Section 12J of the Income Tax Act has been a "huge success" in that it has ignited SA’s venture-capital industry and unlocked funding for innovative firms, says Clive Butkow, CEO of section 12J company Kalon Venture Partners. Section 12J was introduced in 2009 to incentivise investments in small and medium-sized enterprises (SMEs) via tax breaks. While interest was tepid at first, the government amended certain rules in 2015, making the scheme more attractive. Among other measures, the maximum size of investee firms was raised from R20m to R50m, while investors in section 12J companies would have to hold their shares for only five years – as opposed to indefinitely – to retain tax rebates. By February 2017, R1.8bn had been raised by 49 registered investment vehicles, which collectively invested into 56 companies, according to the Southern African Venture Capital and Private Equity Association (Savca). Nearly 900 investors held shares in section 12J venture capital companies. There w...
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