New law threatening South African businesses

Sakeliga warned that South Africa’s new Climate Change Act is set to wreak havoc among South African businesses and pit one company against the other.

On 23 July 2024, President Cyril Ramaphosa signed the Climate Change Bill into law, setting out a national climate change response.

Ramaphosa said the Act enables aligning policies that influence South Africa’s climate change response.

It will also ensure that South Africa transitions to a low-carbon and climate-resilient economy and that policy contradictions do not constrain society.

The law also aims to enhance South Africa’s ability and capacity to reduce greenhouse gas emissions and build climate resilience over time.

Ramaphosa said this will be done while reducing the risk of job losses and promoting new job opportunities in the emerging green economy.

On paper, the new Climate Change Act sounds great. However, Sakeliga warned that it will be disruptive to the business world.

Sakeliga chief economist Russell Lamberti said the Act would create a hyper-bureaucracy over what can be produced in South Africa.

Lamberti said the legislation envisages an unfathomable level of bureaucratic and regulatory complexity.

The onerous conditions go beyond the additional work required by businesses. The state will also need to perform a tremendous amount of work.

It required intense reporting from municipal and provincial governments on their green energy policies and how many emissions they produce.

Considering that the state barely functions, this additional reporting burden will be a step too far for most government branches.

“If fully implemented, it will throw additional sand in the gears of the government and businesses,” Lamberti said.

He added that regulations must now be produced on top of the legislation, creating tremendous uncertainty about what the final version will look like.

Sakeliga’s chief executive, Piet le Roux, added that the Act prescribes a system for dividing the economy into categories.

Each category will be given a carbon quota, and each business in that category must apply for a slice of that carbon quota.

“Should a business exceed its carbon quota, it will be fined. If it uses less than its quota, it can be taken away and given to another business,” Le Roux said.

Even more concerning is that if a new business wants to enter a category, it will need to see if enough carbon quotas are available.

“It will create a massive fight, where big and small businesses turn on each other and businesses of the same size fight against each other,” he said.

Lamberti added that the impact of the Climate Change Act has been underreported and that businesses should take note of it.

“It is going to take a few years to play out. Get this on your radar. It will bubble to the surface in the coming quarters,” he said.