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SONA 2023

Ramaphosa’s tax incentives a ray of light for solar panel roll-out to ease SA’s energy crisis

Ramaphosa’s tax incentives a ray of light for solar panel roll-out to ease SA’s energy crisis
President Cyril Ramaphosa delivers the 2023 State of the Nation Address at the Cape Town City Hall, 9 February 2023. (Photo: Shelley Christians)

It’s a win-win for all involved. Businesses and households need to free themselves from the curse of Eskom, and the rise in productivity levels that comes with reliable energy will more than compensate the Treasury for the tax breaks that are looming.

President Cyril Ramaphosa announced that tax incentives would soon be unveiled to allow households and businesses to tap solar energy using rooftop panels. It’s low-hanging fruit that is welcome, and an acknowledgement that the economy needs to move beyond the shambles that is Eskom. 

Ramaphosa said the initiative was part of the action plan he had announced last July to address the energy crisis – a crisis that has gotten a lot worse since then. 

The tax incentives, which Finance Minister Enoch Godongwana will outline in his Budget speech in two weeks, would aim “to unleash businesses and households to invest in rooftop solar”.

“As indicated in July last year, and with a view to addressing the load shedding crisis, we are going to proceed with the roll-out of rooftop solar panels. In his Budget Speech, the Minister of Finance will outline how households will be assisted and how businesses will be able to benefit from a tax incentive,” Ramaphosa said. 

Read more on Daily Maverick: Ramaphosa outlines ‘extraordinary measures’ to deal with SA’s energy crisis ‘existential threat’

“National Treasury is working on adjustments to the bounce-back loan scheme to help small businesses invest in solar equipment, and to allow banks and development finance institutions to borrow directly from the scheme to facilitate the leasing of solar panels to their customers,” he said.

This is an initiative that banks will fall over themselves to provide finance for at a time when they are increasingly reluctant to touch new coal projects. 

It’s simply a win-win for all involved. Businesses and households need to free themselves from the curse of Eskom, and the rise in productivity levels that comes with reliable energy will more than compensate the Treasury for the tax breaks that are looming. 

It also helps to move South Africa down the road to de-carbonisation, which is crucial if the economy is to remain competitive and access markets that will throw up obstacles to goods and services with a heavy carbon footprint. And, as a bonus, it’s good for the environment. 

For banks extending finance and those receiving it, the initiative will also add value to the assets involved. A household or business with reliable solar power is worth more than one without. 

And it adds to Ramaphosa’s January announcement that customers with solar panels will soon be able to sell power back to the grid.

Read more in Daily Maverick:Solar panel customers will finally be able to sell excess electricity into the SA grid

“One of the potent reforms we have embarked upon is to allow private developers to generate electricity. There are now more than 100 projects, which are expected to provide over 9,000MW of new capacity over time,” Ramaphosa said. 

This is also a sector that has huge potential for creating jobs and opportunities and just in itself adding to gross domestic product (GDP). 

It’s a no-brainer that should have been implemented long ago, but better late than never.

“Behavioural change has seen the South African public adapt to and mitigate the impact of load shedding. For example, in 2022, the country imported more than R5-billion worth of solar panels — up from around R4-billion in the preceding year,” accountancy firm PwC said in a recent report. 

Read more in Daily Maverick:PwC estimates rolling blackouts knocked up to five percentage points off SA’s 2022 GDP growth

“We estimate that these panels will provide an additional 2,000MW of generating capacity in 2023,” the report said. “Put differently, based on varying usage patterns, these off-grid solar panels could be saving the rest of the country from an additional stage of load shedding at any given time.”

So South Africans and businesses who can afford to do so have been installing solar panels even without the benefit of incentives. Hopefully now, many more will have the incentive to do so. And the government is providing them with the means to reduce their reliance on Eskom while also providing it with some power – an acknowledgement that the economy needs to move on from the ailing SOE.  

“The energy crisis is an existential threat to our economy and social fabric,” Ramaphosa said in his Sona. And business as usual is not going to address this crisis. DM/BM

Absa OBP

Comments - Please in order to comment.

  • Dennis Bailey says:

    All too little, far, far too late.

  • greigdoveygd says:

    Are there plans to compensate people who, without any incentive to install solar, have already decided that they have had enough and had extensive systems installed, at great expense?

    • Victor Grobler says:

      Highly unlikely unfortunately.

      • Dave Martin says:

        Can a journalist please follow up on these alleged 9GW of private renewable capacity that have been planned/actioned by the private sector since the 1MW limit on private generation was lifted?

        I realise that these projects caused the latest REIPP to fail, but surely that doesn’t matter as this capacity will come online much faster than the bureaucratic REIPP process.

        Private solar projects are being delivered in less than 12 months so one should expect huge capacity coming online this year already.

        And generation capacity, whether private or for Eskom, has the same impact: reduced load required from the failing coal plants.

        So it would seem that loadshedding – at least during the daylight hours – could end quite soon.

        Someone needs to tally up a table of the various projects making up this 9GW of capacity and the likely completion dates.

    • Gerrie Pretorius says:

      Highly unlikely that anyone who can “afford” solar (Non-blacks in other words) will be assisted or compensated in any manner. This is the anc remember …

      • Scott Gordon says:

        With respect , some wealthy ‘ dark skinned ‘ folk in my area , do not have solar . I expect to spend + – what I bought my house for 27 years ago 🙂
        I am doing it to avoid loadshedding , increase my electricity usage , have it break even in 5-8 years , maybe less . And have an asset .
        I have an option to feed into the grid in the future , is it feasable ? Getting R2/kwh ?
        Not a philanthropist .
        Great that the few that can afford to go off grid will do , less strain on supply .
        Less strain in income too .
        More strain on the poor who voted for the ANC , their choice .

      • David Mark says:

        What an obtuse and racist comment Gerrie. The black middle class is larger than the white, of course they’re spending the same percentage wise on solar. How your comment got through DMs comment approval, I don’t know.

        • Gerrie Pretorius says:

          Mark. I do apologise if my comment seems racist. I had the ‘compensation’ for the hospitality industry during the state of disaster, which was allocated based on race, in mind.

    • Jeremy Doveton-Helps says:

      One might argue that this is an indirect form of wealth-tax, since only those who could afford the high cost of solar conversions will have been the ‘early adopters’. Compensating those people will, by definition, reduce the pot available to take many more households (even partially) off the grid.
      Surely THAT is what South Africa – as a whole, as an economy – needs right now… the rapid and large-scale reduction of demand on Eskom’s ailing fleet?
      Expecting a refund on personal funds spent for one’s own benefit – with such first interest being the refilling of one’s own coffers – is at best, misguided.
      At worst, it smacks of self-interest.

    • Ed Rybicki says:

      I imagine you might receive some incentive if you expand your installation? I was looking at installing another 10 panels and a battery to go almost completely off the grid;I will almost certainly do it now.

  • Sid Peimer says:

    No doubt renewables are very much the future, especially solar where we have the two things it needs: sun and space. However, light industry runs on three phase and they need generators – now. But what we really need is a change in mindset, such as the Eskom Red Paper. To find it search: ‘eskom red paper stratplanning’

  • Jane Crankshaw says:

    Whoa! Sounds a bit like the PPE initiative doesn’t it? Another looting opportunity for the politically connected! Watch this space!

  • Rory Macnamara says:

    Buyers beware! the last subsidies offered by government under the control of EKDom produced a number of unqualified people installing solar systems which where a dismal failure, Look at Alex township as an excellent example. Solar has a compulsory standard to which installations must be done. so check the many solar “so called experts” beating a path to your doorway to sell a system. check their credentials!

  • Rowan G says:

    Finally. Hopefully the incentives are enough that we can get some kind of backup solution at home.

  • Cunningham Ngcukana says:

    The question is where the money is going to come from as tax revenues have been denuded by the blackouts of de Ruyter and company. The other question is how it is going to be rolled out this program and who would be eligible or Mamoloko Kubayi will decide as she did during Covid funds for Tourism and has received a lashing in courts without consequences. The question of oversight by the useless parliament that was rejected during Covid is another. Will we have the mess the AG found in the aftermath of the KZN floods when nobody was held accountable including the lies by Kubayi of R1 billion that was said to be available? The institutional framework for delivery of these, the criteria and the accountability issues are very critical. It may be another suitcase of lies from Union Buildings. The President has been trumpeting the 9 000 MW and the question arises where will the money to build transmission lines for renewables to the main grid come from? Would these business people pay for the transmission or this is another way to take our tax money to the connected with very sharp shoes and teeth? The question arises why was Eskom not consulted on these plans as they are saying they are still studying the gazette and even the speech! The abuse this country has endured under the ANC is untold and the acceptance of this garbage by the public has led to the ANC leadership to believe that they can get away with anything including lies!

    • Alley Cat says:

      Cunningham this is the second time in a week that you have blamed De Ruyter for the Eskom problems? What do you know that we don’t know?
      Have you (and the rest of the general public) got ANY idea what goes on at Eskom? I think not?
      We recently discovered a case where our company quoted a BBBEE reseller R60k for some minor equipment. The reseller quoted Eskom R900k??? Luckily since De Ruyter took over, this is being addressed and they placed the order on us even though we have a low BBBEE score.
      If you really think that De Ruyter is responsible and was able to take down Eskom in 3 years then I would like to know how you arrived at this conclusion??? You make no mention of all the BBBEE compliant cadres that went before him who allegedly looted and stole and feathered their nests? Let’s see what the next man can do if indeed they find someone desperate enough and daft enough to take this on.
      De Ruyter had very little support from the shareholder. In fact quite the opposite, he was accused of destroying our power supply deliberately. Boggles the mind!!! Seems like you believed this?

      • Cunningham Ngcukana says:

        One of my many criticisms is the extractive BEE that you are describing that is not only at Eskom but in all SOEs and in every department. Recently, Panyaza Lesufi was commenting on this thuggery and stationery that they must buy from BEE at 7 times the price. You are not saying anything new that one does not have any grasp of as a former trade union leader and SMS member. I know the origins of the crisis at Eskom better than you think and the first attempts by Stella Sigcau to privatise or implement the 1988/89 National Party plan.
        de Ruyter came into an institution that he knew was ravaged by state capture and corruption over a long period of time including the extractive BEE. If he did not know he ought to have carried out a proper audit of skills, management, supply chains, quality control, risk management, security and security systems, equipment and age analysis, operations management and human resource management and relations. After the audit the gaps would be obvious and he would then devise the plan to tackle the challenge of load shedding. We cannot praise a fish for swimming. He ought to have known about the BEE middle men nonsense and had a plan to deal with it. I have no truck with the BEE that has destroyed state owned enterprises if you care to know. What you are saying is what we know. He is responsible for the blackouts because he failed to do the audit from the beginning and after four years it is poppycock to talk of state capture and sabotage.

    • Roelf Pretorius says:

      You see, that is what Ed means when he says that “the rise in productivity levels that comes with reliable energy will more than compensate the Treasury for the tax breaks that are looming”. The only way that SA, and especially the government, can be sustainable is to get economic growth going. And for that electricity is needed. I see all the negative remarks, and while these remarks are needed to get the government to move faster (a snail is a thousand times faster than the ANC government, it seems), to really solve any crisis, rational minds are necessary, not overreacting or obstructing government. As for the election in 2024, the opposition parties must be careful that they, through all this ANC bashing, don’t expose themselves as EVEN WORSE than the ANC and thus motivating the voters to still go and vote ANC. This is what my gut feel tells me is happening at the moment, if the reaction to the many positive signs (which do exist, one only have to follow the news) by them is anything to go by.

  • Margaret Harris says:

    Surely we should be producing solar panels here in South Africa.
    A locally produced panel should be cheaper and supply precious jobs. Government seems to be a huge stumbling block in the way of new development, while beating their collective breasts about the low numbers of the employed.
    If we suggested a bonus to ministers who aided new companies to set up would there be a rush to assist? Just a cynical thought.

    • J W says:

      Sadly we can’t produce solar panels at anywhere close to the price they can be produced in China. We’re also not an attractive investment opportunity for the manufacturing industry, so getting the capital investment for a solar panel factory would be difficult.

    • Jane Crankshaw says:

      Well said! All “incentives” built into budgets should be be transparent and upfront for all to see…… they are, after all, built into any SOE project budget anyway, but transparency before the fact, would give the taxpayer an opportunity to object and share in the fairness of whatever decision is made. The “spurs” debacle is a perfect example of this!

  • Peter Dexter says:

    Eskom had proposed a significant charge for “grid tied” solar to discourage the exodus of its paying customers. I wonder whether they will remove this and welcome the surplus power fed back into the grid?

  • jimpowell says:

    Water solar is a far cheaper option per kwh saved. I installed 3 and my bill went down 30%

  • Dennis Bailey says:

    I want some numbers on this promise, or is it a threat?

  • Jane Crankshaw says:

    The supply and distribution of Solar panels for this “new” government initiative has already been decided, negotiated and concluded with the Chinese – with “incentives” built in….its a done deal people!!

  • Frans Flippo says:

    “And, as a bonus, it’s good for the environment.”

    I’m amazed how little South Africans and their government seem to really care about the environment as a major factor to their own health. As if “the environment” is some charity that you, at best, get karma points for contributing to.

    The air in SA’s metros is regularly above WHO-acceptable values. Science has shown that breathing polluted air causes all kinds of health problems such as heart disease and measurably shortens your life expectancy.

    And let’s not forget our constitution in Section 24 is supposed to guarantee us “an environment that is not harmful to (our) health and well-being”.

    The environment is not a luxury to attend to when all other things have been taken care of. Care of it should be on par with assuring every person has a roof over their head and food to eat.

    That’s not a bonus, that’s more essential than having electricity.

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