The Property Practitioners Regulatory Authority (PPRA) is talking about enforcing tougher Black Economic Empowerment (BEE) rules for estate and rental agencies, potentially posing a serious challenge for small businesses.
As things stand right now, all property practitioners must have a valid Fidelity Fund Certificate (FFC) to trade, and to receive a FFC from the PPRA, they must also have a valid BEE certificate.
Currently, that’s as far as the requirement goes. As long as the BEE certificate is issued by a South African National Accreditation System (SANAS) accredited provider, that’s enough to satisfy the requirements in the Property Practitioners Act, regardless of how highly (or poorly) the business scored.
But in a recent webinar, PPRA legal manager and acting transformation manager Deli Nkambule said the PPRA will not issue a FFC unless the firm has a compliant BEE certificate. This would mean that non-exempt businesses would need to achieve at least 40 BEE points as set out in the Amended Property Sector Code of 2017.
PPRA CEO Thato Ramaili has also come out in support of the apparent rule change. “While precedents may have been set in the past to allow additional time for industry alignment, it is imperative to underscore that compliance with regulations such as those set forth by the Property Practitioners Regulatory Authority (PPRA) is non-negotiable,” she said.
What does that mean for agencies?
Agencies with an annual turnover of less than R2.5 million are classed as Exempt Micro Enterprises, so they don’t need to achieve a minimum BEE score.
But every other business will need to score at least 40 points, from a maximum of 105 for businesses with annual turnover under R35m or 117 for bigger businesses. BEE points are scored by having previously disadvantaged people in positions of effective ownership or effective control; providing training; working with suppliers who themselves have high BEE scores; and contributing towards socioeconomic development.
Some in the industry worry that this could be an impossible task. Jan Le Roux, CEO of the Real Estate Business Owners of South Africa (REBOSA), estimates that most real estate businesses would currently fall short. Furthermore, he says that around 65% of real estate agencies are sole proprietorships or small businesses, giving them limited scope to take on new owners or managers.
Will it happen?
The PPRA hasn’t yet started requiring a minimum BEE score for FFC renewals. Property industry leaders have reached out to the regulator to discuss the practicality of imposing a minimum BEE score. Given how many agencies could be affected, they may not want to ban a majority of the industry from trading.
The Property Practitioners Act specifically identifies transformation as one of its key objectives. Principals of non-qualifying agencies would do well to familiarise themselves with the BEE framework and identify ways to increase their score, should it be necessary.
