Ron Stuart | Partner | ESG Lead | KPMG South Africa | mail me |
The last two years have seen many countries taking steps in the right direction towards Net Zero, even if most have a long way to go.
While for South Africa, the greatest opportunities to move towards Net Zero at present comes from the private sector. We also know that there are financial pressures to delay such work, given how many companies locally are trying to survive, in a very slow economy, and therefore are not able to embrace additional measures linked to Net Zero.
Challenges in regulatory reform
More can be done to compel companies to decarbonise, whether through legislation or other measures, although some tax allowances are available.
A June 2021 speech by President Cyril Ramaphosa discussed an expansion of renewable energy, which at present only provides a small proportion of the country’s electricity. Not only the pace of regulatory change but also subsequent project activation remains a challenge, including plans (stemming as far back as 2019) to break up the government-owned and coal-dependent power group, Eskom. The country’s energy regulator did license the plans in July 2023 to set up a separate transmission operator whilst focus remains on prioritising stability of current high emission generation. This does therefore continue to constrain the opportunity to increase renewable energy production in our energy mix.
While certainly the introduction of the EU’s Carbon Border Adjustment Mechanism (CBAM) as well as similar schemes elsewhere will provide the country’s heavy-emitting industrial companies with financial reasons to decarbonise, by applying charges on imports designed to match carbon taxes levied on domestic producers.
In fact, a February 2023 paper published by South Africa’s Presidential Climate Commission found that EU countries imported an annual average of US$1.4 billion of products from South Africa that could attract charges under CBAM with iron, steel and aluminium production most likely to be affected. As a result, we have seen large companies, in the energy and natural resources sectors, working on CBAM programs for the last couple of years, but the large scale of the changes required means these will take time to implement. However, all South African companies need to have a strategy for Net Zero and must develop long-term plans based on these with a target Net Zero date and interim reduction targets.
ESG reporting & compliance
The reality is that companies will soon need to …
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Read the full article by Ron Stuart, Partner, ESG Lead, KPMG South Africa, as well as a host of other topical management articles written by professionals, consultants and academics in the December/January 2023/4 edition of BusinessBrief.
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