In Southern Africa, a group of financiers is leading the charge to raise over US$1 billion for the development of green hydrogen projects in South Africa and Namibia.
These initiatives, known as the SA-H2 Fund and SDG Namibia One, are not only poised to transform the energy landscape in the region but also align with the ambitious Net Zero carbon emission targets set by Southern African nations.
Supported by Climate Fund Managers (CFM), Invest International B.V. (II), Sanlam Limited, the Development Bank of Southern Africa (DBSA), and the Industrial Development Corporation of South Africa (IDC), these funds are poised to harness the vast potential of green hydrogen in Southern Africa. The Environmental Investment Fund of Namibia (EIF) is also backing the Namibian green hydrogen project.
At a recent event titled “Powering Green Hydrogen: Shaping Southern Africa’s Energy Future” in Johannesburg, stakeholders and experts gathered to discuss the ambitious goals of these funds and the transformative potential of green hydrogen in the region.
Andrew Johnstone, co-founder of CFM, emphasized the enormous opportunity green hydrogen presents in Southern Africa. He believes that green hydrogen is not just a pathway but a solution to the global energy transition, especially in a region blessed with abundant solar and wind resources. However, he underlines that blended finance is the key enabler to bring all these elements together, bridging the gap between vision and reality.
Blended finance, as promoted at the event, combines donor capital with commercial funding to mitigate risks and enhance returns. It brings together governments, development financiers, donors, and the private sector to create a collaborative funding solution that can support green hydrogen projects throughout their lifecycle.
Southern Africa is well-positioned to meet this demand, with Namibia’s Hyphen project and South Africa’s 19 green hydrogen projects leading the way. These projects, however, require substantial capital and can take years to materialize. The DBSA estimates that South Africa alone will need to invest US$250 billion in green hydrogen by 2050.
The SA-H2 Fund, once established, aims to empower South Africa as a global leader in the green hydrogen sector, alongside the SDG Namibia One fund. However, fundraising for the SA-H2 Fund is contingent on regulatory approvals, emphasizing the urgency of advancing development funding.
From an environmental perspective, green hydrogen has the potential to significantly reduce carbon emissions by replacing fossil fuels. Additionally, it contributes to the transition to a sustainable energy system while preserving natural resources. Concerns about the strain on electricity supply from new electrolyser plants are addressed by the assurance of dedicated renewable electricity generation infrastructure.
On an economic level, green hydrogen projects bring job opportunities, attract foreign capital, and boost GDP growth through export revenues. However, as Mike Peo from Nedbank CIB highlights, the transition must also consider social aspects and job security. A just energy transition is crucial, ensuring that economic and social benefits go hand-in-hand with environmental gains.
Local asset managers like Sanlam Investments are at the forefront of the blended finance movement, integrating impact and social investment into their core values. Their investments prioritize job creation and support for local communities, all while delivering competitive returns for investors.