Solar players respond to scrapping of relief package

Simnikiwe Mzekandaba
By Simnikiwe Mzekandaba, IT in government editor
Johannesburg, 22 Feb 2024
National Treasury has cut the solar tax break incentive from its 2024 budget.
National Treasury has cut the solar tax break incentive from its 2024 budget.

Solar industry players believe the country’s fiscal constraints had much to do with National Treasury’s decision to cut the solar tax break incentive in this year’s financial budget.

Finance minister Enoch Godongwana yesterday presented his 2024 budget, with no mention of tax rebates for households that install rooftop solar.

Instead, Godongwana noted the financial implications of load-shedding, saying it disrupts production, operations and livelihoods.

The minister noted the budget proposes an increase in the limit for renewable energy projects that can qualify for the carbon offsets regime, from 15MW to 30MW, in an effort to ensure long-term energy security.

“It is through the combination of private investment in new energy projects, rooftop solar installations and improvements in Eskom’s generation fleet that load-shedding will reduce, and reliability and security of supply improve.”

Ross Mains-Sheard, co-founder and CEO of Versofy Solar, says South Africa endured a record 332 days of load-shedding in 2023, significantly hindering the country’s economic growth and burdening households.

Mains-Sheard notes the solar energy installations incentive was cut from the budget even though the adoption of rooftop solar is widely recognised as a means of alleviating the country’s ongoing energy crisis.

“Amid broader fiscal constraints, this is an understandable but nonetheless disappointing outcome for South African households, which should be incentivised to make the transition to solar in the form of tax breaks, subsidies and feed-in tariffs.

“Government incentives have a crucial role to play in driving solar energy adoption, particularly for households relying on a rent-to-own or a solar subscription model, which cannot afford to purchase solar panels and the necessary accompanying equipment outright.

“Despite this, South African companies have an opportunity to continue developing the infrastructure and technology that support a mass transition to renewable energy.”

Solar PV industry association SAPVIA says: “We don’t see this cut as a comment on the effectiveness of the incentive scheme, but rather believe this to be an outcome of the need for fiscal consolidation.”

“In an election year, the minister was under pressure to find money for urgent priorities and we believe this led to the decision to cut the incentive. It is important to note the incentive for businesses has not been cut. We hope to continue engaging government further to ensure equitable access remains a priority,” says SAPVIA spokesperson Maloba Tshehla.

Last year, Godongwana announced government would incentivise households that install rooftop solar panels through the new tax incentive.

The finance minister revealed that 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 2023.

Businesses would be able to reduce their taxable income by 125% of the cost of an investment in renewables from 1 March 2023. In addition, changes to the Bounce Back Loan Guarantee Scheme would guarantee solar-related loans for small and medium enterprises.