Call for R75,000 rooftop solar tax break in South Africa

The opposition Democratic Alliance says the government should embrace privatisation in the energy sector – proposing a R75,000 tax rebate for households installing solar energy should it come to power after the 2024 national elections.

DA leader John Steenhuisen said that the DA would push a multi-party government to introduce laws to privatise the country’s electricity market, including reintroducing a DA bill to create an Independent Transmission System and Market Operator that would be mandated to urgently establish a “fully private market for the trading and distribution of electricity”.

As part of this process, the party would also push for an expanded R75,000 tax rebate to further encourage private households to install solar energy, he said.

“We will table legislation to rapidly increase private electricity generation and transmission. It is time for South Africa to stop beating around the bush. We live in a failing state that cannot even fix potholes. That same state is never going to end load shedding,” Steenhuisen said.

“It is time to embrace privatisation, especially when it comes to electricity.”

The likelihood of the DA and a multi-party government coming into power in the 2024 elections is currently slim despite election polls showing that the ruling ANC is set to fall below 50% of the national vote for the first time.

Support for the ANC is expected to drop to 48% from 57% five years ago, according to the median estimate of 14 analysts canvassed by Bloomberg. The DA is expected to garner 22% backing, and the populist EFF — currently the third-largest party — 12.5%.

Most analysts anticipate either an outright ANC win or for the party to work with smaller political parties to attain the 51% majority needed to form a government.

Solar rebates

Election campaigning aside, the government has already been forced to lean on the private sector to deal with the energy crisis in South Africa, with state-run power utility Eskom only showing slight improvements in maintaining the national grid at current levels.

Despite record levels of maintenance and a stated 5% reduction in unplanned outages, South Africa still faces daily load shedding, albeit at low stages.

Eskom’s own data shows that these lower levels of load shedding are only really possible because around 2,000MW of demand has been removed from the grid – likely permanently – as energy users turn away from the utility to source power elsewhere.

This ties into the mass adoption of rooftop solar by private households, where some 4,500MW of solar energy has been installed, taking a huge chunk of pressure off the grid.

In 2023, the National Treasury implemented a tax incentive for households looking to install rooftop solar, but the actual rebate was quite limited.

The solar panel tax rebate was announced by Finance Minister Enoch Gondongwana during the 2023 Budget when South Africa was facing higher levels of load shedding.

Under the system, individuals who pay income tax could claim a tax rebate to the value of 25% of the cost of new and unused solar PV panels, up to a maximum of R15,000.

The tax incentive is only applicable to solar panels bought and installed from 1 March 2023 to 29 February 2024, with analysts casting some doubt that the incentive will continue beyond this point.

In late 2023, economists at Nedbank said, “the government will likely discontinue the solar panel tax rebates introduced for the 2023/24 tax year as load shedding becomes less intense.”

However, Electricity Minister Kgosientsho Ramokgopa has been in favour of the incentive continuing, even proposing that it be expanded to include inverters and batteries.

The future of the tax incentive will be made clear when Godongwana delivers his 2024 budget speech later this month.

Read: Tax hike warning for South Africa – including big changes for remote workers