Solar loan deadline looming

Several solar loans with reduced interest rates from major banks are set to expire at the end of August 2024.

In the past year, at least three banks launched loans with low interest rates that form part of the national government’s Energy Bounce-Back (EBB) Loan Guarantee Scheme.

The initiative aimed to incentivise banks to drive the installation of an additional 1,000MW of private solar capacity within the 12 months from September 2023 to August 2024.

To make this possible, National Treasury provided a guarantee to the South African Reserve Bank (SARB) for a certain amount of funding.

SARB would then lend participating banks part of the funds required to offer low-interest loans specifically for solar power installations.

This funding was provided to the banks at the repo rate of 8.25% plus a 0.5% once-off charge of the amount the bank received from the SARB.

This money is then used to cover 20% of the loans that banks provide to individuals and small businesses for solar power systems, while the banks cover the remaining 80%.

To qualify for this incentive, the bank must offer the loan at an interest rate of no more than the repo rate plus 6%.

At current interest rates, that works out to 14.25% or prime plus 2.5%.

National Treasury said the EBB would be available until Friday, 30 August 2024.

Thereafter, it would assess the incentive’s effectiveness, presumably to determine whether it needs to extend the offer to reach its target.

Critics slammed the incentive for being “too little, too late” and might not have directly contributed to at least 1,000MW of additional solar capacity.

Despite that, well over 1,000MW of additional private capacity was added by households and businesses over the past year.

This contributed to a vast improvement in Eskom’s operational capability in the past year.

However, given that over 1,000MW of private capacity has already been added, it seems unlikely that the National Treasury would consider extending the incentive.

Not all solar-focused loans affected

Absa, FNB, and Standard Bank are among the major banks offering products under the EBB scheme.  

However, many specialised solar financing solutions are not subject to the EBB scheme and will likely continue after August 2024.

For example, Discovery Bank launched a separate dedicated solar budget facility in partnership with Rubicon Energy with an interest rate from prime minus 2% over 72 months in June 2024.

Nedbank also offers various backup power systems at a prime-linked interest rate with repayments of up to 96 months through Avo Solar, with pricing starting at R990 per month.

In addition, many banks — including those in the EBB scheme — allow customers to borrow an additional amount for home improvements at the same interest rate as their home loan with the same bank. This includes solar and backup power installations.

The table below compares the specialised solar financing options available from five of South Africa’s major banks, excluding home loan add-on options.

Be aware that there might be additional costs involved including monthly admin fees and mandatory life insurance and retrenchment cover.

Bank	Interest rate	Payment periods	Maximum value of loan	Loan offer expiring due to EBB scheme
Absa Bounce Back Solar Loan	Capped at 14.25% (Prime plus 2.5%)	Up to 60 months	R300,000	Yes — 30 August 2024
Discovery Bank with Rubicon	From 9.75% (Prime minus 2%)	Up to 72 months	R300,000	No
FNB Solar Benefit	Fixed at 12.75% (Prime + 1%)	Up to 66 months	R300,000	Yes — 30 August 2024
Nedbank Avo Solar	11.75% (Prime)	Up to 96 months	n/a	No
Standard Bank Solar Loan	Capped at 14.25% (Prime plus 2.5%)	Up to 60 months	R300,000	Yes — 28 February 2025