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Budget Speech 2023: Light shed on the fight against SA's energy crisis

In the 2023 National Budget Speech, Finance Minister Enoch Godongwana announced several measures aimed at addressing South Africa’s energy crisis, but it is difficult to predict whether these efforts will be enough, considering the complex and multifaceted nature of the situation. However, they represent a step in the right direction.

 

This is according to Dr Andrew Dickson, Engineering Executive at CBI-electric: low voltage, who says that, aside from the R254 billion earmarked to contribute towards Eskom’s debt, investing in renewable energy, increasing private sector participation, upgrading infrastructure and promoting energy efficiency will play a role in alleviating the energy shortage in the country. “But knowing whether we are out of the woods boils down to the speed and effective execution of key projects.”

 

Considering that the energy crisis has pushed South Africa into a State of Disaster, Dr Dickson outlines pointers that he believes would bolster the efforts tabled by Treasury to resolve load shedding and end the electricity crisis: 

 

More impactful tax incentives: The finance minister outlined tax incentives that will encourage businesses and households to invest in rooftop solar. Individuals who install rooftop solar panels from 1 March 2023 will be able to claim a rebate of 25% of the cost of the panels, up to a maximum of R15 000. As making a meaningful dent in the energy crisis requires mass adoption at a rapid pace, this incentive might not result in sufficient adoption of solar in the residential sector, which constitutes a significant portion of the building types in the country. Three options should be considered, firstly the extension of the rebate to include a greater part of the system - batteries and inverters. To be able to use panels in the first place, an inverter is needed, and storage is crucial if the energy absorbed by the panels during the day is to be available at night.

 

Secondly, a higher rebate percentage for the solar panels should be considered - a rebate of 25% is equivalent to about a 5% discount available in many retail environments. Most people won’t install R60,000 worth of panels, as this equates to about 25 panels, which is extreme for the majority of households, thereby reducing the effectiveness of the proposed incentive. In real hard cash terms, the rebate would be about 4.5% for the lowest income tax bracket and about 11.3% for the top.

 

Lastly, if the incentive is made available for longer than a year, this could also increase the uptake of these systems and go a long way towards alleviating strain on the national grid and helping to keep small and medium-sized businesses operational, enabling the economy to grow. Consideration should have also been given to recent installs, as this would have derived positive sentiment from the man in the street around the action plans being put in place by the government to right the energy crisis.

 

Payment for excess power: Treasury could follow the City of Cape Town’s lead by funding businesses and households for excess power generated by small-scale embedded generators that is fed back into the national grid. For this financial year, the National Energy Regulator of South Africa (NERSA) has approved a rate of 78.98c/kWh and an additional 25c/kWh incentive tariff for the City to pay power sellers. Through this initiative, National Treasury has also granted the City of Cape Town an exemption from competitive bidding or tendering processes for the buying of electricity from small-scale private producers. This could be extended to the rest of the country to hasten the end of load shedding. At the same time, it could open an opportunity for the development of an entirely new business sector to facilitate the procurement of excess power from these producers.

 

Increased spend for infrastructure impacted by load shedding: One of the knock-on effects of load shedding has been the disruption of basic services such as water supply and wastewater management and treatment which has directly impacted citizens’ day-to-day lives. Additionally, this poses an increased risk for health and safety issues. Making these services load shedding-proof must be considered in future but the R132.5 billion being spent in water and sanitation over the next three years is a welcome start. There is a ripple effect if these services are interrupted, impacting the ability of businesses to operate which ultimately impacts all elements of the economy, meaning less money for re-investment.

 

“We need to focus on getting the basics right and empowering South Africans to play a part in conquering the energy crisis. It is only by doing so that we can lay the foundations for a brighter future for our country,” concludes Dr Dickson.