Silverleaf Investments, a registered South African Section 12J Venture Capital company set up to invest in the cannabis and hemp industry, has announced an investment opportunity for investors to take part in this offer. The minimum subscription/investment amount needed is 50 Shares, which costs R50 000 and the maximum investment for individuals and trusts is R2.5 million and the maximum for investment companies is R5 million.
Opening date of the offer started on Friday, O5 February 2021, and the closing date of the offer 17:00 on Friday, 28 February 2021.
Silverleaf Investment's target is to raise a total equity amount of R50,000,000 and a minimum of R1,000,000. This includes the projected issuing expenses excluding VAT. If the minimum amount is not raised, the offer will become null and void. All monies received will be returned to the investors and no shares will be issued.
What is a Section 12J VCC?
A Section 12J VCC is a company that has been registered as Financial Service Provider (FSP) with the Financial Sector Conduct Authority (FSCA) and has been approved by the South African Revenue Service as a Venture Capital Company. The sole objective of the Section 12J VCC is to manage investments in qualifying companies, which should stimulate local investment in small to medium enterprises (SMEs) and address unemployment in South Africa. This is done by providing the investor (South African taxpayers) with a tax incentive for investing in a Section 12J VCC.
There are two types of Section 12J VCCs into which an investor can invest, namely:
1. Third Party Section 12J VCC
Third-Party Section 12J VCCs are managed by fund managers who raise third-party finance for the Section 12J VCC and identify the investment opportunities. Third-Party Section 12J VCCs offer various levels of returns based on the risk profile of the underlying asset class.
2. Ring Fenced Section 12J VCCs
Ring Fenced Section 12J VCCs allow South African taxpayers to indirectly invest in qualifying investments which they have identified and benefit from the tax deduction associated with Section 12J, whilst having exposure only to their specific investment through a specific class of share.
A Ring Fenced Section 12J VCC, therefore, allows angel investors, seed investors, and/or entrepreneurs with a higher risk appetite to invest in qualifying investments which they understand and which in many cases would not be of interest to other investors.
Global growth of cannabis industry
It is anticipated to expand at a CAGR of 18.1% during the forecast period. The increasing legalization of cannabis for medical as well as adult-use is expected to promote growth.
On the basis of type, the medical segment held the leading revenue share of 71.0% in 2019, owing to the growing adoption of cannabis as a pharmaceutical product for treating severe medical conditions, such as cancer, arthritis, and Parkinson’s disease, and Alzheimer’s disease among other neurological conditions. Moreover, the increasing need for pain management therapies along with the growing disease burden of chronic pain among elders is expected to boost the product demand.
More than 30 countries have now legalised medical cannabis, and while precise laws remain patchy in many quarters, there are now half a dozen countries permitting adult use of cannabis. Hemp, once a darling crop globally is also experiencing a dramatic comeback.
“For years it seemed an impossible dream,” says Pierre van der Hoven, joint CEO of SilverLeaf Investments, a cannabis-focused fund focused on the industry’s local growth.
“Then, finally, legalisation as the ending of prohibition gained momentum globally.”
Africa's budding cannabis industry
In 2017, Lesotho became the first African country to allow the cultivation of cannabis for medicinal purposes. Deputy health minister at the time Manthabiseng Phohleli told AFP that the legalisation of cannabis presented “a huge opportunity for the country”, which boasts 300 days of sunshine per year. “It attracts investors,” she said. “So far we have around 10 businesses operating on the territory.
In the same year, Zimbabwe became the second Africa nation to license cannabis cultivation. Zimbabwe’s health ministry issued new regulations, allowing individuals and companies to be licensed to cultivate cannabis, known locally as mbanje. Zimbabweans are now able to apply for licenses to grow cannabis for medical and research purposes. The five-year renewable licenses will allow growers to possess, transport, and sell fresh and dried cannabis as well as cannabis oil.
In 2018, the South African constitutional court paved way for the relaxation of laws on drug use and consumption, when it ruled that private use of cannabis.
“The right to privacy is not confined to a home or private dwelling. It will not be a criminal offense for an adult person to use or be in possession of cannabis in private space,” deputy chief justice Raymond Zondo said. Followed by Zambia and Malawi that have legalised or considering legalising cannabis to some degree, as attitudes towards the drug slowly change and investments in its medical benefits grow.
In South Africa, Distell announced that it bought a 20% stake in the local brand RETHINK, which produces a wide range of cannabis-based products, including CBD oils, teas, and skincare items. Cannabidiol (CBD) is a chemical compound found in the cannabis plant both in the hemp and cannabis varieties. South African law allows CBD products, not exceeding 20mg per daily dose, to be sold. RETHINK does not produce Tetrahydrocannabinol (THC) based products which have a psychoactive effect.
Remgro's venture capital arm, Invenfin, will also buy a 20% stake in the company.
SilverLeaf Investment Fund hopes to stimulate local investment in the industry.
“I am convinced this industry can help us address our problems especially in the areas of job creation and rural economic development,” says van der Hoven.
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