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Solar panels, tax breaks, and the Just Energy Transition Investment Plan: A quick look at the National Treasury’s clean energy initiatives

Thenjiwe Maseko, Senior Investment Associate, 27four Investment Managers

National Treasury has promised Eskom R254 billion in debt relief (around R168 billion in capital and R86 billion in interest) over a three-year period to strengthen the country’s largest power utility. Additionally, the recently announced budget proposes R13 billion in tax relief for clean energy. Individuals who install solar panels will receive a tax break of R4 billion, and companies will receive a tax break of R5 billion through an expansion of the renewable energy tax incentive. For households, solar rooftop costs will be rebated by 25% to a maximum of R15,000. Businesses will be able to reduce their taxable income by 125% of the cost of an investment in renewable energy over the next 2 years.

We applaud the government’s efforts to encourage businesses and individuals to invest in renewable sources. It will not only go a long way in alleviating the current shortage of electricity in the country but also move the country forward in the right direction. Despite this, we are concerned that it may disenfranchise low-income earners who cannot afford solar panels. To ensure a just transition, we urge the national government to put in place measures to ensure no one is left behind.

The government should also clearly define its Just Energy Plan. When discussing the social aspect of transition, a just transition should be further defined. There are two types of transitions. A shallow transition would focus on green jobs and employee protection. A radical transition, on the other hand, focuses on a shift in production and consumption as well as a complete transformation. By enforcing a radical transformation, we can create a more structured change to the economy, which would lead to continuous work and continuous business development. As an example, a job loss can result in a lack of income in a family, which will negatively impact consumption and cause a domino effect on other institutions not receiving support.

Regarding climate change, the Minister of Finance reiterated the same arguments that have been discussed for the past three years regarding a just transition to a lower-carbon economy. In 2022, the Presidency committed to a Just Transition Investment Plan. In addition, South Africa’s goal has been subsidized by an international pledge of US$8.5 billion.

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