San Lameer, one of the properties owned by Fairtree Capital Hospitality, the 12J vehicle which delivers tax savings, plus job creation and economic development in the tourism sector. Photo: Supplied

CAPE TOWN – Increased tourism to the Western Cape, the motivation to create jobs and contribute towards economic growth and the attractive tax incentives have seen inflows into the Fairtree’s 12J solution. 

Section 12J refers to a section in the Income Tax Act, which intends to stimulate investments in venture capital by allowing tax deductions.

Portfolio Manager, Joe Bester, emphasises Fairtree’s 12J solution was set up in the spirit of the original legislation – to contribute towards job creation and grow the local economy with investments into small and medium-sized enterprises (SMEs). 

“Our tax incentivised Venture Capital Company (VCC), Fairtree Capital Hospitality, gives SMEs access to equity finance in the fast-growing hospitality and tourism sectors and the VCC owns four boutique hotels in KwaZulu-Natal, the Western and Eastern Cape,” said Bester.

According to the Minister of Tourism, Derek Hanekom, tourism is on the rise again in South Africa, thanks to the change in visa regulations and the reduced limitations of the Cape drought.

Hanekom predicts a strong growth beyond the 7 percent mark in 2019. He believes the overall relaxation of the country’s visa rules and the introduction of electronic or e-visas across the board next year will bolster tourism growth.

South Africa has also seen increased global air connectivity at all three of its major international airports in Johannesburg, Cape Town and Durban. 

Cape Town International – South Africa’s fastest growing airport in terms of foreign arrivals – secured a direct flight to Hong Kong in November. King Shaka International secured Durban’s first direct route to Heathrow London in decades with British Airways commencing flights in October, while Alitalia re-commenced flights to OR Tambo earlier this year after a decade-long hiatus.

Fairtree’s VCC strategy is to buy hotels positioned to benefit from this growth of international and local tourism to maximise growth over a five-year term and to invest in efficiently structured hotels in unique destinations, where the management strategy ensures that they operate at optimum capacity.

“All the Fairtree directors have skin in the game, and we are co-invested in the VCC”, said Bester.

“We focus on the independent international traveller.  At the higher end of the market, guests expect high quality, personal service, which is excellent for job creation.  We employ over 200 people at our four unique boutique properties.”

“Taxpayers who invest in a registered VCC are entitled to a 100 percent tax deduction on monies invested as the entire amount invested in the Company is deductible from the investor’s taxable income in the year that it is made, as long as the investment is held for five years,” said Bester.

With a minimum investment of R1 000 000, potential investors will acquire an equity share in a private limited company, benefitting from one of the lowest management fees of all listed 12J structures.