South African asset manager launches solar fund

Asset Management

South Africa’s ongoing energy crisis has weakened the South African rand and forced the declaration of a state of disaster. An alternative asset manager is touting a new fund that it says will help alleviate that crisis and make investors a healthy return.

Grovest’s Twelve B Green Energy Fund will ultimately seek to deploy as much as R1 billion annually, Chief Executive Officer Jeff Miller said in an interview, while noting its current pipeline is about a tenth of that.

It will use the funds to invest in solar panels, inverters, and batteries in residential complexes, commercial buildings, and industrial buildings.

The fund will also allow investors to benefit from a tax deduction — as high as 100% — for having qualifying assets used for electricity generation from renewable sources, as stipulated under Section 12B of the Income Tax Act.

“There’s an energy crisis and there’s a tax benefit and there’s attractive cash return after fees and taxes,” Miller said, predicting an investor return of as much as 15% net of taxes and fees.

“We are very bullish on it and because it is a moderate-risk fund we are very comfortable that we will be able to deliver returns to investors.”

The venture comes as the country suffers through its 13th consecutive month of power cuts, which the South African Reserve Bank estimates are costing the economy as much as R899 million per day. 

The power cuts, which started in 2008, are needed to protect the grid from collapse when state-owned company Eskom’s aging and poorly maintained and mostly coal-fed plants can’t meet demand.

This month, South African President Cyril Ramaphosa declared a state of disaster to enable the government to accelerate its response to an ongoing energy crisis and said he’ll appoint a minister in his office who will focus on boosting the power supply. 

Miller says the 12B fund could allow some of the clients to get completely off the grid.

Grovest, which manages and administers the vehicle, has R3.5 billion in assets under administration.


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