Electricity + Control

The South African National Energy Development Institute (SANEDI) has noted Treasury’s recent announcement that the energy efficiency savings tax incentive – Section 12L of the Income Tax Act, 1962 (Act No. 58 of 1962) – will be extended for three more years. This should encourage businesses and industry to be more energy efficient in their operations and reduce their electricity bills.

The announcement was made by Minister of Finance, Tito Mboweni, in his 2019 budget speech, delivered 20 February 2019. It comes at a time when there is a real need to reduce energy consumption nationally.

Sanedi logoSANEDI, which plays the role of implementing and overseeing the application process of the incentive, welcomes the extension. General Manager for Energy Efficiency at the institute, Barry Bredenkamp, says, “It gives businesses an extended window of opportunity to continue the drive towards energy saving. We’ve been called on by government during this time of constrained electricity supply to do all we can to reduce energy usage. The incentive offers customers the multiple benefits of reducing their electricity bills, improving their carbon footprint and earning a rebate on their tax returns, while helping the country work within its energy constraints.”

The 12L tax incentive allows for a tax deduction of 95c/kWh saved on energy consumption by implementing energy efficiency measures. Bredenkamp says SANEDI has seen real and substantial benefits to applicants. “In some instances customers save up to 30 percent on their energy bill. On top of that they get a rebate on their tax return. The tax deduction of 95c per kilowatt hour saved applies across all energy carriers, not only electricity savings.”

The aim of the 12L tax incentive is two-fold: to encourage energy saving in a constrained capacity environment; and to assist South Africa in its international commitments to reduce its carbon emissions by 2030.

Bredenkamp says that the incentive has gained momentum more recently. “A lot of the blue-chip companies in South Africa were among the initial applicants. We’ve seen more than 200 applications to date and we believe with this window of opportunity being extended until 31 December 2022, we should see double the number of applications.”

National Treasury also announced that it will be reviewing the design and administration of the energy efficiency savings tax incentive this year, to make it easier for smaller businesses to access.

Bredenkamp highlights that there is a calculator on SANEDI’s website where companies can check the feasibility of applying for the incentive. “This will give them an indication of what the benefits would be and they can then base their decision on that.”

For more information about the energy efficiency savings incentive visit: https://www.sanedi.org.za/12L.html