• Amped up

    Renewable-energy solutions are critical for boosting SME development

    Amped up

    The Protea Heights Academy in Brackenfell, Cape Town, prides itself on being technologically current. As a maths and science specialist school for 1 200 pupils, it has to be. But technology matters little when there is no electricity. In the midst of load shedding, the school’s interactive whiteboards, projectors and banks of computers were useless. Some school pupils even took to wearing headlamps to write their exams, says principal Andrea Coetzer.

    The school turned to local crowdsourcing start-up Sun Exchange for a solution.

    Launched in 2015, Sun Exchange bills itself as the world’s first peer-to-peer solar leasing platform. It identifies and then evaluates solar leasing projects before starting a crowd sale, allowing Sun Exchange members anywhere in the world to buy solar cells, which they then lease back to the projects, earning an income for themselves (in this case, a total of about ZAR500 per cell over 20 years – an internal rate of return of about 11%). In 2019, when Protea Heights Academy initially joined the programme, 119 Sun Exchange members bought close to 34 kW of solar cells within mere hours.

    Since then, the school’s solar plant has so far generated more than 200 000 kWh of clean energy, saving 20% of its electricity costs and outperforming projects by 10%. The school has subsequently launched another crowd sale, which at the time of writing was more than 90% fully subscribed, to instal new solar PV panels to accommodate its growing numbers and a battery back-up system during extended periods of load shedding.

    ‘These solar projects will empower us to give our students the best chance at a bright future. Our students have access to an innovation centre where they can research, build, make and experiment with different ideas, technologies and resources,’ says Coetzer. ‘Keeping the power on in Africa and providing an immersive and uninterrupted learning experience has never been so important.’

    It is not the only entity to benefit. Other beneficiaries include a farming academy in Mpumalanga, a fish farm in Stellenbosch, a retirement village in Pretoria, a grape and raisin producer near Klawer in the Cederberg, a business park in Cape Town, and a saffron and vegetable producer in the Karoo, as well as many other schools.

    Across the country, small businesses are looking for novel ways to finance their move to solar power, which is becoming a business imperative amid continued load shedding. The Council for Scientific and Industrial Research estimates that in 2019 alone load shedding cost the South African economy between ZAR60 billion and ZAR120 billion.

    Jeremy Lang, chief investment officer at small-business financier Business Partners, says the impact of the energy crisis is the South African SME sector’s most immediate concern. ‘Bringing SMEs into the supply chain for alternative, renewable sources of energy that will relieve pressure on the grid is one way in which government can boost the sector. Involving small businesses in the process of building an energy-secure nation will also be a step in the right direction.’

    Writing in the Conversation in March, Ofentse Olunyolo, a doctoral candidate at the University of Johannesburg, and Tankiso Moloi, a professor and academic director at the university’s business school, say that for SMEs load shedding is a life-or-death issue, citing a recent WEF report showing that ‘major disruptions affect the value chain of SMEs significantly more than they affect larger enterprises’.

    In South Africa, load shedding means SMEs ‘can’t operate. No production or trade is possible, and inventory is damaged. The enterprises can’t plan and execute their operations effectively, or meet the demands of their customers. They can lose revenue and customers’.

    The writers suggest a solution may be the sharing economy, a ‘concept based on sharing and collaborating through digital platforms within a community with similar characteristics’. SMEs ‘could use platforms like this to minimise the adverse effects of the ongoing power cuts. For example, they could share energy generation infrastructure such as mobile battery storage units, portable generators and solar panels’.

    In addition, by sharing resources and equipment, SMEs could reduce operational costs and increase their resilience in the face of power cuts, they write.

    In South Africa, ‘energy-generation infrastructure, including mobile battery storage units, could be shared among community members with different scheduled power cuts’. However, ‘for this idea to work, the zones or load shedding blocks with complementary power outage schedules should be in close proximity to each other’.

    Absa, meanwhile, has launched a total of ZAR50 million worth of grant assistance to SMEs to finance solar installations as part of its Green Asset Finance programme. According to the bank, subsidy amounts can reach up to ZAR50 000 or 10% of the overall installation value.

    ‘Through these subsidies, we are helping to put liquidity back into the hands of small businesses to power their business into full production,’ says Ronnie Mbatsane, managing executive for SME business at Absa’s relationship banking division.

    SME funding provider Lulalend has also launched a campaign offering ‘an easily accessible funding option that will help power up SME businesses with solar energy, ensuring that the doors stay open and the lights on’, says chief marketing officer Tom Stuart. ‘While the initial investment in solar panels may seem expensive, the long-term savings can be significant. Not only will you be able to reduce your reliance on the grid – and, therefore, your monthly electricity bill – but you will also be able to take advantage of the tax incentives mentioned in the recent budget speech,’ he says.

    Those tax incentives, as outlined by Finance Minister Enoch Godongwana in his February 2023 Budget Speech, are not specifically tailored to SMEs and have a time limit, offering a 125% tax deduction on qualifying investment costs for a two-year window period, from March 2023.

    ‘This means that businesses will qualify for a cost plus 25% allowance on the cost incurred on renewable projects in the year it was incurred,’ says Thabo Sithole, a tax consultant at BDO South Africa. There is no limit to the qualifying investment costs.

    SMES are often the ones hit hardest by load shedding, with many now seeking alternative funding solutions to instal renewable energy sources

    Further afield in Nigeria, where power outages are said to cost the economy about US$26.2 billion a year, the World Bank is helping to fund mini-grid renewable-energy systems. Visiting a mini-grid system near Abuja recently, World Bank president Ajay Banga said 150 of the systems had so far been installed, adding that ‘our ambition with the government is to go all the way to 1 000. We are talking about hundreds of millions of dollars that have been invested by the World Bank. Add to that the hundreds of millions of dollars that have been invested by private entrepreneurs and the government’s effort’.

    Nigeria’s Rural Electrification Agency notes that developing off-grid alternatives to complement the grid could save Nigerian homes and businesses US$4.4 billion annually.

    The new mini-grid in the 1 519-strong community of Petti is certainly bearing fruit – in some cases literally. Among those enjoying the benefits are two schools, a health centre, 14 shops, two churches and two mosques, as well as a public water pump and street lights.

    A melon seed trader told Nigeria’s Punch newspaper that the solar-powered borehole had made her business easier as she did not have to traipse to a far-off stream to collect water. And a store owner, meanwhile, said he could now refrigerate his products and serve more customers. ‘Since this light came here, we have been enjoying it. Even my business, I am expanding my business.’

    By Robyn Leary
    Images: Gallo/Getty Images