Jonty Sacks | Partner | Jaltech | mail me |
South Africa’s renewable energy tax incentives have unlocked significant private investment in the commercial solar sector. One fund manager deployed over R1 billion in less than two years. This milestone demonstrates the tangible impact of targeted fiscal policy.
The investment comes as the solar sector adapts to the expiry of Section 12BA’s enhanced allowance in February 2025. This allowance temporarily boosted tax relief to 125% for renewable energy assets. The permanent Section 12B allowance continues to support investment, though at a more modest 100% tax deduction.
Solar tax incentive as a key driver of investment
Understanding the role of the solar tax incentive is critical for both investors and businesses planning long-term energy strategies.
For example, we have utilised the Section 12B incentive, funding over 250 commercial projects totalling 48 MW. The capital used to fund these projects came from the private sector, supported by over 600 investors. This demonstrates how the solar tax incentive channels private funds into renewable energy growth.
The Section 12B incentive has been a key driver of investment for investors. Without the Section 12B incentive, the R1 billion already deployed by Jaltech would not have been available to the market.
The Section 12B incentive allows exposure to an investment with an attractive tax benefit. It also provides diversified exposure to a portfolio of solar projects that aim to deliver stable, predictable cash flows.
On the other side, businesses benefit from a funding model that offers companies a lower-cost electricity option compared to Eskom’s tariffs. This provides immediate savings without the risks of adopting solar or the upfront capital requirements of ownership.
A post-incentive normalisation in the market
Despite the end of load shedding in 2024, South Africa added approximately 1.1 GW of solar in 2024. This is down from 2.6 GW in 2023, reflecting a post-incentive normalisation in the market.
Nonetheless, commercial solar adoption continues to grow as businesses seek protection from Eskom tariff increases that have significantly outpaced inflation over the past decade. Understanding the influence of the solar tax incentive helps explain this sustained uptake.
South Africa’s solar momentum is evolving, with a clear shift toward economic efficiency. In an increasingly competitive market, companies will need to leverage tax incentives such as Section 12B to deliver more cost-effective solar solutions. This approach will strengthen their market position. Awareness of the solar tax incentive remains essential for investors seeking stable returns while supporting national renewable energy goals.
