As a team supporting businesses to deploy Enterprise and Supplier Development (ESD) funding into solar installations, we believe that Eskom is caught in a “catch-22” situation with its proposals to charge higher tariffs on solar implementations and punitive registration fees.
Organisations are increasingly using their ESD funding – part of their B-BBEE scorecards – to align with UN Sustainable Developments Goals including:
These goals are something that organisations are increasingly having to focus on as they seek to operate in a sustainable environment and position themselves as responsible businesses to their stakeholders.
ESD investments in solar infrastructure
While South Africa was gripped by the loadshedding crisis – which lasted between 2007 and March 2024 – the question of access to solar energy became increasingly topical.
While middle-class consumers and businesses went into over-drive investing in solar infrastructure – particularly between 2022 and 2024, more vulnerable communities and small business owners did not enjoy the same access.
This aggressive rollout was supported by the Section12B tax incentive from the South African Revenue Services (SARS).
The South African business community in turn responded by deploying millions of Rands of solar installations into schools, orphanages and small businesses in their supply chains. This investment was supported by development finance institutions and government ramping up the training of solar installers to meet the expected demand.
Not only did this rapid rollout ensure that the economy was able to achieve a modicum of financial growth, it gave Eskom breathing room to conduct much needed maintenance and allowed for schools, ECD centres, orphanages and SMEs to continue operating.
A failed solar water heater programme
The success of the rapid rollout of rooftop solar can be seen in contrast to the recently reported failed R1bn solar water heater programme.
This initiative saw over R300m wasted on storage of equipment which could not be installed. Government is now in a legal tussle with installers.
For context that R300m would be the equivalent of 2325 solar installations of a standard 8 panel installation with 5kw inverter and 5kw battery.
“Hearts and Minds” and the Eskom conundrum
The phrase winning “Hearts and Minds” has been attributed to a couple of sources, typically in a war setting where the intended outcome of the war was to ultimately secure the support for any war-related activities. There is an interesting comparison by the Hoover Institution which says: “
“The term, originally credited to Field Marshal Gerald Templer in 1968 during the Malayan Emergency, is actually ambiguous in its meaning for counterinsurgency efforts. US interpretations refer to the consent and support of the population, while historical British understandings of the term focus on its acquiescence.”
This feels apt in the South African context where Eskom is now looking to penalise those who installed solar by charging higher tariffs but also charging registration fees of up to R30 000 for each solar installation.
This includes the very same installations which were supported and enabled by the Section12B tax incentive.
The obvious question then comes in as to how Eskom will treat these implementations which have been driven by ESD funding? Will they charge higher tariffs on schools, orphanages and small businesses for having access to a service which has been denied to them?
Will the argument be that the organisations who deployed ESD or Socio-Economic Development (SED) funding for solar then be expected to carry these costs for being proactive and helping democratise access to clean energy?
What about solar installations from government in low-income areas which Eskom is seeking to connect to the grid as part of the broader electrification process? Will they be forced to pay higher tariffs and registration fees prior to connection?
Evidenced by over 300 days of no load-shedding in 2024, Eskom has made significant strides under Mteto Nyati and his executive team and they’ve displayed an ability to proactively engage with stakeholders.
While we appreciate that Eskom needs to find ways to generate revenue and compete in an ecosystem where there is competition, it is going to find itself in an untenable position if it adopts a punitive approach to solar rollouts. Companies have utilised legitimate tax and B-BBEE incentives to assist in democratising access to solar energy, it will be hard to then argue that they should be hit with tariffs or penalties post installation.
Looking to deploy ESD funding in solar installations?
If you are looking to deploy ESD funding into solar installations to support the energy transition across South Africa, we would love to hear from you.
Our team has extensive experience building ESD projects for maximum impact in solar, water and healthcare and we look forward to engaging with you around potential solutions.
