Can Africa develop without fossil fuels?

This is an audio transcription of the FT press briefing podcast episode: Can Africa develop without fossil fuels?

Marc Filipino
Hello from the Financial Times. Today is Friday, June 3, and it’s your FT News Briefing.

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Investors are returning to Chinese stock exchanges. OPEC finally agreed to increase oil production. Moreover, some African countries are wondering why they have to go green when they are barely responsible for climate change.

David Piling
What they are saying is that you in the West have done this and you in the West must lead the charge to repair the damage. And in the meantime, we have to grow.

Marc Filipino
I am Marc Filippino. And here’s the news you need to start your day.

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Global investors are regaining confidence in Chinese stocks after a major sell-off earlier this year. Many have fled due to the economic impact of Covid lockdowns in China, as well as repercussions from the war in Ukraine. The country’s CSI 300 stock index is still down about 17% this year. But the lockdowns have started to ease and some international fund managers are betting the worst is over. Over the past week, foreign investors have bought about $4 billion worth of mainland Chinese stocks. An investor added that Beijing’s regulatory crackdown had cooled – that was another factor in the selloff. And he also expects China’s housing crisis won’t engulf the wider economy.

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After months of saying no, OPEC and its oil-producing allies yesterday agreed to boost production by nearly 650,000 barrels a day in July and August. The United States pressured Saudi Arabia to raise oil to bring down fuel prices. The FT’s US energy editor Derek Brower says it’s not exactly extra production.

Derek Brower
What they basically did was accelerate the already planned supply increases that were planned over the next three months to two months instead. And so you get what amounts to a faster rate of supply increases that were already planned.

Marc Filipino
So, Derek, will businesses and consumers see the impact immediately, or will it take a while to see the effect of increased production?

Derek Brower
Well, that’s a very good question because the increases, as planned, are already quite significant. The problem is that OPEC is in trouble. Not Saudi Arabia and the United Arab Emirates, the two big power producers, but the rest of the OPEC members have struggled to add production so they can’t even meet their quotas, some of them. It is therefore an increase on paper. The important thing, however, is this: Saudi Arabia decided it was time to start trying to rein in the global rise in oil prices. That’s what’s important about it. The numbers, in a way, are actually less meaningful than the signal sent by Saudi Arabia that the central oil bank is back in its efforts to try to control damaging oil price increases.

Marc Filipino
So what finally moved the needle? I mean, the White House has been pressuring Saudi Arabia and OPEC for months to release more oil. Why did OPEC finally give in?

Derek Brower
Two reasons. First: Saudi Arabia does not want, despite what one might think, super high oil prices, because then it fears a demand response that causes longer-term problems for its customers, etc. So he doesn’t necessarily want super high oil prices. More importantly, there was all this shuttle diplomacy with the United States and the United States put so much pressure on Saudi Arabia to inject more oil. It does not appear, or at least I am told, that the United States has actually guaranteed anything to Saudi Arabia. But there is a visit from Biden to the Middle East in the coming weeks. He will meet Mohammed bin Salman, the Crown Prince, to shake his hand. It would mean a lot to the Saudis. The Saudis have also requested immunity for Mohammed bin Salman. I’m told, remember, he was singled out by US intelligence for his role in the assassination of Jamal Khashoggi. So the Saudis have asked a lot. The United States, they say, actually gave nothing. The Saudis have just come together with their longtime ally, it seems, on their approach to the oil market.

Marc Filipino
Derek Brower is the FT’s US Energy Editor.

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The war in Ukraine and the rush to non-Russian energy sources have derailed global decarbonization efforts. But in Africa, many countries are so underdeveloped that they wonder: can we go straight to renewables and continue to grow our economies or when we need fossil fuels to industrialize? The FT’s Africa editor, David Pilling, has reflected on this debate and he joins me now. Hey, David.

David Piling
Hello marc. How are you?

Marc Filipino
I’m doing well. So you visited a huge geothermal power plant in Kenya. And this plant is part of the reason why Kenya now gets 75% of its electricity from renewables, which is incredible. But does this show that renewables can power an economy?

David Piling
Well, there are a lot of people on the African continent who say, no, you can’t. How do we make steel? How do you have factories? How do you get people to go from poor to middle income to rich without going through a fossil fuel phase? And I went to Kenya because I thought it was interesting, partly because or in a sense largely because their power grid, as you say, is 75% powered by renewables. They could probably go entirely to renewables because their primary source of renewable energy, as you said, is geothermal steam dumping volcanic rock that can act as a kind of base load. The problem with wind and solar is that sometimes the wind blows, sometimes the sun shines, and sometimes it doesn’t. So it’s very difficult to base a grid on that. But geothermal, you can. Thus, Kenya may be an exception. And that’s in a sense why I went to Kenya, because it raises some interesting questions about whether that’s even possible, even if you have some of the prerequisites that Kenya seems to have in the form of geothermal energy.

Marc Filipino
Which brings us to Nigeria. A huge oil producer, member of OPEC and vice-president of Nigeria, he said no one in the world had yet been able to industrialize using renewable energy. Does he have a point?

David Piling
I think he does. And Nigeria, per capita, emits about zero point seven tonnes of carbon per year. America, 15.5 tons of carbon per capita per year. To expect Nigeria to freeze or reduce its carbon emissions now could be seen as expecting Nigeria to remain poor forever. What the vice president is saying is that we have a lot of oil, we have a lot of gas. We should be able to sell that oil and gas. And more importantly, and something that Nigeria has not done so far, to use this oil and especially now to use this gas, which a lot of people see as a transitional fuel to power the country, to power the factories, fuel development. Of course, the big question is whether they can actually do that. You know, Nigeria has not been an example of using billions and billions of dollars of oil revenue for the good of its people. But what they’re saying is, you know, we see Europeans looking for gasoline, knocking on our doors, saying, can we have some of your gasoline? And yet your banks and even institutions like the World Bank are saying that we will no longer finance any fossil fuel projects. So Osinbajo, the vice-president, and many others on the continent, are crying foul. They cry hypocrisy.

Marc Filipino
To your point about western banks no longer funding oil and gas projects because of climate change. These are valid concerns. So what are African nations doing without this funding? How can they develop?

David Piling
What people like Osinbajo in Nigeria are saying is that you Western countries have to go carbon negative to give us the opportunity to develop. You can’t just stop our development. There is another story. There are people I have spoken to in Kenya who believe there are countries, including perhaps Kenya itself, that can benefit from this energy transition, that can become pioneers in the production of hydrogen from solar and wind power. Many countries in Africa are not yet on the carbon path. So we’re talking – and I’m cautious about the use of that expression – but we’re talking about leapfrogging, going straight to a carbon-free future for example, going straight to electric vehicles as some African countries have straight from not having many phone lines at all to mobile or going straight to digital money, as Kenya itself has done.

Marc Filipino
So David, it’s kind of interesting that African nations are being asked to switch to greener energy because they’re not really the problem here, or I guess I should say they’re a little problem in when it comes to climate change, right?

David Piling
Well, the calculation that is often made is that Africa is responsible for around 3% of accumulated carbon emissions. And yet, Africa itself is extremely vulnerable to climate change. We may have seen climate change-induced famine or at least severe famine in Madagascar. We have seen cyclones in Mozambique. All of these are at least partly related to climate change. Thus, the African continent is well aware of the damage that can be caused by human-induced climate change. But what they’re saying is we didn’t do that. You in the West have done this, and you in the West must lead the charge to repair the damage. And in the meantime, we have to grow.

Marc Filipino
David Pilling is the FT’s Africa Editor. Thanks David.

David Piling
Thank you very much Mark.

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Marc Filipino
You can read more about all these stories on FT.com. This has been your daily press briefing on FT. Be sure to check back next week for the latest trading news. The FT News Briefing is produced by Sonja Hutson, Fiona Symon and me, Marc Filippino. Our editor is Jess Smith. We had help this week from Michael Lello, David da Silva, Peter Barber and Gavin Kallmann. Our executive producer is Topher Forhecz. Cheryl Brumley is the Global Head of Audio and our theme song is from Metaphor Music.

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This transcript was generated automatically. If by any chance there is an error, please send the details for a correction to: [email protected]. We will do our best to make the change as soon as possible.

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