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GREEN HYDROGEN: “Namibia has done well to begin to visualise an important industry in the future”

Exclusive interview with James Mnyupe, Presidential Economic Advisor and Hydrogen Commissioner, Government of The Republic of Namibia.

Let’s start with some background on you and your work as Presidential Economic Advisor and Hydrogen Commissioner for the Government of the Republic of Namibia.

I’m so happy to be here and I’m very honoured that Africa’s Green Economy Summit was able to sort of accommodate us and invite us to the summit, and I’m so very grateful to Sanlam as well.

My job as presidential economic advisor was to work really very closely with the head of state to try and imagine and gender design a more robust Namibian economy that had a much broader and more thriving secondary sector, trying to establish a strong manufacturing base in Namibia, and of course do that in a sustainable way. And I think this is where the green hydrogen part of it came along, because we know that in order to build a sustainable and thriving secondary sector, you need to be trading in goods that have great demand globally.

And so we came to realise that mobilising clean electrons and mobilising clean molecules, which are key ingredients to make goods that have a low carbon dioxide signature, would be a big and important part of building a sustainable and competitive secondary sector. And so that’s how those two jobs came together. And of course, working then closely with the president’s cabinet.

Namibia has done fairly well to at least begin to visualise an important industry in the future.

Namibia has been an early mover in the green hydrogen space on the continent, notably the Hyphen Project. What is the vision behind the country’s strategy for the green economy?

The vision really started in 2020, in about quarter four. We started engaging some developers by October 2020 and by early March, we came to realise that this has to be a big part of our overall economic strategy. So on 18 March 2021, the president approved that green hydrogen be included in his socioeconomic manifesto, the Harambee Prosperity Plan II, as what we called at the time a strategic bet. We knew that the probability of all of that happening wasn’t necessarily high, but if it did happen, there would be an asymmetric payoff.

So that’s really where the journey started from. And very early on, we came to realise that becoming a green hydrogen producer was not really the end game for us, but rather establishing a green industrialisation blueprint was really how we get our economy to increase the probability of achieving the goals that were enshrined in our Vision 2030, which of course entailed more than doubling the economic output from our manufacturing base, creating almost 497,000 jobs and halving our Gini coefficient. These are big targets that are in Vision 2030, but the only way you really get there, we think, is by building competitive, sustainable manufacturing sectors in Namibia. Therefore, green hydrogen is considered an enabler of that ultimate goal and not necessarily the ultimate goal.

As this is a new sector, what are the practical examples of completed green hydrogen projects that prospective investors can look at for research.

So within Namibia at the moment, and when people talk about green hydrogen projects, we have an interesting perspective on that. We’re not just looking at projects that are going to be producing molecules and looking at those as the green hydrogen projects. We’re also looking at projects that are going to be using the clean molecules to add value to minerals.

For example, at the moment, we’ve got about three pilot projects under development.

One of those will actually start production in April this year, and that is a clean hydrogen service station that will start to produce the molecule for primarily long-haul transport. We also have another pilot project that will start producing green hydrogen ammonia potentially that will end up going into fertiliser production. That should come into operation by quarter two this year. We have another project that is looking to use hydrogen in a very novel method of reducing iron ore to produce direct reduced iron or hot briquetted iron that is set to go into production in quarter four this year. So, those are sort of the smaller more nimble projects that are under construction today, and we’ll start producing molecules and minerals that have been added value to by this year.

Of course, we’ve got some larger projects under development: whether it’s hyphen in the south or Zero in the Erongo region that are either acquiring land, they’ve already put up met masts, and some of them are in feed design stage already. And as I mentioned, I think those two will probably champion and anchor those two regions.

I think the other thing Namibia is doing that’s important is we’re also exploring how to get our critical minerals, not just extracted, but processed cleanly. We’re doing some piloting with lithium processing and enrichment in Namibia with Andrada. And of course, we’re exploring two rare earth mines as well. And why I mention this, as this is not green hydrogen, but to do green industrialisation successfully, you also need to mobilise critical raw minerals, and if you can mobilise those minerals by using clean energy and clean molecules, you become a producer of competitive products into legislated markets that are going to start discriminating on those products based on their carbon content.

As investors are coming to Namibia, there’s actually a green industrialisation blueprint that we were working on quite closely with our late president, (may his soul rest in peace), it’s going to go to cabinet. So, as investors are researching Namibia, they should get their hands on this green industrialisation blueprint that really brings all of these key elements together in order to build a dynamic and industrialised network.

Can we talk more about the importance of the green economy in job creation.

The green economy is extremely important for job creation. And why do we say this? At the moment, Namibia obviously is an economy that is primarily reliant on the primary sector for its exports. The primary sector can be quite cyclical in its nature. So you find a gold deposit today, you mine it over the next 5, 7, maybe 10 or 15 years, and then you have to rehabilitate that mine. And then, a lot of those people who are employed in that gold mine are now unemployed. And then you have to do the same with another mine and another mine. And of course, that is not necessarily a very stable way of building permanent employment. Whereas when you start entering into the manufacturing sector, if your products are competitive globally, you typically have a much longer timeframe from development of these assets to operating them and producing these goods over a much longer timeframe.

When you then start overarching manufacturing industries with the strategic infrastructure that needs to get built, rail, ports, those strategic infrastructure typically also have a much longer timeframe in terms of developing them. And of course, if you have a robust policy framework within your country, you can attract more and more industries as well. So at the moment, our green industrialisation blueprint actually estimates that if we’re able to move these pieces coherently, we should be able to create more than 250,000 jobs. Namibia at the moment has just over 370,000 formally employed people. So we would be making a significant dent in terms of our unemployment rate, which is obviously unacceptably high. Our estimates of the jobs that we need to create to meet the targets of 2.3% unemployment levels by 2030 are almost 400,000 jobs.

So, the green industrialisation effort takes us part way there. It doesn’t take us all the way there. And this is why we need to stimulate all other sectors of the economy as well, including agriculture, tourism, pure energy security and others. But the green industrialisation component is definitely a very important contributor towards employment creation and not just in Namibia, but really in the region, because we think Namibia should be able to offer clean electrons to the region through the Southern African Power Pool (SAPP), allowing our neighbours to industrialise sustainably as well.

In your view, what should African governments be doing with regards to enabling green economy investment, project development and job creation?

It’s clear that some of the infrastructure that needs to be developed is cross-cutting, whether it’s transmission lines that are going to the SAPP, potential hydrogen pipelines that may be even going to South Africa, but also the coordination of ports development between Western Cape, Durban, Namibia’s two ports, but even Angola and Mozambique. So the SADC area really needs to share more information about strategic infrastructure that is getting developed, and then be very decisive and deliberate about which assets are we looking to develop where. So, for example, we can’t have three or four refineries for rare earth elements in these countries, for example. You might have one or two. South Africa and Zimbabwe have most of the platinum resources in the world. So perhaps, if you’re going to be developing electrolysers that need platinum, perhaps a concentration of those value-adding plants in that area might make sense.

Botswana doesn’t have a port, and so it might have to collaborate strategically with Namibia to develop a rail to our ports so that we can facilitate exports of some of their key products as well. So, I think that coordination is needed. I think governments coming together from an African perspective and working as a bloc, because, for example, the European Union, the largest trading and economic bloc in the world, writes inter-country policy. They have a European Union-backed hydrogen backbone that they’re developing across various countries. So perhaps from an African perspective, certainly at least starting with SADC, we should be engaging in similar discussions, saying what are the different rail networks that we’re developing that can complement the establishment of new sustainable and competitive industries? What off-takes could we facilitate from one another in order to bring into action the African Continental Free Trade Area, where perhaps if there is a rare earth element refinery in Namibia, rare earth deposits mined in other places could come to that facility in Namibia? And copper and cobalt could go to DRC in Zambia, because DRC and Zambia want to, for example, make battery precursors with their cobalt.

So, that identification of which country could champion what value addition is very important. And it is how Europe and some of our Asian colleagues collaborate. And perhaps that’s one of the things we need to do in order, A, to reduce the risk of duplication, but also to ensure that whatever products we’re making are competitive, and that we’re getting the maximum benefits of economies of scale.

What are the main challenges in your view?

I think at this point in time for the green economy, for green hydrogen, two key challenges we see are off-take. The product is going to be more expensive than its carbon-intensive alternative or cousin. So the customers need to be willing to pay a higher price for this more expensive product. Now, their own governments are putting in place taxes, quotas, subsidies, in order to reduce the cost of this product and certainly to try and induce the industrial customers to use cleaner molecules and cleaner minerals. But at the same time on our side, we need to do a lot more to reduce the cost of capital, which typically starts emanating from the cost of capital associated with country risk. And then you add a whole bunch of other risk parameters. So, working together with our more developed nations and our customers, to reduce the cost of the risk of building these assets in the global south, and therefore the cost of capital, should result in a lower cost of product. Our estimates are for every one percentage drop in the cost of capital, you get a 6–7% corresponding drop in the cost of the product. So that is one area.

The other area is, of course, making sure that there are these off-take support mechanisms to reduce the impact on the buyer. I think that’s one area that certainly requires calibration and coordination between producer nations and consumer nations and their intermediate customers.

But the other one that I don’t think, I think personally is not spoken about a lot specifically for Namibia and South Africa is, these projects will have an impact on

biodiversity hotspots, specifically from Namibia and South Africa, right? The succulent Karoo biome is an area that could get impacted both by the Hyphen Project and the Boegoebaai Project. So, collaborating as a country to make sure that we’re minimising the impact on that biodiversity hotspot could lead to more effective permitting from an environmental and impact assessment. So I think collaboration in that area would be important as well. And I think that could be a potential challenge maybe.

The one last one was just to make sure that the infrastructure being used is not dominated by the first mover, right? So common user infrastructure and the principles attached therein, I think, will be another critical element that could be a challenge if not addressed properly.

What keeps you excited about this industry?

This industry is a very dynamic space. There are lots of learnings. Africa is actually at the coalface of this developing new space and not laggards and we’re only learning after others have developed a space. So I think that’s very exciting. It’s great to see young Africans moving back into Namibia and Kenya from overseas, saying I want to come back home and be a party to this exciting journey, and I’m bringing these skills that I learned when I was building the 200 megawatt electrolyser in Rotterdam, or I’m bringing these skills from working with the European Investment Bank.

I understand how DFIs and IFIs are sort of governed and what is required for them to mobilise a capital. So I find that to be a very exciting part of this industry. It’s new, it’s developing, we’re all learning, but most importantly, it’s acting as a magnet for bringing talent back home. And I can’t wait for that talent to be effectively deployed so that we can all start building our nations with our own bare hands and with our sort of like-minded partners as well.

Anything you would like to add?

At this point in time, I think the one thing I’d love to add is, countries and projects need to be strategic in mobilising blended financing. Not all capital is made the same: It requires different levels of return and it has different risk appetite. So, in Namibia, we’re working very closely with the Climate Fund Managers, Invest International and others in order to mobilise blended financing in a structured manner so that our pension funds can get involved and so that we can reduce the cost of capital of building these specific projects and their associated infrastructure.

So from that perspective, I know from a Climate Fund Manager’s perspective, Sanlam is a 50% shareholder, but I think Sanlam has been a very progressive investor, or at least backer, of this concept of putting together a blended financing fund that is definitely being deployed in Namibia and around the world. So from that perspective, I think it’s a conversation I would encourage more of us to participate in. Because again, as I mentioned, it is one of the ways that you pull one of the key levers that makes us all competitive on a global scale.

So, I really wish I could have been there in person, I’m sure you’re all going have amazing conversations, but I look forward to the next time I can see you all and learn from your experiences and your efforts. So, thanks a lot for having me via this digital format, and yes, I look forward to the lessons from Africa’s Green Economy Summit. All the best.

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