The Treasury has announced two tax relief measures to encourage businesses and individuals to invest in renewable energy and increase electricity generation as part of the R13bn allocated for tax breaks in the 2023 national budget.
The budget made provision for R4bn in relief for households that install solar panels and R5bn for companies through an expansion of the renewable energy incentive.
But the SA Photovoltaic Industry Association (Sapvia) said the relief offered to households will not have a meaningful effect.
Rethabile Melamu, the CEO of Sapvia, said the solar panels incentive is limited and does not provide any benefit for households that could not access instruments for the purchase of solar systems.
The rebate for households will not apply to inverters or batteries because its purpose is to encourage the installation of new generation capacity, the Treasury said in the budget tabled by finance minister Enoch Godongwana in parliament on Wednesday.
“The energy and electricity sector, here at home and globally, is undergoing a rapid process of systemic change.
“Green technologies are becoming cheaper, and the deployment of low-carbon solutions is accelerating. We recognise that we have a role to play in encouraging adaptation and mitigation,” Godongwana said.
He told journalists ahead of the budget speech that the rationale for these tax breaks is to release pressure on the grid by getting more people to generate their own electricity.
“Individuals who install rooftop solar panels from March 1 2023 will be able to claim a rebate of 25% of the cost of the panels, up to a maximum of R15,000. This can be used to reduce their tax liability in the 2023/2024 tax year. This incentive will be available for one year,” Godongwana said.
According to Melamu, the maximum cap of R15,000 translates into a saving on the first R60,000 of a solar system, “which will not make a meaningful impact for the average household without storage”.
She said: “Sapvia is on record indicating that 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.
“We urge the government to consult with Sapvia ... to fine-tune and improve the design of relief packages and financial instruments.”
For businesses, thresholds that previously only allowed investors in photovoltaic projects below 1MW to deduct 100% of the cost in the first year, or a three-year deduction on larger solar installations, and wind or hydropower installation under 30MW, have been removed.
Under the expanded incentive, the Treasury said businesses will be able to reduce their taxable income by 125% of the cost of an investment with no thresholds on generation capacity. The incentive will be available for two years.
In a further step to shield households from the inflationary effect of high energy prices and load-shedding on food prices, the diesel fuel levy refund will be extended to food manufacturers. This will apply for two years from April 2023 until 2025 to limit the effects of power cuts on food prices.
The diesel refund system was implemented to provide relief from the general fuel levy and the Road Accident Fund (RAF) levy to primary sectors such as farming, forestry and mining. “A similar refund on the RAF levy for diesel used in the manufacturing process (such as for generators) will be extended to the manufacturers of foodstuffs,” the Treasury said.
Updated: February 22 2023
This article has been updated with new information
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