The 2020 State Of the Nation Address (SONA) attempted to provide a roadmap around one big South African concern: Energy security and the effect it has on our personal lives and businesses. What does this mean for entrepreneurs in the energy sector who will be seeking to access capital as well as DTI incentives to grow their business?
Load shedding is here to stay for the “immediate future” but there were aggressive stated reforms with regard to processes for alternative energy sources to be brought online, something which had previously hindered business in investing in supplementary or off-grid solutions.
President Ramaphosa announced:
“The National Energy Regulator will ensure that all applications by commercial and industrial users to produce electricity for own use above 1MW are processed within the prescribed 120 days. It should be noted that there is now no limit to installed capacity above 1MW.
We will negotiate supplementary power purchase agreements to acquire additional capacity from existing wind and solar plants.
We will also put in place measures to enable municipalities in good financial standing to procure their own power from independent power producers.”
This is good news for business who can also leverage the Section12B Tax Incentive which allows business to apply an accelerated depreciation for renewable energy projects and DTI Incentives including the Black Industrialist Scheme which can subsidise up to 50% of Renewable Energy (RE) investments as part of wider expansion projects for industrial businesses.
Financing of renewable energy can be done through debt, equity and leasing arrangements, and financial institutions are increasingly eager to finance these deals including international development funds including the French Development Banks initiative – SUNREF which is administered through the Industrial Development Corporation (IDC).
“We have R600million to approve by the end of the year, what we don’t spend goes back to France – which we don’t want, South Africa can definitely make use of this fund. This means that applications must go through the IDC application process and be approved before November 2020.” Says Rob Short from SUNREF.
If you are considering accessing this opportunity, the 5 most important things to keep in mind are:
- Your business must be bankable and able to service the finance
- The installation company (EPC) must be credible and known by financial institutions
- Ensure that your EPC knows the regulations and clearly informs you of timelines and process
- The IDC’s eligibility requirements and processes still apply for applicants
- We recommend any applications are submitted to the IDC before June 2020.02.22
Whilst the major push around renewable energy in South Africa is currently due to our frustrations with Eskom and load shedding, we can choose to see the glass half empty or full. Why waste a good crisis?
My view is that a drive to install alternative energy will not only secure energy security for businesses, reduce pressure on the grid and contribute to a cleaner energy mix but it will also create jobs, investment and growth in a new sector.
I’m encouraged by government’s support through policy and incentives such as Section12B and industry grants, it is now for business and private sector to acknowledge these policies and implement solutions.
If you are an entrepreneur in South Africa with bankable solutions to help tackle the energy crisis, then let’s talk!