Enough electricity in SA might lead to unappealing investment opportunities

South Africa’s electricity improvement might negatively impact investors in the country.

When the country was still battling with electricity challenges, renewable investment opportunities were unlocked for investors to earn market-leading and risk-adjusted returns.

Dino Zuccollo, Head of Investor Solutions at Westbrooke Alternative Asset Management says the government fast-tracked the renewable energy transition, which led to National Treasury implementing amendments to the Income Tax Act in 2023 that encouraged taxpayers to invest in renewable energy projects.

However, the legislation made might change on 1 March 2025 when it is reviewed.

Amendments to the Income Tax Act

Zuzzollo says the amendments were made to incentivise and accelerate the energy transition.

“The subsequent introduction of Section 12BA in the Income Tax Act built on the incentives contained in Section 12B, and allows taxpayers to deduct 125% of the upfront costs of new renewable energy-generating assets acquired for their trade, provided they came into first-time use between 1 March 2023 and 28 February 2025.”

The amendments to the act were also made more appealing with the aim of getting more businesses to invest by removing the cap on project generation capacity.

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Improvement of electricity supply

Statistics SA (StatsSA) on Thursday released data on how much electricity was produced and how much was used for June 2024.

Electricity produced increased by 5.4% year-on-year (YoY) in June 2024. YoY is used to compare the performance from one year to the next. While seasonally adjusted electricity generation increased by 2.3% in June 2024 compared with May 2024.

“Seasonally adjusted electricity generation increased by 2,1% in the second quarter of 2024 compared with the first quarter of 2024.”

When it comes to electricity consumption in the country, it increased by 3.3% YoY in June 2024. Seasonally adjusted electricity consumption increased by 0,7% month-on-month in June 2024. “Seasonally adjusted electricity consumption increased by 1,3% in the second quarter of 2024 compared with the first quarter of 2024.”

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