JOHANNESBURG - We're in a recession: the growth numbers are down to fractions of a single digit, and yet there are rumours of another increase in VAT, the tax rate, repo rate.

To put it mildly, the house is on fire, and there is just not enough water to put out all the flames.

A pearl of wisdom was that you will never become wealthy by saving, you have to work your way into prosperity.

Some have tried to capture prosperity, and we know how that sage is unfolding, right. I doubt if we can tax a country into prosperity.

How do you save a country in flames? Do we tax or do we incubate?

South Africa is and will always be a land of hope, a beacon, not because of the resources and the wine, no! It’s the people. We are a nation of inventors and achievers who never say die!

The fundamentals are that you work, earn, spend and, yes, pay tax.

Is there a tax benefit or deduction lurking somewhere in the Act that can be used to do just that a deduction for investing? A deduction to stimulate growth?

Step in Section 12J of the Act when I first read the section on its initial introduction, I was sceptical, and as with many things once you get exposed to the intricacies you can see the merit and the potential.

Section 12J allows a deduction that if you invest in an approved fund (www.sars.gov.za), you can claim the investment as a deduction. In excess of R2billion has been invested over the past 10 years into the economy by these funds to bridge the venture (risk) gap that banks don’t finance.

Like cars there are various types. Do you want to buy a swanky one, and don’t mind a premium? Do you want a Tesla? The fast and furious? How important is performance?

Venture capital or risk capital is not for the faint-hearted. Do you have a plan that you know will work and you just have to invest in it? Well, a non-discretionary fund may work for you!

There are a couple of restricted trades, that is, fixed property (other than hotels) financial services, banks, insurance, professions (accountants and attorneys), alcohol, tobacco, etc,

The companies have to be small, that is, assets below R50million, and other fine print matters sure, but they are minimal.

Section 12J funds are in effect incubation hubs, that may fund the next “crypto-super” or some fruit-like device to take the world by storm.

My research showed that there are non-discretionary funds, conservative funds, educational funds and, yes, the sporty flashy Bugatti’s with big price tags.

I, for one, would prefer a tax deduction and invest in something that may yield a return (a calculated risk).

The alternative is to not use it and pay tax. I will not comment on free sanitary pads, military cleaning intervention and bailout plans for a national carrier. Do I invest in entrepreneurs and get a tax break? Do I pay it all into the sanitary and military coffer? Do I listen to a tale of two cities or do I fund a dream? A story versus I have a dream?

To 12J or to pay away the question is yours to answer and to research. Cap I this, or cap I that, Cap-i-12J, may be an answer to some and a haven for others.

Willem Oberholzer is a director and tax advisory of Probity Advisory.

PERSONAL FINANCE