KARABO MOKGONYANA: SA’s green hydrogen deal risks deepening existing inequalities
Europe stands to benefit from cheap, clean hydrogen produced in SA, while South Africans deal with the environmental and social costs
13 January 2025 - 11:52
byKarabo Mokgonyana
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International corporations, particularly European companies, are poised to dominate the green hydrogen landscape in SA, the writer says. Picture: 123RF
SA recently announced a big step forward in its green hydrogen ambitions, backed by two EU grants totalling R628m (€32m). These funds are part of the EU’s Global Gateway initiative, aimed at accelerating the development of SA’s green hydrogen industry. While the financial support is significant, the deal raises concerns about who benefits from this partnership. The project seems more aligned with Europe’s energy needs than those of SA’s local communities. Additionally, critical issues like water scarcity and the dominance of international corporations in procurement must be scrutinised.
The first grant, valued at R490m, is aimed at leveraging R10bn in private and public investments across SA’s hydrogen value chain. The funding will support infrastructure for green hydrogen production, transportation and storage, as well as downstream industries. Its primary goals are to help reduce global emissions and stimulate local economic growth by creating jobs, providing water treatment facilities and increasing access to green energy.
The second grant, worth R138m, is focused on assisting Transnet, SA’s state-owned logistics and transportation company, in its green transformation. This funding aims to help Transnet meet its net-zero emissions goal by 2040. The grant will support feasibility studies and pilot projects for low-carbon hydrogen production and storage, particularly in Transnet’s core areas such as ports, rail and pipelines.
While these grants are meant to accelerate SA’s green hydrogen ambitions, there are legitimate concerns about who will ultimately control and benefit from these projects. International corporations, particularly European companies, are poised to dominate the green hydrogen landscape in SA. Given that the bulk of the funding and technical expertise comes from European sources, these corporations are likely to play a central role in both the production and export processes.
This dynamic raises concern about the extent to which SA businesses and communities will benefit from the project. The history of large-scale projects in SA is full of examples where foreign interests have taken precedence over local development, leaving communities with little more than environmental degradation and loss of land. There is a real risk that this green hydrogen initiative will follow the same trajectory, where international corporations reap the rewards while local communities see few benefits.
It’s important to question whether this deal is primarily designed to meet SA’s energy needs or Europe’s. The EU’s Global Gateway strategy, which seeks to boost clean energy connections, explicitly aims to support Europe’s energy transition by importing hydrogen from regions such as SA. The EU commissioner for energy, Kadri Simson, made it clear that this partnership is key to Europe’s goal of building “smart, clean and secure connections in the energy and transport sectors”.
While the EU’s financial support for SA’s green hydrogen ambitions is a step towards a cleaner energy future, the deal is fraught with issues that cannot be ignored.
While it’s true that green hydrogen could help to reduce SA’s carbon emissions and stimulate job creation, the project seems heavily export-orientated. Europe stands to benefit from cheap, clean hydrogen produced in SA, while South Africans may be left with the environmental and social costs. This raises concerns about energy justice, as local energy needs may take a back seat to European demands.
One of the most glaring issues surrounding SA’s green hydrogen ambitions is the country’s water crisis. The production of green hydrogen through electrolysis requires significant amounts of water — a resource SA already struggles to manage. The country is classified as water-scarce, and regions like the Western Cape have faced severe droughts in recent years, with Cape Town’s “Day Zero” water crisis in 2018 serving as a stark reminder of the country’s vulnerability.
Prioritising green hydrogen production in such a water-stressed nation is problematic. The government and its international partners have not adequately addressed how they plan to mitigate the enormous water consumption required for hydrogen production. This oversight could worsen water shortages, particularly in communities already struggling with limited access to clean water. In essence, while SA invests in green hydrogen for export markets, its citizens could be left to deal with the long-term environmental consequences.
Another issue that cannot be overlooked is the procurement process. The grants provided by the EU are expected to leverage significant private and public sector investments, but there is little clarity on who the key players will be. Given SA’s history of opaque procurement practices, there is a risk that international corporations will dominate the bidding process, sidelining local businesses and stakeholders.
The government must ensure that procurement for these projects is transparent and that local businesses are given a fair opportunity to participate. Without proper oversight, the green hydrogen deal could further entrench inequalities by favouring international corporations over SA firms and communities. If this happens, it will only reinforce the long-standing criticism that large-scale energy projects in Africa often benefit external actors more than the local population.
While the EU’s financial support for SA’s green hydrogen ambitions is a step towards a cleaner energy future, the deal is fraught with issues that cannot be ignored. The dominance of international corporations, the export-driven nature of the project, and the serious concerns about water scarcity, all suggest that this initiative may not be as beneficial for SA as it appears on the surface.
Local communities, already struggling with limited access to water and energy, could end up bearing the brunt of this project’s negative consequences. Moreover, the lack of transparency in procurement raises red flags about who will benefit from the billions of rand in investments. If this green hydrogen project is to succeed, the government must prioritise the needs of South Africans over the demands of foreign corporations and markets.
In its current form, the green hydrogen deal risks becoming another instance of how African resources are exploited to serve international interests, leaving local communities with little to show for it. SA deserves an energy transition that benefits its people first and foremost — not one that deepens existing inequalities and environmental challenges.
• Mokgonyana is a renewable energy campaigner at Power Shift Africa.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
KARABO MOKGONYANA: SA’s green hydrogen deal risks deepening existing inequalities
Europe stands to benefit from cheap, clean hydrogen produced in SA, while South Africans deal with the environmental and social costs
SA recently announced a big step forward in its green hydrogen ambitions, backed by two EU grants totalling R628m (€32m). These funds are part of the EU’s Global Gateway initiative, aimed at accelerating the development of SA’s green hydrogen industry. While the financial support is significant, the deal raises concerns about who benefits from this partnership. The project seems more aligned with Europe’s energy needs than those of SA’s local communities. Additionally, critical issues like water scarcity and the dominance of international corporations in procurement must be scrutinised.
The first grant, valued at R490m, is aimed at leveraging R10bn in private and public investments across SA’s hydrogen value chain. The funding will support infrastructure for green hydrogen production, transportation and storage, as well as downstream industries. Its primary goals are to help reduce global emissions and stimulate local economic growth by creating jobs, providing water treatment facilities and increasing access to green energy.
The second grant, worth R138m, is focused on assisting Transnet, SA’s state-owned logistics and transportation company, in its green transformation. This funding aims to help Transnet meet its net-zero emissions goal by 2040. The grant will support feasibility studies and pilot projects for low-carbon hydrogen production and storage, particularly in Transnet’s core areas such as ports, rail and pipelines.
While these grants are meant to accelerate SA’s green hydrogen ambitions, there are legitimate concerns about who will ultimately control and benefit from these projects. International corporations, particularly European companies, are poised to dominate the green hydrogen landscape in SA. Given that the bulk of the funding and technical expertise comes from European sources, these corporations are likely to play a central role in both the production and export processes.
UK study finds Sasol well placed to drive SA’s green hydrogen sector
This dynamic raises concern about the extent to which SA businesses and communities will benefit from the project. The history of large-scale projects in SA is full of examples where foreign interests have taken precedence over local development, leaving communities with little more than environmental degradation and loss of land. There is a real risk that this green hydrogen initiative will follow the same trajectory, where international corporations reap the rewards while local communities see few benefits.
It’s important to question whether this deal is primarily designed to meet SA’s energy needs or Europe’s. The EU’s Global Gateway strategy, which seeks to boost clean energy connections, explicitly aims to support Europe’s energy transition by importing hydrogen from regions such as SA. The EU commissioner for energy, Kadri Simson, made it clear that this partnership is key to Europe’s goal of building “smart, clean and secure connections in the energy and transport sectors”.
While it’s true that green hydrogen could help to reduce SA’s carbon emissions and stimulate job creation, the project seems heavily export-orientated. Europe stands to benefit from cheap, clean hydrogen produced in SA, while South Africans may be left with the environmental and social costs. This raises concerns about energy justice, as local energy needs may take a back seat to European demands.
One of the most glaring issues surrounding SA’s green hydrogen ambitions is the country’s water crisis. The production of green hydrogen through electrolysis requires significant amounts of water — a resource SA already struggles to manage. The country is classified as water-scarce, and regions like the Western Cape have faced severe droughts in recent years, with Cape Town’s “Day Zero” water crisis in 2018 serving as a stark reminder of the country’s vulnerability.
Prioritising green hydrogen production in such a water-stressed nation is problematic. The government and its international partners have not adequately addressed how they plan to mitigate the enormous water consumption required for hydrogen production. This oversight could worsen water shortages, particularly in communities already struggling with limited access to clean water. In essence, while SA invests in green hydrogen for export markets, its citizens could be left to deal with the long-term environmental consequences.
Another issue that cannot be overlooked is the procurement process. The grants provided by the EU are expected to leverage significant private and public sector investments, but there is little clarity on who the key players will be. Given SA’s history of opaque procurement practices, there is a risk that international corporations will dominate the bidding process, sidelining local businesses and stakeholders.
Avoid white elephants while supporting green hydrogen
The government must ensure that procurement for these projects is transparent and that local businesses are given a fair opportunity to participate. Without proper oversight, the green hydrogen deal could further entrench inequalities by favouring international corporations over SA firms and communities. If this happens, it will only reinforce the long-standing criticism that large-scale energy projects in Africa often benefit external actors more than the local population.
While the EU’s financial support for SA’s green hydrogen ambitions is a step towards a cleaner energy future, the deal is fraught with issues that cannot be ignored. The dominance of international corporations, the export-driven nature of the project, and the serious concerns about water scarcity, all suggest that this initiative may not be as beneficial for SA as it appears on the surface.
Local communities, already struggling with limited access to water and energy, could end up bearing the brunt of this project’s negative consequences. Moreover, the lack of transparency in procurement raises red flags about who will benefit from the billions of rand in investments. If this green hydrogen project is to succeed, the government must prioritise the needs of South Africans over the demands of foreign corporations and markets.
In its current form, the green hydrogen deal risks becoming another instance of how African resources are exploited to serve international interests, leaving local communities with little to show for it. SA deserves an energy transition that benefits its people first and foremost — not one that deepens existing inequalities and environmental challenges.
• Mokgonyana is a renewable energy campaigner at Power Shift Africa.
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