Picture: 123RF/RAZI HUSIN
Picture: 123RF/RAZI HUSIN

An association of asset management companies is calling on President Cyril Ramaphosa to reassure local investors on the future of an incentive that provides them with a tax deduction in exchange for investing in small, medium and micro enterprises (SMMEs) in selected industries.

Section 12J investments were first introduced by the government in 2009 and may soon end as a result of a “sunset clause” in the Income Tax Act, which only makes provision for such investments until the end of June 2021.

In the past five years, 12J investments have resulted in more than R5bn worth of investment in more than 360 SMMEs in various strategic sectors, including renewable energy, student accommodation, agriculture and tourism. ​

The National Development Plan (NDP), a government blueprint for eliminating poverty and reducing inequality, has ambitious goals for the SMME sector — including a target of 90% of employment opportunities to be created by the sector by 2030.

The Section 12J Association of SA is an independently constituted industry body representing more than 25 asset management companies, which, collectively, manage in excess of 80% of total industry assets.

According to the association’s data, these investments have directly created more than 10,500 jobs across the country, including in rural areas. 

Over the next five years, the association believes that 12J funds have the potential to secure billions of rand in additional onshore investment that will create up to 45,000 jobs (based on current industry investment rates).

“However, if the sunset clause in the Income Tax Act is not extended, this potential investment and these potential jobs will be lost,” said Dino Zuccollo, chair of the association

Zuccollo said the association fully supports the government’s “Operation Vulindlela” that was recently initiated to drive structural reforms, and believes such investments can help the government open the way for more investment, growth and jobs in the next five years.  

“We need to encourage local people to invest in their country’s future. Capital flight is a very real problem and can only be solved by giving local investors an incentive to keep their money in SA. This is precisely what section 12J of the Income Tax Act does,” he said.

Zuccollo said if the government is to open the way for investment, growth and jobs, it needs to act swiftly to initiate the legislative process to have the section 12J sunset clause extended — at least for the next five years.

phakathib@businesslive.co.za

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