Pretoria – During the visit (June 20) of Prime Minister Mark Rutte from the Netherlands and Prime Minister Mette Frederiksen from Denmark to President Cyril Ramaphosa, a Heads of Agreement has been concluded with the intention to launch a new ‘SA-H2 Fund’ (SA-H2). SA-H2 is an innovative blended finance fund, that will facilitate and accelerate the development of a green hydrogen sector and circular economy in South Africa. The Fund is supported by Climate Fund Managers (CFM) and Invest International B.V. (II) of the Netherlands, Sanlam Limited of South Africa (Sanlam), the Development Bank of Southern Africa (DBSA), and the Industrial Development Corporation of South Africa (IDC), in collaboration with other strategic partners.
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. 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 mobilization of funding towards the development and construction of large-scale green hydrogen infrastructure assets across South Africa.
Green hydrogen is the solution
Andrew Johnstone, CEO of Climate Fund Managers, said: “To achieve Net Zero by 2050, urgent and unprecedented action is needed. We believe that green hydrogen is both the pathway and the solution to the global energy transition. South Africa 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 South Africa to claim its rightful place as a world leader in this exciting and necessary sector. SA-H2, once established, will join the recently announced SDG Namibia One fund (aiming to secure US$1 billion in funding to be raised directly in Namibia or indirectly via other channels), as the second-of-its-kind, regional blended finance fund to develop and fund green hydrogen projects.”
“Hydrogen replaces carbon-intensive fuels, reducing emissions and environmental impact. It also enables efficient storage and utilization of energy from renewable sources which can be more intermittent, ensuring a reliable supply. Hydrogen energy production provides a clean, versatile and efficient energy source that can drive the transition to a low-carbon economy, helping end the climate crisis and secure a more sustainable and prosperous future,” said Johnstone.
How SA-H2 Fund will work and its anticipated impact in South Africa
“Succeeding in a just transition to cleaner energy rests on our ability to create a viable marketplace that attracts and mobilizes public and private capital, and this fund will do just that. We will create and use innovative blended finance architecture and structuring to build a substantial pipeline of green hydrogen projects in South Africa. This will give private sector developers access to risk capital from an early stage of development, throughout construction and into operations,” says Catherine Koffman, Group Executive: Project Preparation at the DBSA. “Further, this fund is a significant addition to national efforts to leverage our existing renewable energy infrastructure. With a national target of US$250 billion investment in green hydrogen by 2050, this sector is projected to amplify the development impact of the renewable energy industry. It is an exciting development that, in accelerating the development of critical green hydrogen infrastructure, will stimulate the economy, train new skills, create jobs, generate export revenues, and facilitate the decarbonization of our economy and industry.”
Key role for the Fund and South Africa
Joost Oorthuizen, CEO of Invest International: “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. Green hydrogen projects in South Africa can contribute to local sustainable development and support the energy transition locally as well as in export markets. While deploying its funds, Invest International makes efforts to demonstrate strong environmental and social commitment, strive for local impact and inclusive growth, and combine the expertise of Dutch and South African businesses.”
Mobilising local South African private sector funding
Carl Roothman, CEO of Sanlam Investment Group, says: “At Sanlam, we are proud to be playing a leading role in building infrastructure that will contribute to Africa’s climate change journey. We have been at the forefront of sustainable investing in our country for many years – through our shareholding in Climate Fund Managers and a range of other sustainably focused initiatives – and are excited about the possibilities and impact this fund will have on our region, environmentally, socially and economically.
“Green hydrogen offers huge promise for solving our energy challenge and, as a company that believes in a just transition to clean energy, our country and our continent’s journey to finding clean energy alternatives will be boosted. The fund will help many important, large-scale projects get underway and will create jobs and stimulate local economies and communities.”
He said the group is well-positioned to provide financial and capital market advice, investment instrument structuring, fund-raising and distribution, marketing and logistical support.
Supporting re-industrialization in South Africa
Joanne Bate, Chief Operations Office of the IDC: “The green hydrogen economy presents new economic opportunities – new skills, employment and community opportunities – for South Africa. The development of this new industry will support the longer-term energy security priority and the just energy transition contribution will proactively address socio-economic development. South Africa will position itself as a globally competitive player in this industry. More importantly, green hydrogen will enable the local decarbonization of hard-to-abate industrial sectors. Recent efforts by both the public and private sectors have resulted in a significant ramp-up of green hydrogen projects in South Africa that are being developed along the value chain. In November 2022, twenty green hydrogen projects were included in the Government Gazette with nine given status as strategic integrated projects (SIP) which will expedite the development and implementation of these projects. SA-H2 will be needed to support these projects and develop this new industry for South Africa.”
Why Hydrogen
To reach net zero by 2050, the world needs power from renewable energy sources as well as the decarbonization of other energy systems. Renewable energy will be the backbone, generating electrons and producing green hydrogen (H2). Hydrogen is a versatile energy carrier that is vital for decarbonising key sectors of the economy, including hard-to-abate industries like steel and chemicals. The development of the green hydrogen industry will have a profound and positive economic, social, and environmental impact.
About Climate Fund Managers
Climate Fund Managers (CFM) is the leading climate-centric blended finance investment firm. It designs and deploys cutting-edge climate finance funds at scale and at pace, working in partnership to co-develop, construct and own sustainable infrastructure solutions that deliver low-emission, climate-resilient growth. Through its innovative model, CFM has created a blueprint for a new generation of climate financiers, whose collective impact can end the climate crisis. CFM currently manages two emerging market infrastructure funds focused on climate change mitigation and adaptation: Climate Investor One (CI1), a USD923m fund focused on renewable energy, and Climate Investor Two (CI2), a USD855m fund focused on water, sanitation, and oceans infrastructure. Established in 2015, CFM is a joint venture between the Dutch development bank, FMO, and Sanlam InfraWorks, part of the Sanlam Group of South Africa. The firm invests across Africa, Asia, and Latin America and is headquartered in The Netherlands.
More information is available on the website https://www.climatefundmanagers.com
About Invest International
Invest International is a financing institution owned by the Dutch Ministry of Finance (51%) and the Dutch development bank FMO (49%). Invest International offers tailor-made financing and project development expertise to bring projects in emerging markets to fruition and create an impact on the SDGs while contributing to the Dutch economy and its future earning capacity. It has a catalytic financing capacity of over 2 billion euros, composed of investment capital for public and private projects, as well as grants enabling public infrastructure projects.
Invest International was assigned by the Dutch Government to develop and finance green hydrogen projects in emerging markets, to contribute to local sustainable development and support the energy transition in Northwestern Europe. While deploying its funds, Invest International makes efforts to engage the expertise of Dutch businesses, demonstrate strong environmental and social commitment and strive for local impact and inclusive growth.
More information is available on the website https://www.investinternational.nl
About the Development Bank of Southern Africa
The DBSA is a South African government-owned development finance institution, established in 1983, with the mandate to promote economic growth as well as regional integration for sustainable development projects and programmes in South Africa, SADC and the wider Sub-Saharan Africa. The DBSA’s primary purpose is to promote economic development and growth, improve the quality of lives of people and promote regional integration through infrastructure, finance and development.
The DBSA mandate focuses the banks underlying policy to play a catalytic role in delivering developmental infrastructure in South Africa and the rest of Africa. More information is available on the website https://www.dbsa.org
About Sanlam of South Africa
Sanlam is the leading non-banking financial services group on the African continent, with a niche presence in India, Malaysia and selected developed markets. We are a purpose-led organization, with all our efforts centered on helping our clients live with confidence. Our investment arm, Sanlam Investment Group (SIG), provides retail and institutional clients in Africa with a comprehensive range of specialized investment management, credit and risk management expertise. SIG is a key enabler of Sanlam’s purpose through superior solutions, leading product capabilities and strong investment performance. A focus on impact investing drives positive social and economic change, creating a world where people can live with confidence. As one of South Africa’s largest black-owned asset managers, SIG is transforming the industry while driving financial inclusion through cost-effective solutions.
Sanlam Investments consists of the following authorized Financial Services Providers: Sanlam Investment Management (Pty) Ltd (“SIM”), Sanlam Multi Manager International (Pty) Ltd (“SMMI”), Satrix Managers (RF) (Pty) Ltd, Graviton Wealth Management (Pty) Ltd (“GWM”), Graviton Financial Partners (Pty) Ltd (“GFP”), Satrix Investments (Pty) Ltd, Amplify Investment Partners (Pty) Ltd (“Amplify”), Sanlam Africa Real Estate Advisor Pty Ltd (“SAREA”), Simeka Wealth (Pty) Ltd, Absa Asset Management (Pty) Ltd (“ABAM”) and Absa Alternative Asset Management (Pty) Ltd (“AAM”); and has the following approved Management Companies under the Collective Investment Schemes Control Act: Sanlam Collective Investments (RF) (Pty) Ltd (“SCI”) and Satrix Managers (RF) (Pty) Ltd (“Satrix”). More information is available on the website https://www.sanlam.com/index
About the Industrial Development Corporation of South Africa
The Industrial Development Corporation (IDC) of South Africa Limited was established in 1940 through an Act of Parliament (Industrial Development Corporation Act, 22 of 1940) and is fully owned by the South African Government.
The IDC’s priorities are aligned with the national policy direction as set out in the National Development Plan (NDP), industry Master Plans, and other relevant policies. The Corporation’s mandate includes proactively maximizing its development impact through driving an ambitious programme of inclusive and sustainable employment-creating industrialization in South Africa and the region. At the same time, the IDC needs to ensure its long-term sustainability through prudent financial and human capital management, whilst safeguarding the natural environment and positioning itself as a forerunner in development finance in South Africa and the continent. More information is available on the website https://www.idc.co.za/about-us/