Africa’s oil and gas bargain

At this year’s African Energy Week in Cape Town, held from 16 to 18 October, two messages were delivered with striking consistency. African governments and businesses insisted that the continent must retain more of the value created by its oil and gas resources. International oil companies and financiers said they accepted that objective and wanted projects that advanced national development. Yet beneath this public agreement lay two private doubts: investors questioned whether governments would make and implement decisions consistently, while Africans questioned whether foreign capital would honour its promises once agreements had been signed.That gap will not be closed by another declaration of partnership. Trust in a capital-intensive industry depends on clear rules, competent institutions and obligations whose fulfilment can be verified. The parties do not need identical interests. Governments rightly seek revenue, energy security, jobs, local enterprise and wider economic linkages. Investors require a reasonable risk-adjusted return, timely decisions and protection against arbitrary changes. A workable partnership begins by acknowledging both sets of interests openly.Mistrust comes at a costThe urgency is commercial. The International Energy Agency estimates that total energy investment in Africa in 2025 was one-third lower than in 2015. Its research also finds that the cost of capital for some African energy projects can be two to three times higher than in advanced economies and China.In such a market, mistrust is not merely a diplomatic inconvenience. It increases financing costs, postpones investment and can leave viable resources undeveloped.Set the rules earlyAfrican governments should first define the national bargain before negotiating individual projects. Issues such as the role of gas in domestic power generation and industry, the balance between exports and local supply, fiscal terms, state participation and local-content objectives should, as far as possible, be settled through policy and law.Changing expectations after capital has been committed raises financing costs and damages a country’s prospects for its next project, not just its relationship with the current investor. Predictability does not mean weak regulation; it means applying clear rules consistently.End approval delaysGovernments also need discipline in decision-making. Major projects often involve multiple ministries, regulators, national oil companies, tax authorities and environmental agencies.A published approvals map, clearly identified officials responsible for decisions, realistic statutory timelines and an escalation process for delayed decisions would reduce uncertainty without lowering standards. A prompt, reasoned ‘no’ is commercially preferable to an indefinite ‘maybe’.Where the state lacks specialised negotiating capacity, it should secure the necessary expertise before signing. The African Legal Support Facility exists precisely because complex energy transactions require commensurate legal, fiscal and technical expertise.Make local content workA percentage written into a licence does not, by itself, create an engineering company, a skilled workforce or a bankable supplier. Governments and operators should jointly map future demand, identify capability gaps years before production begins, break down contracts into manageable packages where appropriate, support certification and improve access to working capital.Targets should be ambitious but linked to demonstrated capacity and a timetable for developing it. The objective should be to build competitive African firms capable of serving several projects and eventually exporting their services, rather than inserting politically connected intermediaries into supply chains.Show the benefitsForeign companies, for their part, should stop treating national benefit as a communications exercise. They should disclose the project assumptions underpinning investment decisions, explain material changes and publish measurable commitments on procurement, training, career progression, infrastructure use and community obligations.Procurement must be genuinely competitive, invoices must be paid on time, and joint ventures must have access to meaningful information and a genuine say in decision-making.Investors should also accept that stability cannot mean immunity from every future law, nor should confidentiality obscure how public risks are allocated. Reasonable economic rebalancing, fair dispute-resolution arrangements and protection against arbitrary treatment are legitimate.Sweeping exemptions, opaque side agreements and aggressive tax arrangements are corrosive. Contract disclosure, beneficial-ownership transparency and clear reporting on state participation, as promoted by the Extractive Industries Transparency Initiative (EITI) Standard, protect reputable companies as much as citizens by making clear what was agreed and who stands behind it.Hold local firms accountableAfrican private companies have obligations, too. Partnership cannot become a claim to contracts based on nationality alone. Local firms need credible governance, audited accounts, safety systems, technical competence and the capacity to invest and deliver.Governments should resist pressure to shield underperforming companies, while international operators should avoid procurement structures that exclude capable local firms through unnecessarily large contracts, short tender periods or inaccessible qualification requirements.Turn promises into resultsEach major project should therefore have a compact alongside its legal agreements: a short public statement setting out the commercial bargain, decision-making timetable, local development commitments, responsible institutions and a small set of independently verified indicators.A joint government-company delivery team should resolve operational bottlenecks, with unresolved issues escalated promptly to senior decision-makers. This is not another forum, but a mechanism for turning promises into measurable results.Protect long-term valueThe strongest objection is that these requirements could slow projects in a competitive global market. Poorly designed requirements certainly can. But weak governance also delays projects, increases financing costs and fuels political backlash.The answer is neither the highest possible state take nor the lowest possible investor obligation. It is to maximise sustainable national value over a project’s lifetime while preserving commercial viability, environmental responsibility and adequate provision for eventual decommissioning.Africa owns the resources, but ownership alone does not translate them into development. Foreign capital can provide finance, technology and market access, but capital alone confers no entitlement to public trust.The next step after Cape Town is to replace mutual assurances with reciprocal, measurable performance. If governments become predictable without becoming passive, and investors remain profitable without becoming extractive, a genuine partnership can emerge.Tom Alweendo is a former mines minister and central bank governor.

Africa’s oil and gas bargain

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Republikein 2026-10-21

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Africa’s oil and gas bargain

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