Invest in solar power, slash your tax bill – a 12J investment with a steady return

Invest in solar power projects that generate solid, steady returns and slash your tax bill this year. That’s the investment opportunity on offer from 12J specialists Futureneers, through its KSE 12J investment opportunity. Time is running out to take advantage of a tax rule that allows you to deduct money from your income tax, provided you funnel it into a South African business that benefits the domestic economy. In this podcast, you’ll hear from Jaco Gerber of Futureneers about the underlying investment and why you can be optimistic about generating a healthy return. This podcast is part of a special series on 12J investment opportunities. For more, visit the 12J section and register your interest, so that you can receive the details about the most interesting 12J investments on offer. Click here for more information. – Jackie Cameron

Jaco Gerber on Futureneers Capital:

Futureneers Capital is a registered Section 12J venture capital company. That’s a lot of jargon, but effectively, what it means is that we are regulated by the FSCA as well as SARS. What it further means, for you as an investor, is your investment gets a full deduction at SARS in accordance with Section 12J of the income tax act.

On the underlying funds investors can choose from:

Our philosophy at Futureneers Capital is that the investor can make the choice. They need to decide which asset they feel comfortable [with] and understand. Once they’ve decided [on] the amount of capital they want to invest in our fund, they assign that capital to a specific asset. We make available more than one asset option to our investor.

On funding opportunities offered by Futureneers:

Step one in the fund is choosing your asset. The second step is choosing your funding method. Now, the normal one is cash. If you’re sitting on cash, you would like to invest the cash. But we also provide the opportunity for investors to actually borrow. We’ve got our own internal loan company that’s got funding options available for investments. Then a third option is where we actually enable the investor to make an overseas investment, in partnership with Sanlam Private Wealth. Then, we borrow against that investment to enable a South African 12J investment.

On how this 12J investment works:

The first thing you’ve got to realise when making any type of investment is that you’ve got limited liquidity. You should be looking at a five-year investment horizon. Effectively, what it means is you’re not going to pull out or sell your investment in the first five years. You are allowed to sell it, but once you [do so], you’ve got a potential recoupment where you’ve got to pay back to SARS the initial benefit you got from the investment.

Normally, we advise our investors to take a long-term view on a 12J investment. The nature of 12J, it’s been structured in such a way that you pool your funds together with other investors. There’s no one investor that can own more than 20% in a 12J. The idea is to pool funds from multiple investments and then as a consolidated base, invest that money into qualifying companies.

On the underlying solar investment:

I’m very excited about this opportunity. Over the last few years, we’ve investigated various options to investing. In Futureneers capital, we’ve got various options. In the past year or so, we’ve focused primarily on hospitality property. But with Covid and what [has] happened in the hospitality industry the last few years, we had to come up with [an] alternative solution for our investors.

When you start analysing the South African space and look at the opportunities – globally and in South Africa – regarding renewable energies, it makes absolute sense to launch a solar solution for our investors. What we did is we we partnered with experienced operators in the solar industry and we are presenting our investors with an option to allocate their capital to a solar focused solution, specifically focused on the commercial and industrial space in South Africa.

On the returns:

The asset that you pick is essential for any investment. When you look at 12J, the tax benefit is a bonus and it enhances your returns. But the essential first choice you’ve got to make is picking your asset. Therefore, it makes sense to choose an asset with a predictable return, something with a long-term off-take agreement – and that’s what the solar fund does.

It gives you an investment that’s backed by assets – movable solar panels. Also, before we as a 12J invest in a solar project, we make sure that these are a long-term off-take agreement in place. What it simply means is somebody is going to buy all the solar energy we produce with that asset for the next 25 years, and that effectively forms the income for the investor.

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