Although no longer available to South African investors, Section 12J was an investment tax incentive designed to create jobs and boost the local economy by encouraging investment into a range of private companies which met defined criteria. The incentive gave taxpayers the ability to write off 100% of their investment against their taxable income in the year they invested.
investment strategies / 2016 – 2022
Westbrooke Alto is a fully tax-deductible investment which aims to invest mainly in Cape Town-based properties which operate as hotel-keepers as defined in Section 12J of the Income Tax Act. The strategy attracts guests through online-based booking reservation systems (such as Airbnb) and aims to provide investors with a combination of operating income and capital growth driven by the potential appreciation in the Cape Town real estate market.
Westbrooke Aria is South Africa’s largest Section 12J strategy, with over R1.5bn raised and successfully invested across more than 50 SMEs across South Africa.
The Westbrooke Aria Plus strategy invests in a portfolio of moveable asset rental businesses which generate predictable revenue streams (but where these streams may not be contractual) and might take underlying asset equity positions. This strategy targets higher returns compared to Westbrooke Aria.
Westbrooke Base is a fully tax-deductible investment into a portfolio of moveable asset rental businesses or fixed property-backed operating businesses alongside experienced, reputable entrepreneurs across South Africa. As the next phase in the evolution of the Westbrooke Aria fund, Westbrooke Base seeks to invest in businesses which generate predictable revenue streams, but where these revenue streams are not necessarily contractually committed.
Westbrooke Host is a fully tax-deductible investment which combines the previous Westbrooke Capital Hospitality and Westbrooke Alto funds into a single offering which provides investors exposure to the South African tourism and hospitality sectors. The strategy invests into a portfolio of well-located, property-backed, income-generating hotel businesses across South Africa.
Westbrooke Stac is Westbrooke’s second largest Section 12J strategy, with over R900m raised and successfully invested across a variety of student accommodation businesses across South Africa.
Westbrooke Stac (“Student Accommodation”) Preferred is the next phase in the evolution of Westbrooke’s successful c.R900 million Westbrooke Stac investment strategy. In the context of a challenging economic climate, Westbrooke Stac Preferred seeks to reduce risk and enhance alignment by investing in a preferred position in the student accommodation equity capital stack.
Westbrooke Capital Hospitality is a fully tax-deductible investment in partnership with The Capital Hotels and Apartments. The strategy invests in a diversified portfolio of property-backed sectional title hotels which are operated by The Capital and aims to provide investors with a combination of income from hotel services, as well as potential capital growth should the underlying hotel properties increase in value during the investment period.
the westbrooke advantage
SA’s largest S12J fund manager with over R3bn in S12J
AUM across more than 1, 300 investors and 8 investment
Successful investor exits at double digit returns, with our
Aria 2016 vintage having recently achieved liquidity whilst
outperforming local and international benchmarks
Demonstrated ability to invest S12J capital at scale by leveraging off the wider Westbrooke deal team, with more than 65 SME investments across South Africa
Significant shareholder and management capital invested alongside our clients, promoting alignment within the S12J investment strategies
Track record of performance, with investor dividends having been paid throughout the Covid-19 pandemic
Co-founder and Chair of the 12J Association of South Africa, leading the direct engagement effort with National Treasury and Parliament
frequently asked questions
what is a Section 12J company?
A Venture Capital Company as described in Section 12J of the Income Tax Act, which came into operation with effect from 1 July 2009. Section 12J is a tax-based incentive designed to encourage individual and corporate investors to invest in a range of small and medium size companies by investing through Section 12J.
The aim of the incentive is to create a pool of passive investors who obtain an upfront tax deduction for investing with a manager who is responsible for making investments which stimulate the South African economy and create jobs.
can the tax relief be recouped by SARS?
Your Section 12J deduction will only be recouped (and the tax relief withdrawn) if:
– you sell your shares within 5 years of being issued; or
– your Section 12J fund manager fails to meet the various investment compliance requirements contained within Section 12J of the Income Tax Act.
what is the term of my investment?
The term of the investment will be a minimum of 5 years, with a realization period of up to 18 months thereafter (if required).
how long does the S12J incentive last for?
The VCC regime, introduced in 2009, is subject to a 12-year sunset period that ends on 30 June 2021. The upfront income tax relief will only apply to VCC shares acquired on or before 30 June 2021. The sunset clause is to be reviewed, and may be extended thereafter.
does a section 12J investment carry risk?
As with any private equity investment, an investment in a Section 12J company carries risk. It is important, therefore, to assess the investment strategy of the Section 12J company to ensure you understand the associated investment risk as well as the expertise and track record of the asset manager.