164 Katherine Street, Sandton

SECTION 12J ASSOCIATION REPORT

The 12J Association recently released a report on the analysis of the impact of the incentive on SMME’s and the associated benefits to the South African economy .

GROVEST’S LENS ON THE 12J ASSOCIATION REPORT

Jeff Miller

Jeff Miller
Grovest
CEO & Co-founder

I am pleased that the Section 12J report confirms that the Section 12J asset class has created more than 10,000 jobs at a cost of below R130,000 per job. I have always been an advocate that the 12J regime is the most cost effective job creation project that government has initiated to date. Furthermore, the quality of the job created is well above that of a minimum wage .

Not only are we creating and maintaining the much needed jobs in these difficult times, but the investments made by Section 12J companies are certainly assisting in stimulating the local economy.

I am quite positive that if the approximately R10billion was not invested into Section 12J companies, a large portion of these funds would have made their way offshore – a huge loss for our economy, not to mention the future positive tax flows that Treasury would receive.

These investments have assisted in creating hospitality, student accommodation, energy and agricultural projects which would never have seen the light of day had it not been for this alternative asset class.

The publication of the survey results was a source of great personal satisfaction.

As some may be aware, Jeff and I established Grovest Venture Capital Company Limited in 2013, the first operational Section 12J, at a time when it was entirely unknown in the investment community.

We quickly realized that the legislation as it was then formulated was sound in principle but required significant amendment for it to become attractive as an asset class and to achieve its well intended objectives.

We advocated actively for change through various channels and it particular, I remember a presentation we made to the Department of Finance in Pretoria one Friday in December 2013. Pravin Gordhan was then serving his first term as Minister of Finance and he was very supportive of developing a VC industry in SA.

We proposed five significant changes to the then legislation and urged the officials to be bold in their outlook, take a long term view and have faith in the entrepreneurial spirit of South Africans. Three recommendations were subsequently accepted and legislated, and as they say, the rest is history.

As the survey amply demonstrates, the growth and success of S12J in South Africa has exceeded our wildest expectations, by all important parameters of success.

We trust that the officialdom will today demonstrate the same wisdom and courage as was the case in 2013 and extend the tenure beyond the sunset date, and further enhance the attractiveness of S12J the benefit of entrepreneurship in South Africa with the huge benefits which will flow in its wake.

MALCOLM SEGAL

Malcolm Segal
Grovest
Non-Executive Chairman, and Co-founder

MALCOLM SEGAL

Malcolm Segal
Grovest
Non-Executive Chairman, and Co-founder

The publication of the survey results was a source of great personal satisfaction.

As some may be aware, Jeff and I established Grovest Venture Capital Company Limited, the first operational 12J in 2013, at a time when it was entirely unknown in the investment community.

We quickly realized that the legislation as it was then formulated was a sound in principle but required significant amendment for it to become attractive as an asset class and to achieve its well intended objectives.

We advocated actively for change through various channels and it particular, I remember a presentation we made to the Department of Finance in Pretoria one Friday in December 2013. Pravin Gordhan was then serving his first term as Minister of Finance and he was very supportive of developing a VC industry in SA.

We proposed five significant changes to the then legislation and urged the officials to be bold in their outlook, take a long term view and have faith in the lentrepreneurial spirit of South Africans. Three recommendations were subsequently accepted and legislated,
and as they say, the rest is history.

As the survey amply demonstrates, the growth and success of 12J in SA has exceeded our wildest expectations, by all important parameters of success.

We trust that the officialdom will today demonstrate the same wisdom and courage as was the case in 2013 and extend the tenure beyond the sunset date, and further enhance the attractiveness of 12J the benefit of entrepreneurship in South Africa with the huge benefits which will flow in its wake.

MELANIE DE NYSSCHEN

Melanie de Nysschen
Grovest
Non-Executive Director

It has come as no surprise that women have been more severely affected than men by the COVID-19 crisis.

Global poverty projections suggest COVID-19 will push over 70 million people into extreme poverty, sub-Saharan Africa being hardest hit. It is vitally important that we find common ground on efficient mechanisms to prevent a fall into extreme poverty by vulnerable groups in South Africa, including women from previously disadvantaged race groups.

To date, Section 12J investments have created c.10,500 jobs (50% permanent) across a broad range of industries, and from predominantly previously disadvantaged race groups (63% black). Should the legislation be given more time, the total capital raised into Section 12J has the potential to create an additional c.45,000 jobs. An opportunity South Africa cannot afford to miss.

Key report highlights:

  • Section 12J industry had raised approximately R9.3 billion as at 29 February 2020
  • An approximate R5.5 billion (or 59% of total capital raised) has been invested into more than 360 SMMEs across the country
  • Survey respondents indicated that 25% of total industry investments have been made outside of major metropolitan areas, thereby assisting the job creation and economic growth initiatives in rural communities
  • Section 12J has created an approximate 10,500 jobs (and has the potential to create an approximate 45,000 jobs based on the quantum of capital raised)

Grovest Webinar Series

EPISODE 3

The future of S12J

Thank you to our expert panelists for joining us for this pertinent conversation

Dino Zuccollo – Chairman of the 12J Association
Mansoor Parker – Tax Executive at ENS Africa
Avi Gordon – Fund Manager, Decentral & Sunstone Capital

Moderated by Jeff Miller, Founder Member and Non-Executive Director of the 12J Association, and Grovest CEO