Popular investment vehicles in South Africa

Updated on February 2024

• Limited Partnership
• Real Estate Investment Trust (REIT)
• Special Purpose Acquisition Company (SPAC)

• Contractual

• Public Company (corporation) or Trust (contractual)

• Public Company

• Transparent

• REITs are exempt from capital gains in respect of the disposal of its immovable property, shares in another REIT or shares in a controlled property company REITs can claim, as a deduction, distributions made to its shareholders

• SPACs are subject to ordinary corporate taxes

• Securities transfer tax (0.25%) on portfolio company disposals
• Capital gains tax (at ranging between 18% and 36%) or income tax (at a marginal rate) could apply to the carried interest earned by the fund manager or general partner

• The transfer of shares in a REIT is exempt from securities transfer tax
• Investors will only pay capital gains tax when the REIT share is sold, dividends withholding tax does not apply to distributions to South African investors
• If the recipient of a dividend is a non‐resident investor, the dividend will remain exempt from income tax but dividends withholding tax may apply (depending on the relevant double taxation agreements)

• Securities transfer tax (0.25%) on portfolio company disposals.
• Investors may incur capital gains tax (on exit) and dividends withholding tax (at 20%) on dividends/ Distributions.

• No

• Yes

• Yes

• Usually closed-ended
• May be used on an open-ended basis for suitable asset classes such as infrastructure and primary agriculture

• Open-ended

• Closed-ended

• The Financial Sector Conduct Authority regulates the fund managers

• Subject to requirements of the Companies Act, 2008 (Companies Act) and requirements of the relevant exchange
• Also subject to oversight by the South African Revenue Service

• Subject to the requirements of the Johannesburg Stock Exchange.
• Subject to requirements of the Companies Act, 2008 (Companies Act). Also subject to oversight by the South African Revenue Service.

• Yes, no retail investors
• The investors are high-net worth individuals and institutional investors

• None

• Yes. The minimum capital to be raised by a SPAC is R500 million for a listing on the Main Board of the JSE and R50 million for a listing on the Alternative Exchange (AltX) of the JSE

• Limited liability for investors
• Familiar investment vehicle for international investors
• Tax transparent

• Liquidity for investors
• Favourable tax treatment

• SPACs minimise operating business risks;
• it is an effective way of creating currency for M&A transactions.
• The cost of going public is significantly lower than a traditional IPO.
• SPACs allow for a broader base of investors and have built in regulatory safeguards to protect all parties to the deal.
• SPACs may not obtain debt financing for reasons other than to facilitate an acquisition.

• Restricted investor base

• Extensive regulation

• A company applying for a SPAC listing may not undertake any commercial or business operations.
• If the SPAC fails to complete the acquisition(s) within a set timeframe (generally two years), funds must be returned to investors.
• SPACS don’t require the same level of due diligence as traditional IPOs.

• Private equity funds

• Real estate investment

• Mergers and Acquisitions

Disclaimer: “Information in this guide for any particular country or topic may have been subject to change since the date to which it was prepared”