South Africa’s push for local manufacturing could mean higher costs for homeowners and businesses. From Moneyweb.
The cost of renewables could be on its way up. The International Trade Administration Commission of South Africa (Itac), which monitors South Africa’s trade regime, is considering raising import tariffs on 82 tariff codes covering R59 billion worth of imports in the renewable energy value chain.
The review will explore the possibility of removing rebates on solar panels, which until now helped keep costs down at a time when the country was desperately trying to wean itself off load shedding.
This follows the decision by Itac in June 2024 to increase import duties on solar panels from zero to 10%, following an application by one of two local producers – ARTSolar – for protection.
The state-owned Industrial Development Corporation (IDC) invested R66 million into ARTSolar in 2022 which resulted in the creation of 200 direct and 1 100 indirect jobs.
In 2024 some R6.3 billion worth of solar panels were imported, with 55% of these qualifying for rebates.
If this rebate is removed, R344 million more would be paid in duties, says Donald MacKay, CEO of XA Global Trade Advisors.
“The idea is to drive up investment and make more solar panels locally. This R344 million will become an extra cost and local producers will have an opportunity to charge more.
“If this is not strongly opposed, this rebate will almost certainly be removed.”
If the rebate is removed, some 53 traders are at risk, of which just five account for 75% of the rebate benefit.
The idea ‘boggles the mind’
“Few things have harmed the South African economy more than load shedding, so it boggles the mind that increasing the cost to private individuals, spending their own money to generate electricity, which benefits the whole country, would be taxed for their efforts,” adds MacKay.
There are already protections in the form of 25% local content requirements built into the Renewable Energy Independent Power Producer Programme (Reippp).
Now it is proposed to expand this beyond Reippp – but at a cost ultimately borne by the consumer.
Rooftop solar has been a lifeline to SA, reducing demand on Eskom’s grid by 5 200 megawatts (MW) in 2023, helping to almost eliminate load shedding over the past year.
Under the latest review, if all 82 renewables tariffs are increased to the “bound” rate as proposed – which is the maximum allowable under World Trade Organisation rules – it would raise the duty liability on these products from R371 million to R7.2 billion, based on 2024 imports, adds MacKay.
The tariff and rebate review has raised eyebrows, given the crucial role played by solar panel and battery storage suppliers in stabilising the electricity grid at a time when the country was plunged into almost daily load shedding.
Itac is also looking at adding more products for minimum levels of local content, but this can only be done together with the Department of Trade Industry and Competition (dtic) and only once the regulations for the Public Procurement Act have been published for comment and adopted. That is only likely to happen later in the year.
Manufacturing inputs also in crosshairs
Another aspect of the review is the possible introduction of export control regulations for critical minerals or other products used as manufacturing inputs for the renewable energy sector. This would be most applicable in the manufacture of battery storage technologies.
Consideration will also be given to relaxing import controls for critical minerals as a way to drive investment in local manufacturing and ensure security of supply.
At an XA Global Trade Advisors presentation on Friday, it turns out SA has just two solar panel producers that benefit from the current import protections – and the added protections likely to be introduced once the review recommendations are finalised.
According to the SA Photovoltaic Industry Association in 2024, SA is able to produce just 620 megawatts (MW) of solar, which is five times less than the annual demand of roughly 3 100MW.
“This is not the path to industrialisation,” wrote MacKay when duties on solar panels were introduced in 2024.
“You cannot tax productive investments and expect good outcomes,” he said.
“When you tax investment you simply get less investment. Less investment means fewer service sector employees installing and repairing solar panels. All that will happen is prices will rise.”
