Presidential economic adviser and Green Hydrogen Commissioner, Office of the President of Namibia, James Mnyupe gives an update on the current green hydrogen projects in the country.
CHAMWE KAIRA (CK): There have been a lot of developments regarding the development of green hydrogen in Namibia. Briefly, give us where we are as a nation in terms of developing green hydrogen
projects?
JAMES MNYUPE (JM): Before we consider where we are, it is useful to meditate on where we have come from, because that indeed may give us context on how we got here, where we are going and how
much confidence should we have in our ability to get there. In the second Harambee Prosperity Plan, the government has articulated its ambitions to develop green hydrogen not for the sake of producing the actual molecule but rather in the context of its ambitions to develop the Southern Corridor Development Initiative as a means to deliver jobs, socio-economic development and dignity to the people of Namibia. Step-by- step, we are undeniably delivering on this ambition.
It is useful to pause and wonder where this thinking originated from. In 2019, the President gathered a team of 10 Namibian leaders from all walks of life and asked them to help him think about how to introduce a shot of economic dynamism in our country’s ambitions to industrialise. At the time, when the President was humble enough to seek the insights of ordinary Namibians to serve the nation, he was ridiculed by many for forming, too many committees.
Three members from the High-Level Panel on the Namibian Economy (HLPNE) were subsequently asked to join government to help implement the findings of the panel which was inscribed in the report submitted to His Excellency. I was humbled enough to be one of them. A little after a year later, we worked together with our new colleagues and developed the Harambee Prosperity Plan II (HPP II) -Action Plan of the Namibian Government Towards Economic Recovery and Inclusive Growth.
Yet another effort that was harshly criticized for being aloof and full of plans that would not deliver. HPPII included various recommendations from the findings of the HLPNE, the golden thread was obvious.
An even more important link between HPP II and the report from the HLPNE was the link back to the ambitions espoused in our Vision 2030, which had been broken up into various National Development Plans. This was an assignment President Geingob got given in the early 1990s by our Founding Father. All these efforts link back to President’s passion to industrialize Namibia as he was instrumental in crafting Vision 2030 under the tutelage of our Founding Father. So, the origins of Green Hydrogen are not random, but rather are founded on our President’s passion to fight for the economic plight of our people and lead us through the most important war of our generation – the fight for economic emancipation. Importantly, the President is willing and eager to work with Namibians and friends of Namibia from all walks of life to achieve this goal. An examination of the various members of committees He has mobilized over the years is great attestation to that. This, I find, is the most underappreciated quality about the President’s contribution to our country’s socio-economic developmental journey, inclusivity, he says, spells harmony.
On the back of this dynamic application of ideas from private sector pundits in Namibia, professors from Singapore, experts from global consulting firms, leaders from fellow African nations and economists from far afield, Namibia has crafted ideas that extend beyond our typical intellectual reach. This has resulted in a flow of foreign direct investment that very few would have ever predicted. In my opinion, where we find ourselves now is the nexus between diverging global ideas and theories on how to build emerging industries with clean energy, while at the same time being good custodians of our planet. Namibia is at the cutting edge of the latest industrial revolution and we are not watching these historic developments unfold, we are writing them.
(CK): When can we expect Namibia to start producing green hydrogen for export and local
consumption?
(JM): Namibia is expected to start producing its first ‘commercial’ (versus experimental or educational) green hydrogen molecules as early as Q1/2- 2024 – in other words, just next year. The Daures Green Hydrogen Village and Cleanergy’s Service Station are currently under construction and are both expected to be commissioned in the first half of next year. This will mark just three years since the government declared its ambitions to build a local green hydrogen industry.
As for the larger Hyphen project, that is expected to start producing green hydrogen at very large scale in 2027/8, after two years’ worth of feasibility studies are conducted and another two years of construction. But long story short, the journey to incubate a synthetic fuel industry in Namibia is well and truly underway, with millions of Namibian dollars being spent in our economy from a plethora of public and private sector actors, both young and old, from around the world. If you are still skeptical as a Namibian, it’s time to have another look.
(CK): In terms of project financing, where will the developers source the money, is it from local or foreign banks?
(JM): Entrepreneurs have creatively sourced capital from all over. O&L dug into their own pockets, used some of their retained earnings and got some financing from their own banks.
They then combined that with new capital that was sourced from our Belgian investors CMB. Daures used some of their own capital and pitched for public money that the Namibian and German Governments made available through grants. Hyphen sourced money from the UK and Germany, formed a Namibian company and started accessing credit lines right here at home as well.
In short, if you have a good idea, there is plenty of capital around that is seeking economic potential. The Namibian government itself has led by example, executing on the policy ideas in the integrated national financing framework (INFF) and employing an approach to attract blended financing (money from various investors with differing risk appetite) to attract money into Namibia. We are looking to establish an infrastructure fund in Namibia that will ‘blend’/combine grants, concessionary loans, traditional debt instruments and equity capital into one vehicle which will ultimately lower the cost of capital to be deployed into Namibian hydrogen projects and related infrastructure. We shall be looking to formerly announce this vehicle in June 2023 and it will be capitalized with a €40 million grant. The fund will aim to raise €100 million to develop green hydrogen projects and possibly more than €1 billion to construct these assets right here in Namibia.
This fund could one day be registered with Namibia Financial Institutions Supervisory Authority (NAMFISA) allowing local investors (pension funds, banks and individuals) to deploy capital into this new burgeoning industry, right alongside peer investors from around the world. This is a very strategic effort from the government to provide new investment opportunities for local institutional capital that typically finds itself starved of investment a diverse set of local investment opportunities.
CK: We have seen a lot of foreign interest in Namibia’s green hydrogen potential from Europe and other places, briefly tell us the major foreign players who have shown interest in investing in Namibia?
(JM): The European Union members States have undoubtedly pioneered the way in terms of interest and support for Namibia once we declared our interest to go down this path. Namibia executed an MoU with the EU and is considered a key partner for the EU’s Global Gateway Initiative – a new programme designed to champion trade and development between the EU and Strategic Partner countries around the world.
More recently the United States Government has offered assistance and various companies expressed an interest to invest in Namibia or deploy some of their technology in this upcoming industry. China too has visited and offered to host Namibians to learn from their own clean hydrogen exploits.
One of the more exciting prospects, is Japan, the third largest economy in the world and undoubtedly the second largest market for clean molecules globally second only to Europe. The Japanese government has engaged the Namibian Government in deep and deliberate talks to explore supporting various Japanese private sector players to make strategic investments in Namibia alongside their Namibian counterparts. Japan is interested in the whole value chain of the just energy transition including critical rare minerals such as lithium. Namibia is of course interested in engaging in economically viable trade with a diverse group of trading partners whom share our values and ethos. So, there is a lot of common interest there.
Namibia will host a large Japanese delegation during the last week of June to explore further avenues of collaboration in this exciting area. Most excitingly however, our own neighbors such as South African and Zimbabwe have expressed an interest to invest in green hydrogen related opportunities in our country.
Zimbabwe’s largest fertilizer manufacturer makes ammonia, as we aim to, they use electricity from their grid which predominantly supplies hydroelectricity. Sasol from South Africa currently manufactures more than 2 million tons of grey hydrogen (more than 5 times what Hyphen will produce by 2030) per annum alone and had bid for the same opportunity as Hyphen to build a green hydrogen project in Namibia.
So indeed, Namibia is becoming a host of global interests in the area of clean hydrogen. When the Presidency embarked upon his second term, local economists bemoaned for the need for the Government to do more to attract foreign direct investment. In two years alone this sector has attracted more than N$2 billion in grants and that is just the beginning.
CK: What impact will the development of the green hydrogen industry have on the Namibian economy? How many jobs are expected to be created? Kindly give us investment and production figures.
JM: The Namibian Government has so far mobilized grants from the EU Commission and EU
member states to establish pilot projects (€30m), craft the Synthetic Fuel Strategy (€5m), run a national scholarship program (€5m), establish the SDG Namibian One blended financing infrastructure fund (€40 m) and the implementation authority office (€4.2m), provide technical support to the Luderitz town council (€5m) amongst other programmes(€5m).
The total of all these investments is almost N$2 billion. That in itself is worth some reflection. From the above investments, more than 100 jobs have already been created, construction of two pilot projects in the Erongo region have begun, the development of a US$10 billion project in the //Kharas region has commenced and a new sector is well and truly under development as was envisioned in HPPII.
Hyphen alone is seeking to develop a N$60 billion project which will be the largest ever investment in Namibia’s history. Those who are focused on the date it starts construction (2025/6) or indeed the day the project commences production (2027/8), to mark the day the project starts to contribute to the Namibian economy will be missing the mark. Hyphen started creating Namibian jobs in 2022 already and this year will be ramping up employment. The €93 million budget they have earmarked to develop the project during the feasibility phase equates to a N$2-billion-dollar investment. More than N$600 million of that will be spent in 2023 already. The now infamous figures from the project, estimate that 15000 jobs during construction, 3000 during operation will be created but the key missing issue here is the multiplier effect of having such an undertaking unfolding in our backyard. The publicly available Namibian Synthetic Fuel Industry Strategy estimated that more than 184 000 direct jobs could be created by 2040, up to 420 000 additional indirect and induced jobs, and more than 50% of our current GDP in value by this strategic industry. The possibility of eradicating unemployment in Namibia before 2050 alone justifies why the government has spent some time and effort to nurture this delicate and nascent industry in Namibia.
When full scale production of the Hyphen project is underway, we expect Namibia to be exporting more than 2 million tons of ammonia before the end of this decade and Hyphen could be grossing more than N$ 40 billion in revenue and contributing N$ 11 billion to the fiscus, 20% our total fiscal take today as a nation.
Many compare these figures to the prospects for oil, but indeed there are some key differences. While oil is expected to potentially contribute more to the fiscus, the clean hydrogen industry is expected to be a lot more labor intensive, resulting in the deployment of a lot more infrastructure built on land and unlike oil, does not have a depleting life of resource. Importantly as well, the cost of capital that either industry attract could be markedly different and over time could be a deciding factor of which assets are developed and over what period. Least to say, it is a great time to be Namibian and to be alive as these historic developments are unfolding before our very eyes and being shaped by our citizens.
CK: Why is Namibia an attractive destination for green hydrogen?
(JM): While our world class renewable energy resources steal the headlines, the quiet characteristic that keeps on differentiating Namibia from most developing and indeed developed nations is our stable and predictable political climate. Namibia’s constitution explicitly charges those to whom we have entrusted with the custodianship of our flora and fauna to protect the environment. We have a healthy and thriving democracy and a civil society that has the potential to impact key investments decisions. This sort of climate attracts the right capital which comes at a lower cost and importantly also holds the various branches of government accountable to a very high standard. This is a major superweapon in a world where the renewable resource edge alone is wiped out by a 4% relative increase in the cost of capital.
Namibia has very good infrastructure when compared to many a peer on the continent and elsewhere. When one considers that much of the product and the equipment needed to construct these projects will have to be transported over road and rail, our existing corridors will prove critical in hitting key construction milestones and targets. This of course will also oblige government to upgrade some of these routes and thus various Namibian firms stand to benefit from the impending work, but more importantly the citizens of our countries will enjoy these assets for decades to come.
Additionally, Namibia possesses a sophisticated capital market by many standards and has more than its GDP in institutional savings looking for a fertile home to receive its potential.
In His address during the 75th sitting of the United Nations General Assembly, President Geingob noted that Namibia would be looking to make use of sophisticated financial tools to mobilize capital from around the world to build a local green and blue economy. To date we have witnessed talks of green bonds, blue bonds, debt for nature swaps and even carbon credits being used to finance relevant assets in Namibia. We should not take this for granted as this is not common-place in various other neighboring jurisdictions and indeed not in many parts of the globe today.
But lastly, an aspect that we have heard repeated all over, whether it be via international media or during the execution of key economic diplomatic efforts, is that the Namibian Government is dedicated, organized and focused. In government, we would be the first to admit that this is not true for every quarter of government, but none the less, this government has demonstrated what is possible when we move resolutely as one and we intend to continue doing so if we are to bring this big elephant home. But it is undeniable that this so far has been one of the main ingredients of Namibia’s success in this competitive and evolving space.
CK: How does the Namibian government plan to use green hydrogen as a catalyst for development?
JM: This is a very appropriate way to look at how we view the opportunity presented by the development of green hydrogen in Namibia. We articulated the intention to develop the green and blue economies in Namibia and green hydrogen in particular as a strategic bet in HPPII. With some effort and strategic planning, it was clear to us that we could unlock economic multiplier effects of unparalleled proportions, given the globe’s interest in decarbonizing hard to abate sectors in the world’s ambition to combat climate change.
With minimal GRN investment we canvassed interest from international investors, like minded governments and development finance corporation. The appetite was palpable. Namibia was truly a pioneer in its ambitions as an emerging market nation on the continent that viewed the just energy transition as an exciting opportunity to industrialize whereas most of its peers viewed it as a burden that would retard growth. The international community has so far rallied behind the President’s bold vision as examples of leaders looking to do good and do so profitably are far and few in between.
The size of the assets, capex budgets and product to be produced and sold is so significant that the ancillary impact on the surrounding economy and social fabric of the country is hard to ignore. The hydrogen projects will anchor the construction of thousands of houses, new roads, new port facilities, new electricity transmission lines, new pipelines, new desalination plants amongst many other necessary and enabling social infrastructure such as schools and clinics.
In addition to this, local SMEs stand to benefit from multibillion-dollar contracts that could provide opportunities to create generational wealth and sustainable businesses given that some of the projects are seeking to explore the unlimited renewable energy for multiple decades – this is very atypical to our extractive industries that have limited shelf lives as we have experienced again and again in Namibia.
Furthermore, the Namibian government is very aware of the limited investment opportunities in Namibia, which is why it is developing yet another pioneering intervention.
In partnership with the Dutch Government, we are going to set-up a local green hydrogen fund which will invest in various Namibian Green Hydrogen assets and related infrastructure. This vehicle once registered with the local regulator will give our local investors and pension funds an opportunity to deploy Namibian capital into a unique and new asset class alongside investors from around the world.
Lastly, the gigawatt scale hydrogen assets are going to produce excess water and electricity and the Namibian Government is going to explore getting some of these excess ingredients of industry and avail them to energy and water intensive industries that want to be based in Namibia. This could result in Namibia attracting new green manufacturing industries to our shores, deepening and broadening the type of FDI that we can bring into Namibia and helping to graduate our economy into the secondary and tertiary sectors over time.
As the President’s Economic Advisor, this is truly our main mission, to help grow the Namibian economy beyond an extractive based economy that is vulnerable to exogenous shocks such as the commodity boom and bust cycles. This has always been the mission since we were assembled by His Excellency to serve the Namibian people in 2019 under the banner of the High-Level Panel of the Namibian Economy. The work is far from done, but I think we are definitely making good strides in the right direction.
CK: Do you have further information that you may wish to add?
JM: Stakeholder engagement and information dissemination is a fundamental part of building a successful industry. To this end, the government has established a dedicated green
hydrogen website to disseminate information on this exciting initiative – visit www.gh2namibia.com
The nature of the undertaking is one that will be characterized by the need for dynamism. New skills will be needed just as new jobs will be created. My biggest takeaway is that Namibia will need to develop a dynamic immigration policy to help compete for scarce skills in the world that if deployed in Namibia can help create many hundred jobs for each new skill brought into Namibia. Current estimates are that for every one skill that we do not have that we import; they will unlock more than 9 new opportunities for Namibians. To me, this is going to be the biggest lesson that we have to embrace as Namibians during this long and exciting journey.
His Excellency, a Pan-African at heart, has long since advocated for a united Namibian house and reminds us how irresistible we can be when we show up as one tribe. The truth is we
are a small nation of 2.5 million people competing in this industry with the United States, which has more 3than 350 million people and admits that their economy has been built on the back of migrants and the varied portfolio of skills and know-how they can unleash. Our President has always insisted that Namibia is a friend to all and an enemy to none – this chapter in our history will require us all to walk the President’s talk if we are to truly unlock this once in a generation opportunity that our government has delivered to our doorstep.
