Amid growing international investor interest in Africa’s green hydrogen market, countries including Namibia, South Africa, Mauritania and Kenya are at the forefront of exploring potential green hydrogen opportunities on the continent. Namibia is ideally positioned to produce green hydrogen given its significant solar and wind generation capacity.   

Green hydrogen will increasingly play a part in the energy mix of developed and developing countries, particularly those looking to transition away from fossil fuels. Unlike grey hydrogen, energy produced from renewable sources such as solar and wind can be used to create green hydrogen. This means green hydrogen will play an increasingly pivotal role in decarbonisation through the production of low-carbon compounds and fuels, including green ammonia for the decarbonisation of nitrogen fertilisers, sustainable aviation fuel and e-methanol for maritime transport.

Green hydrogen in Namibia  

Namibia’s government is seeking to position itself as a green hydrogen hub in southern Africa, and opportunities for investment in the sector are increasing. The country is largely arid and receives significant amounts of sunshine, while its low population density means that there are many large areas in which to develop green hydrogen projects.   

The government has introduced a green hydrogen strategy to advance investment in the sector, and will continue to seek to introduce incentives to create an enabling environment for green hydrogen projects. It will also seek to reassure investors and Namibians of its ability to effectively manage renewable energy sources. President Hage Geingob in May 2022 launched a sovereign wealth fund (Welwitschia Fund) to which proceeds from green hydrogen projects will be channelled. 

A USD 10bn green hydrogen pilot project is currently being developed in Karas region to kickstart development of the sector. The government has 24% equity in the project, with Germany positioned as the primary off taker. The government will continue to seek stakes in future projects to ensure the country benefits through green hydrogen projects contributing to its sovereign wealth fund.   

With the ruling SWAPO likely to win another majority in the 2024 elections, the government will continue its efforts to promote green hydrogen projects in the coming years. Such projects will both increase local generation capacity and drive the expansion of port infrastructure to support international exports. Increased energy generation will also make the country more energy self-sufficient and produce surplus energy that can be exported to the region.  

Risks and headwinds 

While the sector currently lacks a regulatory framework, the government will seek to position the country as a green hydrogen export hub and attract foreign investment by drafting business-friendly legislation to govern the sector amid pressure from international organisations and investors for effective regulation. However, as the government works to draft regulations, it will also seek to maintain public support by ensuring that the country benefits visibly from the sector’s development through localised supply chains and job creation.  

Water management linked to green hydrogen production will be one of the greatest environmental challenges that investors will face. Namibia is a highly arid country, and the authorities will seek to promote sustainable water usage in green hydrogen projects. Additionally, there will be concerns regarding the potential adverse effects of green hydrogen projects on local biodiversity. Companies will likely be required to conduct ESG risk assessments and comply with stringent conservation regulations or face sanctions.   

Although there has been an increase in activism by climate groups against energy projects in Namibia in recent years, activism regarding green hydrogen will continue to centre on land displacement and revenue allocation. This is particularly the case in southern regions such as Erongo, Hardap and Karas, where many green hydrogen projects are being proposed. Southern regions remain relatively underpopulated and underdeveloped compared with northern regions, and economic representation and compensation for groups in the south will continue to be a political focus. This will drive activities by local interest, lobbying and political groups, which will push for fair compensation for those displaced by projects and to ensure that the regions obtain economic benefits from green hydrogen production. Nonetheless, given that green hydrogen is largely considered to be a cleaner energy source than fossil fuels, the industry is unlikely to attract the same level of scrutiny from climate activists as recent oil exploration in Namibia.  

Given that senior government officials in Namibia are often involved, either directly or through proxies, in sectors such as oil and gas, mining and agriculture, it is likely that there will be actors within the nascent green hydrogen sector who are politically connected. This means that due diligence of planned projects will be key to mitigate integrity risks.  

The government will also face increasing scrutiny of its plans to develop renewable energy sources amid the emergence of various corruption cases in recent years. Despite having a strong legal framework to combat corruption, including a dedicated Anti-Corruption Commission (ACC), official corruption presents financial and reputational risks to operations. While the government will seek to take action to tackle high-level public-sector corruption, the risk of conflicts of interest will persist, particularly regarding government contracts. 

The 2019 “Fishrot” scandal is the most high-profile corruption case in recent years. Government officials issued fishing licences to an Icelandic fishing company in exchange for bribes. This led to the arrest of several government ministers and has increased sensitivities around corruption in the country, particularly when foreign companies deal with government officials.

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