Sars takes R60bn load shedding hit

The South African Revenue Service (Sars) has not been immune to the devastating economic impact of the energy crisis, reporting load shedding-related losses of R60 billion for the financial year ending 31 March 2023.

Sars, which collected R1.686 trillion in tax revenue for the period, compared to government’s R1.692 trillion estimate in the 2023 budget, said the country’s erratic power supply had a debilitating effect, not only on normal life, but on the country’s overall profitability, business growth and revenue collection.

Read: Here are big banks’ worst-case scenarios for the SA economy in 2023

Sars Commissioner Edward Kieswetter said at a media briefing in Pretoria on Monday that the loss to the tax system as a result of load shedding was estimated to be at least R60 billion for the 2022/23 financial year.

Since load shedding was first implemented more than 15 years ago, rolling power cuts have become progressively worse, with South Africa’s power outage hours reaching new records over the past three consecutive years.

Speaking about the impact of relentless load shedding on Sars, Kieswetter said the most vulnerable tax segment in terms of revenue collection is value-added tax (Vat).

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“Load shedding affects our revenue collection daily due to loss of sales and profits. Vat is the tax that would immediately be the first to respond to load shedding as sales come under pressure.

“Company taxes are also impacted by load shedding,” Kieswetter said.

Despite these constraints, Sars managed to grow Vat collections by 8% to R422.2 billion from R390.8 billion previously.

Kieswetter said a Council for Scientific and Industrial Research report, which tracked power generation in 2022, showed that load shedding of 8 301 Gigawatt hours (GWh) occurred for 3 773 hours during the year.

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He said Sars is still refining its understanding of the full impact and timing of load shedding on revenue collection as this might only manifest over a longer period of time.

“For example, Vat [collections] in some instances are delayed [and] corporate income tax may spill over more than one financial year.

“Sars expects that the impact of load shedding will reflect in corporate income tax collections particularly during the first half of the current financial year,” added Kieswetter.

However, he said there has also been a positive spinoff to the energy crisis, as it had led to the emergence of renewables, despite load shedding continuing to present a huge risk to the fiscus.

“In the Western Cape, for instance, we have noted a number of wind energy linked entities that have moved from being in a refund position over the past 25 years and are now paying Vat because they are actually producing electricity and generating income. In particular, for the reporting financial year 2022/23 collections from wind farms, across all tax types, increased by 26.6% and have contributed R2.7 billion to the fiscus.”

Read: Load shedding is driving SA’s rapid energy revolution

Kieswetter said there was a drastic increase in solar panel imports during the financial year.

“The top 10 importers experienced growth of import value of 73% year on year, totalling a value of R3.8 billion in 2022.”

The value of imports by the top 10 static converter importers grew 609%, totalling R5.1 billion in value, while the top 10 lithium ion battery importers recorded an import value of R7.8 billion, a 240% hike.

Listen to Sars Commissioner Edward Kieswetter speaking to Fifi Peters about Sars’s latest revenue performance: