We have previously covered the Section 12B tax incentives as they relate to your personal investments. It provides for the deduction of contributions, to alternative energy projects, against taxable income. These investments need to be concluded during the tax year, so in preparation for Feb 2026, we will focus on them over the next two weeks.
In short, this is a government incentive designed to build up sustainable energy investment, it is referred to as Section 12B because that is the SARS tax code which enables the deductions.
Under Section 12B our government is providing a subsidy to investors for capital allocation which improves the energy mix in South Africa.
Climate change is increasingly topical, the effects of which are growing, and while ESG investing have become a popular their investment performance has been questionable.
However, this subsidy improves the expected return and allows you to direct your taxes towards an identifiable project, instead of it going to the general treasury pot.
Given the favourable climate in South Africa, we are rich in opportunities when it comes to renewable energy, the returns are attractive.
There has already been significant investment into solar, wind, biomass and hydro power generation. As of 2024 Alternative energy made up approximately 17% of total energy generation, this is expected to keep rising and has been supported by these incentives.
Accessing These Investments
There are several investment options each of which has pros and cons. The industry has developed attractive enhancements to the original concept; by pooling investor contributions and introducing an element of finance the scale and efficiency have improved. Ultimately, your tax deductions can exceed the initial capital outlay.
Finova will assess the characteristics of each and provide clarity on which one is most suitable for you. Look out for the follow up, or book a free General Investment discussion with one of our advisors to discover how to turn your taxes into returns.
