Tax Deductible Solar Investment
Alternative investment opportunity
Turn your personal tax liability into an investment asset
The AGA Solar Fund is a closed-ended investment vehicle providing investors with annuity income from a diverse portfolio of commercial solar assets together with a S12BA income tax deduction of up to 250% in year one.
Fund Objective
The fund is invested in a portfolio of solar assets which generate steady contractual cash flows via Power Purchase Agreements (PPA’s) with commercial off-takers.
What is S12BA?
Section 12BA of the Income Tax Act No. 58 of 1962 permits a tax deduction for investments made in renewable energy-generating assets. For the period 1 March 2023 to 28 February 2025, the Section 12BA allowance has been increased from 100% to 125% of the investment value with no cap on the output of the solar installation.
Unlocking S12BA’s lucrative potential
Attractive project returns in both the short and long term
Investors will benefit from stable, long-term, diversified cash flows from a solar portfolio underpinned by high-quality off-takers. The fund aims to invest in commercial solar PPA's with a pre-tax IRR range of 11%-14% based on an ungeared portfolio.
Enhanced returns through gearing
The fund offers a geared or an ungeared option. By gearing 50% at the fund level, the investor increases their tax deduction from 125% to 250%. For example, with a R500 000 cash investment in the fund, the investor is entitled to a S12BA tax deduction equal to R1 250 000.
Access to the accelerated S12BA tax deduction
The investor can deduct up to 125% of the amount invested from his/her taxable income in the first year, providing immediate tax relief. The fund is structured such that an otherwise unavoidable tax payment becomes a fully-deductible investment.
Anticipated IRR exceeding 30%
Combining stable portfolio returns with 50% leverage, the anticipated IRR in the hands of the investor exceeds 30%, net of investment costs, fund management fees and all taxes.
Investment options
The Ungeared Opportunity
Example based on R1 000 000 equity invested
The AGA Solar Fund offers an ungeared version, allowing investors to claim the Section 12BA tax deduction on their cash investment alone. This provides a tax benefit of 125% on the investor’s committed capital. The enhancement of the investment is solely derived from this tax deduction, making it an attractive option for investors seeking tax relief without leverage.
**Assumes the investor pays tax at the highest marginal tax rate of 45%
The Geared Opportunity
Example based on R500 000 equity invested
The AGA Solar Fund utilises gearing in its portfolio, allowing investors to claim the Section 12BA tax deduction on both their cash investment and the gearing portion. This results in an enhanced tax benefit of 250% on the investor’s deployed capital. It is important to note, investors must provide a limited recourse guarantee for their proportionate share of the gearing to obtain the full tax benefit.
**Assumes the investor pays tax at the highest marginal tax rate of 45%
Who we are
African Green Alpha is a subsidiary of DG Capital. The DG Capital group boasts over 22 years of experience in the financial services sector, including more than 18 years of lending expertise through a variety of working capital finance products funded by our own balance sheet and external funders.
As a prominent lender in the South African market, we leverage our extensive credit experience to carefully select PPA deals for investor exposure, thereby optimising returns while effectively mitigating risks.
The combination of investment expertise and operational experience sets us apart, providing our clients with confidence in both the quality and security of their investments.