The EIUG welcomes the Budget 2023 announcement on energy recovery support mechanisms. The Minister covered three important aspects, namely, Eskom Debt Relief, Municipal Debt Resolution and Renewable Energy Fiscal Support.
The EIUG agrees that the Eskom Debt Relief of R254 billion has to come with some stringent conditions that will ensure the fiscal support is used appropriately but as the EIUG we would caution against actions that might result in effective micro-managing of Eskom. To this extent the EIUG fully supports prioritising transmission and distribution infrastructure investments, investing in generation maintenance improvement and using relief funds for debt settlement and interest payments only. On recommendations by the National Treasury independent panel, EIUG will only support those conditions that are practical and are not too intrusive in managing Eskom operations.
On the issue of Municipal debt, the EIUG supports providing some incentives to encourage payment but would have preferred these incentives are provided through the fiscus, as expecting Eskom to incentivise municipalities is tantamount to reduction of the Eskom support as provided by the National Treasury. Besides this matter, National Treasury is unclear on how a durable change of behaviour could be ensured which would promote a culture of payment of services, apart from pre-paid meters, and failure to do so will result in accumulation of new debt. We can only hope the discussions between Eskom and National Treasury will provide some sustainable, realistic and practical solutions in this regard and that the circular promised in March will provide the necessary clarity and confidence to such solutions.
The tax measures announced for renewable energy investments are significant and most welcome. For businesses these will be effective from 1 March 2023 for two years wherein businesses will be able to reduce their taxable income by 125 per cent of the cost of an investment in renewables. The government further guarantees solar-related loans for small and medium enterprises on a 20 per cent first-loss basis. We hope that business will make the most of these incentives and that the legislative and regulatory environment, including municipal bylaws, will enable and support these investments. In the case of individuals who install rooftop solar panels within a year from 1 March 2023 they will be able to claim a rebate of 25 per cent of the cost of the panels, up to a maximum of R15 000. This is a welcome development, even though it would have been preferred that this incentive is not limited to panels only but the full solution. However, considering the mooted net-billing and/or feed-in-tariffs this 25 per cent rebate will be an added incentives to encourage uptake. For these incentives to stimulate maximum participation, there will have to be corresponding efforts in enabling the grid to accommodate these projects and in this regard one year for individuals’ installations and two years for business installations seems to have limited practicality in terms of the desired wide-spread uptake and hence longer periods may have to be considered to achieve the desire level of uptake. A concern though is that poor households may not be able to take advantage of these incentives and hence more innovative solutions are required to ensure the maximum participation and inclusiveness across all of our society.
The EIUG would have liked the minister to have dedicated some incentives to energy efficiency and demand side management initiatives which are an important component of the President’s Energy Action Plan. Energy efficiency and demand side management initiatives are a faster and cheaper response than investing in new capacity. However, these initiatives have got to be economically viable measures that consumers can afford and hence a need for incentives. Also not clear in the budget speech is if there is any financial support that may be required to execute the National State of Disaster related to the President’s Energy Action Plan.
The EIUG encourages all affected role-players to take advantage of these incentives as they will go a long way in adding additional generation capacity to our power system which remain extremely constrained. More additional and innovative solutions need to be developed to cater for all stakeholders and maximise participation.
Notes to the editors:
The EIUG was established in 1999, and is a voluntary, non-profit association of energy intensive consumers whose members currently account for over 40% of the electrical energy consumed in South Africa. As electricity is a key input to the processes of these organisations, it is the ‘life blood’ of our businesses. Our members collectively contribute over 20% to the GDP of South Africa and employ over 650 000 people across multiple sectors, including mining, quarrying, manufacturing, electricity, transportation, and water. The EIUG is dedicated to the promotion of the interests of energy users in South African Industry.
The EIUG is a consumer-led organisation working for the good of the country. The group strongly believes that energy is the engine for economic growth and development in South Africa. We are therefore committed to working with government, power utilities and other stakeholders to ensure South Africa has energy industries which provide reliable supply at acceptable quality and competitive prices.
Energy Intensive Users Group of Southern Africa NPC