Many small business in South Africa are battling to stay afloat as banks and other traditional finance institutions will not accommodate them; however, Section 12J provides an effective and versatile funding instrument option, says Impact Group executive chairperson Chris Hart.
He says this enables investors to divert their taxes from being paid over to the South African Revenue Services (Sars) into investments in venture capital projects.
“The benefits of S12J are due to expire in the next few months, unless we can get the National Treasury to change its mind, but in the meantime the door is still open.
“Our S12J activities are still up and running, and we can help small business to raise capital, by mobilising the taxes within their own circle of influence,” Hart notes.
He stresses that this funding can be deployed into startups, distressed businesses, as well as businesses looking for growth capital.
“We can also help businesses in the design and development phase of new projects. We can help take them from vision to reality. And unlike the traditional funding sources, our S12J funds can offer a lifeline to small entrepreneurs who don’t have access to the normal financial system – such as your township entrepreneur that needs funding,” Hart points out.
“We operate across a number of sectors - agriculture and agroprocessing, manufacturing, education, engineering, information technology and catering, besides others. All of these sectors and more can be funded with S12J,” he adds.
Hart acclaims that this is an excellent way for small firms to access capital as the normal barriers – in terms of credit record, track record and collateral – are much lower.
Hart also emphasises that opportunities remain for funders who wish to use S12J to divert their tax liability into deserving – and potentially lucrative – venture capital investments.
Projects which Hart and his team have supported include student housing, a rabbit abattoir, a township rat-catching venture, a cannabis startup and a security protection project.
“Our current focus is to seek out investors and projects which can be matched up under S12J. However, other funding mechanisms will also be explored to compensate for the unfortunate termination of the S12J incentive from June this year,” Hart informs.