SA’s energy crisis: How renewable energy incentives could help combat load shedding

South Africa is faced with an energy crisis that has been exacerbated by the constant challenge of load shedding. In an effort to combat this issue, the government has introduced various schemes and incentives to encourage the adoption of renewable energy solutions, such as solar panels. One of the initiatives discussed is the bounce-back loan scheme, originally designed to support small businesses during the Covid-19 pandemic. However, the scheme is now being considered for amendments to fund solar panel installations for small businesses. Marcus Botha, Head of Corporate Tax at BDO South Africa, highlighted the key features of the bounce-back loan scheme. Small businesses with a turnover of less than 100 million are eligible to apply for loans capped at 10 million, with a minimum amount of 10,000. The scheme offers a capped interest rate of prime plus 6.5%, providing a financial lifeline for qualifying businesses. However, the administrative complexity of the scheme has been a barrier to its widespread adoption. Botha acknowledged the challenges faced by small and medium enterprises (SMEs) in navigating loan schemes and tax incentives. He emphasized the importance of simplifying the process to make it more accessible to businesses struggling with the impact of load shedding. The effectiveness of these initiatives hinges on streamlining administrative procedures and enhancing ease of access. While discussing the potential benefits of tax incentives for renewable energy investments, Botha explained the existing incentive under Section 12B. Businesses that generate renewable energy, such as solar, wind, or hydro, can qualify for tax deductions on machinery used for energy generation. This incentive allows for upfront tax savings of up to 27% on qualifying assets, providing a significant financial advantage for businesses seeking to invest in renewable energy infrastructure. Looking ahead, Botha expressed optimism about the upcoming budget speech and the possibility of expanding access to renewable energy incentives. By broadening the scope of existing schemes and simplifying application processes, the government aims to encourage greater participation in sustainable energy solutions. The push towards renewable energy is not only an environmental imperative but also a strategic economic opportunity for South Africa to diversify its energy sources and promote long-term sustainability. In conclusion, the road to renewable energy adoption in South Africa may be paved with challenges, but the potential benefits for businesses and the environment are undeniable. With the right policies and support mechanisms in place, small businesses can seize the opportunity to embrace renewable energy solutions and contribute to a greener future for the country.