South Africa identifies green hydrogen as big frontier sector to attract foreign and domestic direct investment

  • South Africa’s President,  Cyril Ramaphosa, has highlighted the vital role the green hydrogen economy plays in the country’s development and just energy transition. 
  • Ramaphosa was delivering remarks at the second iteration of South African Green Hydrogen Summit (SAGHS) in Century City, Cape Town, on Monday. 

“The hydrogen economy has a prominent role to play in our country’s just energy transition, providing employment and support to vulnerable workers, communities and small businesses.

“It has been estimated that the hydrogen economy has the potential to add 3.6% to our GDP by 2050 and approximately 370 000 jobs. We must act with purpose to harness the potential of the green hydrogen economy,” the President said.

The inaugural SAGHS, held in 2022, reaffirmed South Africa as an investment destination of choice and a world leader in the green energy space. It focused on scaling up regional cooperation around green hydrogen.

This second summit aims to highlight South Africa’s exceptional potential as an early stage, large scale and low cost world-class green hydrogen production hub, and total value chain investment destination.

South Africa’s Investment Strategy, approved by Cabinet earlier this year, lists green hydrogen as one of the big frontier strategic sectors expected to attract foreign and domestic direct investment.

The President emphasised the nation’s goal to position itself as a globally competitive player in this dynamic and growing industry.

The President noted that 64 countries, accounting for 89% of global emissions, have announced net zero targets by 2050. He further said that is anticipated that global green hydrogen demand will increase sevenfold by 2050.

He said that for the world to limit global warming to less than 1.5 degrees Celsius, green hydrogen will need to constitute 10% to 20% of the global energy mix.

“South Africa has committed to ambitious emission reduction targets. Our own estimates indicate that green hydrogen has the potential to remove 10% to 15% of our domestic emissions and contribute to our nation’s long-term energy security,” he said.

Green Hydrogen Alliance

The President acknowledged the collaboration efforts being made through the African Green Hydrogen Alliance, which includes Egypt, Kenya, Mauritania, Morocco, Namibia, Ethiopia, Angola and South Africa.

The alliance aims to harness Africa’s potential in developing green hydrogen industries. It aims to make joint calls for technical support, funding and market access to international public and private sector partners.

“The inaugural summit laid a strong policy foundation. This year’s summit has a dedicated project focus, providing an opportunity to demonstrate the degree to which projects have matured and advanced. This is also an opportunity to demonstrate technological developments and advancements in the green hydrogen space.

“Close cooperation between public, private and financial partners will be key to unlocking Africa’s green hydrogen potential. This will enable mass-scale domestic and international demand for green hydrogen, and increase cooperation on green hydrogen production, storage and distribution infrastructure,” President Ramaphosa said.

The President emphasised that if investment is significantly scaled-up, green hydrogen can deliver the equivalent of more than one third of Africa’s current energy consumption, increase the collective GDP, improve clean water supply and empower communities.

He said proper planning, regulation and incentive schemes are critical to mobilise private sector investment.

“South Africa has deep capital markets, with world-class conditions for generating renewable energy through solar and wind power, which are key drivers of the production of green hydrogen.

“Funding green hydrogen projects will require innovative financing structures sourced from multiple stakeholders,” President Ramaphosa said.

Building the green hydrogen industry

In June 2023, South Africa concluded a Heads of Agreement with the intention to launch the SA-H2 Fund. This is an innovative blended finance fund that will facilitate the development of a green hydrogen sector and circular economy in South Africa.

SA-H2 aims to secure $1 billion in funding raised directly in South Africa or via indirect channels. The Fund is a partnership of private and public enterprises, locally and globally.

Since the last Summit, the President said advances have been made towards building the green hydrogen industry in the country.

These include a Joint Declaration of Intent with the German government, focusing on market access, off-take opportunities and value-additive benefits in the production of green steel and green fertiliser.

South Africa has also signed a MOU with the Netherlands as an off-taker for green hydrogen derivative products.

“It is encouraging to note that a Memorandum of Cooperation will be signed at this conference by three multinationals in the green hydrogen mobility space, namely Sasol, Anglo American and BMW.

“Sasol will serve as a supplier to Anglo and BMW as part of their focus on commercial and passenger fleet transformation. These are important initiatives within the context of carbon border adjustment mechanisms,” the President said.

He thanked all the partners and sponsors that have made this summit possible. He sent a special mention to Anglo American, BMW, Sasol, the Industrial Development Corporation and GIZ.

“I wish business and government delegations at this summit well as we work to shape Africa’s green hydrogen agenda for the benefit of our economies and societies, now and into the future,” he said.

Source: SAnews.gov.za

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