Energy crisis: Banks’ solar loans bonanza

South African businesses and households are increasingly borrowing to invest in solar panels and other energy-generating equipment to help them escape load-shedding.

FNB, a subsidiary of financial services group FirstRand, said increasing numbers of customers were seeking credit to reduce their reliance on the national grid.

“A big chunk of our client base is installing solar panels at their homes and investing in equipment to get their businesses able to cope with the energy disruptions,” CEO Jacques Celliers  told Business Times on Thursday. “Obviously, they don’t have that cash lying around, so they need to finance those infrastructural adjustments.”

After reaching stage 7, there are reports that Eskom has submitted plans to energy regulator Nersa for even higher stages as its ailing plants battle to meet demand.

As panic sets in, the government has introduced tax breaks for individual households and businesses to encourage investment in renewable energy. Households can claim tax rebates of up to R15,000 for installing rooftop solar panels.

In a recent interview with Business Day TV, Eskom board chair Mpho Makwana urged households and businesses to invest in solar and other alternative energy.

“Those that can afford it must ask themselves … if I can delay buying that luxury car and rather put rooftop solar  … perhaps let’s do so. Drive that current car that you have a year or two longer so that you can help relieve pressure by doing your fair share of putting in rooftop solar,” Makwana said.

Those that can afford it must ask themselves … if I can delay buying that luxury car and rather put rooftop solar  … perhaps let’s do so. Drive that current car that you have a year or two longer so that you can help relieve pressure by doing your fair share of putting in rooftop solar

“As businesses, as we review our capex, let’s look for opportunities to put rooftop solar at our corporate offices.”

Celliers told Business Times  the bank was working with customers to assist in the transition to alternative energy.

“Everyone has got a solar need or a battery need, or a business that has to get out of these premises to another premises. That adjustment of value chains, we want to help them.”

Steven Barker, head of banking products at Standard Bank, also said customers were increasingly borrowing to buy solar-powered  systems, which cost between R150,000 and R170,000, depending on a household’s electricity consumption.

“It is difficult to give the loan book for solar. I don’t have it ring-fenced,” Barker said. “A lot of people don’t necessarily directly ask us for just this loan, but we know there is a lot of solar installation going on that we potentially see demand for, and people will draw on their access bonds.

“When I look at specific loans for solar, we are seeing early days and I think there is a lot more growth to come.”

Radebe Sipamla, an investment analyst at Mergence Investment Managers, said an acceleration in credit uptake to finance renewable energy solutions in an attempt to beat the disruptive effects of load-shedding on businesses and individuals was likely.

“Given the low gearing levels currently  … for individuals and most especially businesses, there is ample capacity to take up credit,” Sipamla said. “The softer macro environment will make loan growth challenging, but the increased appetite by individuals for renewable solutions financing should provide a moderate tailwind to loan growth and earnings,” he added.

Sipamla predicted  banks would make a lot of money from solar system loans.

“It is still a small segment in the overall balance sheet of the banks, but it is a growing," he said.

Harry Botha, bank researcher at Anchor Stockbrokers, said that judging by the increase in solar panel imports by the private sector based on data from the South African Photovoltaic Industry Association, it was safe to assume that households were spending more to reduce reliance on the grid.

“This is probably financed by debt, though it could also be from savings. Household savings levels have also been above the long-term average since Covid struck,” Botha said.

FNB, which in its interim results to end-December reported active customers increased to 11.2-million, contributed 61% to parent company FirstRand’s R18.05bn profit personal loans and credit cards rose by 10% from the same period in 2021.

Celliers said  the retail bank’s array of solutions for clients made  it an attractive value proposition.

“Many actors out there have a retail offering, or they will have a commercial offering, or they will have this product but not that product. They will have credit but don’t have investments. They will have insurance but  not have value adds to do loyalty schemes. We think our ecosystem’s execution is unique,” he said.

FNB’s eBucks awards increased by 9% to R1.1bn in the six months under review, with eBucks travel sales increasing to R594m from R225m last year.

Still, Peter Hirst, associate consultant at Euromonitor International,  expressed concern about the increase in loans.

“FNB’s disbursements of personal loans and credit ultimately paint a bleak picture for consumers, especially in an economic climate where inflation remains a risk,” he said. “While loans and advances rise, consumers will be forced to pay back more in the future to cover the cost of credit extended now.”

Separately, FirstRand CEO Alan Pullinger told BusinessLIVE that South Africa’s failure to condemn Russia’s invasion of Ukraine was “morally despicable”, and that its decision to stage joint naval exercises with the Russians could be catastrophic for the economy.

“My personal view around South Africa’s stance on that invasion — I think it’s despicable that we can’t find it within ourselves to call it out,” he said. “Increasingly, the progressive world is going to start looking around at countries that are friendly to or are enabling Russia and they are going to say ‘maybe we need to weaken them as well’. We’re playing with fire.”

Western powers, led by the US, the UK, and the EU, could retaliate by  imposing trade barriers or restricting South Africa’s access to the Swift global payment system, or other market settlement and clearing mechanisms.

Pullinger said the US could consider revoking South Africa’s duty-free access to its market under the Africa Growth and Opportunity Act.