As someone deeply invested in the future of solar energy in South Africa, I find the 10% import tariff on solar panels , implemented by the International Trade Administration Commission of South Africa (ITAC) and approved by the finance ministry to protect local manufacturers, counterproductive. This measure, intended to safeguard local industry, is, in reality, stifling growth and innovation within the sector.
Looking back to the early 2000s, South Africa had a fledgling solar manufacturing sector. Companies like Tenosol, Solar Direct, ArtSolar, and later Jinko Solar, set up manufacturing facilities. However, the global landscape has shifted dramatically since then. Solar PV module manufacturing has declined not just locally but in Europe too, with China now dominating the market. The top five producers, responsible for about 70% of global production, are all based in China.
The 10% import duty is detrimental to the South African solar industry for several reasons. Modern manufacturing facilities are highly automated, offering minimal job creation potential. Local manufacturers, despite their best efforts, produce at a significantly lower volume compared to their Chinese counterparts. Competing on volume alone is challenging, but its compounded by the fact that South Africa lacks a supply chain for solar components. Essential parts like solar cells and glass are manufactured in China. Even if we assemble these components locally, the real value-add remains minimal.
Duties do not offer significant benefits. They might provide a slight protective buffer for local manufacturers, but in the grand scheme of the global PV business, this protection is negligible. The situation in India presents a contrasting example. Indias local content rules have been somewhat successful because they have developed a robust supply chain, manufacturing components domestically rather than relying solely on imports.
In South Africa, we have only one locally owned company, ArtSolar, manufacturing in Durban with funding support from the IDC. Another player, Seraphim, is a Chinese-owned company with facilities in East London and Port Elizabeth. However, the current production capacities of these companies, I believe, are limited.
The real job creation in the solar industry lies in the design, engineering, and installation of solar systems. China excels in large-scale production, so it makes sense to import quality components at the lowest cost. This approach allows us to concentrate on installations, creating numerous small businesses and employment opportunities. Local manufacturers of structures and batteries should receive support, as these sectors provide additional value.
Small business owners need offices, insurance, vehicles, and other services, creating a ripple effect of economic benefits. By ensuring the cheapest possible components, we build a value-added industry around them, which is better for the country in the long term.
The import tariff should be scrapped altogether. Its benefits are minimal and limited to one company, ArtSolar. The damage caused by this tariff outweighs its intended protection. Allowing free importation from countries like China will enable us to acquire large quantities at a lower cost, fostering a more competitive and dynamic solar industry.
Ultimately, the tariff increases costs without offering substantial benefits. Scrapping it would support broader economic growth, job creation, and a more sustainable energy future for South Africa.
Sign up to receive our newsletters and magazine free - click here.
