South Africa has reached an agreement to launch a $1 billion blended finance fund to help accelerate the development of the green hydrogen sector in the country.
The fund is supported by the climate-centric finance investment firm, Climate Fund Managers (CFM), as well as Invest International of the Netherlands, financial services group Sanlam, the Development Bank of Southern Africa and the Industrial Development Corporation (IDC), in collaboration with other strategic partners, according to a joint statement issued on Tuesday.
A heads of agreement had been concluded to launch the SA-H2 fund, during a meeting between President Cyril Ramaphosa and the visiting prime ministers of the Netherlands and Denmark, the statement said.
“The SA-H2 fund initiative will aim to secure US$1 billion in funding, to be raised directly in South Africa or indirectly via other channels,” it said.
“A partnership of private and public enterprises and international and domestic institutions, SA-H2 reflects the immense potential of blended finance in tackling the climate crisis. Its focus will be to fast track the mobilisation of funding towards the development and construction of large-scale green hydrogen infrastructure assets across South Africa.”
Last year, Bloomberg quoted Masopha Moshoeshoe, a specialist in the presidency’s investment and infrastructure office, as saying South Africa had set its sights on attracting as much as $250 billion to its green hydrogen industry by 2050 to take advantage of abundant solar and wind energy sources.
Green hydrogen, produced using renewable energy as opposed to fossil fuels, is an alternative, low-carbon fuel to power emissions-intensive industries such as steelmaking.
On Tuesday, Ramaphosa said the new fund supported South Africa’s commitment to decarbonise the economy to meet its climate commitments.
At the COP26 climate change conference in 2021, the United Kingdom, United States, Germany, France and the European Union pledged $8.5 billion to help accelerate South Africa’s just energy transition, which aims to achieve “net zero” carbon emissions by 2050.
On Tuesday, CFM chief executive Andrew Johnstone said to achieve “net zero”, “urgent and unprecedented action” was needed and that green hydrogen was both the pathway and the solution to the global energy transition.
“Fitting within the framework of the just energy transition, SA-H2 will help empower South Africa to claim its rightful place as a world leader in this exciting and necessary sector,” he said.
“SA-H2, once established, will join the recently announced SDG Namibia One fund [aiming to secure $1 billion in funding to be raised directly in Namibia or indirectly through other channels], as the second-of-its-kind, regional blended finance fund to develop and fund green hydrogen projects.”
In November last year, 20 green hydrogen projects were included in a 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, helping create new jobs.
“Green hydrogen will enable the local decarbonisation of hard-to-abate industrial sectors,” IDC chief operations officer Joanne Bate said on Tuesday.
An investment plan submitted to wealthy nations at COP27 last year says green hydrogen is critical to decarbonising the economy, “with the potential to remove 10% to 15% of South Africa’s carbon emissions, while protecting and growing major downstream industrial sectors such as chemicals, cement, iron and steel”.
Mandisa Nyathi is a climate reporting fellow, funded by the Open Society Foundation for South Africa.
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