If the government’s solar tax incentive for households works well, it could strip municipalities of most of their paying customers, adding to the damage the power crisis is doing to their revenues, the SA Local Government Association (Salga) has warned Parliament.

Salga pointed out municipalities' revenue from the sale of electricity has already been harmed by the move of customers off the grid. 

Without measures to mitigate the effects of load shedding, municipalities’ ability to deliver services would be compromised, the organisation said, according to a Business Day report.

Its officials were briefing Parliament’s Standing Committee on Appropriations on Friday on the allocations to local government in the national Budget in February.

Salga chair Lesetja Dikgale said the R15 000 tax incentive for rooftop solar installations is concerning to local government.

‘If this incentive works well it may remove most of our paying customers (from the municipal electricity distribution network). Most of the people who can afford solar rooftops are generally the paying customers who are subsidising those who are unable to pay.'

‘So it is a double-edged sword for us. It reduces the issue of load shedding but … it deals with our revenue. As local government we are saying that government and Treasury need to look into that and be careful not to put local government under the bus in this regard.’

Business Day says Salga specialist in municipal infrastructure finance James Matsie noted the speed with which large energy users are going off-grid and said that the solar panel tax incentive benefits only middle-class, high-energy consumers, who are a big portion of municipal ratepayers.

Their move off the grid would leave municipalities with poor customers and affect municipalities’ ability to cross-subsidise them.

Full Business Day report