Mining incentives could boost Africa’s hydrogen demand

From the newsletter

A new policy paper published by the International PtX Hub, a German-backed advisory initiative on green hydrogen, argues that targeted incentives could de-risk green ammonia adoption in South Africa’s mining sector. The approach could spur mining-led hydrogen demand and enhance competitiveness in low-carbon markets.

• While mining underpins Africa’s economy, its heavy emissions expose the sector to rising trade barriers and stricter environmental, social and governance (ESG) requirements in global markets.

•  Well-designed incentives could make green ammonia more attractive to miners, accelerating adoption and positioning Africa as a competitive player in hydrogen-linked supply chains.

More details

• Authored by Thabo Gcwabaza of the African Fertilizer and Agribusiness Partnership (AFAP), the policy paper argues that while South Africa’s mining sector is vital to the economy it is also among the most carbon-intensive, responsible for 5–7% of national greenhouse gas emissions. The sector consumes about 30% of Eskom’s electricity, making it one of the country’s largest industrial energy users and heavily exposed to coal-driven emissions.

• As a result, mining companies face mounting pressure from global market forces such as carbon border adjustment mechanisms, low-carbon supply chain mandates and ESG-focused investor demands. Green ammonia, a hydrogen-based input for ammonium nitrate explosives, offers miners a practical entry point into decarbonisation. When produced on-site alongside nitric acid and fuel oil it can bring emissions within a mine’s reporting boundary, reduce upstream Scope 3 emissions and enhance ESG credibility while aligning operations with international buyers’ expectations.

• Despite its potential, adoption of green ammonia in South Africa’s mining sector faces cost barriers. The paper highlights the wide price gap between fossil-based and green ammonia, driven by high electrolyser and renewable energy costs. Mines also require capital upgrades for blending, storage and safety systems which add to investment risks. Policy gaps compound the challenge: South Africa’s carbon tax does not yet reward low-carbon inputs, procurement rules give no preference to green materials and standards remain fragmented across the SADC region.

• To overcome adoption hurdles, the paper recommends a series of policy instruments to make green ammonia more attractive to South Africa’s mining industry. A green premium compensation scheme would subsidise the price gap between fossil-based and green ammonia, helping mines manage higher input costs until scale brings prices down. Carbon credit eligibility would allow mines using certified green ammonia in explosives to generate tradable Verified Emission Reductions, either for voluntary markets or compliance under the Carbon Tax Act, rewarding emissions reductions with financial value.

• On the investment side, fast-tracked depreciation rules could enable mines to write off capital costs for blending systems, storage and safety upgrades within three years, improving cash flow and returns. The paper also calls for green procurement mandates in state-linked mining projects to create early demand and a SADC-wide certification framework to harmonise standards, reduce trade frictions and integrate regional markets.

• Beyond demand creation, mining companies are strategically positioned to support green hydrogen and ammonia production by leveraging South Africa’s reserves of platinum, vanadium and manganese, critical minerals used in electrolysers, hydrogen storage technologies and other clean energy applications. This dual role as both off-taker and supplier strengthens the sector’s importance in building Africa’s hydrogen economy.

• Although tailored to South Africa, these measures have wider application. Other mining hubs across Africa, including Zambia, DRC, Namibia and Guinea, face similar ESG requirements and trade pressures. Instruments such as subsidies, carbon credits and accelerated depreciation could equally ease adoption in copper, cobalt and bauxite mining. A regional certification framework under SADC, and adapted by blocs such as ECOWAS, could provide consistent rules across borders, encouraging investment and creating a single market for green inputs.

Our take

• Implementing the policy recommendations could give South Africa a first-mover advantage, allowing its mining sector to attract sustainable finance and maintain competitiveness as global markets tighten climate and trade standards.

• Beyond mining, the policy recommendations could act as a blueprint for decarbonising other carbon-intensive sectors across Africa, from cement and steel to transport and agriculture, ultimately creating broader anchor demand for hydrogen and its derivatives.

• A recurring concern in Africa’s hydrogen debate is the lack of clear domestic demand, with most strategies focused on exports. Positioning mining as an anchor off taker helps address this gap by creating a credible local market that can scale hydrogen adoption and strengthen the business case for investment.