Explainer: Section 12B solar investment webinar

Webinar hosted by BizNews focused on unpacking current trends, opportunities, and challenges within the booming solar market as well as key information about Jaltech’s Section 12B Solar Tax Deductible investment. Patrick Bennett, the CEO of Magneto Renewable Energy, and Jaltech’s Jonty Sacks joined the panel. If you are looking to invest, visit https://www.biznews.com/jaltech-fund-….


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Excerpts from the webinar

Jonty Sacks on the difference between 12J and 12B

It’s very similar in the sense that there’s a tax benefit which is higher than the 12 days. But what’s nice about Section 12B is that in the Section 12J days, there were lots of limitations. I couldn’t invest along with my wife in the investment. The investor at the actual 12J’s had a limit in terms of how much you could invest. There was a requirement on how much the 12J’s just had to invest. There were lots of restrictions around the fund manager with 12B. It’s different. It’s only solar. The benefit to the investor is they get 125% tax deductibility of the investment. So they invest a million rand, they can reduce their taxable income by 1.25%, so there’s an enhancement. And this enhancement was actually news to the market in February as the finance Minister announced a few tax incentives. One which is often confused with this is if you’re a residential homeowner, you want to install solar on your home. You can claim up to 15,000 and back, in the section 12B space they increased the allowance and that increase has made it really exciting for investors. But really what the government’s saying is: private market please help fund energy in South Africa. We need your help. And as a result, Section 12B became more popular, more attractive to investors. But ultimately the similarities with Section 12J was that they are both tax deductible. But Section 12B is more exotic from a tax perspective.  

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Patrick Bennet on the finance minister’s incentive to invest in solar impacting the demand of solar panels

I think the government initiative and the 125% tax write back is a driver. So that’s a positive and yes, it’s driving demand. But right now, just seeing Jonty go into the dark and a few seconds later the generator fired up. That experience is driving demand more than anything else. And the light in his room and the power on his laptop is not the primary thing. Imagine running a production business or any form of business where you are dependent on systems. You’re dependent on lighting. And people are realising that the problem is just not going to be solved by governments and Eskom and solar once you’ve installed it, most people install solar. For the reason of load shedding to run their businesses and to keep their homes functioning. And everybody kind of commences the journey because they’ve had enough load shedding and they had to come up with a plan. I experience beyond that, if you interview clients who’ve installed solar. It goes way beyond just being a solution for load shedding. Because in many respects it pays for itself. And so if you had to have a number of people on screen who have installed solar into their lives, yes, it solves the loadshedding dilemma. 

But in many respects, depending on the system that you put in, it saves you a heck of a lot of money as well. And if it’s well engineered and the right system is being installed for your needs, it literally pays for itself. And so it goes from being a disgruntled customers looking for a solution for load shedding to someone who says not only have I taken the loadshedding out of the equation, I’m actually saving money. We installed it in our own businesses, in warehouses and distribution centres. We have one production facility which has never bought a watt of electricity from the moment we took it over. It’s got panels on the roof, inverters installed, and sufficient storage to see it through load shedding. It functions predominantly during the day when the sun is shining. And we’ve never bought a watt of electricity, and that has paid for itself from the word go. So yes, I think the tax incentive is a driver. I think a bigger driver is people are looking for a solution so that they can carry on with their lives, run their businesses. And then a by-product or a benefit thereafter is that they actually realise, look, this actually can meet my electricity requirements or a large portion of it.  

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Patrick Bennett on the power of solar and it impact on Vietnam

I think the example that’s been thrown around and that’s even mentioned in government circles when the new electricity minister talks about the power of solar. The example always mentioned is Vietnam. A great tragedy is that I have panels on the roof of my home and in our office. We generate more electricity during the day than we can use in the home or office. But the process is not in place to allow me to export that on to the grid. I live in La Lucia in Durban. It’s absolutely wasted and I get nothing for putting it onto the grid. So now I look at the Vietnam scenario, in one year, just by putting together all the mechanics needed to export power onto the grid. I think the Vietnam example is 11,000 megawatts put onto the grid in one year just by enabling the export of excess solar power onto the grid. Just a tragic story that I think solar is going to grow at an amazing rate, but I think we can solve a lot of our problems, 11,000 megawatts today would solve 11 stages of load shedding. And Vietnam achieved that in one year. And so to put it, just put the wheels in process to be able to harness the electricity, the solar electricity that we generate on our roads, which the country can use, would be step number one.  

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Jonty Sacks on the investor market

I think this is a unique opportunity in the investor market. Not often do we, you know, see tax incentives and, at these levels. So I think it’s exciting. The interest has been really high. We capped our funding at 100 million. We are already at 45 million and we’re looking to close early June. So I’m really confident that we’ll hit our cap of 100 million. So if there is anyone interested, be in contact because I’m really confident that we’re going to be oversubscribed. 

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