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Gas-exporting countries in Africa and the problem of a displacement equivalent

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Gas-exporting countries in Africa and the problem of a displacement equivalent

14th May 2021

By: Saliem Fakir

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The public discourse around gas is intensifying. Climate activists have now made gas – which has been touted as being better than coal and a necessary transitional fuel – the target of their next big effort against a fossil fuel. Predictions are that demand for gas will be healthy, but the pace at which gas transmission and distribution networks are being developed is quite slow.

Fossil fuels can be both a ‘promise’ and a curse for exporters, and sudden shocks such as the Covid-19 pandemic show up these fuels’ vulnerability to sudden demand destruction. The prospect of dependence on a resource with increasingly volatile supply and demand ought to convince one that a change in policy is necessary. It is also not useful to parrot the usual diatribe about climate change without an appreciation of the economic development challenges gas-producing countries face.

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Southern Africa is deemed to be the world’s next big gas hub, but all this will depend on whether the conflict in Mozambique’s Cabo Delgado comes to an end as soon as possible.

The problem with gas extraction is easy to understand; it’s all about economic disequilibrium, with one side of the economy benefiting more than the other. Usually, a small minority extracts a disproportionately bigger amount of wealth than the rest of the populace. The consequences of this disequilibrium can be seen on the poverty-stricken streets of Equatorial Guinea, Nigeria and Angola, for example.

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The daily lived experience is so stark that those who argue that gas is a winning game for Africans are faking reality. Oil, gas and other mineral extractives have been nothing but a curse.

There are at least two major challenges that gas-exporting countries currently face: pressure to wean themselves off gas because of climate change concerns and their inability to invest the revenues earned through gas extraction in a way that leads to economic diversification. It is for this reason that the African Climate Foundation is looking closely at economic frameworks that take into account new risks and the stranded-asset problems faced by gas-exporting countries.

We have called such a framing a displacement equivalent. Inevitably, even if gas was to be allowed in a future world, it would not last forever. Politicians and the business elite have to think of a world without gas, which is a very healthy cognitive disposition to hold, given that few countries have done the transition out of oil and gas extraction successfully. Most have suffered damnation from the disequilibrium.

The displacement equivalent model is a hypothetical but also real scenario – to think of what a gas-producing country’s economic world would look like without gas. Societies that can hardwire this into the apparatus of their politics are more likely to achieve this than societies that are not able to do so.

The framing here is to induce a mode of thinking about how countries can transition to diverse economies based on other endowments they have, without gas in the picture. In such a world, the supply of energy will have to come from other sources because even in gas-rich countries, with the exception of those in North Africa, the dearth of electricity provision is one of the biggest paradoxes and is indicative of the contradiction of having vast gas resources, while lacking durable and cheap electricity.

The displacement equivalent model has to meet certain criteria to challenge the dominance of gas and other extractives. Green – or climate-positive – investments must be a source of new infrastructure investments, but where capital, technology and labour need to be imported, this needs to be done in such a manner that it does not create a negative trade balance and increase public and private debt, the net effect of which will be to reduce foreign currency earnings. If such investments lead to healthy, sustainable growth, as well as enhanced exports of higher-value goods, and generate a healthy trade balance, then there will be less and less reliance on a traditional mainstay like oil or gas or other minerals.

Effecting a transition from dependence on extractives to more sustainable economic options is hard to do when the political elites favour what they see and can get now rather than what they cannot see or have to wait much longer to get.

There is always the danger in countries with high resource extraction modes and elites disequilibrium that, if you take away their key dependence for economic survival, you not only kill the golden goose but also kill an entire society through economic collapse. This is why the framing of the displacement equivalent model that we propose is to nurture a collective approach to transitions not only from gas but also in terms of the very way in which Statecraft and policy are tied to the gas economy and it is the only cosmos and bubble the elite want to live in.

The most difficult part is not just the climate imperative but to force the hand of extractive political economies to deliver better options for themselves and their fellow citizens.

Ultimately, these are political questions and not just scientific or technical issues. The latter follows the former – not the other way round. But nobody has a fool-proof answer in terms of how to shape that enlightened political transition that is the bridge for the climate transition. There are no universal answers as to how to do this. We will all have to stumble along, facing the hard rocks of life. In most cases, our fates can be decided by others and perhaps the curve balls that nature will throw at us.

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