The future of South Africa – A Light at the End of a Dark Tunnel
02 March 2016
By Keelen Snyders, Tax Trainee
The impact of global warming and the prevalence of load shedding in South Africa over the last few years, require the prioritisation and encouragement of energy saving initiatives. In the National Energy Efficiency Strategy of South Africa (approved in 2005 and reviewed in 2008), the then Minister of Minerals and Energy, highlighted changing people’s behaviour as the biggest challenge in driving energy efficiency initiatives. To achieve this, people will need to be educated on the different options available to save energy.
As it may not always be financially feasible for business to support energy efficiency due to costs associated with replacing existing equipment or changing current infrastructure, the fiscus has embarked on a path to incentivise the right behaviour. National Treasury issued a government notice on 9 December 2013 in which the Minister of Finance announced the introduction of a new provision in the Income Tax Act (the Act), which grants a tax allowance or deduction for effected energy savings. The allowance came into effect on 1 November 2013.
The Act initially granted an allowance of 45 cents per kilowatt hour or kilowatt hour equivalent. A fairly recent amendment increased the rate to 95 cents and took effect on 1 March 2015. This increase applies to years of assessments starting on or after 1 March 2015.
A person will qualify for the allowance, if it obtains a certificate from an institution, board or body as prescribed by regulation. This institution, board or body must provide a report which contains the energy savings effected. To claim the allowance the person must:
- Register with SANEDI in the in the prescribed manner;
- Appoint a professional to report the computation of the energy efficiency savings per year of assessment;
- Submit the report to SANEDI ; and
- Obtain a certificate from SANEDI
The allowance may be disallowed if the person also receives a concurrent benefit with regards to energy savings.
To ensure the sustainability of energy resources and to conserve and protect the environment, our society needs to utilise the resources available to us sparingly. It is important that business adopt energy saving measures. A behavioural change in people is needed. To achieve this, business needs to be informed of the energy saving options and incentives available. South Africa needs to adopt energy saving measures to ensure the sustainability of the human race.