Southern Africa hydrogen fund targets green steel and industrial transition

A new green hydrogen investment fund for Southern Africa has secured ZAR 3 billion (around USD 182 million) at its first close, providing fresh financing for projects that could support the decarbonisation of steel and other energy-intensive industries.

The SA-H2 Fund, managed by Climate Fund Managers and also known as Climate Investor Three South Africa, will invest across the green hydrogen value chain. This includes hydrogen production, derivatives such as green ammonia and methanol, and projects designed to reduce emissions in hard-to-abate sectors including steel, chemicals and fertilisers.

The fund combines public and private capital, with commitments from the European Commission under its Global Gateway strategy as well as South African and international institutional investors.

Green hydrogen for energy-intensive industries

For the steel sector, the initiative is particularly relevant because renewable hydrogen is considered an important option for replacing fossil fuels in direct reduced iron production and other industrial processes.

Southern Africa's renewable energy resources could provide the region with a competitive position in hydrogen-based industrial production. SA-H2 Fund Managers CEO Mphokolo Makara pointed to the combination of renewable resources and an established industrial base as important advantages for South Africa.

Climate Fund Managers CEO Andrew Johnstone said industrial decarbonisation would require technologies beyond direct electrification, adding that "green hydrogen has a critical role to play."

The fund uses a blended finance structure intended to reduce investment risks during project development and subsequently attract institutional capital for construction. Its development tranche will provide early-stage financing and technical assistance to help projects reach final investment decisions.

Fund targets ZAR 12 billion by 2028

Investors in the fund include the European Commission, Invest International, South Africa's Public Investment Corporation, Sanlam Life and the Industrial Development Corporation of South Africa. The Development Bank of Southern Africa is also supporting the initiative.

Initial development agreements have already been signed for a wastewater-to-green-methanol project in Gauteng and the large-scale Hive Hydrogen Coega green ammonia project.

Following the ZAR 3 billion first close, the fund is targeting a total volume of ZAR 12 billion by mid-2028. The initiative is intended to help establish commercially viable hydrogen projects while supporting industrial development and the transition of South Africa's energy-intensive industries towards lower-carbon production.

Source: European Commission, Photo: Fotolia