South Africa, which holds 70% of the world's platinum group metal reserves, is viewed as a key player in developing large-scale hydrogen technologies. Financial institutions in South Africa and foreign development finance groups have contributed 3 billion rand to the SA-H2 Fund, which aims to support the implementation of commercially viable hydrogen projects.
Despite rapid progress in the development of South Africa's hydrogen economy, it remains in an early stage of commercial adoption, lagging behind developed countries such as Germany, Japan, and the USA, which have already integrated hydrogen into their transport networks and national energy systems.
The SA-H2 Fund, also known as Climate Investor Three (CI3) South Africa, was announced by Climate Fund Managers, a mixed-finance investment manager, which secured the 3 billion rand. The Fund's main focus is on large-scale energy transition projects across the entire value chain of green hydrogen.
This chain includes the production of green hydrogen, as well as derivative products like green ammonia and green methanol, and the decarbonization of hard-to-abate industries. Green hydrogen is produced through the electrolysis of water using renewable energy sources, such as solar or wind power.
Mphokolo Makara, CEO of SA-H2 Fund Managers, noted that thanks to the availability of world-class renewable resources, a strong industrial base, and growing demand for low-carbon fuel, the country is capable of playing a significant role in the green hydrogen economy. He emphasized that SA-H2 is developing a portfolio of commercially viable projects that will help decarbonize industry, stimulate long-term economic growth, and support a just energy transition.
To date, the SA-H2 Fund has signed development financing agreements with Green Efuels Producers, which is building a wastewater-to-green-methanol plant in Gauteng, and with Hive Hydrogen Coega Green Ammonia Project, which is the country's first large-scale green ammonia production facility.
The Fund operates as a blended finance mechanism, combining public and private capital to balance risks and ensure institutional investment. It consists of a Development Tranche, which provides seed capital and technical assistance to prepare projects for final investment decisions, as well as blended Equity Tranches, facilitating the transition from financial close to project construction.
The commitments for the Development Tranche came from Invest International and the European Commission under its Global Gateway strategy, as well as the Industrial Development Corporation of South Africa (IDC). Regarding the Equity Tranches, commitments were provided by the Government Employees Pension Fund (GEPF) through the Public Investment Corporation (PIC), Sanlam Life Insurance, Invest International, the European Commission, and received additional support from the Development Bank of Southern Africa (DBSA).
The fund's initial closing signals growing investor confidence in green hydrogen and its derivatives as a solution for decarbonizing complex sectors, including steel, fertilizers, e-fuels, and chemicals. Andrew Johnston, CEO of Climate Fund Managers, stressed that decarbonizing industry requires solutions beyond mere electrification, and green hydrogen plays a critical role in this transition.
Jeroen Plag, Investment Director at Invest International, noted that the multi-tiered capital structure allows for more efficient capital allocation, reducing risks at early development stages and mobilizing institutional investment on a large scale. He added that this supports investment-ready projects and the creation of long-term value during the energy transition.
European Commissioner for International Partnerships, Josef Sikela, emphasized that the Global Gateway initiative creates favorable conditions for private investors to enter fast-growing markets with high potential. He stated that cooperation with SA-H2 demonstrates this in practice by supporting job creation and industrial development in partner countries while contributing to the decarbonization of international industry.
Leki Payne, Head of Research and Innovation at PIC, reported that their investments in the SA-H2 Fund align with the Hydrogen Investment Strategy adopted in 2022. He explained that this allows PIC to help clients diversify their energy needs and achieve net-zero goals, while also supporting the United Nations Sustainable Development Goals.
Rian Kotze, Executive Director of Industry Planning and Project Development at IDC, noted that this development will strengthen their commitment to investing in large-scale energy transition projects across the entire green hydrogen value chain.
