An organisation representing small businesses wants government to review a bounce-back loan-guarantee scheme intended to encourage SMMEs and households to invest in renewable energy.
Small Business Institute (SBI) CEO John Dludlu said it is consulting with the government about repurposing the Energy Bounce Back scheme.
“Our appeal has been three-fold: it should be responsive to the current high interest rate environment and cost of living crisis; it should address both business users of alternative sources of energy (outright purchases and leasing); and should be forward-looking to assist our exporters to prepare to produce products from clean energy sources. Critically, of course, we have to keep in mind that households and firms remain hugely indebted,” Dludlu said.
In his buget speech in February, finance minister Enoch Godongwana announced that a loan guarantee scheme designed to help small businesses recovering from Covid-19 pandemic closures would be repurposed to incentivise SMMEs to invest in rooftop solar panels to minimise the impact of load-shedding on their operations.
Working with banks, which would extend loans to qualifying businesses, the scheme would operate on a 20% first-loss basis, where government carried 20% of the loss on defaulted loans. This was intended to encourage banks and other financial services providers to extend loans to SMMEs that may not qualify if normal lending criteria were applied.
The Covid-19 loan guarantee scheme failed due to poor uptake by small businesses because banks were strict about who they extended this credit to.
The bounce back loan guarantee scheme for energy was supposed to start in April, but not a single loan has been disbursed because Treasury is still consulting with banks about final contractual obligations.
The Banking Association of South Africa (Basa), which is co-ordinating the participation of banks in the scheme, told Business Times Basa has submitted comments on the scheme to the National Treasury and the South African Reserve Bank and is waiting for feedback on its inputs."
Absa confirmed its participation in the scheme and said it is involved in negotiations through Basa to conclude final contractual arrangements with Treasury. “At this stage, it is too early to comment on any specifics,” the bank said.
Standard Bank said it is also in negotiations on the matter and will “address a need in the market that will assist not only businesses to stay in business, but also individual households to generate power during the crisis we face with load-shedding”.
Once negotiations are finalised, the scheme will cater to small businesses that fall outside National Credit Act regulations, while ensuring “there is reasonable affordability to take on the debt”, Standard Bank added.
Nedbank said it has agreed to participate in the scheme through Basa, which is engaging with Treasury and the Reserve Bank to enable certain exemptions from the National Credit Act.
Capitec said it is aware of the scheme and that once concluded, “we will assess what is in the best interest of our clients”.
Experts have also criticised tax breaks introduced to encourage households to invest in renewable energy, saying they largely benefit affluent families, while excluding low- to middle-income households.
Homeowners intending to invest in solar panels can claim up to R15,000 in tax rebates for the installation costs, as part of R13bn in tax relief measures.
From the beginning of March, individuals installing panels can claim a rebate of 25% up to a maximum of R15,000. This can be used to reduce their tax liability in the 2023/24 tax year.
James MacKay, CEO of the Energy Council of South Africa, said an unjust energy transition is leaving those who cannot afford new technologies to compete with those who can. He said while the incentive from Treasury is welcome, it is too small to allow the poor universal access. At the same time, the wealthy don't necessarily require a subsidy.
If the energy transition is left to commercial interests alone, it will socialise the cost of the transition to the poor, which lies at the heart of an unjust energy transition
— James MacKay, CEO, Energy Council of South Africa
“We need to recognise that the energy transition is inevitable, so accelerating the adoption within a national framework that allows the benefits and efficiencies to be fairly distributed to all is in all South Africa's interest. If left to commercial interests alone, it will socialise the cost of the transition to the poor, which lies at the heart of an unjust energy transition,” MacKay said.
The South African Photovoltaic Industry Association’s (Sapvia) technical specialist for solar energy De Wet Taljaard said only the wealthy can access the rebate.
“The rebate is unfortunately only applicable to households that either have the capital to self-fund or have access to financing solutions to fund the solar PV project. Thus, a vast majority of low- to middle-income households are excluded from benefiting from the rebate,” Taljaard said.
Energy expert Adil Nchabeleng described the tax rebate as too elitist. “I mean elitist in the sense that it excludes the majority of South Africans.”
He said township households in particular will not benefit from the rebate, while affluent households might view it as an additional administrative burden.
“So far, I can tell you that it is not going to impact anyone in the townships. It might impact a few people in the suburbs who know what is happening and who want to reduce their tax [burden], but the maximum of R15,000 becomes a problem. What if I want to buy a panel for R200,000 and [the rebate] is capped at R15,000? Is there a value benefit or is it an additional administrative burden for me?” Nchabeleng added.
Taljaard said the cost of a five-kilowatt-hour (kWh) residential rooftop solar panel can range from R75,000 to R150,000. If batteries are added, the cost can rise even further. He said a residential battery storage system can range from R4,000/kWh to R8,000/kWh, while for a 10kWh system it can range between R40,000 and R80,000 for a turnkey battery energy storage system.
Solar PV panel prices in South Africa are dependent on the rand-dollar exchange rate and as such can change rapidly and significantly in a short space of time. “However, the price volatility has not weakened local demand.”
Taljaard said in the first half of the year more than R12bn in solar PV panels were imported into South Africa, or about 2.2GW worth of panels.
Treasury said it will only be able to assess if the household rebate scheme was successful when income tax returns for next year are submitted. “Taxpayers will be able to claim the rebate for qualifying solar PV panels that are brought into use for the first time in the period from March 1 2023 to February 29 2024.”
The Competition Commission said it is probing allegations of excessive pricing of certain inverter brands and allegations of collusive conduct between players in the solar panels market.
It is also investigating complaints about the “after-sale service of a certain brand of uninterrupted power supply boxes”.
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