‘Self-regulation could save property industry millions’

Jun 12, 2018 | News

“Anything between R30 million and R50 million per annum can be saved and applied more effectively, for example to effect meaningful transformation in the property industry”

The latest call for a probe into allegations of maladministration at the Estate Agency Affairs Board come amid mounting concerns over the competency of the organisation as supervisory body for the estate agency industry. Welcoming an investigation, Jan le Roux, chief executive of industry body Rebosa asks if it is not time for the industry to regulate itself as that could save millions.

Last Friday the Public Protector received a written complaint from Bantu Holomisa, leader of the UDM, asking for a probe into allegations of maladministration and corruption at the Estate Agency Affairs Board (EAAB), the supervisory body for the estate agency profession in South Africa.

“The matter is being investigated but the probe is still in its early stages,” spokesperson Oupa Segwale told Property Professional on Monday.

A core function of the Board is to manage the Estate Agents Fidelity Fund, worth R600 million. Annually estate agents have to pay the EAAB to renew their Fidelity Fund certificates, a mandatory requirement to operate as a registered estate agent in South Africa.

“We welcome this investigation,” Le Roux commented, but added he wish they had a little more confidence in the Public Protector. “Her misplaced enthusiasm re SA Reserve Bank endeavour and lack thereof with the Estina farm scandal come to mind,” he said.

The complaint was revealed Monday morning in an TimesLive online news article, ‘Exposed: There’s rot in the roof of SA realty’ written by journalist Farren Collins. In his article Collins revealed this latest complaint is but the tip of the iceberg.

A forensic report in 2016 brought irregularities to the fore such as irregular registration of estate agents, receiving cash from estate agents for favours and acting as estate agents without proper consent.

In December 2017 a forensic report by auditors Grant Thornton found that over a period of five years poor controls and IT support resulted in unauthorised staff ‘looting’ a suspense account with R28 million in funds deposited by estate agents. The report recommended that civil prosecution be brought against former CFO Silence Mmotong (who resigned last year) and former CEO Bryan Chaplog, both of whom deny any wrongdoing and allegedly reacted dismissive towards the findings of the report towards Collins. Mmotong apparently instigated the forensic report.

National Treasury also raised concern about the state of financial management at the EAAB to the Department of Human Settlements, the state department that the EAAB reports too.

“We’ve heard rumours of the irregular registration of estate agents and cash changing hands in this regard, but cannot confirm. There’s however no doubt that thousands of agents are operating illegally and that the service delivery, work ethics and systems of the EAAB leave much to be desired,” Le Roux said.

He added that Rebosa wasn’t aware of a forensic report by Grant Thornton, but was in constant interaction with EAAB officials re service delivery.

“Where as we are not aware of the irregular usage of funds, we are unfortunately overwhelmingly aware of the wastage of funds and resources. An estimated 30%-50% of the current expense in the operation of the Board can be saved by more effective self-regulation,” Le Roux said.

He continued that for the service it delivers, the running expenses of the Board far exceeds its efficiency.
“Anything between R30 million and R50 million per annum can be saved and applied more effectively, for example to effect meaningful transformation in the property industry,” concluded Le Roux.

Bongani Mlangeni, spokesperson for the EAAB, told Property Professional they are aware of the complaint sent to the Public Protector, but said the EAAB has not received any formal correspondence from the Public Protector’s office.

With regards to the forensic reports mentioned, Mlangeni said the employees mentioned in the 2016 report were subjected to disciplinary processes and dismissed from the organisation; and with regards to the December 2017 report the suspense account was “cleared” while “efforts to reduce the backlog are ongoing”.

Mlangeni said the EAAB has not undertaken any action against their former CEO and CFO as the Grant Thornton report was still “being processed” by the various Board committees and the Board will only consider how best to implement the recommendations in the report once this is completed.

“The report does point to serious control weaknesses that existed in the organisation and to the extent that this relates to performance breaches, financial loss, or fraud, this will be distinguished and addressed accordingly,” explained Mlangeni.

Mlangeni also confirmed that the EAAB is aware of the concerns raised by the National Treasury with the Department of Human Settlements but did not elaborate further on the matter.

National Treasury referred Property Professional’s query about the matter to the Department. No comment was received from the Department of Human Settlements.

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