Cape Town - Eskom’s debt relief, a diesel levy refund for food manufacturers, and solar panel tax incentives were the major announcements made by Finance Minister Enoch Godongwana as part of the government's efforts to deal with the country’s energy crisis.
Delivering his Budget Speech on Wednesday at the joint sitting of Parliament, Godongwana announced that the government was absorbing R254 billion of the more than R400bn debts of Eskom over the next three years.
He said the debt relief would ease the pressure on the entity’s balance sheet and enable it to invest in transmission and distribution infrastructure.
“It will also allow Eskom to conduct the maintenance required to improve the availability of electricity,” the minister said.
Godongwana said the debt relief measure would reduce the fiscal risk and would entail R184bn for Eskom’s debt settlement in three tranches and a takeover of R70bn of its loan portfolio.
“Because of the structure of the debt relief, Eskom will not need further borrowing during the relief period.
“Government will finance the arrangement through the R66bn baseline provision announced in the 2019 budget and R118bn in additional borrowings over the next three years.”
He, however, said the debt relief was not without strict conditions to safeguard the public funds.
Eskom will be required to prioritise capital expenditure in transmission and distribution during the debt-relief period and to focus on maintenance of the existing generation fleet to improve availability of electricity.
The utility will have to implement recommendations from an independent assessment done by an international consortium that has been commissioned by the National Treasury to review coal fired power stations.
Godongwana also announced tax relief of R4 billion for individuals who wanted to install solar panels and R5bn for companies.
“From March 1, 2023, businesses will be able to reduce their taxable income by 125% of the cost of an investment in renewables.
“There will be no thresholds on the size of the projects that qualify, and the incentive will be available for two years to stimulate investment in the short term,” Godongwana said.
The minister also announced that individuals who install rooftop solar panels from March 2023 will be able to claim a rebate of 25% of the cost of the panels, up to a maximum of R15 000.
“This can be used to reduce their tax liability in the 2023/24 tax year. This incentive will be available for one year.”
Godongwana said changes to the Bounce Back Loan Guarantee Scheme were also proposed to incentivise renewable energy, rooftop solar, and address energy-related constraints experienced by small and medium enterprises.
“Government will guarantee solar-related loans for small and medium enterprises on a 20 per cent first-loss basis,” he said, adding that the Energy Bounce Back Scheme will be launched in April.
The minister said in addition to the tax measures to promote investments in renewable energy and Eskom’s debt relief, the general fuel levy and the Road Accident Fund levy would not be increased this year. “This takes effect from April 1, 2023 for two years,” he said.
In a short statement, Eskom said it welcomed and was grateful for the financial relief.
Policy analyst Nkosikhulule Nyembezi said the announcement of social grant increases, a two-year refund on the RAF levy food manufacturers pay for diesel used in generators in the manufacturing process, a zero-increase in the general fuel and RAF levies, a zero-increase in the sugar tax in the next two years, a tax rebate of 25% of the cost of new solar PV panels for the next year, and lower income tax rates to cushion inflation were welcome.
“They will take the sting away, but they won’t be enough to insulate millions already struggling to afford everyday essentials due to high unemployment and poverty.”
DA MP Dion George said Godongwana’s speech budget completely ignored the country’s mounting debt problem and offered no solution to revitalize state-owned enterprises or address the energy crisis.
“The minister has missed an opportunity to bolster domestic savings by increasing the tax-free savings limits, amongst others.”
He said the offloading of Eskom’s debt onto our sovereign balance sheet was the mother of all bailouts.
GOOD party secretary general Brett Herron said the announcement of the new tax incentive for the installation of rooftop solar panels was a wasted opportunity.
“In order to claim the rebate, however, residents will have to lay out approximately R100 000, including the cost of batteries and inverters.
It is an expensive exercise that the vast majority of South Africans won’t be able to afford.”
The Agricultural Business Chamber said with agribusinesses and farmers face rising input costs and higher interest rates, the refund on the RAF levy for diesel used in the manufacturing process will help ease consumer food price inflation.
Cape Times