The implementation of a carbon tax in South Africa is set for the middle of next year, says National Treasury chief director of economic tax analysis Cecil Morden.
“We are currently busy with the legislation, and we hope to have that legislation out within the next month or two. We are nearly there,” he notes.
“There will be another round of consultation once the legislation has been published.”
Morden says South Africa is not “running ahead” of the world with the legislation, but “following”, with similar tax regimes implemented in countries such as Chile and Mexico.
“What is the carbon tax design? Briefly, it is a proposal of a [tax at] R120 per ton of carbon dioxide emissions, which is today slightly less than $10.
“As an emerging economy, we indicated that we are moving in this [direction], but that we have to take it a bit slow, and, therefore, we have quite significant tax-free thresholds. We have a basic tax-free threshold of 60%, so you only pay 40% of the R120.”
“We will revisit this in five . . . six years’ time.”
The proposed tax will hit heavy emitters such as Eskom, ArcelorMittal and Sasol hard.
Economist Mike Schussler is highly critical of the introduction of a carbon tax in South Africa.
He says the carbon tax will not be ring-fenced to “help the environment”, but will go into the general State coffers.
He adds that South Africans and South African companies already carry a high tax burden.
The mining industry, which will also have to pay the carbon tax, faces severe challenges in that the prices of platinum, coal, gold and iron-ore have more than halved in dollar terms, compared with four years ago. This industry is also battling labour unrest and erratic power supply.
“Why don’t we just switch off the lights permanently?”
The transport industry will be hit “quite hard” with carbon taxes, adds Schussler.
“We are going to make ourselves more expensive and less competitive.”
Considering that Transnet and oil refineries will also have to pay the carbon tax, he believes this tax will, over time, be passed on to consumers, and make logistics costs in South Africa “even higher”.
Schussler also questions why government is building new coal-fired power stations if it is “genuinely trying to create carbon efficiency”.