Contractors must prepare for South Africa’s Draft Carbon Budget and Mitigation Planning Regulations

As we predicted earlier this year, on August 1 2025 South Africa’s Department of Forestry, Fisheries and the Environment (DFFE) released the Draft National Greenhouse Gas Carbon Budget and Mitigation Planning Regulations (Draft Regulations), coupled with the Draft Technical Guidelines for the Draft Regulations, under the Climate Change Act 22 of 2024 (the Act) for public comment, with comments due by 30 September 2025.

The Draft Regulations aim to institutionalise carbon budgeting and mitigation planning for emitters that produce 30,000 tons or more of declared greenhouse gas emissions per year. This is significant for heavy and difficult-to-abate industries such as mining, steel, cement and fossil fuel-based electricity generation, all of which form part of the value chain and life cycle of the construction sector.  The publication of the Draft Regulations also come at a time when the obligations of all individual States in addressing climate change has been the subject of an advisory opinion by the International Court of Justice.

The construction industry in South Africa is a significant driver of carbon emissions, drawing from these heavy GHG emitting industries, which makes the Draft Regulations and their eventual finalisation and implementation, material to the decarbonisation of the construction industry.

The Draft Regulations look to put in place a robust framework for carbon budgeting – limiting the total amount of direct greenhouse gas emissions that can be released in a specific timeframe - and would require companies to, amongst other obligations:

• Submit GHG emissions data for each facility within the company and determine emissions baselines in order to be allocated a carbon budget, which budget must be apportioned amongst all facilities within the company
• Develop mitigation plans which must outline specific, realistic strategies to reduce GHG emissions;
• Submit annual progress reports to the DFFE, including actual emissions data for the reporting period, progress against the carbon budget and mitigation plan to ensure transparency and accountability; and
• Maintain data integrity through third-party verification of emissions data and mitigation outcomes with audits conducted by accredited bodies to prevent underreporting.

Companies can face fines of up to R10million or 10 years in jail for failing to comply with the regulations.

Impact on the construction sector

The draft regulations will significantly reshape the construction value chain, especially for developers and contractors in energy and infrastructure projects.

Notable examples of “listed activities” identified in the Draft Regulations, include, amongst others, cement manufacturing, steel and ferro-alloy production, coal mining, brick manufacturing, mining (both extractive activities and processing); and electricity generated from fossil fuels. Each of these sectors and industries plays a material role in the construction sector value chain, from raw and processed materials to electricity needs, and have been identified as priority areas of focus in the drive to decarbonise embodied and operational carbon in the construction sector.

The draft regulations bring to the fore considerations including:

• Whether these proposed rules will align with the second draft of South Africa’s nationally determined contribution (NDC), currently out for public comment - and whether their implementation will serve as evidence by the South African government of its obligations to address climate change;
• the readiness of the identified sectors and industries to meet the compliance obligations;
• the planning, financing and opportunity around carbon capture use and storage technologies and the opportunity for innovation in the sector;
• the increased use of renewable energy and cleaner fuels to power engines and boilers;
• the ability to meet the EU Carbon Border Adjustment Mechanism carbon tariff on carbon intensive products, such as steel and cement imported to the European Union;
• Carbon Tax implications, both positive and negative; and
• The possible influence on lending and investment requirements around a project’s alignment with the Paris Agreement and South Africa’s NDC.

These will require behavioural, systems-based change, and a shift by contractors to more collaborative contracting models which share and incentivise the delivery of sustainability commitments, and more accurately cater for broader climate driven risks, such as the foreseeability of climate related weather events and supply chain disruption.

Developers and contractors should also consider revising or updating procurement policies and requirements, to ensure that suppliers of high-emission embodied materials are compliant with carbon budgeting requirements.

Those active in the construction sector, especially its value chain, must take action to consider carefully the possible implications that will come from the finalisation and implementation of the Draft Regulations in terms of risk, cost implications, opportunity and climate governance.

Organisations able to demonstrate compliance, the implementation of robust procedures, and the bonus of an international track record in carbon reduction measures will position themselves well in South Africa’s drive to turn the country into a construction site with decarbonisation as its foundation.

Co-written by Njabulo Gumede.