Mixed reaction as govt readies solar tax incentive

Simnikiwe Mzekandaba
By Simnikiwe Mzekandaba, IT in government editor
Johannesburg, 23 Feb 2023

Industry commentators have expressed mixed reactions following government’s announcement that households and businesses will receive a tax incentive for going solar.

As the country’s load-shedding crisis reaches tipping point, finance minister Enoch Godongwana yesterday confirmed plans to introduce a new tax incentive to help reduce pressure on the grid and ease load-shedding.

Delivering the 2023 National Budget Speech, Godongwana said individuals who install rooftop solar panels will be able to claim a rebate of 25% of the cost of the panels, up to a maximum of R15 000, from 1 March.

Businesses will be able to reduce their taxable income by 125% of the cost of an investment in renewables from 1 March. In addition, changes to the Bounce Back Loan Guarantee Scheme will guarantee solar-related loans for small and medium enterprises.

However, not everyone is enthused by the rooftop solar power relief package, with some labelling it “limited” and calling for more clarity.

Lukewarm reaction

Solar PV industry association SAPVIA CEO Dr Rethabile Melamu comments that solar panels alone do not protect end-users against load-shedding.

Melamu explains: “The solar panels incentive is limited and does not address those households that can't access instruments for the purchase of solar systems. At best, those who install panels will only get up to R15 000 back from their taxable income.

“Based on a 25% cap, this could translate to a solar system of R60 000, which will not make a meaningful impact for the average household without storage. This can get households 6kWp to 7kWp solar PPV panels without storage. We also need more clarity as the rebate seems to incentivise higher tax rate paying people.”

According to SAPVIA, an average household tends to purchase a 5kW hybrid system, including panels and battery storage, which ranges from R95 000 to R200 000, depending on the components used.

“It looks as if the incentive announced for business is better,” says Melamu.

“Incentivising solar PV is a step in the right direction. However, we urge government to consult with SAPVIA as industry experts to finetune and improve the design of relief packages and financial instruments.”

Energy expert Chris Yelland, responding to a tweet from National Treasury about these plans, commented: “Weak and ineffectual, in my view.”

In a longer response to another tweet, Yelland stated: “…the announced tax incentives for solar PV installations by individuals are very timid and weak, and as a result, will likely be ineffective in reducing load-shedding in SA.”

Eskom’s energy supply troubles have worsened in the past few years, with the power utility implementing around the clock power cuts.

The situation led to president Cyril Ramaphosa declaring it a national disaster earlier this month.

Godongwana yesterday noted that record levels of load-shedding were experienced in 2022, with 207 days of rolling blackouts compared to 75 days in 2021.

The budget saw National Treasury allocate Eskom R254 billion debt relief over the next three years, in an effort to respond to the load-shedding crisis and transition to renewable energy.

Greenpeace Africa climate and energy campaigner Thandile Chinyavanhu welcomed the tax incentive, saying it’s an essential element of the just transition, which must also be accompanied by a feed-in tariff.

“Government must, however, invest in tackling the heart of the problem, which is the continued reliance on fossil fuels for our electricity needs. The just transition must be handled with utmost transparency and urgency to prevent further damage to economic sectors impacted by floods.

"Government needs to stop throwing money at Eskom − this time, to the tune of R254 billion − and invest more seriously in renewable energy technology and the just transition more broadly. A just transition is still the best and most immediate solution to South Africa's electricity and unemployment crises.”

On the upside

Yolandi Esterhuizen, director of product compliance at Sage Africa and Middle East, thinks it won’t be surprising to see these rebates extended in the minister’s next budget, depending on uptake and the power situation next year.

“The finance minister came through with a scheme that allows businesses to reduce their taxable income by 125% of the cost of an investment in renewables in the tax year. Individuals who install rooftop solar panels from 1 March 2023 to 29 February 2024 will be able to claim a rebate of 25% of the panels, up to a maximum of R15 000.”

Cape Town mayor Geordin Hill-Lewis welcomed the move, calling on Capetonians to help end load-shedding by using the solar incentive.

“Cape Town welcomes the incentives announced for solar PV investments, which will support households and businesses to rapidly scale up power generation. Our message to Capetonians is clear: there has never been a better time to invest in solar. We want as many residents and businesses as possible to help us end load-shedding over time.”

Cape Town is set to start paying businesses cash for power before June, while residents can start selling power for cash later this year. The city says it will add a 25c p/kWh incentive to feed-in tariffs.

It is also forging ahead with its three-phase procurement for load-shedding protection, with the goal of protecting residents from the first four stages of Eskom load-shedding.

Deon Geyser, CEO of Liquid Intelligent Technologies SA, lauded government’s focus on helping Eskom alleviate power outages, as well as its commitment to stimulating the growth of renewable energy.

“We are delighted to hear the finance minister’s plans to empower Eskom to invest in transmission and distribution infrastructure to mitigate the negative impact load-shedding has on SA’s businesses.

“We are also pleased to note businesses will receive tax deductions for investment in wind, solar, hydropower, biomass and other renewable energy projects they undertake, which will prompt enterprises to move to sustainable power sources.”

Executive drama

Meanwhile, Eskom CEO Andre de Ruyter left the parastatal with immediate effect yesterday, after the board announced he would no longer be required to serve the balance of his notice period and will immediately vacate his position.

This development followed an hour-long media interview with De Ruyter on My Guest Tonight With Annika Larsen, during which he made accusations surrounding corruption, power station sabotage and government’s ongoing reluctance to reduce the power utility’s dependence on coal.

Daily Investor has since reported that De Ruyter is leaving the country for a time, to ensure his safety following his allegations.