Norfund, the Norwegian investment fund for developing countries, and CDC Group, the UK's development finance institution (DFI), have announced their commitment to invest R600-million (R360-million by Norfund and R240-million by CDC) in H1 Capital – a South-African black-owned and managed renewables investment and development company.
The transaction represents a joint vision by the DFIs to mobilise climate finance to Africa and back clean infrastructure projects across the continent. The investment from Norfund and CDC, which will soon be renamed British International Investment (BII), will help to improve access to clean and affordable energy in South Africa. The increase in clean energy supply will provide consistent power to cities, villages, townships, businesses and farms, thereby increasing productivity and encouraging economic growth.
South Africa has tremendous economic potential. The government has set an ambitious target to generate 20 GW of new renewable capacity over the next decade to address power shortages and decarbonise the power generation fleet, where 86% of the country's energy mix is thermal.
This investment will support the country's clean energy goals, as it will enable H1 Capital to fund a pipeline of over 2,4 GW of new wind and solar projects, generating approximately 6400 GWh per year. This will contribute to avoiding annual emissions of 6,2 million tons of CO2 and help to accelerate South Africa’s transition to clean energy.
H1 Capital is a development partner of choice, owing to the company's expertise on several renewable power projects and its deep commitment to energy sustainability. H1 Capital, a broad-based black economic empowerment (BBEE) company, applies an inclusive approach to provide clean energy solutions which enhance the participation of the wider communities in the economy. This, in turn, helps to transform the lives and livelihoods of marginalised groups in South Africa.
This investment in H1 Capital demonstrates the UK’s and Norway’s commitments to act on pledges made at COP26, viz., scaling climate finance to Africa and deepening collaboration on solutions which will meet the continent’s needs and address the continent’s climate emergency. At the summit, Norway announced the creation of a new climate investment fund to be managed by Norfund, and this capital to H1 Capital will be the first investment under the new fund.
This commitment also contributes to the UN’s sustainable goals (SDG 7) on affordable and clean energy, (SDG 8) on good jobs and economic growth and climate action (SDG 13). The transaction also qualifies for the 2X challenge, which seeks to support businesses which provide women in emerging economies with access to leadership opportunities, quality employment, and products and services which enhance their economic participation and inclusion. Moreover, the investment aligns with South Africa’s ambitions and steps toward securing a just transition to a low-carbon economy.
Statements from the signatories
Tellef Thorleifsson, the CEO of Norfund, said, “We are honoured that the Norwegian government has entrusted us with the responsibility of managing the new climate investment fund. We are delighted to be able to put the money to work quickly and effectively through what will be the first investment under the new mandate, with our existing partners in H1 and CDC, in projects in line with the energy plans of the South African government”.
Anne Beathe Tvinnereim, the Norwegian minister for international development, said, “I believe that the new Norwegian climate investment fund managed by Norfund will be our most efficient tool to help accelerate the global clean energy transition, making it possible to base necessary development on renewable energy and limit the climate crises’ devastating impacts on the world’s poor. I am confident that this first investment under the new climate mandate will be the first of many mutually beneficial partnerships that contribute to a just transition in South Africa and in the other markets that Norfund aims to prioritise.”
Nick O’Donohoe, CDC Group’s chief executive, said that CDC is delighted to once again partner with Norfund on this investment in H1 Capital, which will help increase clean energy access for people, communities, and businesses across South Africa. This investment, he added, marks another key step toward fulfilling CDC’s pledge to devote greater capital to fund clean infrastructure and to support markets like South Africa on its path toward a just transition. “This investment signals our strengthened relationship with South Africa and clearly signals Britain’s commitment to help accelerate economic productivity and inclusive growth for Africa's green recovery”, he added.
UK Minister for Africa, Vicky Ford, said: “South Africa’s target to generate 20 GW of new renewable capacity over the next ten years is indicative of the country’s bold steps toward securing a net-zero future for itself. $16-million of UK investment in H1 Capital demonstrates our continued commitment to remaining a strong partner for Africa, to help address the urgent climate challenge, and promote clean and equitable growth that will ensure African economies can build back better. Investments like this reaffirm and follow on from the commitment we have made to South Africa's low-carbon transition through the $8,5-billion multi-donor Just Energy Transition Partnership.”
Reyburn Hendricks, the CEO of H1 Capital, said, “H1 is excited to be able to partner with Norfund and CDC to achieve our purpose of improving the quality of lives. South Africa needs access to long-term, patient capital to develop the large-scale energy projects required for reliable, clean power supply and economic development. H1 hopes that the partnership fostered with Norfund and CDC can be replicated with other players and projects in sub-Saharan Africa”.