Africa faces $30 billion spending cut in energy sector – report
Tuesday, November 10, 2020

Capital expenditures in Africa’s energy sector are expected to experience a $30 billion cut over the 2020-2021 period, the latest report by African Energy Chamber on the sector outlook has stated.

The report dubbed the African Energy Outlook 2021, explored the forces shaping up the continent’s energy market after the historic shocks of 2020, and analyzed the upcoming recovery on the back of the global energy transition and persisting market uncertainties.

And among other things, it identified uncertainties regarding a further $80 billion of investment whose sanctioning "will depend on improving market conditions, along with bold policy and fiscal reforms from African regulators.”

Capital spending on the continent estimated to be about $60 billion in the 2020-21 period due to project delays and cost-cutting measures, which is a significant reduction compared to the pre-Covid-19 estimates where almost $90 billion.

"The coronavirus pandemic has accelerated this underlying pressure by causing unprecedented havoc on global energy markets that Africa is not insulated from,” it reads in part.

The report says the Covid-19 pandemic has ravaged the global energy markets, and as such global liquids demand that has typically increased by about 1 to 1.5 million barrels per day year-over-year is currently expected to see an annual average contraction of 10 million barrels per day from 2019 to 2020.

And yet, going forward towards 2021, there remains high uncertainty around how the virus outbreak will unfold, how economies will react and ultimately what the impact will be on oil markets.

Besides Covid-19, the report says there were also regulatory matters that have unnecessarily delayed major projects in some economies that represent big opportunity losses for local content development, delayed job creation and further deteriorated Africa’s competitive position versus resources elsewhere.