Ken Silverstein EnergyBiz Insider Editor-in-Chief

Africa's richness benefits the rest of the world. China's leaders have traveled the region in an effort to shore up much needed oil and gas resources. And, the continent is expected to be an ever-increasing supplier of energy to this country. It already provides 18 percent of all oil imports here as well as holds 8 percent of all the world's known proven reserves of natural gas. The Bush administration says that a global alliance with Africa will bring about a favorable investment climate as well as greater transparency and a responsible use of natural resources.

Obviously, the rest of the world is thirsty for new energy sources and particularly for those located outside the Middle East. Africa could be the beneficiary of this. But, in the past, the nations that make up the Sub-Saharan region have suffered at the hands of outsiders who took advantage of its resources. Times are changing and economies around the globe are opening up. And Western nations are typically responsible members of the communities they serve. China comes to process with a clean slate.

But Africa can't just sit back. It's a continent that has been ravaged by civil and border wars. Such conflicts mean that governments are using scarce resources to build armies, not strong societies. It's also a continent damaged by corruption, where some of its leaders have grown wealthy at the expense of the people they rule. As a result, at least a third of Africa is still too formidable for investors, say economists.

The African nations that are advancing are doing so because they have rid themselves of belligerent leadership and opened their markets to private industry. But change has been slow. Before a meeting with World Bank officials, government representatives from 12 African nations, which included Cote d'Ivoire, Ghana and Kenya, issued a joint statement saying that poor infrastructure, inept government agencies and unfavorable trade practices are turning investors away from Africa.

"For Africa as a whole, the trick now is to convert the short-term commodity boom into long-term growth of at least 5 percent a year," says the Economist Intelligence Unit. "For this to happen, countries must diversify and reduce their reliance on primary commodity exports. The danger is that they will be content to ride the commodity boom rather than making the tough decisions needed for structural change to their economies."

According to the International Monetary Fund, the region's debt balance and subsequent interest payments are falling. About 18 of the 47 Sub-Saharan nations will report economic growth of at least 5 percent, which compares to just eight countries in that region that experienced that growth a decade ago. The fastest growing economies are the oil exporting nations of Angola, Mauritania and Sudan.

Transparent Governments

The United States has tried to increase its efforts to foster transparent and accountable government in Africa by increasing political support for democratic principles and institutions. Understandably, those countries that can demonstrate a stable rule of law and a predictable investment climate stand the best chance of success. It's particularly true in the oil sector where many resources are located off-shore in deep water locations that require a lot of capital to harvest.

In those countries dedicated to reform, there is a strong predilection that foreign investment is a necessary component of prosperity. The issues, therefore, are about the methods by which the private sector will operate. The doctrines of nationalism and self-sufficiency -- the notion that all outsiders are colonialists -- are minority views now almost everywhere in Africa

Private ownership is taking different forms in Africa. In some cases, like Cote d'Ivoire, the government is establishing long-term contracts with private companies that are assuming management roles. In others, governments are selling equity. Senegal, for example, has sold a 34 percent stake in its national utility to Hydro-Quebec and Elyo, part of Paris-based Suez-Lyonnaise Group.

"Business has a key role in building credibility of reform and re-branding efforts, not least to counter the 'collective contagion' still afflicting Africa," says Haiko Alfeld, director for Africa of the World Economic Forum, in a release to promote a "Going for Growth" gathering of political and business leaders from around the world. The goal is to sustain the 5 percent economic growth now taking place.

Africa is currently producing 9 million barrels of oil per day, with about 4.7 million of those coming from West Africa. African oil production currently accounts for 11 percent of the world's oil supply -- and it supplies 18 percent of the oil to this country, which is expected to rise once new fields are brought on line.

Africa is also responsible for more than 5 percent of the world's natural gas production, which does not include gas that is flared or re-injected. Many countries in Africa and West Africa have significant untapped reserves and export potential, the U.S. Energy Department says, noting that the world's demand for natural gas is rising and many international companies are expanding their investments there.

"Development of natural gas is well underway in several countries but many countries are still struggling with the basic principles of gas commercialization and its economic and regulatory links to the power and other sectors for domestic consumption," says John Brodman, undersecretary for international energy policy at the Energy Department. Given its reserve base, he adds that it is not probable that the continent will ever supplant the Middle East as the major supplier of either oil or gas but it is expected to become a more vibrant partner in international circles.

Many in Africa live on less than $1 dollar a day. But, more prosperity is possible. The oil wealth now enjoyed by some must not be squandered. It must be re-invested. And the laws and regulations in the Sub-Saharan region must be more compatible with those of free market societies, if national governments are to attract outside capital. That's good for Africa and the rest of the world, which needs diversified energy sources.

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