Norfund, CDC to invest R600m to back renewable energy in SA

NORFUND, the Norwegian investment fund for developing countries in collaboration with CDC Group, UK's development finance institution (DFI), plans to invest R600 million in H1 Capital towards renewables development in South Africa.

Norfund will invest R360 million and CDC will fund R240 million to H1, which is a South African black-owned and managed renewables investment and development company.

The investment aims to help improve access to clean and affordable energy in South Africa and also mobilise climate finance to Africa and back clean infrastructure projects across the continent. Norfund said the investment would soon be renamed British International Investment (BII).

According to Norfund, the increase in clean energy supply would provide consistent power to cities, villages, townships, businesses, and farms, thereby increasing productivity and encouraging economic growth.

“The investment in H1 Capital demonstrates the commitment by the UK and Norway to act on pledges made at COP26,” the company said.

Norfund chief executive Tellef Thorleifsson said: “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”.

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 6 400 GWh per year. This would contribute to avoiding annual emissions of 6.2 million tons of CO2, and help to accelerate South Africa’s transition to clean energy, Norfund said.

H1 chief executive Reyburn Hendricks said: “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”.

The South African government has set a target to generate 20GW of new renewable capacity over the next decade to address power shortages and decarbonise the power generation fleet, where 86 percent of the country's energy mix is thermal.

UK minister for Africa Vicky Ford said: “South Africa's target to generate 20GW 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.”

Norfund said the transaction also qualified for the 2X challenge, which seeks to support businesses that provide women in emerging economies with access to leadership opportunities, quality employment, and products and services that 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,” it said.

CDC Group chief executive Nick O'Donohoe said: “This investment signals our strengthened relationship with South Africa and clearly signals Britain’s commitment to helping accelerate economic productivity and inclusive growth for Africa's green recovery.”

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