Solar Financing for Business in South Africa: Cash, Loan, Lease or PPA

Solar financing for a business comes down to four routes: pay cash, borrow from a bank, lease the system, or buy its electricity under a power purchase agreement (PPA). Each route changes three things: who owns the system, who claims the tax deduction, and who carries the risk that it produces less than promised.

At Phoenix Energy we design, engineer, fund, build and operate commercial solar, and we offer three of these routes ourselves: outright purchase, our Power Lease Agreement and a PPA. A loan comes from your own bank, and the system on the roof is the same whichever way you pay. This guide compares the four on one illustrative site, a 200 kWp warehouse in Gauteng, after tax and at the prime rate in force on 13 October 2026. It covers the tax, VAT and accounting treatment of each, the bank products on offer, and what to check if you rent your building. Every figure is dated and sourced at the end, and your tax adviser and auditor should confirm how the rules apply to you.

prime lending rate since 25 September 2026

10.75%

typical term of a commercial solar PPA (GreenCape, 2026)

10 to 20 years

Section 12B deduction in year one, for the owner only

100%

Rates and bank terms checked on 13 October 2026. We will update this guide after the Reserve Bank's rate decision on 19 November 2026.

The four ways to pay for business solar

The table sets out how the routes differ. The rows that decide most cases are the first three: what you pay up front, who owns the system, and who claims Section 12B.

The rest of this guide takes each route in turn, then runs all four on the same site.

Paying cash

Buying outright gives the largest total saving over the life of the system, for two reasons. You keep the whole saving, and you claim the whole cost under Section 12B: 100% in the year the system is brought into use, for solar PV of one megawatt or less. At the 27% company tax rate, a R2.4 million system takes R648,000 off that year's tax.

That tax saving has a condition. It arrives in full only if the company has at least R2.4 million of taxable income that year. With less, the deduction creates an assessed loss that is set off in later years, so the benefit arrives later. A VAT vendor also claims the input VAT back, and the 12B deduction is on the cost excluding VAT.

What you take on is the running cost and the risk: monitoring, cleaning, insurance, repairs and an inverter replacement at some point in the system's life, backed by the equipment warranties and the installer's workmanship guarantee. Most business insurance policies don't cover a solar system automatically, so it needs to be declared to your insurer.

Solar loans and asset finance

A solar loan lets you own the system without paying for it up front. For tax, a bank-funded purchase works the same as paying cash: you own the system, you claim Section 12B, and you deduct the interest as well (section 24J). On the wording of section 12B(3), which measures cost as if you had paid cash, the finance charges are not part of the 12B cost; they are deducted separately as interest.

Banks offer two structures:

• A term loan: the bank lends you the money and you buy the system.
• Asset finance, usually an instalment sale: the bank buys the system and sells it to you in instalments, keeping title until the last payment. The Income Tax Act lets the buyer claim 12B, even though the bank keeps title.

The instalment sale has a VAT advantage. A VAT vendor buying under one claims the full input VAT on the cash price in the period the system is delivered (VAT Act sections 9(3)(c) and 10(6)), so the refund arrives early in the term. Nedbank notes that the VAT refund can be used to reduce the loan.

What the banks publish for business solar in October 2026:

The National Credit Act doesn't apply to most of these loans. It excludes credit to a company or other juristic person with assets or annual turnover of R1 million or more, and any deal of R250,000 or more with a smaller one. The bank's own credit assessment still applies: Capitec Business, for example, asks for at least two years' trading history, and Standard Bank asks the same of new clients.

The government's Energy Bounce Back loan guarantee scheme, which backed solar loans from 2023, closed on 30 August 2024. The Reserve Bank has also consulted on replacing prime with the repo rate as the reference rate for loans, no earlier than 2027; for now, "prime plus" pricing is unchanged.

Leases, rentals and rent-to-own

Most of what you'll find when you search for rent to own solar or solar rentals is written for homes: a monthly subscription for a 5 kW system. Businesses can lease or rent too, but the word on the contract tells you little. What matters is the type of agreement, because it decides the tax, the VAT and the accounting:

• A rental. You pay to use the system and hand it back, renew or upgrade at the end. Capitec Business, for example, offers rental finance on renewable energy with no transfer of ownership. The rentals are deductible as a business expense, and no one claims Section 12B.
• A lease that ends in ownership. You pay fixed monthly amounts for a set term, often 5 to 10 years, and the system becomes yours at the end. Under section 12B, a plain lease generally gives the deduction to no one: you don't own the system, and the lessor doesn't use it (SARS IT39, p. 10). If you deduct the rentals and then take ownership for a token amount, section 8(5) adds part of those rentals back to your income in the year you take ownership.
• An instalment sale sold as rent-to-own. Some rent-to-own products are instalment finance under another name: a sale with finance charges, where you own the system once you've paid. Then you are the buyer for tax, you claim 12B, and a VAT vendor claims the input VAT up front.

Which of these you have depends on the wording of the contract, so ask for the agreement and have your tax adviser classify it before you count on a deduction.

Our Power Lease Agreement runs 5 to 10 years on fixed monthly payments, includes maintenance and monitoring, and ends with the system yours. The body corporate at the office park in Germiston in the photo above took its 67 kWp array and 80 kWh battery on our Power Lease Agreement, with no upfront capital; the logistics warehouse in Bellville bought its system outright.

As for price, GreenCape's 2025 energy services report puts a 10-year lease-to-own of a 100 to 500 kWp system at R25,000 to R120,000 a month before annual escalation. That range is too wide to price any one site, so the worked comparison below uses a test instead of a price.

Power purchase agreements

Under a PPA you buy the electricity, not the system. The provider designs, funds, installs, owns and maintains the system on your roof and bills you for the kilowatt hours it produces, at a rate set below your grid tariff. GreenCape's 2026 Western Cape report describes the terms as 10 to 20 years, with an annual escalation linked to inflation, and notes that a PPA moves the performance and operating risk to the provider at a possibly higher cost over the life of the contract than owning. Its 2025 report puts the tariff at up to 30% below the Eskom or municipal rate.

The owner of a PPA system claims Section 12B: SARS ruled this way for two PPA portfolios (BCR 85 and BCR 88), where the investors in the owning partnerships claimed it. A competitive PPA tariff should already reflect that deduction. Your PPA invoices are a running cost, deductible like any electricity bill, and a VAT vendor claims the VAT on each one.

Three clauses decide whether a PPA delivers its promised saving:

• What you pay for. Under "pay for what you use" (SolarAfrica calls it "no take, no pay"), you pay only for kWh the site consumes. Under take-or-pay, you pay for everything the system produces, whether you use it or not.
• Escalation. Linked to CPI, fixed, or something else. Compare it with what you expect from Eskom or your municipality, since the saving is the gap between the two.
• Buy-out and exit. Many PPAs let you buy the system during the term, often from year 5, at a price set in the contract, and set out what happens if you sell the building or close the site. Agreements can sometimes be ceded to a new owner.

We found no independent source that publishes current market tariffs for commercial PPAs in South Africa. Providers price each site on its load, roof and tariff, and we price ours the same way.

The four routes on one site: a worked comparison

The site is the warehouse from our guide to commercial solar costs and payback: 200 kWp, grid-tied, on Eskom Miniflex in Gauteng. It produces 330,800 kWh in year one, of which the warehouse uses 80%, saving R644,610 at the standard-time rate of 243.58 c/kWh, excluding VAT. Installed cost: R2.4 million, the bottom of GreenCape's 100 to 500 kWp benchmark.

Bank solar financing calculators, such as Standard Bank's solar savings calculator, take your usage, tariff, system cost and loan term, but leave out tax, degradation and running costs. The comparison below adds the first two. The assumptions, so you can rerun them with your own figures:

• All figures exclude VAT and are after company tax at 27%.
• The company has enough taxable income to use the Section 12B deduction in year one.
• The loan is 100% of cost at prime plus 2.5%, or 13.25%, repaid monthly over 5 or 10 years. We applied the same rate to both terms; your bank will set its own.
• The PPA bills only the kWh the site uses, at 20% or 30% below the grid rate. GreenCape puts the discount at up to 30%; 20% is the more cautious case.
• Output falls by 0.4% a year from year two. Grid tariffs and the PPA rate are held flat, in today's money. Tariff increases would raise the saving on every route, and on the owned routes most, because a loan instalment doesn't rise with them.
• Owning means paying for monitoring, cleaning, insurance and repairs. These costs are left out of the owned routes, because we found no independent South African benchmark for them; deduct your own quotes. Every R50,000 a year of running costs takes about R36,500 a year after tax, or R365,000 over ten years, off each owned route.

Cash saves the most rand, if you have the cash and the tax to shelter. It pays back in 3.7 years after tax and is ahead by about R2.9 million at year ten, before running costs. Those are undiscounted totals, and money has a cost. Discounted at 9.7% a year, the loan's rate after tax, cash and both loans each come to about R1.1 million in today's money, and the PPA to R0.58 million to R0.87 million. Cash beats the five-year loan only if your own cost of money is below about 8.4% a year.

A loan turns the deduction into early cash. In year one, the R648,000 that Section 12B takes off the tax bill almost pays the year's R659,000 of instalments. Nearly all of the saving is cash in hand, and the five-year loan ends year one R540,000 ahead. In years two to five it runs behind, by R124,000 to R184,000 a year after tax. The instalment is slightly more than the saving, the saving is taxed, and only the interest in each instalment is deductible. That interest shrinks as the loan is repaid. Once the loan is paid off, the whole saving is yours. The ten-year loan costs R36,200 a month, below the saving from the first month, so it is cash-positive every year. It pays more interest, and it is only just repaid at year ten; from year eleven it keeps the full saving like the others.

A PPA earns less, but needs no capital. At 20% below the grid rate, the warehouse keeps about R94,000 a year after tax with no capital, no asset and no performance risk. That is the price of handing the system, its maintenance and its risk to someone else.

The lease test. We can't put a market lease price on this site, but any lease can be tested the same way. The saving in year one is about R53,700 a month. A lease payment below that is cash-positive from the first month; one above it costs you money until the saving catches up. Under a plain lease the payment is deductible and the saving is taxed, so you keep 73% of the gap: every R10,000 a month that the payment sits below the saving is worth about R87,600 a year after tax. If the payment escalates faster than your tariff, the gap narrows each year, and a lease that ends in ownership can add part of the rentals back to your income in the final year (section 8(5)). Compare that with what a loan for the same system would cost, remembering that under a plain lease no one claims Section 12B, while under a loan you do.

Solar finance and the balance sheet

Solar leases and PPAs are often described as off-balance-sheet finance. For most leases that doesn't hold, and the accounting framework your company uses decides the answer.

Full IFRS (IFRS 16). Listed companies must use it, and others may. Since 2019, a lessee shows almost every lease on its balance sheet: a right-of-use asset and a lease liability. The only exemptions are leases of 12 months or less and low-value items, such as personal computers and small items of office furniture. A multi-year lease of a R2.4 million solar system qualifies for neither, so it goes on the balance sheet.

IFRS for SMEs. Many private South African companies may use it instead (Companies Regulations, regulation 27). It keeps the older split between finance leases, which go on the balance sheet, and operating leases, which don't. The third edition, issued in February 2025 and effective from 1 January 2027, did not change this. A lease that transfers ownership to you at the end of the term is normally a finance lease (Section 20.5(a)), so it is on the balance sheet too. A rental for part of the system's life, with no transfer and no bargain purchase option, may be an operating lease.

PPAs. Under IFRS 16, a contract contains a lease if it gives you the right to control an identified asset: to take substantially all its output and to direct how it is used. EY's guidance on PPAs (2021) notes that for solar most decisions are fixed by the design, and that customers rarely design or operate the plant, so they rarely direct its use. On that reasoning, an on-site PPA where the provider designed and runs the system is usually not a lease. It can become one where the customer designed the system, operates it or decides when it generates. Under IFRS for SMEs, taking substantially all of a system's output can be enough for an arrangement to contain a lease, so the answer is less certain. Either way, ask your auditor before you sign, and check whether your lender's covenants treat lease or PPA payments as debt.

For tax, the accounting entries don't decide anything: under a lease, the rentals payable are deducted, even where IFRS 16 shows an asset and a liability (Kreston, for SAIT, 2024).

Tax and VAT by route

Two smaller rules can catch a business out. A large rental paid in advance is spread over the period it covers (section 23H), unless the prepaid amounts total R100,000 or less or the period paid for ends within six months after year-end. And if your company has an assessed loss, the 12B deduction adds to it; a company can then set off a brought-forward loss only up to the higher of R1 million or 80% of the year's taxable income.

If you rent your building

Tenants can install solar, and many do, but four things need settling first:

• Landlord consent in writing. Most commercial leases treat a rooftop system as an alteration. The SAPOA standard lease, for example, needs the landlord's prior consent for alterations to the roof; get yours in writing.
• Who owns the equipment. Panels fixed to a building can become part of it, and South African law on rooftop panels is unsettled. If they become the landlord's, neither of you can claim Section 12B (IT39, pp. 9 to 10). Agree ownership in writing; systems that can be removed without damage are easier to keep yours.
• The lease term against the finance term. A 5-year building lease and a 15-year PPA don't fit. Agree what happens when the building lease ends: the landlord takes over the agreement, a new tenant takes it, the system moves, or you buy it out.
• The landlord's claim on the equipment. The PPA provider or lessor should give the landlord written notice that it owns the equipment, so that the landlord can't attach it for unpaid rent.

If the roof isn't yours to use, wheeling brings solar power from a plant elsewhere on the network to your meter, with no equipment on your site.

How to choose

• Choose cash if you have the capital, a tax bill large enough to use the deduction, and the appetite to run the system or pay someone to.
• Choose a loan if you want ownership and the 12B deduction but would rather keep cash for the business. A 10-year term keeps the instalment below the saving; a 5-year term costs less in interest.
• Choose a lease if you want fixed payments, maintenance included and ownership at the end, and your adviser has confirmed the tax and accounting treatment of the agreement.
• Choose a PPA if you want savings with no capital, no asset and no performance risk, you expect to occupy the building for the contract term, and you can agree the terms with your landlord.

We offer purchase, our Power Lease Agreement and PPAs, so we model all three for a site, using its interval meter data and tariff, before recommending one.

What to check in any solar finance contract

• The total you pay over the term, and the escalation.
• Whether you pay for all the kWh produced or only those you use.
• Who maintains, insures and replaces the inverter, and who pays when the system underperforms.
• The performance guarantee, and what you are owed when output falls short.
• The buy-out price, when you can exercise it, and what happens at the end of the term.
• What happens if you sell the business, sell the building or move.
• Who registers the system with NERSA or your municipality.
• How the agreement is classified for tax, VAT and accounting, confirmed by your adviser and auditor.

Frequently asked questions

Can I claim Section 12B if I buy solar with a loan?

Yes. Whether you pay cash, take a term loan or buy under an instalment sale, you claim the deduction from the year the system is brought into use, even though under an instalment sale the bank keeps title until the last payment. You also deduct the interest. On the wording of section 12B(3), the finance charges are not part of the 12B cost.

Is rent-to-own solar worth it for a business?

It depends on what the contract is. If it is an instalment sale, it is a loan under another name: you claim Section 12B and the input VAT up front. If it is a lease, no one claims 12B, the rentals are deductible, and part of them can be added back to your income when you take ownership. It is worth it when the total payments, after the tax effect, cost less than a bank loan for the same system.

Is a solar lease off the balance sheet?

Usually not. Under IFRS 16, almost every lease longer than 12 months goes on the balance sheet. Under IFRS for SMEs, a lease that transfers the system to you at the end is normally a finance lease, which also goes on the balance sheet. Under full IFRS a PPA is often off the balance sheet, depending on the contract; under IFRS for SMEs the answer is less certain. Ask your auditor.

What interest rate do banks charge for business solar finance?

Banks set the rate per client. Standard Bank's business solar finance is linked to prime plus 2.5%, which is 13.25% at the prime rate of 10.75% in force since 25 September 2026. Absa and Nedbank publish terms of up to 10 years but not rates. The Reserve Bank's next rate decision is due on 19 November 2026.

Is a PPA cheaper than buying?

Usually not, if you can use the tax deduction: on our 200 kWp example, buying is ahead by about R2.9 million after ten years before the owner's running costs, against R0.9 million to R1.4 million for a PPA, whose tariff covers them. Discounted at 9.7% a year, the gap narrows to about R1.1 million against R0.6 million to R0.9 million. A PPA costs nothing up front and moves the maintenance and performance risk to the provider, which is what you pay for.

What happens at the end of a solar PPA?

Many agreements give you a choice: extend, buy the system at a price the contract sets, or have it removed. Many also allow a buy-out during the term, often from year 5. Check the price formula before you sign.

Can I get solar finance if I rent my premises?

Often, yes, with the landlord's written consent and a plan for when your lease ends. Banks may ask for proof of the owner's permission. The provider should also give your landlord written notice that it owns the equipment. If the roof isn't available, wheeling supplies solar power without equipment on your site.

Does the National Credit Act apply to business solar finance?

Not for most businesses. It doesn't apply to credit for a company or other juristic person with assets or annual turnover of R1 million or more, or to agreements of R250,000 or more with a smaller one. A sole proprietor borrowing in their own name is a natural person, so the Act can apply.

Is there a solar financing calculator for business?

Banks offer simple ones. Standard Bank's solar savings calculator takes your annual kWh, tariff, system cost, deposit and loan term, but discloses no assumptions on tariff increases, degradation, running costs or tax, which is where most of the difference between the routes lies. The worked comparison above shows how to add them.

Does a PPA need NERSA approval?

The provider doesn't need a generation licence for a system that supplies only the site it sits on. The system still has to be registered: with NERSA if it is above 100 kW and connected to the grid, and with Eskom or the municipality if it is 100 kW or less, according to NERSA's statement of 2 February 2026. Agree in the contract who handles it.

Sources

• South African Reserve Bank, Statement of the Monetary Policy Committee, 23 September 2026: repo rate 7.25% from 25 September 2026. Prime is set 3.5 percentage points above repo, so 10.75% (eNCA, 23 September 2026).
• Standard Bank, Business Solar Financing, product page, as at 13 October 2026.
• Standard Bank, Solar savings calculator, as at 13 October 2026.
• Cliffe Dekker Hofmeyr (Suné Kruger), Prime rate under pressure, 30 April 2026.
• Absa, Move to solar energy and save on costs, as at 13 October 2026.
• Nedbank, Banking help to make your small business greener, as at 13 October 2026.
• Capitec Business, Rental finance, Business term loan and Vehicle and asset finance, as at 13 October 2026.
• National Treasury, Energy Bounce Back Loan Guarantee Scheme, 8 August 2023.
• GreenCape, Western Cape Market Intelligence Report 2026: Renewable Energy, March 2026, pp. 22 to 23.
• GreenCape, South Africa Market Intelligence Report 2025: Energy Services, April 2025, pp. 19 to 21.
• SARS, Guide IT39 on allowances for assets used in generating electricity, 23 November 2024, pp. 8 to 10.
• SARS, Binding Class Ruling 88, 22 February 2024, and Binding Class Ruling 85, 9 December 2022.
• Income Tax Act 58 of 1962, sections 8(5), 11(a), 12B, 23H and 24J.
• Value-Added Tax Act 89 of 1991, sections 9 and 10; SARS, VAT 404 Guide for Vendors, issue 15, section 4.5.1.
• Kreston South Africa (Johan Heydenrych, Marina Pretorius), Tax pitfalls and opportunities: leases, SAIT, 25 April 2024.
• IFRS Foundation, IFRS 16 Leases: Project Summary and Feedback Statement, January 2016, and Effects Analysis, January 2016.
• IFRS Foundation, Supporting material for the IFRS for SMEs Standard, Module 20: Leases.
• EY, IFRS Developments Issue 235: third edition of the IFRS for SMEs Accounting Standard, March 2025.
• EY, Applying IFRS to the energy transition: lease considerations in respect of power purchase agreements, August 2021.
• Companies Regulations 2011, regulation 27: financial reporting standards.
• National Credit Act 34 of 2005, section 4, and the Determination of Thresholds, GN 713 of 1 June 2006.
• SAPOA, standard commercial lease agreement, clauses 17 and 18.
• Reghard Brits, Rooftop solar panels: movable or immovable?, South African Law Journal, volume 142, part 2.
• Peter Scott Watermeyer, minor dissertation, MSc (Property Studies), University of Cape Town, December 2023, p. 24: a lessor's notice to the landlord.
• Schedule 2 to the Electricity Regulation Act, GN 2935, 17 January 2023; NERSA, media statement on small-scale embedded generation, 2 February 2026.
• SolarAfrica, How to compare solar energy proposals, 12 March 2025, and Power purchase agreement explained, 12 March 2025.
• Personal Finance (Ryno de Kock), Understanding the insurance implications of solar energy for South African businesses, 24 May 2026.