By Lehlohonolo Lehana.
The National Treasury has officially launched the Energy Bounce Back Loan Guarantee Scheme (EBB) for small businesses and households looking to invest in solar and power storage equipment.
The scheme was first announced by President Cyril Ramaphosa in the February 2023 State of the Nation Address, aimed at allowing small businesses to have the finances to invest in solar equipment so they could overcome the impacts of load shedding.
This was reiterated in the budget speech delivered by Finance Minster Enoch Godongwana.
At the time, Godongwana indicated it would guarantee solar-related loans for small and medium enterprises on a 20% first-loss basis. This means that government will carry 20% of the loss on defaulted loans, so banks don’t have to take the whole loss.
Treasury in a statement on Tuesday indicated that this guarantee also applies to households with rooftop solar.
The scheme is being launched to the benefit of both households and small businesses. It is part of an initiative to help alleviate the “negative impact of continual difficulties resulting from unreliable power supply”, Treasury said.
The scheme, which runs until 30 August 2024, aims to have about 1 000MW of new additional generation capacity over the next 12 months. This should “facilitate resilience” to load shedding for micro and informal businesses too.
Participating banks, Development Finance Institutions and non-bank SME finance providers will compete subject to the product terms, conditions, and pricing cap.
To facilitate investments, government will, through a government guarantee administered by the South African Reserve Bank, assume the initial losses (20%) with finance providers assuming the risk for remaining losses for SMEs’ and households’ rooftop photovoltaic solar investments (rooftop solar). The EBB will operate through three mechanisms.
The loan guarantee for rooftop solar for SMEs and households’ investment facilitates loans to SMEs and households for investments related to rooftop solar-generated energy.
Loan guarantee for rooftop solar for Energy Service Companies (ESCOs) facilitates loans to ESCOs who provide leasing, instalment sale, and power purchase contracts to SMEs and households.
“This mechanism will allow businesses and households to switch to ESCO service providers for more reliable and cleaner energy without the need for loans to finance the full upfront costs of rooftop solar equipment themselves.”
Support from the EBB, which will be provided to the ESCOs to enable them to scale up and expand leasing services to households and small businesses, will require ESCOs to assess the individual need of households or businesses, the implementation of a suitable solution, and the conclusion of a leasing, instalment sale, and power purchase contract between the ESCO and applicant, “Treasury said.