South Africa's renewable energy tax incentives have unlocked significant private investment in the commercial solar sector, with one fund manager deploying over R1 billion in less than two years – a milestone that 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, which had 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.

Jaltech, South Africa's largest Section 12B solar fund manager, has utilised the Section 12B incentive, through which the company has funded over 250 commercial projects totalling 48 MW. The capital used to fund these projects came from the private sector, with support from over 600 investors.

"The Section 12B incentive has been a key driver of investment for our investors," said Jonty Sacks, Partner at Jaltech. "Without the Section 12B incentive, the R1 billion already deployed by Jaltech would not have been available to the market."

Sacks adds that, “The Section 12B incentive allows Jaltech to offer investors exposure to an investment which offers an attractive tax benefit as well as diversified exposure to a portfolio of solar projects which aim to deliver stable, predictable cash flows. On the other side, businesses benefit from Jaltech’s funding model as it offers companies a lower-cost electricity option compared to Eskom’s tariffs, immediate savings without the associated risks of adopting solar or the upfront capital requirements of ownership.”

Despite the end of load shedding in 2024, South Africa added approximately 1.1 GW of solar in 2024, down from 2.6 GW in 2023, reflecting a post-incentive normalisation in the market. This demonstrates that commercial solar adoption continues to grow as businesses seek protection from Eskom tariff increases that have significantly outpaced inflation over the past decade.

South Africa’s solar momentum is evolving, with a clear shift toward economic efficiency. In an increasingly competitive market, companies like Jaltech will need to leverage tax incentives such as Section 12B to deliver more cost-effective solar solutions and strengthen their market position.