When government slashed tax on importation of solar equipment, it wanted to increase access to the renewable power source.
However, both households and businesses may not have fully benefitted from the five percent tax cut because Parliament maintained Value Added Tax (VAT) on solar accessories.
In an interview, solar firms said the impact of the incentive to diversify energy sources is being eroded by the 16.5 percent VAT.
On Wednesday, Energy Unlimited director Martina Kunert said although the tax cut was a logical step to increase the uptake of solar systems in the country, it is has not catalysed a big turning point.
She said: “The 16.5 percent VAT is an area of concern. It can make a big difference in affordability, especially for the majority of poorer households who buy smaller systems.
“But the sector generally needs more support for those companies that offer long lasting products and quality-oriented installation services if we really want to get somewhere,” she said.
Solar power offers a reliable alternative for users with unmet demand for electricity, especially the rural communities not connected to the national grid and those hit hard by worsening electricity blackouts.
Kunert urges government to engage with banks and other finance institutions to guarantee access to loans for off-grid energy consumers who cannot afford quality solar solutions.
She reckoned the financial incentive will safeguard consumers from providers that offer the customers systems that break down a few months later.
Community Energy Malawi, a no-profit organisation striving for greater access to renewable energy in remote communities, the cutback on duty was a welcome development, but reaping the full benefits remains a sticky issue.
Its country director Edgar Bayani said “We still face challenges to get the products into the country. Malawi Revenue Authority (MRA) still lacks the capacity to understand and categorise some of the equipment and gadgets as applicable for the tax reduction.
Bayani decried that importers often have problems convincing MRA labour force when they import solar batteries.
He said: “To MRA, any battery is a car battery. They charge duty even if they are meant for solar systems,” he said.
“It is imperative that after making such a landmark gesture, we get full benefits. MRA staff would have been oriented on how to differentiate solar and car batteries.”
The situation is different for Solar Aid Malawi-Sunny Money whose national sales coordinator Brave Mhone described the tax cut as rewarding.
“We find the arrangement very beneficial. We have since increased our imports and reached out to more clients,” he said.
The country spends almost $50 million (K 34 billion) on bad quality and harmful lighting every year. This shows that there a viable market for clean energy for businesses ready to provide innovative ways of reaching the off-grid population estimated at one in 100 Malawians.
The DFiD-funded study by Business Innovation Facility shows that solar lighting enjoys the highest levels of satisfaction.
Up to 71 percent of the interviewees as saying they were satisfied with portable solar system and 55 percent contented with fixed systems.
Torches and candles, which are the most used lighting methods, recorded the lowest level of satisfaction 35 percent and 41 percent, respectively.
In an interview on Thursday, Treasury spokesperson Nations Msowoya said government is not ready to revise the Vat on solar equipment.
He said: “It is not in governments’ plans to have tax waiver on solar gadgets. We can only ensure that the playing field for both businesses and NGOs is leveled. Should any player have issues with this, they are encouraged to officially communicate with the ministry.”