The International Trade Administration Commission (Itac) has given the go-ahead for the imposition of a 10% customs duty on solar panels coming into SA, sparking the fear it will become more expensive for local businesses and households to secure renewable energy.
The commission also recommended the imposition of a temporary rebate in the event of solar panel shortages in the domestic market, saying this would mitigate the risks of supply, especially given the “current electricity crisis in SA”.
In a document published recently, Itac said it approved the 10% customs duty in a bid to protect the domestic industry. Several local producers have blamed high manufacturing costs and increased competition from low-priced imports for having to stop production.
SA is said to have imported about R17.5bn worth of solar panels in 2023, up from R5.6bn in 2022. A temporary rebate was also created to ensure the security of supply if local producers could not secure panels, so buyers could get duty relief.
The investigation began after ARTSolar, a local solar panel manufacturer, filed an application with Itac in 2017 to increase the duties on solar panels.
The company and former trade, industry and competition minister Ebrahim Patel had highlighted the need for an investigation, saying the local industry that manufactures the panels needed to be protected as they had invested locally on the basis of a green value chain.
Though renewable energy generation is touted as a catalyst for industrial development and job generation, the minister flagged a need to balance local protections with the need to avoid shortages in the supply of components that may slow down the energy supply rollout plan, hence the rebate.
Trade policy expert group XA Global Trade Advisors welcomed the decision, saying Itac and the department had investigated for five years and three months, or 1,918 days.
“This investigation holds the record for the longest time taken to complete an investigation since Itac was created in 2003,” it said. “This decision has taken time, but at least now we can power ahead with clarity.”
Solar panels, designated in terms of the Preferential Procurement Policy Framework Act, are used in households, industrial and commercial operations to convert energy from the sun directly into electricity by a photovoltaic (PV) effect.
The products have seen a rise in demand owing to the country’s electricity shortages, along with the government’s tax rebate of 25% on the cost of solar panels — to a maximum of R15,000 — announced in the 2023 budget and has promoted the installation of solar panels.
Data released by Eskom shows that SA’s installed rooftop solar PV capacity increased from 983MW in March 2022 to 4,412MW in June 2023 — a 349% increase. However, the duties have sparked the fear that the positive benefits of the government’s tax rebate incentive would be eroded.
Imports jump
XA Global Trade Advisors said the adjustment was related to the steep increase in solar panel imports in the past year.
However, its CEO, Donald Mackay, cautioned that the duties would increase the cost to private individuals spending their own money to generate electricity, which benefited the whole country. This would also erode the positive benefit of the government’s incentive.
“I think this is a bad call because we need electricity and this will simply raise the cost of people installing their own panels,” Mackay said.
“We are protecting one company but at a massive cost to the consumer,” he said.
While the duties would increase the price of imports, there was not much standing in the way of local producers also raising their prices, he said.
“Beyond all of this, it’s not clear that we have any path to ever being competitive producers, which means we will need to keep the duties in place for as long as there are local producers. This becomes a very expensive way to industrialise the country and is unlikely to work,” Mackay said.
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