South Africa is offering a total of 13 billion rand ($710 million) in tax incentives to businesses and individuals to encourage investment in renewable energy projects and offset the impact of higher fuel and food prices.
(Bloomberg) — South Africa is offering a total of 13 billion rand ($710 million) in tax incentives to businesses and individuals to encourage investment in renewable energy projects and offset the impact of higher fuel and food prices.
Africa’s most industrialized economy is experiencing its worst bout of power rationing yet, with outages occurring for more than 200 days in 2022 and every day this year, because the state power utility can’t meet demand from its old and poorly maintained plants. The central bank estimates that the electricity crisis is costing the economy as much as 899 million rand a day.
Individuals who install new solar photovoltaic panels at private residences in the year through February 2024 will be eligible for a tax rebate of 25% of the cost, up to a maximum of 15,000 rand, the National Treasury said in its Budget Review, released in Cape Town on Wednesday. An existing incentive for businesses that implement renewable energy projects will be expanded, enabling them to claim the equivalent of 125% of their investment as a deduction up front, it said.
The incentives for business appear to be better than those offered to households, the South African Photovoltaic Industry Association said in a statement. The rebate apepars to benefit people who pay higher rates of tax “and won’t have a meaningful impact for most earners” without battery storage, the lobby group’s Chief Eexcutive Officer Rethabile Melamu said.
Read more: South Africa’s Eskom Deepens Power Cuts to Unprecedented Level
Fuel levies won’t be increased in the next fiscal year, a concession that will cost the government 4 billion rand in foregone revenue. Food manufacturers will also be eligible to receive full or partial refunds of fuel and Road Accident Fund levies imposed on diesel for the next three fiscal years — a tax break that’s been limited to farming, forestry, fishing and mining companies since its inception in 2000.
Annual food and non-alcoholic beverage inflation quickened at the fastest pace in almost 14 years to 13.4% last month, partly due to the blackouts that have increased costs for producers and retailers. In an open letter to President Cyril Ramaphosa earlier this month, they called for the fuel rebates and renewable energy tax incentives, warning that their ability to maintain a consistent supply of food and other essential goods was under threat.
Food manufacturer Tiger Brands Ltd. spent 27 million rand on back-up generators used to keep its operations going in the four months through the end of January and will need to invest about 120 million rand in additional generating capacity. Shoprite Holdings Ltd., the country’s largest grocery retailer, said buying diesel to keep stores lit during the worst of the blackouts, cost it an extra 560 million rand in the six months through Jan. 1, while rival Pick n Pay Stores Ltd. spent an extra 346 million rand to run generators in the first 10 months of its financial year.
–With assistance from Paul Burkhardt.
(Updates with solar lobby group’s comments in fourth paragraph)
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