South Africa’s National Budget will be presented to Parliament on February 23, and it is expected that the National Treasury will allocate more funds to energy efficiency and ‘green’ projects as government seeks to grow the green economy.
In the Department of Economic Develop- ment’s New Growth Path (NGP) policy, government has stated its intention to grow the economy at around 7% over the next decade and create five-million additional jobs during this period in the key sectors of infrastructure, agriculture, mining, manufacturing, tourism and the newest addition to this list – the green economy.
“Recent government policy documents identify increased energy costs as a major threat to the energy-intensive sectors in South Africa. This is of concern as the sector presents significant opportunities for the development of new industries to assist government in meeting its growth and job creation objectives,” says Deloitte tax director Duane Newman.
“An increased focus on the green economy in this year’s Budget, with some policy preroga- tives being expressed as part of the Budget pro- cess, may also see an additional budget being allocated to the Department of Trade and Industry (DTI) and, potentially, the Economic Development Department to support their proposed green economy initiatives as expressed in their latest policy papers,” explains Newman.
He proposes that government could look at possible support from private investors to invest in energy infrastructure initiatives, such as self-generation projects to supply their operations. This would increase security of supply to investors and counter the increased energy costs currently hampering growth and new investment in the energy-intensive sectors.
He adds that it is expected that existing grants and incentive initiatives, such as the DTI’s Enterprise Investment Programme, will remain in place as these initiatives support growth in the manufacturing and tourism sectors.
The latest Section 12I tax incentive also has some mandatory energy efficiency requirements for projects to benefit from the incentive, which indicates government’s intention to support energy efficiency initiatives, notes Deloitte.
In the 2010 Budget, Finance Minister Pravin Gordhan said that a total public-sector infrastructure investment of R845-billion would be undertaken over the next three years.
In recent years, the National Treasury has started to implement a number of so-called ‘green’ taxes, such as the carbon emissions tax on new motor vehicles, the 2c/kWh levy on carbon-dioxide-emitting electricity generated from coal-fired sources, the tax on energy-effi- cient incandescent light bulbs, as well as the plastic bag levy.
The National Treasury has also released a discussion document, tabling its ideas on the implementation of a carbon tax, which would likely be introduced in South Africa in future. The department has called for feedback from stakeholders on this document.
One of the major concerns with so-called ‘green taxes’ is that the National Treasury does not ringfence revenues for specific allocation in the national Budget, and some taxpayers feel that ‘green taxes’ should be allocated specifically towards environmentally beneficial endeavours.