Why transformation should be the priority

May 11, 2017 | Features, Local Property

“With so much economic exclusion and unemployment in the country, if this industry becomes inclusive it will have a positive economic impact”

With the recent publication of the Property Practitioners Bill, transformation is a particularly hot topic in the industry. Eugenia Kula-Ameyaw, chair of the Transformation Committee for the Estate Agents Affairs Board (EAAB), provides input on what can be done to speed up the wheels of change

The president flagged the lack of transformation in the property industry in his State of the Nation address in February. He also portrayed the industry as extremely lucrative. Is this a fair portrayal of residential agent earnings?

The concern raised is fair. The government wants to create an enabling environment that creates opportunities for the previously disadvantaged, especially the historically disadvantaged, so that South Africa’s economy reflects the demographics of the country.

The property sector is valued at about R7-trillion, of which R3.9-trillion is made up of residential properties. Statistics show that active participation in transactions in this sector remains in the hands of the minority. With so much economic exclusion and unemployment in the country, if this industry becomes inclusive it will have a positive economic impact.

As the regulator, we must add that there are agents who are experienced, have resources and operate in upmarket areas of the industry that can be lucrative – hence our resolve to fast-track transformation.

The commission-only remuneration structure is often cited as making entry into the industry difficult. Is this true and if so, is it significant? 

Commission-only can be one barrier, as it takes too long to earn commission. If there is no income during this time, training might not be sustainable.

The other side of the coin is trainees who aren’t passing the exams but are earning a stipend. Then, three months later they drop out and pursue learnerships that pay far more than what this industry is paying.

The Property Charter has been in operation for a number of years. Is the negative perception about it indicative that it is not being adhered to?

The question is: are industry players happy with an economy that is not inclusive? If the answer is no, then the charter will be their guiding document. Depending on how patriotic or profit-driven (at the expense of the broader societal needs) organisations are, their perceptions about the Property Charter can be selective.

The charter derives its model and target from the BBBEE codes, including ownership, management control and skills development. The industry must comply with these transformative initiatives as directed by the government.

I believe the reason the new legislation focuses on transformation is because of the slow progress of or non-adherence to the Property Charter.

The success of the One Learner – One Estate Agency programme could have contributed to the skills development scorecard target for the industry. With ownership there appears to be only one success story: the RE/MAX deal. The actual impact is still to be realised and measured. But in my view you cannot have one success story in the whole residential property sector.

A number of racist incidents in the industry have made the news. Is that indicative of an industry not willing to change or does racism itself cause the lack of transformation?

Putting the blame squarely on the industry might not be fair, but it could be an indication of an unwillingness to change. On the other side are consumers who instruct agents to sell to a certain racial group only. So we call on agents not to accept such instructions from consumers, as agents are accountable. Consumers also need to be made aware of what is acceptable.

What obstacles to transformation in the industry do you identify?

The commission-only earnings, as mentioned. And the time it takes to train and qualify as an agent. The cost of the actual training has been raised as an issue, especially if we are to realise our objectives of increasing the number of black Africans in the sector.

The current legislation, too, is rigid and assumes that one model fits all when it comes to compliance issues. For example, the cost of compliance can be expensive for small and emerging estate agencies. To expect audited financial statements from an agent who sold one house in a township in the same way we expect from established estate agencies is unfair.

Do you have practical suggestions as to how transformation can be effected at a faster rate?

The overarching factor is the monitoring and evaluation of transformative interventions – setting fair targets for training and rewarding attraction, for instance. Those who do the right thing must be recognised. Examples include:

  • An awards category for the transforming agents, which will not only focus on numbers but attraction, retention and impact.
  • Revisiting the stipend paid to trainees and incentivising the mentors or host agencies.
  • Educating consumers about using their buying power to drive transformation, and to buy from transformed agencies.
  • Exploring other mechanisms to include the youth and women in other property careers or business opportunities.

Which bodies can play a role in promoting transformation?

Currently the EAAB or the planned regulator – the Property Practitioners’ Regulatory Authority – will ensure a regulatory framework including transformation. I am delighted to see that the Bill has prioritised transformation. Industry stakeholders have a role to play in transformation, engaging and empowering their members.

Kula-Ameyaw on the Property Practitioners Bill:

It’s transformative and provides an opportunity to be aligned with the democratic South African constitution and other progressive legislation. The Estate Agency Affairs Act only focuses on regulating estate agents, but the Bill seeks to extend that to include all property practitioners. There is also provision to establish an ombudsman office.

During the transition into a democratic South Africa there appeared to be more and more legislation that was not aligned with the constitution and the spirit of the country’s legislative framework. The lack of enforcement and capacity to do so has been exploited as a gap by some players. As an industry, we can choose to use the financial muscle to resist, argue and delay transformation or work together as we did with Codesa to find each other and transform this industry.

The property industry has potential but how we leverage that to ensure economic growth as we simultaneously transform the sector will be the test for the new legislation.

Words: Catherine Davis