By Ahren Posthumus
As a blockchain entrepreneur, I’ve been at many a braai at which crypto technology has been laughed off as “just a fad” or a “young man’s plaything”; the domain of “tech bros” and cyber-geeks, not serious-minded professionals like accountants and attorneys.
There’s merit to some of this criticism. The most well-known blockchain technology, Bitcoin, had a wild price surge between March 2020 and March 2021 of 800%, making some crypto enthusiasts go “all in”, sometimes on highly leveraged bets. Some of them lost everything after a sustained price correction some months later. Bitcoin seemed like geeky gambling, not a sound investment.
The hype surrounding Bitcoin has unfortunately diverted attention from blockchain technology's more intriguing applications, many of which hold potential solutions to pressing economic, political, and social challenges.
The demand for creative and eco-friendly resolutions has become increasingly evident as we continue to struggle with South Africa's persistent energy crisis. Could blockchain technology be the key to addressing such a challenge?
I recently argued that privately operated solar installations, both on residential and commercial rooftops, could be the key to resolving the energy crisis. However, solar panels remain prohibitively expensive for most South African community facilities like schools, old age homes, and crisis centres.
The steep initial investment of R150 000 to R300 000 required to ameliorate the impact of blackouts still poses a barrier, despite Finance Minister Enoch Godongwana's announcement of a 25% tax rebate for installation costs. The fact that this deduction is capped at R15 000 doesn’t do much to reduce the cost. Furthermore, the 125% tax rebates available to businesses offer little assistance to non-profit organisations and community establishments without large amounts of taxable income.
This is where blockchain technology shines, providing urgently needed innovative financing solutions that facilitate equitable access to solar energy for households and non-profit organisations.
When stripped of technical jargon, the concept is straightforward: those unable to afford substantial upfront investments in solar panels could - and currently can - purchase single, tokenised cells. Instead of a large corporation monopolising the income and cost of entire solar panels, the investment could - and can - be safely crowd-sourced.
Blockchain technology enables us to collect capital in this way, allowing individuals an opportunity to invest in their community's energy security while generating returns over time (based on the solar power generated by each solar cell you’ve invest in).
Each cell in a solar panel installation can be connected to a blockchain token, costing South Africans as little as R85, with secure ownership over that solar cell and the energy it produces that is not threatened by corruption and mismanagement. Rental income can be securely distributed via the blockchain as well.
Using this technology, more capital can be made available for electricity generation projects than has ever been mobilised before in a way that democratises access and ensures that even the most basic retail investor can benefit while doing something good for their community.
Clearly, we needn't rely on the state, which previously was the only actor with the means to make the substantial capital investment required for nuclear, coal, and hydroelectric generation, and the ability to spread the cost of this investment over as many users as possible.
The fact that new technologies and approaches to financing exist that can build new installations, while giving thousands of investors a stake (that is not threatened by corruption and mismanagement) means we need to update our thinking about how electricity is produced in South Africa.
There are two important imperatives here for our new Minister of Electricity to consider if he wants to achieve security of supply and drive our sustainable transition to renewables. The first, as I’ve mentioned in detail elsewhere, is to expand tax incentives for private solar installations. Second, it's time to fully concede that Eskom should exit the generation business, focusing instead on transmission and storage.
Transforming Eskom into a storage and transmission company would enable it to utilize its existing infrastructure and expertise while making space for the community to lead in renewable energy generation. This change would contribute to a more resilient and diverse energy landscape, incorporating a variety of stakeholders and solutions.
Now more than ever, the tools are at our disposal to establish a transparent, innovative, and accountable energy generation ecosystem in South Africa — one that consistently keeps the lights on. As always, political willingness remains the missing component to expedite this process.
However, even if the necessary political backing does not materialise, South Africans will find ways to circumvent an incapable state and ensure energy security. We are already making progress in many energy sectors, including hydro, wind, gas and with solar panels.
The South African spirit is a tenacious and creative one. Thanks to ordinary South Africans’ indomitable drive to survive and thrive, to always “make a plan”. We will overcome this crisis, just as we’ve overcome all the others in previous years.
Ahren Posthumus is CEO at Momint and national spokesperson of the SunCash Initiative.