Africa’s leaders are calling for investments, not more promises
Written by Terje Osmundsen, CEO of Empower New Energy has 15 years of experience in the development and financing of solar energy in Africa and is also a member of the NABA Advisory Board.
Monday, Aug 19; Norway’s Foreign Minister Espen Barth Eide will present the “new Norwegian Africa-strategy”. Why is this important and what should be the focus of Norway’s new Africa-strategy, asks Terje Osmundsen - CEO Empower New Energy in this article.
Photo: Thomas Mukoya, Reuters/NTB
(This is an updated version of an op-ed published in the Norwegian newspaper Aftenposten Tuesday, Aug 13)
The youth-led protests in Kenya and Nigeria recently are a warning signal not only for Africa, but also for Norway and the world. Faced with the growing challenges from the continent, Norway and Europe should respond with a determined strategy to scale up investments into Africa from the private sector.
The Western world is struggling to come to terms with the new realities in Africa:
Economic growth is too low to prevent rising unemployment and growth in crime, terrorism and migration.
Russia has signed military agreements with 14 countries in Africa and, according to Freedom House, engages in extensive disinformation activities to undermine democracy in a number of countries. At the same time, the majority of African countries remain neutral on the Ukraine war, citing Western double standards on international law issues.
Climate change is attacking the livelihoods of millions of people in Africa. Their leaders are pushing for rich countries to pay for restoring the damage from decades of greenhouse gas emissions
In recent years, Africa has seen a sharp drop in investment from the West, while China, India and countries in Asia and the Middle East have increased their presence.
To respond to the challenge, the US and the EU, among others, have recently launched Africa strategies with visions and promises of a new momentum. For example, the EU's new Africa plan, "Global Gateway", announces EUR 150 billion in investments.
What Africa needs is investment in food production, industry, IT, health, energy and other infrastructure. Only 3.5 per cent of the world's total foreign investment goes to the 55 countries in Africa. Norwegian companies invested only about USD 600 million in Africa in 2022, representing less than 2.5 per cent of total Norwegian foreign investments, a sharp drop compared to the level before 2020.
A few private Norwegian companies have increased their investments in Africa in recent years, often in partnership with Norfund and NORAD. This applies particularly to renewable energy, but also to technology start-ups, agriculture and health, etc. However, the big picture is that many Norwegian businesses do not invest in Africa. This applies not least to companies where the state is the dominant owner:
Statkraft, DnB, Telenor and Hydro are major foreign investors, but have all chosen to stay away from Africa.
Only 0.2 per cent of the Norwegian Oil Fund's equity investments have been made in companies headquartered in Africa, and the fund has only bought one government bond in Africa.
While European oil and gas companies are stepping up their green investments in Africa, Equinor is choosing to reduce its involvement in Africa.
There are many reasons why Norwegian and Western companies are reluctant to invest in Africa, and most of these can only be addressed by the countries themselves. One of several bright spots is the ongoing work to establish the world's largest free trade area, the African Free Trade Agreement (AfCFTA).
The government's Africa strategy risks being a flash in the pan if it does not respond to the need for strong growth in business investment. The focus must be on market-based measures that reduce the barriers to investing in Africa, in addition to the important role played by Norfund and the funding agencies. Singapore provides an interesting example. Here, business investment in Africa is stimulated with favourable loan terms, which have resulted in more than 100 companies investing more than USD 30 billion in Africa in recent years.
Denmark now looks set to follow in Singapore's footsteps. According to Foreign Minister Løkke Rasmussen, a scheme modelled on Danish investments in Ukraine is being considered. The plan is for Danish companies to gain access to long-term loans and guarantees for investments in Africa through the recently established Export and Investment Fund.
In 25 years’, time, Africa is expected to have 2.5 billion people, 25% of the world's population. The world cannot succeed without including Africa, and Africa cannot succeed without including the world.