South Africa’s R3 billion investment in hydrogen projects to drive green economy

Professor Sampson Mamphweli, the head of the department and innovation’s energy secretariat at the Sanedi, said previously thtat South Africa holds the keys to the development of large-scale hydrogen technology as home to 70% of the world’s deposits of platinum-group metals. South Africa’s leading financing institutions and some overseas development finance groups have committed funding to the R3 billion, SA-H2 Fund, which aims to help fund the development of a pipeline of commercially viable hydrogen projects. While South Africa’s hydrogen economy is advancing rapidly, it remains in the early stages of commercial deployment, lagging behind developed nations like Germany, Japan, and the US.

These countries are already integrating hydrogen into their national energy systems and transport networks. The SA-H2 Fund, also known as Climate Investor Three (CI3) South Africa, was announced by Climate Fund Managers, a blended finance investment manager, which secured R3bn in commitments. The SA-H2 Fund focuses on large-scale energy transition projects across the green hydrogen value chain.

This includes the production of green hydrogen, downstream derivatives such as green ammonia and green methanol, and the decarbonisation of hard-to-abate industries. Green hydrogen is produced using renewable energy sources, such as solar or wind, to split water into hydrogen and oxygen through electrolysis. Mphokolo Makara, CEO of SA-H2 Fund Managers, said that world-class renewable resources, strong industrial base, and growing demand for low-carbon fuels position the country to play a significant role in the green hydrogen economy.

[paywall]

“Through SA-H2, we are developing a pipeline of commercially viable projects that will help decarbonise industry, drive long-term economic growth, and support a Just Energy Transition,” he said. To date, the SA-H2 Fund has signed development funding agreements with Green Efuels Producers, which is establishing a first-of-its-kind wastewater-to-green-methanol plant in Gauteng, and the Hive Hydrogen Coega Green Ammonia Project, South Africa’s first large-scale green ammonia production facility. The SA-H2 Fund operates as a blended finance facility, combining public and private capital to balance risk and enable institutional investment.

It consists of a Development Tranche, which provides early-stage risk capital and technical assistance to prepare projects for final investment decisions, and blended Equity Tranches to facilitate the transition from financial close to project construction. Commitments to the Development Tranche have been secured from Invest International and the European Commission through its Global Gateway strategy, as well as the Industrial Development Corporation of South Africa (IDC). Meanwhile, commitments to the Equity Tranches have come from the Public Investment Corporation (PIC) on behalf of the Government Employees Pension Fund (GEPF), Sanlam Life Insurance, Invest International, and the European Commission, with additional support from the Development Bank of Southern Africa (DBSA).

The first close of the fund reflects growing investor confidence in green hydrogen and its derivatives as solutions for decarbonising hard-to-abate sectors, including steel, fertiliser, e-fuels, and chemicals. Andrew Johnstone, CEO of Climate Fund Managers, emphasised that industrial decarbonisation requires solutions beyond electrification, and green hydrogen plays a critical role in this transition.

[/paywall]