Sahara Energy CEO Tope Shonubi has called for more momentum to adopt unified standards for petroleum trade across Africa to replace the current fragmented African market.
A "lack of unitisation, inefficiencies, scale and different specifications brings about chaos", he told delegates at the yearly African Refiners and Distributors Association (ARA) Week, in Cape Town, this week.
“The African region operates a fragmented petroleum products market with different product specifications, sulphur content and emissions requirements,” said the CEO of the international energy and infrastructure conglomerate which operates in over 38 countries across Africa, the Middle East, Europe and Asia.
He said the African Union (AU) needed to be mobilised to jointly drive the adoption of a unified standard across the continent.
“There has to be a way in which the AU gets more politicians involved in this.”
Adoption of similar specifications and standards has been achieved across Europe and most of North America, creating a single larger market for petroleum trade.
The European Union (EU), ahead of the world, had also created the "EU sulphur directive”, which has driven regional adoption of even lower sulphur standards of -0.1%. Shonubi said Europe had leveraged its regional union to drive the adoption of lower sulphur specifications across its member countries.
He said that in Africa, infrastructure for regional products was currently underused, resulting in higher landing costs for products to countries within the continent. He called for better leadership in this regard.
“New Partnership for Africa's Development (Nepad) has not been a success because the private sector was not carried along. We have to realise that politics and money are the drivers of the world economy. We hope the AU corrects the mistake of Nepad.”
Shonubi pointed out that the ARA, in partnership with the World Bank, had created the Afri-4 standards which were tailored to promote the adoption of a single standard for cleaner fuels. He said the adoption of the Afri-4 specifications would guarantee unified product standards across the region and ease interregional petroleum product trade. It would reduce bulk transportation costs and optimise regional logistics infrastructure.
He said regional harmonisation of taxes, excise duties and subsidies would also significantly reduce smuggling and adulteration of fuels.
Shonubi further called for a common currency as it would "de-risk trade in Africa" no matter whether the currency was based on the dollar or any other currency.
“Whether it relates to the euro or the franc or the lira, it doesn’t matter to me. All I am looking for is a common currency that de-risks trade in Africa.”
He said banks were wary of currency risk in Africa and this was hindering investment.
“The biggest problem in African trade today is finance. There are a lot of people with brilliant ideas, but they can’t get the finance, at the right rates.”
Shonubi said temporary subsidies could help the industry.
“I believe in temporary subsidies for the environment to be stimulated, but don’t believe in permanent subsidies as they are not sustainable.”
ARA Week has been focusing on its theme ‘Strengthening investment in the African downstream' and has been looking at petroleum refining, storage and distribution, port operations, supply chain efficiency, human capital, safety, security and the environment.
The ARA was formed in 2006 to provide a pan-African voice for the African oil supply, refining and distribution industry. It represents refiners, product importers, storage companies, marketers and government regulators.
ARA executive secretary Joel Devain said the past year had seen exciting projects coming to fruition across Africa, including in refineries in Egypt and Cameroon and ongoing investments in Nigeria. New investments had also been announced in Uganda, Algeria, Angola and South Africa, which were very positive developments.
“Downstream players across the sector and the continent now have the confidence to make the necessary investments to improve the downstream landscape, to supply clean fuels, reduce product imports, improve the logistics infrastructure, better our environmental performance and develop our greatest asset – human capital, particularly of women and young people.”