Tax Incentives resulting in increased demand for Solar Panels in South Africa

South Africa is making local power history as the Minister of Finance has announced that they will be introducing a Solar Panel Tax Incentive. This is a feat which is unprecedented on South African soil and therefore calls for some reshuffling of legislature in order to ease the burden that tax payers are feeling from regular rolling blackouts. But the reasons behind this new Solar Panel Tax Incentive runs beyond the taxpayer and has roots in easing the strain on the South African Grid. As of 1 March 2023, residents are able to apply for their solar panel rebate in order to convince homeowners to immediately install solar rather than postpone this decision or waiting for the legal process to be outlined.

Claiming the Incentive:

Any individual who pays personal income tax is eligible to claim the rebate against their tax liability. This incentive is aimed directly at home owners rather than business premises as a separate budget is outlined for the expansion of the renewable energy tax incentive for businesses.

A rebate of 25% on the cost of new and unused solar photovoltaic (PV) panels can be claimed up to the maximum value of R15 000 per individual. With money on the table, government is optimistic that South Africans will be more willing to act on investing in clean electricity generation sooner rather than later.

With more households turning to their own energy production, exponential growth can be seen in products relating to energy generation, battery storage and solar panels. This growth has created a spike in foreign investment of funds and equipment both in small quantities and larger ones. The need for affordable and reliable backup power and electrical meters to manage these is a need which is developing faster than technology can keep up, giving rise to credible and eager “energy-preneurs”.

Requirements for the solar incentive:

With this new growth opportunity for foreign investors, entrepreneurs and households eager to jump on the bandwagon the requirements are clearly outlined:

  • Only new and unused solar PV panels are eligible to ensure that the capacity is in addition to what the country already has in place. These panels can be installed as part of a new system or as an extension to an existing system.
  • The PV panels are the only components of the system which qualify.
  • Solar PV panels must be installed at a residential address which is used for domestic purposes. The installation must be supported by a certificate of compliance in terms of the Electrical Installation Regulations of 2009 to ensure the safety of the installation and the local compliance of energy regulations.
  • The rebate is solely applicable to solar PV panels that are bought into use for the first time during the period of 1 March 2023 to 29 February 2024.

Why only Solar?

Generators are often used as emergency back-up power options and therefore are not a sustainable solution to generate additional power. The use of diesel generators increases the demand for fuel and inevitably will lead to negative environmental impacts. By promoting the use of generators, a major contradiction will be introduced as this would detract from the climate objectives which the South African government is committed to where fiscal instruments, such as carbon tax, play an important role.

The focus of this kick back is solely on the PV panels in order to maximise the use of limited government funds to gain as much additional generation capacity as possible. Even though an inverter and batteries are required to use solar panels, they can also be operated without solar panels meaning that they offer no additional value to the grid system and do not qualify for the incentive.

What does this incentive mean for the tax legislation?

The amendment will be included in the 2023 Draft Taxation Laws Amendment Bill which will be made available to public sources. The minister of finance was adamant to provide as much upfront information as possible. This vital information was laid out to aid clarity and ensure that taxpayers do not wait for the tax bills to be published later in the year and instead seize the moment to benefit from this incentive.

With this new incentive taking centre stage in the news, investors of all forms are quick on the ball to see how they can get a piece of the action and seize a market which is only set to improve with the electricity situation. Enterprise Africa is a wholesale eCommerce platform, focusing on the business sector and offering the opportunity to tap into the African market. Listing your products are free of charge and minimum order quantities can be set to ensure profitable sales. Sellers have the option of storing their products in a local warehouse or making use of our dropshipping model – meaning you only ship your products to South Africa once an order has been placed.

For more information on how to list as a seller, click HERE