up a space rocket! It brings life to sectors where intellectual property has not yet invaded everything. And for Africa, these are interesting areas of consumption; with a growing population, its consumer market for food products is becoming gigantic. Agro processing is therefore a huge and unique opportunity for Africa. We don’t need to look elsewhere for markets…

The second area is industrial transformation through relocation. This is inherent in any industrial revolution.

And, from this point of view, we are in the process of experiencing the last relocation. It will come from Asian countries, notably China, to other countries where labour costs and associated costs are lower. With robotisation and automation, labour has become less important. So machines of all kinds can replace it.

Of course, this is not true in all sectors; here I was referring to those where added value is low. It makes no sense to automate the entire production system.

The third area is the one we’re most interested in, making the jump, skipping stages and integrating into technical and technological sectors where we don’t need creativity. We need young people. Just look at the example of Japan, the number of intellectual property registrations in relation to the ageing population. We’ll see the same phenomenon in European countries, but not necessarily in the United States, where there is a fair amount of immigration, including of skilled labour. On the other hand, Russia is going through a demographic crisis… In general, we have a huge opportunity in Africa if we identify, in great detail, the priorities and entry points that make sense. The advantage we have is that, as we are lagging behind in terms of infrastructure, we can skip to an infrastructure that is much greener and has a much lower carbonisation rate.

Given its needs, but also its debt, what kind of financing does Africa need to develop?

Africa’s debt is not huge if you take the indicator in relation to the size of the economy. During all these crises, it has only grown by 10% in relation to African countries. It has stabilised at around 60% of GDP. Which is about half the rate seen in the OECD. The problem is not the size of the debt, but the ability to repay the loans. After all, they are the most expensive in the world! If we had the same interest rates as Germany, close to 0%, we wouldn’t have the problems we have at the moment. We have to pay 6% to 7%, which is enormous.

We are witnessing the end of development aid. The contribution of concessional loans from the IMF and the World Bank, and bilateral aid from individual countries, has not grown, in global terms, for nearly fifteen years. And today, a significant proportion of this aid is going to Ukraine, almost half. We are seeing a considerable reduction in aid to African countries.

So how can we make the transition in the structure of African economies so that they are no longer dependent on aid, and so that they can have access to financing at much more realistic interest rates? I think this discussion is well under way. The year 2023 has had a major effect in changing the nature of the discussion with international financial institutions and in climate financing in particular. We now have an opportunity to look at all these issues through different eyes than in the past.