The role of tax incentives in encouraging energy efficiency in the largest listed South African businesses

Dippenaar, Mareli (2018)

CITATION: Dippenaar, M. 2018. The role of tax incentives in encouraging energy efficiency in the largest listed South African businesses. South African Journal of Economic and Management Sciences, 21(1), a1723, doi:10.4102/sajems.v21i1.1723.

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Publication of this article was funded by the Stellenbosch University Open Access Fund.


Background: South Africa is faced with a significant challenge of securing the supply of electricity as well as reducing its greenhouse gas emissions. The implementation of energy efficiency (EE) and renewable energy (RE) measures by energy consumers, especially businesses, is becoming increasingly important and a number of tax incentives have been introduced to promote EE and RE. Objective: The objective of this preliminary study was to determine the role that the available tax incentives play in the decision making of South African businesses regarding investment in RE or EE projects. Aim: To determine this role, the largest South African businesses were selected from the Johannesburg Stock Exchange Top 40 Index. Method: The study contained both empirical and non-empirical elements. A literature review was conducted to determine the role of tax incentives globally, while questionnaires were distributed to determine the role in South Africa. Results: Findings highlighted that, while tax incentives do play a role in decision making, various other non-tax factors drive South African businesses’ decisions to invest in EE and/or RE projects. These businesses do not perceive the available tax incentives as effective, nor do they regard them as sufficiently motivating for businesses to change their environmental behaviour. They also feel that the government should reduce the burden of complying with the requirements of Section 12L (the EE allowance). Conclusion: Improving the available RE and EE tax incentives in South Africa might result in more businesses considering the implementation of RE or EE projects. It is therefore recommended that the available tax incentives are expanded and/or the qualifying criteria simplified.

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