This is part 5 of a series of educational posts from the IFoA’s Climate Change Disclosures Working Party about climate reporting topics. Here we focus on South Africa: current practices and a brief overview of things to come.
South Africa acknowledges the existence and importance of climate change. A signatory of the Paris Agreement, it has made some progress on policies that aim to address the climate crisis. But regulations are less developed, and legislation less stringent, than in other countries. Currently, South Africa is not expected to meet its 2030 emissions target compatible with limiting warming to 1.5 degrees.
The country has suffered from the effects of climate change, experiencing increased severity and frequency of extreme weather events. It’s also in a particularly challenging position as the country relies heavily on coal for energy generation (which accounts for about 80% of its energy burden) and coal mining is a key economic industry, making up about 8% of its GDP. There is therefore a difficult balance between developing climate-related regulations and maintaining socio-economic development.
One of the most notable pieces of climate-related legislation in South Africa is the Carbon Tax Act, enacted in 2019. The act is intended to encourage a shift towards a low-carbon economy and reduce greenhouse gas emissions. The act applies to entities that conduct activities resulting in direct or indirect emissions exceeding specified thresholds, levied on the total emissions of an entity, primarily focused on carbon dioxide but also including other greenhouse gases.
However, corporate lobbying by fossil fuel interests has resulted in the extension by 3 years of the first phase of the carbon tax. The second, more stringent phase of the carbon tax will now not come into action until 2026.
The South African government has not made Task Force on Climate-related Financial Disclosures (TCFD) reporting mandatory, but it does encourage businesses to make climate disclosures in line with the TCFD framework.
The Johannesburg Stock Exchange has published its sustainability reporting guidelines for publicly listed companies in South Africa that aligns with international best practice, including the recommendations of the TCFD. Currently, this is on a voluntary basis.
In March 2022, the country’s treasury issued its first edition of Sustainable Finance Taxonomy, defining which assets, activities etc are ‘green’. The taxonomy is voluntary.
Actuaries should monitor the progress of South Africa’s Climate Change Bill (see below) and its potential impact on climate disclosure practices in the country.
South Africa’s Climate Change Bill 2022 is currently progressing through its parliament. If passed as legislation, it would form the first legal framework in South Africa to respond to the impacts of climate change. It would introduce an obligation for the minister to determine national and sectoral greenhouse gas emissions reduction targets.
The bill currently contains only one criminal offence: failure to prepare and submit a greenhouse gas mitigation plan to the minister. This may result in fines or imprisonment or both. See: Key Aspects of South Africa’s much-anticipated Climate Change Bill - Fasken (fasken.com)
Regulatory bodies such as the Johannesburg Stock Exchange may further develop reporting guidelines for climate disclosures, aligning with international best practices.
Below is a list of websites we hope you find useful:
Climate Risk Country Profile, South Africa - World Bank Group (climateknowledgeportal.worldbank.org)
What are your thoughts on the points raised in this article?
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To find out more, visit: Sustainability: research working parties
The views expressed in this post are those of the individual authors, and not necessarily those of the Institute and Faculty of Actuaries or those of their employers. Information within this post is correct as at the date of writing (i.e. end of July 2023). Hence, there may be subsequent updates which are not reflected. Any reader should still reference the underlying legislation and standard, and should there be any conflict, the underlying information in the relevant standard or legislation supersedes any information presented in this post.