SINCE 1994, the South African government has invested significant political capital in the support of small and medium-sized enterprises (SMEs). This is because SMEs are recognised as key contributors to both growth and employment, contributing 30% of the country’s gross domestic product and almost 70% of private-sector employment. Government intervention in this sector has included the provision of wholesale finance and nonfinancial support services. The 2005 and 2006 budgets have also given support to SMEs through the tax system, streamlining VAT procedures and raising qualifying tax thresholds for small businesses.


But while there is government support at the company level for SMEs, there is practically no government support for private individuals wishing to invest in small businesses. In many developed economies, private investors are able to take advantage of a range of tax incentives, including an upfront income tax deduction, tax-free dividends, capital gains tax deferral, and so on.


Such individuals may be highly sophisticated professional investors — so-called “business angelsâ€