Picture: THINKSTOCK
Picture: THINKSTOCK

SLOW progress with legislation is hampering the rapid development of Africa’s energy sector.

Steve Harley, global energy sector head of logistics group DHL, said this week laws had to be put in place to facilitate the investments that went with the discoveries of oil and gas on the continent.

A lack of efficient customs procedures and port and rail infrastructure for moving goods also presents problems.

“New infrastructure has to be built to ensure sustainable success of the (energy) developments,” Mr Harley said.

In contrast to countries elsewhere, the supply chains for developments in Africa are long, he said.

“In some parts of the world, you can get all the materials you need for a project in the same country, or in the country just next door. In many cases in Africa, the materials and equipment may come from the Middle East or Asia or Europe, so you have to plan ahead much more efficiently and effectively to make sure you get your materials in place.”

Mr Harley said there was also a need for transport hubs to be developed in Africa.

“A region like East Africa can be served more effectively from one single point (rather) than having each country operate its own supply chain.”

He said South Africa could  be the solution, via facilities such as the Saldanha Bay harbour, despite it being far from some of the new energy discoveries on the continent.

West African countries such as Angola and Nigeria have fallen prey to the so-called “resource curse”, with discoveries of oil leading to wealth for some but leaving the majority of the population living in poverty. Mr Harley said it was important to ensure that revenue from oil and gas was spent wisely.

“Mozambique will start exporting gas in 2018 and will see huge revenue from that. One can only hope it will be spend more wisely than perhaps some countries did 20 years ago. (People) are learning from what happened in Angola and Norway, which suddenly discovered oil.

“There is a need for greater local content, local training and local manufacturing facilities in order to make the local economy grow.”

Indigenisation laws, such as those enforced in Zimbabwe, were a serious issue for companies looking to invest in Africa, Mr Harley said.

“Resource nationalisation and state intervention is always going to be part of the risk calculation. But look at the major players who have gone into Africa (in the energy sector). All of the global companies are there: Shell, Exxon, BP, Chevron. Most of them have been there for decades.”

Despite global attempts to move towards more renewable energy, Mr Harley said hydrocarbon energy should remain a critical focus in Africa.

However, diverse energy sources were required, he said, especially in countries such as South Africa that lacked abundant hydrocarbon energy reserves. The cost of renewable energy, compared with hydrocarbon energy, remains a concern.

* This article was first published in Sunday Times: Business Times