Fears new bill will raise more barriers

Jul 5, 2018 | News

“This country needs transformation and it needs to deregulate many of the draconian measures imposed on the industry.”

It’s been more than 24 years since the end of apartheid yet compared to most other professions the property sector in South Africa remains dominantly white, middle-aged and male. Some property experts say overregulation is partly to blame for this lack of transformation. Will the new Property Practitioners Bill, once passed, raise even more barriers or will it make it easier for young black people to enter the sector?

The average black participation in the property sector was around 8% in 2013, but dropped back to around 5% in 2017 Neville Chainee, Deputy Director General for Strategy and Planning with the Department of Human Settlements told the Portfolio Committee on Human Settlements last Tuesday 26 June. In comparison black representation in professional professions is reportedly around 38% and 58% in technical professions. Why is this the case?

Too many hoops to jump through

One reason property experts say is that previously it was much easier to become a qualified estate agent. Passing the EAAB exam and some practical experience was all that was required, but the Estate Agency Affairs Board (EAAB) changed all that around 2013. Since then estate agents are required to do a 12-month internship and pass NQF level 4 and 5 qualifications followed by continued professional development courses. Add to that annually submitting audited financial statements, an auditor’s report of the trust account and renewing Fidelity Fund certification, or face being deregistered by the EAAB, all of which cost money and is time consuming.

Property principal Phumzile Makhosana and Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty*  say the EAAB has become gatekeepers keeping people from entering the profession with all their regulations and this is one of the key factors delaying transformation.

Makhosana started the first black bond originators company in the country in around 1999 and a few years later also began his own estate agency, Linomtha Properties. He serves on the board of the EAAB and also served for four years on the board of the non-profit Real Estate Business Owners of South Africa (Rebosa).

He says this is already a difficult industry and many people, especially if operating in the townships, don’t make a lot of profit. The EAAB’s requirements for qualifications, continued professional development and other requirements like annually audited financial statements are too expensive.

Geffen says some of the measures imposed by the EAAB are “draconian measures that prevent people from getting into the industry”.

“The barriers to entry are too stringent and unless people break the rules it is very difficult for them to survive in the industry having to jump through so many hoops that it becomes financially unviable for many people,” Geffen says.

“This country needs transformation and it needs to deregulate many of the draconian measures imposed on the industry. Most big agencies have in-house training in any event to teach the rookies “the art of the deal”. The industry has shrunk since 2008 to approximately 30,000 operating agents from 85,000. How is it possible to transform a bulk of the population without reducing the barriers to entry, concludes Geffen.

Another factor Makhosana and others highlight is that the property industry is commission-based. He says he has taken in many interns but received no support from government or anyone else. Most of them left, a tendency also reported by other estate agencies.

Many estate agents say it is very hard for a young person to survive on commission only when starting out. A young person has to survive with no income for the first 4 to 6 months while working as an intern and also have funding for transport, own a smart phone and have funding for phone calls and often also own a computer. Advertising is about the only expense the employer will cover.

Property development consultant Stefan Maree says that it is the fact of the industry being commission-based that keeps many people away. There is no work security and a person’s income depends on his/her own initiatives – when people hear that they either work ‘unregulated’ or stay away. However, instead of levelling the playing field, he has concerns that the new bill will raise the barriers of entry for new entrants.

“The new bill will just kill what is left of the industry and the worst is that they want to include more professions without consulting them,” he says.

More engagement needed on new bill

Makhosana says the new bill has been drawn up by civil servants who don’t understand the issues on the ground. In his view it is a “cut and paste” of the 1976 Estate Agency Affairs Act and definitely has to go back for proper consultation with the people in the industry who are really affected by it, especially in the black townships which he says was mostly excluded in the public participation process on the bill up to date.

“They need to do a proper consultation. They can’t just rush it for the sake of rushing it,” he says.

“To transform this industry won’t happen overnight, it will be a process,” says Makhosana and part of that process should be more active government-involvement especially in the EAAB. The established white-owned estate agencies also must come to the party, he says and look for ways to empower their own agents.

He highlights as a concern that transformation, though the principal aim of the new bill, is only mentioned in chapter 11 and even then the chapter is not dedicated solely to this topic. This aspect of the bill was also raised as a concern by MP Nocawe Mafu, chairman of the Portfolio Committee of Human Settlements during the briefing on the bill on 26 June. “Transformation shouldn’t it stand alone as this is the main purpose of the act? It should be thé thing!” Mafu said.

*Property Professional asked nine established estate agencies whether they had comment on the new Property Practitioners Bill. Only Sotheby’s replied with comment, some declined and one referred us to Rebosa. The latter indicated they would send comment later. Ed.

Find out more: Parliamentary briefing session on 26 June

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