Tito has spoilt the party. Cannabis investors have until June 30 to take advantage of the Section 12J tax incentive before it gets closed down. South African Finance Minister Tito Mboweni announced in his budget speech of 24 February 2021 that the Income Tax Act would be amended to allow Section 12J to fall away. Section 12J of the Income Tax Act is effectively a government incentive to promote private investment in small businesses and give investors a healthy tax break at the same time.
The first casualty will be the Chairman of the 12J Association of South Africa, Dino Zuccolo, who will have to look for another job. He explains 12J as “you get a rand-for-rand deduction of every rand that you invest in a Section 12J company against your taxable income in the same year that you invest. So if I earn R100 this year, and I invest R100 in a Section 12J company, effectively this year I don’t pay any tax. And then what happens in turn, is a Section 12J compliant fund manager will take your money and invest it into different areas of the South African economy. And of course, that has a whole lot of knock-on benefits, both to the investor who, as you mentioned, pays exit Capital Gains Tax, but he gets a very healthy tax break upfront”.
Several companies are offering cannabis investors Section 12J schemes. Among them is Chris Hart’s Impact Investment Africa which is financing a community grow-op near Richards Bay in KwaZulu Natal. The most recent entry into the field is Silverleaf Investments which opened its fund-raising season at the Cheeba Craft Cannabis Summit on 25 February 2021. Founded by Pierre van der Hoven and Cliff Giesenow.