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BEE compliance can’t be ignored any longer

The Amended Property Sector Code, and Scorecard, was published last June and became effective immediately. It was received with some resistance and criticism from within the property industry for various reasons, but however it’s imperfections it is in the sector’s best interest to support the Code says Jan le Roux, CE of Rebosa

“I believe the Property Charter has been ignored, viewed with suspicion, discarded and misunderstood for too long,” he told an attentive audience attending the Rebosa talk at the River Club in Cape Town on Wednesday 23 May. This was the organisation’s final session, following two others held in Johannesburg and Durban respectively, to unpack the complexities of the BEE Scorecard contained within the Code.

“It is not perfect,” conceded Jan le Roux, and he says Rebosa has been very clear in its criticism of a number of aspects, the most important being that the industry is not fully understood and that the remedy is not always practical.

However, Le Roux explained the reality is that the property industry is not remotely transformed with only around 17% of practitioners being black and the number of black business owners insignificant. The vagueness of these numbers underlines the inadequate research he said.

A target of 26% black ownership in the property sector was set by the minister with the publication of the Code last year. The gazetting of the Code coincided with the publication of the Property Sector Charter Council’s 2015-2016 State of Transformation Report for the Property Sector. The Council acknowledged the attempts made so far to make the industry more inclusive, but found that black people, black women and people with disabilities, in particular, are still under-represented in the property sector. The Council’s research found that most of the enterprises in the property sector were still owned by white people.

“One must also keep in mind that this country has moved from job reservation for whites (formally and informally), which in certain occupations excluded blacks entirely from being employed, to the now imperfect attempt to promote very necessary transformation,” said Le Roux.

“Laws and regulations are never perfect and our challenge and duty now is to support transformation as best and as fast we can,” he continued.

The measure for this is the Property Charter. Le Roux predicts that when the pending Property Practitioners Bill eventually become law, it will contain the requirement of a BEE certificate before an Fidelity Fund Certificate will be issued.

Property practitioners packed the hall for the Rebosa Roadshow hosted at The River Club, Cape Town.  PHOTO:  Zoom Photography, photographer Christiaan Coetzee

“It will be in everyone’s best interests to move towards compliance. Many requirements will be hard to meet and in some instances for some near impossible. Today we can learn from an expert how to achieve the best results under circumstances,” he concluded.

The expert referred to is Adrian Frewen, a young associate in the Commercial Division of Phatshoane Henney Attorneys. Frewen agreed that he also believes the Bill will make BEE certification a requirement. He added that even now, while it is still uncertain when the Bill will come operational, it is increasingly becoming difficult for property practitioners to conduct business without BEE certification especially when dealing with major property developers. The same would apply to obtain property deals from government or parastatals, big corporates and banks.

Property practitioners need to take note of the following:

  • Exempted Micro Enterprises (EME’s), companies with an annual turnover of less than R2.5 million, are exempted from BEE compliance. They can provide on request an affidavit confirming their annual turnover. The forms for the affidavit is available on the Rebosa website.
  • EMEs, even without black ownership, automatically gain Level 4 BEE status. If there is 51% black ownership, they are given Level 2 status, while EMEs with 100% black ownership immediately gain Level 1 status.

However, Le Roux warns owners of EME’s will do well to already put plans in place to achieve BEE compliance as the R2.5 million annual turnover minimum is not cast in stone and could well be lowered in future. Turnover may also exceed said threshold the very next year.

Frewen also highlighted that fronting has been made a criminal offence by the amended B-BEE Act of 2013. It refers to misrepresentation of the company’s B-BBEE status by various acts such as splitting the company into smaller ‘companies’ to avoid having to comply with B-BBEE certification. Persons found guilty of this crime could face up to ten years in prison and/or a hefty fine linked to their annual turnover.

The better solution lies in upskilling  current black staff (black being inclusive of black, Indian or coloured), especially black women. Skills development, one of the critical elements on the scorecard, offers various options for companies concerned about how they can afford upskilling their black employees. Frewen explained how a significant portion of the expenditure on learnerships etc could be negated by tax deductions and rebates. This will be explained in more detail in one of the series of articles Frewen will write for Property Professional to explain how compliance with the six elements, especially the three priority elements (Ownership, Management Control and Skills Development), on the scorecard works.

The bottom line is that the government wants to see the property sector transformed at a faster pace. Black ownership at around 17% so many years after 1994 indicates that the sector has a long way to go and the Charter provides a measure not to be ignored.

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