SA has launched a dedicated fund that aims to raise $1bn (R18.2bn) in funding for the construction of a substantial pipeline of green hydrogen projects in the country to help facilitate its transition away from an energy system based on fossil fuels.
The fund was launched in Pretoria on Tuesday during a visit to the country by the prime ministers of the Netherlands and Denmark, Mark Rutte and Mette Frederiksen, who concluded a heads of agreement with President Cyril Ramaphosa for the planned fund dubbed SA-H2.
The blended finance fund aims to raise $1bn directly in SA or indirectly via other channels through partnerships between the private sector and public enterprises, as well as domestic and global financing institutions, to fast-track the development of large-scale green hydrogen infrastructure assets across SA.
The SA-H2 fund is supported by Climate Fund Managers (CFM), a joint venture between Dutch development bank FMO and Sanlam InfraWorks, as well as Invest International, a financing institution owned by the Dutch finance ministry (51%) and FMO (49%). It is further supported by the Sanlam group, the Development Bank of Southern Africa (DBSA), the Industrial Development Corporation (IDC) and other strategic partners.
Once established, the SA-H2 fund will join the recently announced SDG Namibia One fund, which is also targeting $1bn, as the second regional blended finance fund for developing Southern Africa’s green hydrogen economy.
“We believe that green hydrogen is both the pathway and the solution to the global energy transition,” said Andrew Johnstone, the CEO of CFM. “SA combines deep technical and capital markets with world-class conditions for generating renewable electricity through solar and wind power, key drivers in the production of green hydrogen. Fitting within the framework of the Just Energy Transition, SA-H2 will help empower SA to claim its rightful place as a world leader in this exciting and necessary sector.”
CFM manages two emerging market infrastructure funds focused on climate change mitigation and adaptation: Climate Investor One, a $923m fund focused on renewable energy, and Climate Investor Two, a $855m fund focused on water, sanitation and oceans infrastructure. Established in 2015, CFM invests across Africa, Asia and Latin America and is headquartered in the Netherlands.
“SA-H2 is a showcase of how public, private, international and local parties can join forces to create a catalytic effect on the development of an exciting new sector,” said Joost Oorthuizen, CEO of Invest International, which has financing capacity of more than €2bn (R39.7bn). “Green hydrogen projects in SA can contribute to local sustainable development and support the energy transition locally as well as in export markets.”
Hydrogen is seen as a viable alternative to carbon-intensive fuels as it enables efficient storage and use of energy from renewable sources which can be more intermittent, thereby ensuring a reliable renewable energy supply that can help reduce emissions and environmental harm. Developing SA’s green hydrogen economy could also present new economic opportunities for the country while simultaneously assisting with its transition to a more sustainable energy system.
“This fund is a significant addition to national efforts to leverage our existing renewable energy infrastructure,” said Catherine Koffman, group executive for project preparation at the DBSA. “With a national target of $250bn investment in green hydrogen by 2050, this sector is projected to amplify the development impact of the renewable energy industry.”
In November 2022 no fewer than 20 green hydrogen projects were included in the Government Gazette, with nine given status as strategic integrated projects. The SA-H2 fund is expected to help expedite the development and implementation of such projects, which should assist with job creation and new skills development.
“Green hydrogen will enable the local decarbonisation of hard-to-abate industrial sectors,” said Joanne Bate, chief operations officer of the IDC. “Recent efforts by both the public and private sectors have resulted in a significant ramp-up of green hydrogen projects in SA that are being developed.”
Carl Roothman, CEO of Sanlam Investment Group, said green hydrogen offers “huge promise” for solving SA’s energy challenges, adding that the company is well positioned to provide financial and capital market advice, investment instrument structuring, fundraising and distribution, marketing and logistical support for such projects.
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