Out-Law News 1 min. read

South Africa’s budget says infrastructure investment among ‘strategic national priorities’


South Africa’s government has announced plans to boost investment in the country’s energy, transport and communications sectors, including $1 billion to expand broadband telecoms infrastructure in government institutions and schools over the next three years.

The government’s 2015 budget, unveiled by finance minister Nhlanhla Nene, said support for small firms and infrastructure investment is among nine national “strategic priorities”, many of which are expected to involve public-private partnerships.

Nene proposed to spend 105 billion rand (ZAR) ($9bn) on housing projects and “associated bulk infrastructure requirements”, in addition to more than ZAR 18bn ($1.5bn) in funding for a major electrification programme to boost grid connections and the availability of off-grid electricity.

To help combat ongoing power shortages in the country, Nene proposed an increase in the national ‘energy-efficiency savings incentive’ from ZAR 45 cents per kWh to ZAR 95c (about 8 US cents) per kWh and said the scheme would be extended to include co-generation power projects.

Other measures under consideration include enhancing the accelerated depreciation for solar photovoltaic renewable energy projects (32-page / 992 KB PDF), to encourage further investment in the sector Nene said.

To help cities across South Africa “mobilise the finance required for more rapid infrastructure investment and maintenance”, amendments will be proposed to the country’s Municipal Fiscal Powers and Functions Act (6-page / 64 KB PDF), Nene said. The amendments aim to “clarify the rules surrounding bulk infrastructure charges, and ensure an equitable and transparent system of contributions by land developers”.

Nene said: “The National Treasury has recently met the mayors and city managers of all eight metropolitan municipalities to discuss how to accelerate investment, improve infrastructure maintenance and strengthen financial management.” A government-backed conference on urban infrastructure will be convened later this year “to enable private investors to obtain further details of financing opportunities that will arise from this new programme”.

Nene confirmed that a carbon tax will be introduced in 2016 to “provide an additional tool to deal more sustainably with the current electricity shortage, while lowering the electricity levy”. Nene said a draft carbon tax bill will be introduced later this year for public consultation.

As of November 2013, South Africa was rated as the 12th most attractive investment destination for renewable energy, according to the government, which has approved a number of major renewable energy projects since 2013.

South Africa’s National Treasury published a ‘Carbon Offsets Paper (50-page / 1.44 MB PDF) for public comment in April 2014. This followed an earlier finance ministry commitment, made in the country’s 2014 budget, that a package of measures was “needed to address climate change and to reduce emissions... this will include the proposed carbon tax, environmental regulations, renewable energy projects and other targeted support programmes”.

Last month, the company behind a UK-backed pilot carbon offsets trading scheme (17-page / 609 KB PDF) for South Africa said the scheme had been successfully demonstrated for “market readiness”.

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