Sanedi shares lessons from 12L tax incentive success

19 Sep 2024

A flagship South African energy initiative has surpassed Sanedi’s expectations, demonstrating remarkable success in environmental conservation and economic growth. The 12L Energy Efficiency Tax Incentive, launched in November 2013, aimed to incentivise businesses to reduce energy consumption and associated costs while enjoying tax benefits. The program's broader goal was to alleviate pressure on national energy resources and mitigate greenhouse gas emissions. However, over the past decade, a significant and unexpected outcome has emerged: substantial job creation.

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"The incentive has been able to generate new jobs, maintain existing jobs, and generate a residual effect of indirect jobs," says Stalin Ndlovu, 12L Lead and senior advisor for measurement and verification at the South African National Energy Development Institute (Sanedi), the regulatory body overseeing the tax incentive programme.

"Businesses can expand their operations with access to the incentive, thereby creating and sustaining jobs."

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Sanedi's recently published Job Impact Report offers a comprehensive overview of the programme's achievements over the ten-year period from 2013 to 2023.

The report highlights several key accomplishments:

Total energy savings of 27.6TWh

Gross tax rebate of R22.6bn

Greenhouse gas emission reduction of 26.7 tonnes

Creation of at least 449 jobs, contributing an estimated R136m annually to the economy

Success stories

The report showcases notable beneficiaries of the incentive, including Woolworths which achieved a 10% reduction in energy consumption and approximately R35m in electricity cost savings over six years starting from the 2015 financial year.

Golden Arrow Bus Services also benefited, recording a 2.5% reduction in energy consumption and saving over R1.8m in the 12 months from April 2016 to March 2017.

SA's high unemployment rate, reaching 34.4% in the second quarter of 2021, shows the importance of job creation in any initiative, even those primarily focused on energy conservation.

To evaluate the 12L Tax Incentive's impact on job creation, Sanedi conducted a survey of participating organisations, contacting 150 businesses.

Of these, 27 responded, with 23 reporting a positive effect on employment.

Based on these, there were at least 449 jobs created that can be tracked directly to the incentive.

Notably, 98% of these jobholders were South African, with 60% being black.

Ndlovu explains that these new jobs were primarily within energy-services companies responsible for implementing energy-efficiency projects.

Extrapolating the impact

The report suggests that the available data indicates a likely far greater number of jobs created, both directly and indirectly, with a substantial positive impact on the current and future economy.

While the 12L Tax Incentive is currently available until December 2025, Ndlovu expresses hope for its extension.

"Our aspiration is that the scheme will be extended, and that mechanisms will be implemented to facilitate and enhance the participation of small and medium-sized enterprises," he states.

The 12L Energy Efficiency Tax Incentive stands as a testament to the potential for energy initiatives to drive both environmental sustainability and economic prosperity.