SouthAfrica.info (Johannesburg)

South Africa: Tax Incentive for Companies to Save Energy

The Department of Energy is introducing a tax incentive for South African companies that make measurable savings in their energy consumption.

Briefing journalists in Johannesburg on Wednesday, the department's director-general, Nelisiwe Magubane, announced the promulgation of regulations which will allow Finance Minister Pravin Gordhan, in consultation with the ministers of energy and trade and industry, to publish the tax incentive.

The incentive will contribute to energy efficiency and the reduction of South Africa's greenhouse gas emissions, Magubane said.

He said the regulations would be published soon, and urged businesses to scale up their energy efficiency improvement measures so as to take advantage of the incentive.

"We're not saying [to companies], reduce your energy use by simply switching off machines. We are saying, run your machines in an energy saving way."

Registration with Sanedi

To benefit from the incentive, companies will have to register with the South African National Energy Development Institute (Sanedi), which will administer the technical component of the incentive.

Cecil Marden, chief director at the National Treasury, said the incentive would work "on the basis of quantifiable energy that you have saved expressed as kwh [kilowatt hours], and for each kwh that you have saved, you will get a 45 cent tax relief."

On the projected cost of the incentive to the national fiscus, Marden said: "That is difficult to [estimate] right now ... We will rely on Sanedi, which will collate data upfront. Once we have data from Sanedi, we will be able to quantify that."

Marden said South Africa was "a fairly energy-intensive country, and over the years some effort has been made and energy efficiency is improving. We've made a commitment as Treasury to support the Department of Energy to deal with energy efficiency."

The department, the Treasury, Sanedi and the South African Revenue Service will conduct workshops from January to March 2014 to help businesses understand the incentive and the registration process. Information will also be made available on www.sanedi.org.za.

Private Sector Energy Efficiency Project

The department, together with the National Business Initiative, also launched the Private Sector Energy Efficiency Project on Wednesday.

The initiative will help companies - both commercial and industrial, large and small - to identify energy savings measures, and has received financial support from the British government.

This augured well for the implantation of the new tax incentive, Magubane said, adding that the government's National Energy Efficiency Strategy set a national target of reducing South Africa's energy intensity by 12% by 2015. The strategy had recently been reviewed and was ready to be submitted for Cabinet approval, he noted.

National Business Initiative CEO Joanne Yawitch said the Private Sector Energy Efficiency Project aimed to work "with about 60 large companies and just over 1 000 medium-sized companies to support the awareness and uptake of best practice in energy management and energy efficiency".

Yawitch said the initiative would offer remote advice for small businesses, technical face-to-face support for medium-sized companies, and longer-term support of energy management and strategy for large companies.

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