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FIFI PETERS: A new investment fund has been launched today, and it allows you to get tax breaks for investing in renewable energy. It’s called a Section 12B [in reference to that part of the Income Tax Act].
Here to tell us and to explain exactly what the Twelve B Green Energy Fund is and how it will work I’m joined by Jeff Miller, who is the founder.
Jeff, you were giving us a bit of history there as to the background and you made us aware that Section 12B is not entirely new. But you have innovated something that has been there, with this Twelve B Green Energy Fund. So tell us more about how this will work and who it’s for.
JEFF MILLER: The fund is really for individuals who pay tax, companies, trusts who are in a tax-paying position, as well as for pension and provident funds who may want to invest.
Regulation 28 [of the Pension Funds Act, which limits the extent to which retirement funds may invest in certain asset classes] is available to all investors. It does assist if you have a tax base.
So obviously individuals paying tax at the maximum rate, 45%, would get the full 45% benefit.
If they invested, say, R1 million into the fund, they would get a tax benefit as we would give them a Section 12B certificate of R1 million they can deduct from their taxable income in the year in which the investment was made and the solar kit brought into production.
FIFI PETERS: More about the solar kit and more about how the fund works. From my understanding now as to the money that is invested, you – the administrators and the managers of the fund – go and take that money and you invest it in solar projects that are able to generate electricity. And in doing so you are able to generate returns for the fund. Just give us that ABC.
JEFF MILLER: Yes. What happens is the investor makes the investment into the fund, the fund buys solar kit which it deploys to various projects. Those projects could be a sectional title complex, it could be an industrial or commercial building. We don’t invest in houses, but we do do big sectional title units.
What we do is we provide them with the solar panels, batteries, inverters, and we take them off the grid.
We have a 24-hour remote-control centre that can see that they’re always up. We put geyser controllers into the systems as well, so we can monitor geyser usage. And at the end of the day, not only is there a good return for investors – which is between 14% and 15% net of fees and taxes – but the off taker is able to peg their electricity costs because the escalations are set to CPI plus one or two percent, as opposed to these surprises where you get like an 18.6% increase for this year and 12% for the next year.
FIFI PETERS: Okay. So [there are] criteria for investment – it’s not for everyone. It looks like you need to have a sizeable amount to be able to participate. So just give us that breakdown.
JEFF MILLER: The minimum amount is a R100 000 investment into the fund. There is no maximum such as with Section 12J where there was a cap of R2.5 million for individuals and trusts, and R5 million for companies. But here there’s a minimum of R100 000 and no maximum. It’s really for people who are high-paying taxpayers.
FIFI PETERS: Okay. But then you’re able to invest R100 000 minimum, and you’re able to get that tax benefit of R100 000 from your tax filing.
JEFF MILLER: You would invest R100 000 to the fund, the fund would use that kit and deploy it in solar systems, which would deploy at sectional title or industrial [developments], or complexes, or shopping centres. They would then in turn give the investor a Section 12J allowance for the R100 000 that they invested, which they can deduct from their taxable income. In addition, there would be profits generated from the sale of electricity from the solar kit, and those distributions would be distributed biannually to investors in February and in August each year.
FIFI PETERS: Okay, so twice a year. And, as you say, investors who are able to participate are looking at returns of 14% to 15% net of fees.
JEFF MILLER: That’s net of fees and taxes.
FIFI PETERS: So how much are the fees?
JEFF MILLER: As to the fees, there’s a 1% set-up fee. There’s a 2% per annum management fee, and there’s a 20% performance fee after returning the risk capital to investors. So it is very typical of Section 12J or the private equity funds where it’s a two-and-20 [percent] type structure.
FIFI PETERS: What are your expectations just in terms of uptake?
JEFF MILLER: Well, so far we’ve had a great, great response. I think the timing is good. I think we are at the right time at the right place. I think that it ticks all the boxes in terms of ESG [environmental, social and governance], in terms of job creation, in terms of sorting out the energy crisis that we all understand on a day-to-day basis. I think that the investments into the energy sector from both the private sector and the government sector will assist the fiscus and growth in the economy.
I believe that South Africa by going this route will become a big player in solar energy across the world.
So I think, all in all, there is light at the end of the tunnel.
FIFI PETERS: I’m not going to excuse that pun. But Jeff, thanks so much for your time. Jeff Miller, founder of the Twelve B Green Energy Fund. The fund was launched to give you a tax benefit, potentially, for investing in solar energy.
