In this piece, Tivon Loubser of Twelve B Fund Managers comments on the ongoing need for solar investment in South Africa and how investors can participate through Twelve B Energy Fund II. For more information on how the team approaches solar, this recent podcast with Tivon is highly recommended:

In the wake of our politically motivated load shedding sabbatical, we seem to be back on track for what has become status quo (albeit under a different guise – Load Reduction). While it would not have come as a surprise to anyone, it does reiterate the dire position of our energy crisis.

In what has been a trying time for South Africa, characterised by little to no growth in our economy, it is tough to find the silver linings. In this case the one silver lining that does come to mind, is the 125% SARS-approved Section12BA tax allowance, and the resulting investments into renewable energy-generating assets. This has served as a catalyst for South Africa’s transition to a low carbon economy, while also reducing reliance on the failing power grid. At the end of 2023, South Africa had an installed capacity of just under 8GW, which accounts for almost 50% of installed capacity on the continent.

A lot of this stimulus has come from foreign direct investment, as well as the private capital markets. In the private market space, at Grovest we pioneered Section 12BA investments through the Twelve B Green Energy Fund. Not only has this made investing in solar accessible to retail investors, but it has also provided a mechanism for businesses and body corporates to finance solar installations at their premises through Power Purchase Agreements (PPAs).

Investing in solar

Investing into the Twelve B Green Energy Fund enables taxpayers, including individuals, trusts, companies and pension funds, to invest in a portfolio of renewable energy-producing assets and benefit from the Section 12BA tax incentive. The Fund also offers bi-annual income distributions, an average annual cash yield of 14.22%, and a targeted IRR of 18%.

There are a number of important caveats to the 12BA allowance. In order to claim the allowance, the money must be invested into renewable energy-generating assets during the period of assessment. Therefore, it is very important to do your homework when choosing which Section 12B fund to invest in. Make sure the respective fund has sufficient deal pipeline to deploy all the raised capital. It is also important to ensure that the fund is using reputable solar installers (Engineering, Procurement and Construction companies – EPC’s). As the solar industry is currently a gold rush, more and more ‘fly by nights’ are popping up, which has resulted in subpar installations, and installations which poser a major fire risk.

Twelve B Green Energy Fund I successfully closed at the end of 2023, and all monies raised were successfully deployed, enabling all investors to claim their full 12BA allowance. Our Fund I portfolio consisted of 10 different projects, creating a strongly diversified portfolio.

Fund II: 30 June closing date

Fund II is closing on the 30th of June, and operates on the same premise as Fund I. The big difference is that we have expanded our network of vetted EPC partners. Extensive due diligence is done on all the prospective EPC partners, ensuring they have all the necessary industry accreditation and a strong track record.

The existing Fund II pipeline is well in excess of R200m, with a number of blue chip off-takers. This bodes well for Fund II, and ensuring all the raised capital is deployed. This is imperative considering the 12BA allowance is going to be sunset on the 28 February 2025.

Further to the financial returns, and the lucrative tax allowance, one of the reasons we at Twelve B are so passionate about this investment is the tangible impact it is having on South Africa. To date we have had countless success stories of businesses and homeowners experiencing increased efficiencies due to the solar installations.

For more information, you can visit the Twelve B website.

This article includes forward-looking statements which have been based on current expectations and projections about future results, which although the Fund Manager believes them to be reasonable are not a guarantee of future performance. Twelve B Fund Managers (Pty) Ltd is an approved juristic representative of Volantis Capital Proprietary Limited, an Authorised Financial Services Provider FSP No 49836.

This article is not a recommendation by The Finance Ghost regarding this project. Please do your own research and speak to your financial advisor as part of any investment decision.