The downstream sector is vital in allowing the African continent to benefit from its resources. A panel discussion at this year’s African Energy Week (AEW): Invest in African Energies 2024 conference, titled From Feasibility to Bankability – Developing a Sustainable Finance Strategy for African Downstream, explored the critical steps in developing the right mechanisms to make Africa’s downstream projects achieve bankability.

Africa needs to prioritize the development of its downstream sector to ensure maximum exploitation of local resources and to achieve energy security. Across the continent, there is rising demand for petroleum, leading to new developments launching across the downstream sector. Nigeria’s Dangote Refinery – the largest in Africa – began producing diesel and aviation fuel this year. With a capacity of 650,000 barrels per day, the facility is set to meet Nigeria’s domestic energy needs and will, upon reaching full capacity in mid-2025, position the country as a major exporter.

“With a growing population and economy, we have to have a clear path to making investments in the downstream. We must have the right regulatory frameworks in place, and we have to drive project realization. We also need an ESG [environmental, social and governance] overlay as well as human capital, who will actually make the investments. When you have these things in place, you can start to have discussions with financiers,” stated Anibor Kragha, Executive Secretary of the African Refiners and Distributors Association (ARDA).

ARDA has led several efforts to harmonize financial strategies for Africa’s downstream sector. Dedicated to the development of sustainable pan-African infrastructure projects, the association recently announced plans to launch a database of sustainable energy projects across the continent, which will serve as part of an actionable downstream plan for the association.

Meanwhile, challenges around a lack of access to finance in the African downstream sector were discussed. It was noted that strategic partnerships are required to generate significant returns while creating value for local communities and economies.

“The critical challenge in investment is the lack of access to finance. That finance will power infrastructure development,” stated Founder and Managing Partner at advisory firm Premier Invest, René Awambeng, adding, “But we as a continent, we continue to suffer a lack of access to affordable finance. As a continent, the way the financial sector is shaped, we have constraints. We need to find solutions to this to bridge the $200-billion-per-year financing gap.”

Vinay Guddye, Director of Financial Services and Africa Center of Excellence, Economic Development Board, Mauritius, added, “We need to attract more private funding into projects going forward.”

Furthermore, the importance of private players in the downstream market in Africa was highlighted as a prerequisite to driving the sector. The panel called on indigenous and international oil refiners, importers, terminal operators, marketers, distributors and regulators to collaborate to drive electrification, investment and the deployment of digital technologies in the downstream sector.

“[The entry of private players in the downstream market] has served to attract significant capital for the sector and showcases significant changes in the downstream funding space,” stated Lloyd Manokore, Managing Principal Consultant, Emerging Africa Advisory Group.