Rooftop solar tax breaks for South Africa — what to expect

Finance minister Enoch Godongwana is set to deliver South Africa’s budget speech on Wednesday, 22 February 2023, which should see the announcement of incentives for installing solar panels at homes and businesses.

However, according to a Times Live report, some experts believe tax incentives will be challenging to implement. The focus should instead be on lowering import duties on solar panels, batteries and inverters.

This comes after President Cyril Ramaphosa spoke of a tax incentive for rooftop solar panels to help households and businesses afford solar systems during his 2023 State of the Nation address (Sona).

“We are going to proceed with the rollout of rooftop solar panels,” he said.

“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.”

South African Revenue Service (Sars) commissioner Edward Kieswetter said he is engaging with his colleagues to review the additional provisions that can be made to provide “relief and some incentive for people to become more self-sufficient.”

BusinessTech reports that while Sars doesn’t set financial policy, Kieswetter said he was actively engaging with the national government over rebates and incentives for private power producers.

He also cautioned that tax is not always the most effective route.

Grovest CEO Jeff Miller agrees, saying incentives for homeowners will be complex for Sars to implement.

Jeff Miller, Grovest CEO

“Reducing tariffs on imported solar components would make them more affordable for the homeowner,” he told Times Live.

Grovest recently launched the Twelve B Green Energy Fund, which intends to deploy R1 billion a year to invest in solar panels, inverters and batteries in residential complexes, commercial buildings and industrial buildings.

On the other hand, Metrowatt CEO Laurent Pieton believes tax incentives for consumers could have a significant impact.

“This has been a proven driver in the uptake of solar around the world,” Times Live quoted him as saying.

Following Ramaphosa’s announcement during Sona 2023, business experts raised concerns over the incentives as little detail has been given on how this will happen, according to a BusinessTech report.

Business Leadership South Africa CEO Busi Mavuso explained that the avenue government takes to implement incentives will be crucial to stimulating off-grid installation and ensuring the promises aren’t just empty gestures.

“A half-hearted approach is not likely to make much of an impact, and there’s a danger that this benefits only high-income earners,” Mavuso said.

She highlighted several approaches that government could take for effective incentives:

  • Zero-rating VAT for renewable energy equipment and investors
  • Removing customs duties on solar panels and other equipment
  • Applying grants or tax deductions for taxpayers filing returns

South Africans have been subject to daily load-shedding since October 2022, and solar power installations at homes and businesses have accelerated.

As a result, South Africa imported solar panels worth $125 million (about R2.25 billion) in the first five months of 2022, according to the World Economic Forum.

It said this is enough to boost the country’s existing solar capacity by 40%.

Factories, mines, farms, businesses and individuals have been forced to reduce their dependence on Eskom’s network by supplementing their electricity with in-house power generation.

However, the level at which this is happening isn’t yet sufficient to reduce power cuts substantially.

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