Green Hydrogen: The new energy frontier in Africa
Business
PATRICK PRESTELE
The 2015 Paris Climate Agreement, which seeks to limit global increase in temperatures to less than 2C this century, was signed by 195 countries, 33 of which are African. To achieve this ambitious target, significant carbon emission reductions and energy efficient systems are required. As part of the agreement, countries have set out a range of clean energy and energy efficiency targets (Nationally Determined Contributions) to cut emissions.
Electricity generation is most commonly the leading contributor to CO2 emissions in most countries, at which the majority of NDC in Africa are targeted at. Massive strides have been made into the installation of renewable energy capacity, driving the decarbonisation of the energy sector. The biggest issue surrounding renewables is the difficulty of storing the electricity at scale and for prolonged time without long distant, inefficient transmission, as well as the irregularity of electricity supply from these technologies. While batteries have certainly helped at a micro-scale, they are not yet cost-effective at macro-scale.
Hydrogen, produced through electrolysis of water, is the perfect solution to the problem. Specifically green and blue hydrogen are suitable for further development in Africa. The development of a green hydrogen economy in Africa has since gathered considerable attention, driven by the continent’s high renewable energy potential and investment coming from developed countries desperately looking for means of decarbonising their own industries. Green hydrogen is best positioned to reduce CO2 emissions in typically hard-to-abate sectors such as Industry (e.g., construction and steel manufacturing), centralised energy systems, as well as transportation and mobility. Natural gas will form the basis of hydrogen integration as methanation becomes commercially viable and pipeline infrastructure is upgraded to support hydrogen blends.
The EU has introduced its hydrogen strategy in 2020, proposing a shift to green hydrogen by 2050, mainly services through a steady supply coming from Africa. Africa is expected to become the preferred location for the green hydrogen economy due to its growing penetration in renewable energy, greater land availability, easy access to water sources and port facilities, enabling Africa to position itself as a major hydrogen export hub.
Development Finance Institutions (DFI) are thought to be the primary financiers of green hydrogen projects in Africa, as they have mandates for green investments. Additionally, Export Credit Agencies (ECAs) are expected to become major financial contributors; as well as alternative financing structures such as green bonds and green infrastructure funds.
Despite Africas dire energy need, over-supply of electricity has become a significant challenge, primarily driven by poorly maintained generation, transmission and distribution (T&D) systems. Hydrogen production and storage can be a useful technology to solve this problem. Excess electricity can be used to generate green hydrogen during times of oversupply, and in turn be utilised to generate electricity during an undersupply of electricity. Hydrogen is also a suitable clean resource to help decarbonise numerous other industries including transportation, building heat and industrial sectors.
Egypts 100 MW Scatec Ammonia plant is the perfect example of how to set up a green hydrogen economy. There are three main steps African countries need to follow in order to seize the green hydrogen opportunity:
1. Installation of a Pilot Plant: Government needs to partner with a private electrolysis company to develop commercial-scale pilot project including a renewable energy plant (Solar/Wind), electrolysis facility and a direct source of demand (i.e., Ammonia plant). This will aid policy makers in developing domestic capabilities, identifying unique local challenges, further developing R&D and crafting initial policies and regulations.
2. Development of Local Policies and Regulations: Once the initial pilot plant has proven commercially viable, government needs to develop comprehensive green hydrogen policy including realistic production targets considering domestic demand and global market trends, defining sector governance and outline policy framework, as well as outline funding structures.
3. Develop an International Export Market: Increased generation and experience with green hydrogen throughout the continent will result in falling production costs in response to economies of scale, R&D development and domestic experience. Export of green hydrogen can be either in the form of liquified green hydrogen to renewable energy deficit countries or in the form of green finished industrial products such as steel, polymers, metals, methanol, etc. A government supported company can be set up to form supply agreements with key export markets which will enable government to build, upgrade or retrofit the required infrastructure for shipping and pipeline channels.
In summary, green or blue hydrogen production is already gathering pace on the continent. While the production is not yet broadly cost competitive as compared to the conventional fuels, it would replace (natural gas, coal). Africa has the opportunity to position itself as a major producer and exporter of green hydrogen as the hydrogen economy in Africa develops, driven by R&D, integration of hydrogen in the value chain and increased capacity of renewable energy in the power mix.
Frost & Sullivan’s Consultant, Patrick Prestele gives an insight into the hydrogen economy in Africa.
Business
CA SALES revenues rose to R9.5 billion
The Botswana and Johannesburg Stock Exchange listed distributor of fast-moving consumer goods
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Business
Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Business
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.