The Zimbabwe Energy Regulatory Authority (ZERA) has put forward a crucial proposal—removing Value Added Tax (VAT) on renewable energy products. This policy, if adopted, could exponentially accelerate the adoption of clean energy solutions. The potential benefits stretch beyond just cost savings and could mark a significant shift in Zimbabwe’s energy landscape, creating ripple effects across various sectors.
Lowering Costs for Consumers and Businesses
The VAT exemption would directly lead to a reduction in the upfront cost of renewable energy technologies, including solar panels, batteries, inverters and other essential components. Zimbabwean households and businesses already face high electricity costs and erratic power supply due to over reliance on grid electricity. By removing VAT, the price of renewable energy systems becomes more accessible, allowing more people to adopt these solutions. This will also increase the demand for renewable energy products, creating a more vibrant market.
Currently, many households rely on expensive diesel generators or intermittent power from the national grid. Making solar and wind energy more affordable will reduce the need for these costly and polluting alternatives. This VAT relief will also help small and medium-sized enterprises (SMEs), which form a critical part of Zimbabwe’s economy, as they will be able to reduce their energy costs and improve productivity.
Bridging the Energy Gap Zimbabwe is currently experiencing an energy crisis, with supply falling short of demand by anywhere between 500 to 1,000 megawatts (MW). This deficit has resulted in persistent load shedding, which has had a detrimental impact on industries, healthcare facilities and households. According to the Ministry of Energy and Power Development, renewable energy could play a vital role in narrowing this gap.
The country has set ambitious targets to generate 1,100MW of electricity from renewable sources by 2025. Removing VAT on renewable energy products is a strategic move to encourage investment in the sector. It would make it more feasible for private investors to develop large-scale solar and wind projects, thereby reducing the nation’s dependence on thermal power plants, which rely on coal and contribute to greenhouse gas emissions.
Economic Growth and Job Creation
By encouraging investment in solar and wind energy projects, the VAT exemption could stimulate local industries involved in manufacturing, installation and maintenance. According to a study by the International Renewable Energy Agency (IRENA), every dollar invested in renewable energy yields triple returns in economic benefits.
Moreover, as renewable energy infrastructure grows, more technical jobs will be created. From engineers to installation experts, this could lead to a much-needed boost in employment, especially for the country’s skilled labor force. In addition, ancillary industries such as manufacturing and logistics will benefit from the increased demand for renewable energy equipment.
Environmental Benefits and Sustainability
Zimbabwe is a signatory to the Paris Agreement and has committed to reducing its carbon emissions by 33% by 2030. Transitioning to renewable energy is a key component of this commitment. The VAT exemption on renewable energy products would not only make clean energy more affordable but also contribute to the country’s broader climate goals.
Increased use of renewable energy would lead to a reduction in the use of coal and diesel-powered generators, which are currently among the largest contributors to carbon emissions in Zimbabwe. The reduction in VAT could also incentivise consumers and businesses to adopt energy-efficient technologies, thereby fostering a culture of sustainability.
Attracting International Investment
Zimbabwe’s renewable energy sector has already attracted interest from international investors. However, the high cost of renewable technologies has been a barrier to widespread adoption. By removing VAT, the government could send a strong signal to international financiers and developers that Zimbabwe is serious about its renewable energy transition. This policy change could lead to an influx of foreign direct investment (FDI) into the energy sector, boosting the economy and improving energy security.
ZERA’s proposal to remove VAT on renewable energy products is a bold and progressive step that could catalyze Zimbabwe’s shift towards a cleaner, more sustainable energy future. The benefits are multifaceted: from reducing energy costs for consumers and businesses, to bridging the country’s energy deficit, fostering economic growth and supporting environmental sustainability.
Text: Farai Chaka
From: E&P ISSUE 12