SA-H2 Fund Raises ZAR3 Billion to Back South Africa's Hydrogen Projects

South Africa has taken another step towards building a green hydrogen economy after the SA-H2 Fund secured its first commitments worth ZAR3 billion (USD184 million) to finance projects across the country's emerging hydrogen value chain.

Climate-focused blended finance investment manager Climate Fund Managers (CFM) announced the first close of the fund, saying the capital will support the development and construction of green hydrogen projects, including green ammonia, green methanol and other low-carbon fuels.

The fund, also known as Climate Investor Three (CI3) South Africa, aims to mobilise investments across the full project lifecycle, from early-stage development through to construction and commercial operation.

According to CFM, the development tranche has attracted support from Invest International, the European Commission through its Global Gateway strategy and the Industrial Development Corporation of South Africa (IDC), while the equity tranches are backed by South Africa's Public Investment Corporation (PIC) on behalf of the Government Employees Pension Fund (GEPF), Sanlam Life Insurance Limited, Invest International and the European Commission. The Development Bank of Southern Africa (DBSA) is also supporting the initiative.

The fund has already signed development funding agreements with the Green Efuels Producers wastewater-to-green-methanol project and the Hive Hydrogen Coega Green Ammonia Project, South Africa's first utility-scale green ammonia development.

CFM explained that the fund is designed to accelerate investments in sectors that are difficult to decarbonise, including steel, fertiliser, chemicals and synthetic fuels, by supporting projects capable of producing green hydrogen and its derivatives.

Fund targets growing hydrogen investment pipeline

The SA-H2 Fund is targeting a final size of ZAR12 billion by mid-2028, with the latest fundraising milestone reflecting growing investor confidence in South Africa's potential to become a major producer of green hydrogen and related products.

By combining concessional development finance with commercial capital, the blended finance model will support reduce investment risks and help projects reach final investment decisions more quickly.

South Africa has been positioning itself as a future exporter of green hydrogen since the launch of its Hydrogen Society Roadmap in 2021, leveraging its abundant solar and wind resources together with platinum reserves used in hydrogen technologies.

In 2023, the government unveiled an investment pipeline worth more than R300 billion for hydrogen-related projects, while several large-scale developments, including the Hive Hydrogen green ammonia project in the Eastern Cape and Boegoebaai Green Hydrogen Project in the Northern Cape, moved into development.

The first close of the SA-H2 Fund provides dedicated capital to help projects progress from early development to construction, addressing one of the biggest hurdles facing South Africa's ambition to become a global supplier of green hydrogen and its derivatives