World Economic Forum to look at Africa's Green Revolution and energy

This year’s World Economic Forum (WEF), will once again discuss the vexed issue of how to end African poverty. The January 23-27 event in Davos, Switzerland, might look at how biofuels produced in Africa can offer an opportunity to boost African agriculture, tackle climate change, and form an anti-dote against catastrophically high oil prices. The continent has a large opportunity to produce highly efficient biomass products both to fuel its own economy, as well as to supply energy hungry industrialised countries. Such a win-win relationship can emerge synergetically with improved agricultural production: when African countries become bioenergy exporters (a Green OPEC of sorts), then they have the means to finance a Green Revolution that lifts the continent out of poverty for good. Amongst the many other initiatives to be launched at the WEF, is also a new organisation devoted to tackling energy poverty as a way to achieve the UN's Millennium Goals.

Regarded as one of the most influential events in shaping the international political agenda, the WEF will be dominated by business leaders (balanced by civil society which gathers at the World Social Forum). They will discuss, amongst other things, a paper about the much anticipated African Green Revolution. An alliance of companies banding together such diverse groups as the food giant Unilever, sportswear manufacturer Nike and delivery firm TNT, will be presenting the text which claims Africa, like India and Mexico between the 1960s and 1980s, will finally be able to bring about its own agricultural revolution by tapping into biotechnology, modern agronomic knowledge and techniques and new markets, such as biofuels.

Many have recognised that African agriculture indeed holds tremendous potential for improvement. The continent's population is largely made up of farmers the majority of who have no access to even the most basic farm inputs, infrastructures, technologies and science.

With rising agricultural commodity prices and the rapidly growing global demand for bioenergy, this could soon change. According to projections by scientists writing for the IEA's Bioenergy Task 40, Africa by itself can produce more than 350 Exajoules of exportable bioenergy by 2050, in an explicitly sustainable manner. That is: without deforestation and after meeting all food, fiber, fodder and forest product needs of growing populations. 350 Exajoules is almost twice as much energy as that contained in all petroleum currently consumed by the world.

This enormous technical potential will only be actualised with good planning, policy assistance, tech transfers and indeed, with the tools of the Green Revolution.

But first things first. Food. Many people have a static view of Sub-Saharan Africa as a miserable pool of hungry people who have used up all their resources and are doomed to remain in perpetual poverty. Nothing is further from the truth. Africa has abundant land, water, and climatic resources making highly productive agriculture possible. The recent, much discussed example of Malawi's super harvests also shows the situation can be changed dramatically in a very short time span. By simply subsidizing a small amount of fertilizers, Malawi made two record maize harvests in a row, turning the country from a begging bowl dependent on food aid, into a major grain exporter supplying even the World Food Program. This most simple of interventions can be replicated across the continent.

In short, the idea that Africa is set to experience its own Green Revolution is not far fetched. Biofuels can help a great way in speeding up the process, because one of the key ingredients of the revolution is smooth, mechanised production and efficient supply chains. This requires abundant and cheap energy, in a liquid form. This is needed to drive water pumps, irrigation tools, harvesters, tractors, processing machines, and so on. There's no sense in an African farming community producing an excess of grains, when it can't transport them to markets or export them. Tens of recent examples of harvests being ruined because of physical oil scarcity in developing countries show that without liquid fuels both the production and distribution of farm products are threatenend. The role of oil products in agriculture is thus not to be underestimated. Biofuels can prevent high oil prices from ruining the opportunity:
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But biofuels, and biomass in general, can play another role in Africa's development. Biomass produced in Sub-Saharan Africa enjoys many comparative advantages: plenty of land, suitable agro-climatic conditions, labor in urgent need of employment. The crops grown there, such as sugarcane (for liquid biofuels) or eucalyptus (for solid biofuels), are more efficient compared to fuels grown in more temperate climates. If the wealthy West were to import bioenergy, instead of subsidizing its own inefficient producers, African countries woul be certain of a new market that would bring in the funds needed to finance the Green Revolution.

But care should be taken to ensure that African countries do not once again become mere exporters of raw materials. They should invest in processing biomass into finished products - liquid fuels, pellets, biomaterials, bioplastics and so on - to add value.

Oil key
The World Economic Forum will of course also address the key issue of energy security and the geopolitics of oil. Last month it published a report in conjunction with various financial institutions including Citigroup, Marsh & McLennan and Swiss Re, and it was pretty unequivocal: there is no reason for energy prices to fall any time soon. On the contrary, the report sees prices rising. And that is just going to be another pressure on the global economy.

High oil prices hit developing economies particularly hard, especially because they are energy intensive and because the product is so all pervasive, needed in all sectors of economic life (hence its demand inelasticity). Oil importing developing countries, representing more than 2 billion people, feel each increase in oil prices immediately in all productive segments of society. Abundant and cheap energy is key to development. Scarce and expensive energy is detrimental to progress. The correlation is one of the best established relationships in development economics. The generic 'human development index' strictly correlates with the 'energy development index'.

For the wealthiest countries (non-oil producing OECD), oil imports make up less than 2% of GDP, whereas for African oil importing nations this was more than 10% of GDP in 2006. In poor oil importing countries, oil price rises of the current magnitude imply a significant reduction of economic growth rates, an erosion of trade balances and a hike in inflation rates.

If coupled with low foreign reserves some of the effects of current high oil prices are: decreased import capacity, lower consumption and investment, lower production and employment. And as always, the poor are hit hardest as they face lower employment prospects, higher inflation (fuel, transportation, basic goods), and cuts in government spending on social services (in a recent report, when oil stood at around US$ 60 per barrel, the UN found that some of the poorest countries are already forced to spend twice as much on imported oil as on such fundamental social services as health care and education (earlier post). According to an African Development Bank document on the effects of high oil prices on African societies:

Lower employment prospects and the higher inflation rate will lower the purchasing power of the poor who have fewer (if any) instruments to hedge against the oil price increase. The biggest impact will be through higher price of kerosene which is used for cooking and lighting. The poor will also be affected by higher transportation costs. Clearly, higher petroleum costs will increase commuting costs and, especially in the case of agricultural economies, the cost of getting the crops to the markets.

Of the 47 poorest countries, 38 are net importers of oil, and 25 are fully dependent on imports.

For this reason, discussions about Africa's development always imply an analysis of the impacts of high oil prices and how to mitigate them.

Energy poverty
Beyond oil and liquid fuels, the WEF will also discuss energy poverty in general. Through the Energy Poverty Action (EPA), an initiative created by several CEOs of leading energy companies during the WEF in 2005, leaders will look at implementing electrification schemes (grid-extension and off-grid) that are sustainable, replicable and scalable. They see access to energy as a key to achieving the UN's Millennium Goals.

Poor access to energy entrenches poverty, constrains the delivery of social services, limits opportunities for women and erodes environmental sustainability at the local, national and global levels. Worldwide, nearly 2.4 billion people use traditional biomass fuels for cooking and heating, and nearly 1.6 billion do not have access to network electricity. Sub-Saharan Africa has the lowest electrification rate in the world with three out of four people without access to electrical energy (IEA, World Energy Outlook 2002).

EPA is managed and facilitated by global companies in partnership with national governments and international financial institutions. The initiating companies, British Columbia Hydro (Canada), Eskom (South Africa) and Vattenfall (Sweden) signed an Alliance Agreement to facilitate the implementation of projects in Lesotho and the Democratic Republic of Congo (DRC). The EPA Board, comprising the Alliance Partners, provides strategic advisory services and technical know-how for the design, supervision and construction of projects.

The governments of Lesotho and the DRC ensure national ownership of the projects and their integration in the national development programmes, and facilitate financing and project implementation.

The World Economic Forum has undertaken the Energy Poverty Action initiative in the context of its Industry Partnership programme for the Energy sector. The Forum facilitates dialogue between its member companies, national governments, intergovernmental organizations and representatives of civil society, and supports EPA Alliance Partners in achieving their objectives. The longer-term objective is to establish a formal link with a development institution that is mandated and equipped to grow and sustain the Energy Poverty Action initiative.

The Energy Poverty Action Management Unit (EPAMU), launched during the World Economic Forum on Africa in June 2007, is a centre of excellence that employs world-class skills and expertise from some of the most sophisticated and committed energy companies in the world to facilitate access to energy for deprived communities by delivering technical, operational, commercial and financial management.

By developing sustainable, replicable models to address the challenges of energy poverty, EPAMU uses the expertise of the EPA partner companies to ensure the capture and sharing of lessons learned.

The delivery of energy access is facilitated by creating a marketplace for energy supply, to overcome energy poverty, and by delivering business expertise and best practices. EPAMU brings together key energy players in partnerships between leading companies, country governments, local entrepreneurs and communities, national and international finance institutions and donors.

Local autonomy, balanced with planning and guidance by national governments and leading development agencies, is the core principle of the EPA approach. Local user associations are formed and empowered to manage, maintain and operate the electrification systems.


References:
World Economic Forum: Energy Poverty Action - "Delivering business expertise and best practices to reducing energy poverty".

Financial Times: Davos forum to discuss African needs - January 20, 2008.

Malaysia Sun: Davos forum to discuss African needs - January 20, 2008.

Biopact: High oil prices disastrous for developing countries - September 12, 2007

Biopact: Malawi's super harvest proves biofuel critics wrong - or, how to beat hunger and produce more oil than OPEC - December 04, 2007

Biopact: A look at Africa's biofuels potential - July 30, 2006