South Africa's green hydrogen sector boosted by big-ticket funding commitments

This audio is brought to you by Astec Industries, a Global Leader in manufacturing equipment for infrastructure, including asphalt production, construction, and material processing, driving innovation and sustainability. In a step to accelerate South Africa's just energy transition and establish the country as a global green hydrogen leader, R656-million has been committed to a green hydrogen fund. South Africa's state-owned Public Investment Corporation (PIC) asset manager, the State-owned Industrial Development Corporation of South Africa (IDC), and the Development Bank of Southern Africa (DBSA) have committed the equivalent of $37-million to South Africa's SA-H2 green hydrogen fund, also known as CI3 South Africa. The pioneering blended finance SA-H2 facility has been designed to stimulate the energy transition with a core focus on the green hydrogen value chain, support inclusive economic growth, and drive job creation. The fund is managed by a partnership between leading climate finance investor, Climate Fund Managers, and a Dutch development finance institution, Invest International. The announcement was made on the first day of South Africa's Green Hydrogen Summit in Cape Town on June 12, at which SA-H2 also announced its first investment: $20-million in development funding for the Hive Hydrogen Coega Green Ammonia Project at Nelson Mandela Bay, in the Eastern Cape. Hive will become South Africa's first large-scale green ammonia production plant, producing a million tonnes of green ammonia a year for export. The project will ensure that an annual 2.6-million tonnes of COe does not pollute our planet and create more than 20 000 jobs during construction and operations. The Development Funding Agreement will cover engineering, procurement, and construction selection; front-end engineering and design; and the completion of advanced stage permitting, environmental and social impact assessments; leading to offtake finalisation and financial close preparation. It also secures SA-H2's right to invest up to $200-million in construction funding. Financial close is targeted for the second half of 2026, with commercial operations expected in 2029. SA-H2 blends public and private capital within a single platform, made up of the: Development Tranche, providing early-stage risk capital and technical assistance to prepare projects for financial close. SA-H2 secured its initial commitments in 2024, raising R1.4 billion ($80-million) from Invest International and the European Commission. Blended Equity Tranches, to finance construction of projects through a tiered capital structure: The Tier 1 first loss tranche designed to absorb construction-stage risk; the Tier 2 Junior Equity tranche offering enhanced returns, supported by the other tiers; and the Tier 3 Senior Equity tranche, supported by risk mitigation instruments offering moderate risk-adjusted returns. Accordingly, the IDC and DBSA have each committed R178-million ($10 million) to the second close of the development tranche, enabling it to achieve its fundraising target. The PIC, on behalf of the Government Employees Pension Fund (GEPF), has committed an initial R300-million ($17-million) to the equity tranche as the anchor commercial investor in Tier 2. An additional allocation may be considered for the second close, subject to the PIC's approval processes. Climate Fund Managers CEO Andrew Johnstone described the commitments of PIC, DBSA, and IDC as signalling what he said was strong market confidence in South Africa's energy transition and green hydrogen potential. "These institutions are backing a new generation of infrastructure, such as the Hive Green Ammonia Plant, that will decarbonise the economy, create green jobs, and enhance long-term competitiveness. SA-H2's blended finance model unites local and international partners across public and private sectors to deliver the energy transition at scale," Johnstone explained. PIC CIO Kabelo Rikhotso spoke of SA-H2 offering ...