The practice of ‘greening’ buildings refers to the design of commercial and civil infrastructure with environmental considerations in mind. As the world becomes increasingly aware of the need to adapt to climate change, so too have the parties involved in the commercial property industry in South Africa.
Measures to mitigate building impact on the environment include energy-efficient power systems, the harvesting and reduction of water/electricity consumption (which, in turn, contribute to lowered greenhouse gas emissions), recycling, and the promotion of human-powered transport (cycling or walking). Aside from the substantially lowered utility costs, enterprises benefit from heightened staff productivity, loyalty and morale; while developers of green buildings can look forward to attracting socially responsible investors seeking higher returns. A recent McGraw and Hills World Green Building Trend survey found 51% of South African businesses (especially in the financial sector) expect to be based in green commercial spaces by 2015. In addition, the Green Building Council of South Africa, since its launch several years ago of green property evaluations, has already seen more than 50 Green Star certifications, with the number of buildings applying, rising at an accelerating rate.
Cape Town CBD Sustainability Initiatives
The past two years in Cape Town have seen prominent refurbishments and new developments. The Portside and The Towers in the CBD now feature the latest in integrated green design; while the Black River Park complex in Observatory has transformed its energy generating capacity covering its rooftops with solar photovoltaic panels, making it largely independent of the City grid.
The V&A Waterfront last year also introduced environmentally friendly initiatives, not least of which are waste recycling and power efficiency. Numerous decorations have been awarded to the business attraction over the past two years, most notable of which are the Heritage Gold Environmental certification (recognising The Waterfront as a pan-Africa leader in eco-friendly tourism and commercial enterprise) and the recent six-star Green Star rating of the No.1 Silo office block, making the building only the second in the country to achieve the maximum recognition given by the Green Building Council of South Africa.
It is thus evident that the movement towards environmentally conscious property ownership is not a temporary phenomenon.
With the country among the most intensive emitters of carbon dioxide in the world due to its reliance on coal and mining, South Africa’s stated intention, announced in 2009, is to “reduce greenhouse gas emissions by 34% by 2020.” In May last year, the National Treasury released its carbon tax policy paper outlining the implementation of a carbon-pricing mechanism, applicable to all major commercial facilities. By pricing carbon emissions, the plan is to effect desirable producer and consumer behaviour change and thus address climate change.
The mechanism outlined consists of two routes aligned with international emissions reduction efforts. Carbon tax price on the amount of emissions; while emissions trading schemes are designed to limit the permissible level of greenhouse gases.
Legislation Shaping Environmentally Sustainable Property
Research by Frost and Sullivan has found corporations in the extractive, power generation, and manufacturing industries – all key to South Africa’s economy – intend to apply for exclusion from the first round of emissions control. The National Environmental Management: Air Quality Act (2004) set a deadline of 1 April 2015, with the second round coming into force on 1 April 2020. Corporate firms have analysed the material costs of complying with emissions control legislation and found them prohibitive. The time and logistics – obtaining board approval, selecting appropriate suppliers, and outfitting of facilities – are forecast to take months to years. Such projects would be even more difficult to achieve given investor interests in a floundering economy. In turn, demand for industrial property could be dampened.
One criticism levelled at emissions control legislation (applicable to civil, commercial, and industrial infrastructure) is the sizeable proportion of projected carbon taxes on corporate earnings. This is well illustrated by the example of Eskom. Henk Sa of EcoMetrix Africa, a carbon consultancy, explains if the planned rate of R120 a tonne of greenhouse gas emission is actualised, Eskom would be contributing approximately R11 billion a year, making it the largest source of carbon revenue. The utility made a net profit of R13.2 billion in the year ending 31 March, 2012 – investors would be able to expect turbulence; while the public would be affected by higher electricity costs.
A further concern brought forward by business analysts is the lack of feasibility and clarity on compliance evaluation and monitoring. Making the implementation of carbon legislation even more complicated is the likelihood of a small industry or profession emerging to audit, consult and advise on emissions compliance, deepening the costs of doing business in the country. For property owners, the benefits and drawbacks of greening commercial and industrial space across the economic sectors should be carefully weighed up before decisions are made.
It is clear that South Africa as a country is giving serious thought, and indeed making solid progress, on environmentally sustainable development. While organisations occupying commercial office buildings and public infrastructure stand to enjoy substantial benefits from the practice, heavy industries, an important component of the national economy, could find ‘green’ schemes such as emissions credits to be costly to corporate profits, as well as cumbersome to implement and monitor. This in turn could have a negative effect on the industrial property market. In any case, it is clear that the ‘greening’ of commercial, societal, and industrial space will continue for the foreseeable future. Businesses operating in the retail, light and heavy industry sectors will increasingly need to keep South African environmental legislation in mind going forward.