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Solar industry slams 10% duty on solar panels

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 04 Jul 2024
Solar panels will now incur a 10% import tax, in an effort to prioritise supporting the local market.
Solar panels will now incur a 10% import tax, in an effort to prioritise supporting the local market.

Local players in the solar PV industry have slammed government’s imposition of a 10% duty on solar panels.

According to government agency, the International Trade Administration Commission (ITAC), which made the recommendation, the move is aimed at supporting and protecting the local market.

However, the industry believes the move will see costs being passed on to the already financially-constrained South African consumer.

The announcement that solar panels will now incur a 10% import tax, in an effort to prioritise supporting the local market demand, is not necessarily good news, says Thomas Bergenthuin, founder of local solar company The Bees.

“South Africa is an extremely small producer of solar panels. The vast majority of solar panels are imported into the country, so this move by the finance minister doesn’t make economic sense,” says Bergenthuin.

Theoretically, he says, duties are normally imposed to protect the local industry, but in South Africa’s case, the local industry is extremely small and unlikely to ever be competitive with the likes of China.

“This duty will, therefore, put strain on other industry sectors, such as installers, and also impact the competitiveness of everyone using electricity, as the effective pricing will be higher. This at a time when globally solar equipment prices have dropped by up to 60% over the past year, and Eskom tariffs are on the rise, with many expecting tariffs to double over the next five years. This import tax is going to significantly impact small businesses in SA, as well as residents,” says Bergenthuin.

The Solar PV Industry Association (SAPVIA) says it is surprised that the duty has been imposed without any formal industry engagement as requested, especially taking the approval and imminent announcement of the South African National Renewable Energy Masterplan into account.

Dr Rethabile Melamu, CEO of the industry body, believes the immediate implication is likely that a 10% price increase will be passed on to consumers to cover any potential problems or delays in importers utilising the rebate mechanism.

SAPVIA says it will engage the relevant authorities to gain clarity and understanding of the rebate mechanism and communicate this information to all SAPVIA members wishing to utilise the mechanism.

The association says despite continued module price declines over the last three to four years, based on upstream cost of production decreases and oversupply locally and internationally, module pricing still makes up a significant portion of the total solar PV project capex, ranging from 30% to 45% for rooftop PV and decreasing to 20% to 35% for carport and ground-mount solutions.

Melamu explains that SAPVIA is only aware of three operational module assembly facilities in South Africa.

“It is important to note that local assembly facilities import most of the components required for module assembly, with minimal localisation of the upstream components and no localisation of solar polysilicon, ingot, wafer or cell production,” she says.

Dr Rethabile Melamu, CEO of SAPVIA.
Dr Rethabile Melamu, CEO of SAPVIA.

According to SAPVIA, based on industry estimates, the local module assembly capacity is approximately 620MW per annum for larger format modules destined for the utility-scale, as well as commercial and industrial markets.

It notes the current annual demands of the last two to three years was around 3 000MW per annum, five times that of what the local assembly plants could offer.

“The immediate introduction of a duty is not ideal at this point,” says the association.

Members of the SAPVIA governing committee met yesterday afternoon to consider the best plan of action.

SAPVIA says the governing committee members agreed to engage ITAC on the duty and rebate.

The association aims to share industry feedback, as well as the unintended consequences of the announced duty on active projects, for both public and private procurement schemes.

“SAPVIA acknowledges government’s desire to protect the solar PV manufacturing capability and expand it in the medium- to long-term in line with the ideals of the South African Renewable Energy Masterplan,” notes Melamu.