Draft Regulations on Trade Exposure and Performance Benchmarks were published on December 2nd 2019

The long-awaited draft regulations on trade exposure and performance benchmarks were published for comment on the 2nd of December 2019.

Comments are due on 17 January 2020.

Based on the regulations, the allowances for trade exposure and performance benchmarks are outlined as follows:

Trade Exposure Allowance

・Trade intensity is used as a proxy for trade exposure, and is determined at a sector or subsector level, based on the World Customs Organisation (Harmonised System Convention) Codes.

・Trade data on imports and exports were extracted from either the South African Revenue Service or the Department of Trade and Industry websites for the corresponding nominal three-year period.

Average production data were calculated using the Stats SA mining and manufacturing data at the standard industrial classification 2-digit code levels.

・The trade intensity of a particular sector / subsector is based on the sum of the value of imports and exports divided by production of that sector or subsector.

・The trade exposure allowance is determined according to the trade intensity category - and the three categories are low, medium and high.

・The level of trade exposure allowance for each different trade intensity category is shown in the table below:

Trade Intensity Category

Trade Exposure

Level of Allowance


TE < 10%


TE ≥ 10% to < 30%

Between 3% and 9.9% *










TE ≥ 30%

Maximum of 10%

・Annexure A of the regulations provides a list of the sectors and the level of trade exposure allowance that each sector qualifies for (including SIC codes and corresponding IPCC codes)

・The carbon tax payable by a firm will be determined by a sum of the GHG emissions for each category less the allowances for each category (fuel combustion, process, fugitives)

・Companies with activities across different sectors with varying SIC code categories, but within the same category, will potentially face different trade intensity risk levels simultaneously.

・The production data for each sector is obtained from the StatsSA publications on the StatsSA website.

・If a taxpayer is of the opinion that the allowance does not accurately reflect the extent of the trade exposure of that taxpayer, an alternative method for calculating trade exposure may be used - based on their own exports, imports and sales.

Performance Benchmark Allowance

・A company can also qualify for an incentive-based performance allowance, where companies that perform better than an agreed sector or sub-sector emissions intensity benchmark can qualify for up to a maximum of 5% tax free allowance, to reduce their respective tax liability.

・Section 11 of the Carbon Tax Act (no 15 of 2019) sets out the formula to be used by taxpayers to determine the level of allowance for which they qualify.

・The emission intensity benchmarks for the South African Carbon Tax study of the National Treasury set out the methodological approach to be used.

・Benchmark proposals were developed by industry associations for the following sectors:

・Liquid fuels

・Gas and coal to liquids



・Iron and Steel

・Paper and Pulp


・Titanium slag

・Chemicals (nitric acid)


・Clay brick.

・The regulation does not specify the processes or procedures to follow for industry sectors not listed in the Annexure.

・Neither does this regulation specify the methodology to be followed to calculate the intensity benchmark .

We recommend that companies analyse the impact and do their own calculations. based on proposed methodologies per the draft regulations, to determine whether any comments need to be submitted by the deadline.

Should you have any questions, please feel free to contact us.

Zelda Burchell, Carbon and Energy Manager

+27 11 568 3341

+27 82 410 0750