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Home Forex Analytics Market Overviews

COVID-19 and an Oil Price Collapse: Impact on Energy Security in Africa –

November 28, 2020
in Market Overviews
3 min read
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The coronavirus disease (COVID-19) has arrived in Africa and it will need an African response if it is to be successfully managed. In early March there were few reported cases on the continent. As of the time of writing, Africa has passed the 10,000 reported case milestone with confirmed cases in almost all African countries (Africa Centres for Disease Control and Prevention).

In this article we look at some of Africa’s unique challenges and opportunities in this pandemic as well as some of the legal issues that may arise in relation thereto.

Africa’s Unique Challenges

Africa has unique demographics, which may impact how the disease plays out on the continent. We understand that COVID-19 is most severe in older segments of populations and those with underlying health conditions. Africa’s population is young with the median age of its 1.3billion people being just 19.7 years. The median age in Europe is 43.1 years and in China 38.4 years.

On a preliminary examination, this may bode well for Africa. However, when we look more closely, we find that Africa has a disproportionate number of its population with underlying health conditions, which also affect the young. Diseases such as tuberculosis, malaria, polio and high blood pressure are common. Malnutrition causing growth issues and other health conditions including mental ill-health are also high and may make already vulnerable groups more susceptible to COVID-19. Diseases which attack the immune system such as HIV/AIDS are also widespread.

The healthcare system in a number of African countries has improved over the last decade but remains largely unsatisfactory. Hospitals lack capacity and the number of doctors and intensive care unit beds in proportion to population numbers is low compared to other parts of the world. Advanced medical equipment such as ventilators are also few and antimicrobial hand sanitisers and gels, face masks and gloves are also in short supply.

Limiting person-to-person transmission will be more difficult in highly populated African cities. Many people work in the informal economy and stay in areas where clean water for handwashing may be challenging and self-isolation practically impossible. This could lead to a bigger and more prolonged outbreak of COVID-19.

Availability and access to power in Africa has become more urgent amidst the threat of COVID-19. As countries prepare to respond to the ensuring crisis, makeshift hospitals and care facilities are being assembled. However, given the current availability challenges, it is difficult to see how these facilities will be powered in a reliable way. Power outages and blackouts could cost lives and be detrimental to critical medical equipment.

As lockdown measures are implemented across the continent reliable power access is fundamental as business and individuals try to maintain business continuity and work from home. Energy required for daily activities such as lighting, refrigeration, internet access, phone charging and cooking are essential. For rural communities that are not connected to the grid this may be more challenging. In some cases mini-grid and off-grid solutions including pay-as-you-go solar power are filling the gap. This leap from have no electricity straight to using green power is significant and highlights the importance of investing in renewables and in maintaining a sustainable energy mix in Africa.

The foreign exchange impact of the virus on the global economy will likely affect investment in renewable energy. Key components, which are typically procured in US dollars, will now be significantly more expensive. Faced with depreciating currencies and increased capital costs, companies may delay or even halt the commissioning of new solar or wind plants. Governments around the world continue to cut interest rates and although the low cost of debt will be favourable to renewable energy companies, the fall in the global stock markets will make it increasingly difficult for investors to raise equity. Note also that many clean energy technologies such as batteries for electric cars, solar panels and wind turbines are sourced from China. If there is a significant slowdown in China this will have a knock-on impact on this market.

Cheap oil will also impact renewables. In many cases on the continent, the cost of solar or wind power is higher than for power generated by traditional gas-fired plants. In Nigeria, for example, the government is struggling with instituting…



Read More: COVID-19 and an Oil Price Collapse: Impact on Energy Security in Africa –

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