As South Africa once more struggles with increased load shedding and rising energy prices, many business owners need to source alternative energy to remain operational. Rooftop solar has become a popular choice as it requires minimal maintenance, most of its components are highly durable with a long lifespan, and energy costs reduce over time.
But the challenge most business owners face is how to fund the large capital outlay required to install a solar solution. The recently enhanced Section 12B tax incentive has encouraged fund managers, such as alternative investments specialist Jaltech, to raise retail capital from South African taxpayers specifically to fund solar projects in South Africa.
Given the large tax incentive for these investors, fund managers are able to offer funding to property or business owners at rates that are significantly more competitive than traditional funding options.
Jonty Sacks, a partner at Jaltech explains, “Traditional institutions are only able to fund a portion of a project but since Section 12B fund managers are not subject to banking legislation, we can fund an entire project. The terms we offer are also significantly more attractive.”
Property or business owners benefit from accessing Section 12B funding as no security is required. There are minimal upfront costs and costs are stable and predictable. The funding term can be as long as 15 years, lowering the annual payment and structuring the funding in a way that is off the balance sheet for the property or business owner.
The property owner will be able to appoint the engineering, procurement and construction provider / solar installer that will also be responsible for maintenance and monitoring.
Sacks adds, “Solar installers also benefit as they now also have access to Jaltech’s Section 12B funding for their clients or new or existing projects which they operate. This has unlocked a number of projects which simply took too long through traditional funding channels. This has resulted in more business for them.”
According to Sacks, “The likelihood of Eskom supplying the South African market with reliable electricity within the next two years is remote. When they eventually achieve this, the cost of the electricity will likely be significantly higher than the cost of producing energy through solar.”
One of the main benefits of accessing this type of funding is that the cost of the funding is expected to be much lower than purchasing electricity from Eskom, and it’s anticipated that each year the business or property owner’s savings will increase as Eskom increases its tariff. The adoption of alternative energy solutions is inevitable, so businesses should explore them now.
