South Africa Implements 10% Import Tax on Solar Panels: A Strategic Move to Boost Local Industry

In a significant move to support local industry, South Africa’s Finance Minister, Enoch Godongwana, has introduced a 10% import tax on solar panels. The new duty, gazetted on June 28, 2024, aims to bolster local photovoltaic (PV) panel manufacturing, drive industrial development, and enhance local capabilities as part of the National Renewable Energy Master Plan.

The National Renewable Energy Master Plan, crafted by the Department of Mineral Resources and Energy, outlines a strategic framework to support South Africa’s transition to renewable energy. It seeks to meet local demand, stimulate industrial growth, and foster emerging suppliers and technological advancements within the country.

Artsolar, a prominent local solar energy equipment supplier, initially advocated for this import duty in 2017. With the tax now in place, Artsolar has expressed strong support, emphasizing its potential to advance local solar PV manufacturing and its associated value chains. The company underscored the importance of this transition in addressing climate change and energy security concerns.

Potential Impacts

Positive Impacts

• Boost to Local Manufacturing: The import tax is expected to invigorate South Africa’s domestic solar panel manufacturing industry, leading to job creation and economic growth. Artsolar anticipates new market entrants and an expanded local value chain as a result of this protection.

• Economic and Technological Growth: The move is seen as a dual benefit: reducing the strain on the national electricity grid by decreasing demand and alleviating unemployment. It is expected to support skilled jobs across various sectors, including research and development, manufacturing, installation, and maintenance.

• Global Competitiveness and Innovation: As local companies adapt to meet new demands, there will likely be improvements in production processes, leading to more efficient and cost-effective solar technologies. This enhances South Africa’s technological capabilities and positions the country competitively in the global renewable energy market.

Negative Impacts

• Higher Costs for Consumers: The import tax could lead to higher prices for solar panels, making it more expensive for consumers and businesses to adopt solar energy solutions. This might slow down the transition to renewable energy, potentially prolonging reliance on traditional energy sources.

• Market Disruption: The sudden change in import policies could disrupt existing supply chains and contracts, causing financial challenges for companies that had planned investments based on previous import costs.

Photo: Government Gazette

Market Reactions and Current Trends

In 2023, South Africa experienced a record boom in solar panel imports, driven by severe load-shedding and government incentives for solar installations. Over 5,000 MW of rooftop solar capacity was installed, significantly reducing the demand on the national grid. This contributed to an 85-day streak without load-shedding, a rare occurrence given Eskom’s historical performance issues.

However, demand for solar panels has slowed in 2024, partly due to reduced load-shedding and high inflation affecting consumer purchasing power. Data from the South African Photovoltaic Industry Association (SAPVIA) indicates a significant drop in rooftop solar installations over the past three months.

Industry Perspectives

The introduction of the import tax has elicited mixed reactions from industry stakeholders. While local manufacturers like Artsolar are optimistic about the boost to local production, importers have expressed concerns about the potential for increased costs and the perceived inferiority of locally produced panels. Bryan Groenendaal from Green Building Africa and Viren Gosai from Artsolar highlighted the tax’s potential to promote local innovation, create sustainable jobs, and enhance economic resilience.

The 10% import tax on solar panels is a strategic move aimed at supporting South Africa’s renewable energy transition and local industry development. While it presents challenges such as higher costs for consumers and potential market disruptions, it also offers significant opportunities for local manufacturing, economic growth, and technological advancement. Careful implementation and continuous evaluation will be crucial to achieving a balanced and sustainable energy future for South Africa.