Tuesday, August 11, 2009

There’s now a new reason to be sporting green and gold in South Africa.  With the launch of the Green Building Council of South Africa (GBCSA) in September 2008, South Africa became the 13th member of the World Green Building Council.  According to the Urban Land Institute of Washington, D.C., “[A] green building is an outcome of a design which focuses on increasing the efficiency of resource use (energy, water, and materials) while reducing building impacts on human health and the environment during the building's lifecycle, through better siting, design, construction, operation, maintenance, and removal.” The Green Star SA Rating is a green building rating tool which sets standards and benchmarks for green buildings.  To receive certification, building owners must submit documentation to the GBCSA which is then independently assessed and scored.  If successful, a four, five or six star certification is awarded.

Why go green?  According to the GBCSA, conventional buildings consume nearly double the energy and potable water of a green building and produce twice as much waste.  By choosing to go green, developers can transform the South African property industry by designing and building environmentally sustainable buildings.  This, in turn, will have an impact on resource consumption and help combat global warming.

The positive environmental impact is not the only reason to start this transformation.  The draft Taxation Laws Amendment Bill 2009, which was recently released for comment, contains two new tax incentives for businesses.  Both of these incentives are aimed at reducing the carbon footprint of businesses.

Should the Bill be promulgated, businesses who take part in the qualifying clean development mechanism project(s) (CDMs) will enjoy a tax saving when they dispose of certified emission reductions (CER).  In other words, the disposal of the CERs will be exempt from income tax.  In addition, for VAT purposes the disposal of the CERs will be treated as a supply of services and because all CERs will be exported, the supply will be subject to VAT at 0%.  The CDM was introduced under the Kyoto Protocol to allow industrialized countries to invest in projects to reduce carbon emissions.  Under the Bill, the disposal of qualifying CERs (which are derived in the furtherance of a qualifying CDM project) will be exempt from income tax.  Further income tax deductions will be enjoyed by businesses if documentary evidence, which is duly certified by the Energy Efficiency Agency, shows an energy savings resulting from activities in the production of income.

Currently, there is no legislation in South Africa that requires the implementation of green buildings.  However, with the major environmental issues facing us: excess energy consumption; CO2 emissions from burning carbon fuels; air, water and land pollution; the depletion of natural resources and waste disposal, legislation seems inevitable. 

Despite the current lack of legislation requiring properties to be built in an environmentally sustainable way, some businesses have initiated the transformation for the long term energy cost savings, waste and consumption reduction benefits and probable future tax breaks.  According to Jason Buch, Technical Manager of the GBCSA, 6 office projects have already registered with the GBCSA since the launch of the rating tool in November 2008.  Although no projects have been submitted for certification, it is expected that the first submission will take place in July 2009, which is sooner than expected.

So far, the registered projects are only in Johannesburg and Durban.  However, it is likely that projects in other provinces will quickly follow.  Buch believes that there are approximately 12 to 15 projects that have not registered with the GBCSA, but are using the green star framework.

Currently, the only rating tool available is for the design and building of office projects.  However, Buch confirms that the GBCSA is developing rating tools for retail buildings.  It is the GBCSA’s intention to eventually be able to rate the design and building of all types of building projects in South Africa.

To receive project certification, a documentation-based submission can be put forward for either the “Design” or “As Built” construction process.  Both of these certification processes are completely separate as a Design certification is not a prerequisite for an As Built certification.

Design submissions can be submitted as soon as there is documentation to support the submission, which can be prior to the commencement of construction.  Although the Certified Rating can be achieved prior to practical completion, it must be achieved no later than 2 years after practical completion.  Should a successful submission be made for Design, certification will be awarded at the end of the design phase of the project.  Upon receiving such certification, the building can then be marketed as a Green Star SA certified building, having demonstrated the green building strategies to be included in the building.

Only at the end of the construction will a project be submitted for As Built certification.  If all green building strategies were in fact incorporated into the final building then the certification will be awarded. 

The urgent need to reduce greenhouse gas emissions and other environmental degradation is starting to be taken seriously in South Africa.  With millions of visitors about to embark on South Africa’s shores in anticipation of the FIFA World Cup, South Africa has the opportunity to show the world that it is one of the leading countries at the forefront of change.   So go on - register, get certified, and support these green and gold initiatives.