It was proposed by Finance Minister Trevor Manuel in his 2008 budget announcement that general venture capital investments (non-mining) would qualify for a 30% up-front deduction, with annual deductions to be capped at R500,000 for individuals, R750,000 for corporations and R7.5 million for venture capital funds.

Junior mining exploration investments would qualify for a 50% upfront deduction, with annual deductions capped at R1 million for individuals, and R10 million for corporations and venture capital funds. This incentive mechanism is also proposed in the place of the flow-through share incentive mechanism for junior mining exploration companies mentioned in the 2007 Budget Review.

In general, the targeted enterprises are high growth and high-tech companies with an annual turnover of up to R14 million or gross assets of up to R7 million. For junior mining and exploration companies, a different threshold – gross assets of R30 million to R50 million – will be considered. The proposed tax incentives will target individual investors, corporate investors and venture capital funds.

Access to equity finance by small and medium-sized businesses has been cited as one of the main challenges to the growth of this important sector of South Africa's economy.

According to the government, while the private-equity industry in South Africa is well developed, the industry’s appetite for start-up, early stage and seed-capital type transactions is low.