South Africa, along with the governments of the Netherlands and Denmark, unveiled a $1 billion fund on Tuesday to support the development of the country's green hydrogen sector. The establishment of the fund is a crucial step in South Africa's efforts to transition to a decarbonized economy.

The country's energy transition plan focuses on creating an ecosystem and export hub for green hydrogen, a fuel produced using renewable energy sources and without emitting greenhouse gases. South Africa aims to utilize green hydrogen in various sectors such as aviation, green steel production, transportation, and more. Additionally, the country plans to export green hydrogen to the European Union. However, President Cyril Ramaphosa has estimated that this ambitious endeavor will require an investment of 319 billion rand ($17.57 billion).

Managed by Climate Fund Managers, a joint venture between the Dutch development bank FMO and South African insurer Sanlam, the newly launched fund, known as SA-H2, aims to provide support to South Africa's green hydrogen industry. The statement released by Climate Fund Managers mentioned that the initiative seeks to secure $1 billion in funding, either directly from South Africa or through other channels.

European nations, including France, Germany, Britain, the United States, and the European Union, are eager to assist South Africa, the 14th largest global emitter of carbon dioxide, in its transition toward a greener economy to combat climate change. Presently, South Africa heavily relies on an aging fleet of 15 coal-fired power plants for its electricity needs.

Last year, a similar fund was established for Namibia, targeting the development of a green hydrogen industry in the country.

However, critics highlight the slow progress in renewable energy deployment in South Africa as a significant challenge for establishing a successful green hydrogen industry. To support such an industry, Boston Consultancy Group suggests that South Africa would need to install 6-7 gigawatts (GW) of renewable capacity annually for the next two decades, whereas the country has only managed to achieve a total of 6 GW since 2011.