Investing in a Section 12J offering is not a short-term undertaking so, while the numbers are important, it’s probably a good idea to buy into something you can believe in – something that talks to your heart as well as your financially-oriented head. Mdluli Safari Lodge may well do that.
Sad story with a happy ending
After a successful land claim, the Mdluli community, which was forcibly removed in the 1960s, once again has ownership of their traditional lands. This includes 850 hectares within the Kruger National Park, which – in partnership with various stakeholders and private industry – they are developing into a luxury safari lodge.
Inkhosi MI Mdluli explains how excited the community is about the development: ‘Through this project, I undertake to bring stability and social cohesion to the community, and I also remain convinced that the children shall go to university. Schools, roads and clinics shall be upgraded, and poverty shall be eradicated through the creation of skills and employment opportunities.’
Just four hours from Johannesburg, or a quick shuttle from Kruger Mpumalanga International Airport, Mdluli Safari Lodge, located inside the border of the Kruger National Park, offers luxury tented accommodation, and escorted (or self-drive) safaris in the park. So – finances aside – this is the perfect ‘investment’ in me-time, staff incentives, conferencing or client hospitality.
Best of both worlds
Mdluli Safari Lodge’s Section 12J property investment programme makes plenty of sense as its structure allows for a 100% tax write-off, along with investing in a luxury property in South Africa’s premier national park.
While investing is usually a purely financial decision, buying bed nights in the Kruger is a definite sweetener. There are two different options, each coming in at a number of price points. You can choose to invest in a bed nights only package, or to invest in a package that combines bed nights with an annual dividend for 10 years – the first offering of its kind in South Africa.
Let’s say you have R1 million to invest. You can choose between a bed nights only package, which will give you 53 bed nights per person each year, for the 10 years of your investment (valued at R3,700 in 2019 with an 8% escalation), or you can choose to take fewer bed nights (25 per person, each year, for the 10 years of the investment) and also receive an annual dividend. Of course, this is over and above the tax benefit. If you invest R1 million, you can deduct that amount from your taxable income, which effectively reduces your tax bill by R450,000 if you are paying at the 45% marginal rate.
For package 1 (bed nights and dividends) you can buy in at R250,000, R500,000 or R1 million, or anywhere in between, escalating at R100,000 intervals.
If it’s the bed nights only package you’re after (Option 2), you can buy in at R125,000 for four nights, R250,000 for 10 nights, R500,000 for 22 nights, and R1 million for 53 nights. This package is ideally suited for a conference, a company team building or incentive, or just a special Kruger family holiday.
But what’s the (triple) bottom line?
For the bed nights only package, estimates indicate that the internal rate of return after 10 years would be about 14% for an initial investment of R125,000 and about 26% for R1 million. This does not include the tax benefit, and is based on return of the entire invested capital in years five to 10, along with the imputed value of these allocated bed nights accruing to the investor and their family.
For the bed nights and dividend package, estimates indicate that the internal rate of return after 10 years would be about 18% for an initial investment of R250,000 and about 23% for R1 million. This does not include the tax benefit, and is based on the return of invested capital, anticipated dividends and the imputed value of the allocated bed nights per package.
But that’s just one bottom line. Mdluli Safari Lodge is truly a triple bottom line investment. With this investment, not only are you owning your share within the Kruger National Park, which is one of our foremost conservation treasures, you are also obtaining a 100% tax deduction, and investing in the social and economic vitality and development of the Mdluli community.
What’s not to love?