BEE compliance (Part 3): Salient provisions of the Amended Property Sector Code
The Property Sector Code has identified 3 priority elements for estate agencies, namely Ownership, Management Control, and Skills Development. Adrian Frewen, associate with the Phatshoane Henney Group of attorneys, explains more in the 3rd article in his series on the Property Charter and B-BBEE compliance.
As we’ve learnt the draft Property Practitioners Bill has an additional requirement that a Fidelity Fund certificate may not be issued to a practitioner who is not in possession of a BEE certificate. This means all estate agencies who aren’t compliant, must ensure now already that proper initiatives are implemented to ensure compliance with the Property Sector Code for Broad-Based Black Economic Empowerment (B-BBEE or as more commonly referred to BEE).
Over the course of the next few weeks the various elements contained in scorecard of the Property Sector Code will be discussed in more detail in a series of articles to follow.
Before examining each element, it is important to note that the compliance requirements of estate agencies are unique to the industry and may differ slightly to those of other sectors or industries.
Generally, an entity’s B-BBEE compliance is measured in terms of the applicable Codes of Good Practice. The Amended Codes are applicable to all entities unless an entity falls within the ambit of a specific sector code, such as the Property Sector Code which will be applicable to estate agencies. Each sector code is aligned with the Amended Codes in general, however the scorecard elements and targets contained in each sector code vary slightly in accordance with salient nature of each sector.
The Property Sector Code is applicable to all entities operating within the property sector, however the scorecard elements which need to be complied with together with the targets and points allocation of each element varies between different types of property sector entities. An example hereof is property owning companies which, although they fall within the ambit of the Property Sector Code, need not report under Employment Equity and Skills Development, presumably because most such companies have very few, if any, employees.
In this series of articles all references to the Property Sector Code are specific to estate agents only, detailing the scorecard elements and general provisions applicable specifically to estate agents.
Entities are generally classified into three different groups based on their annual turnover. The turnover thresholds for estate agencies are significantly lower than those in other sectors. The annual turnover threshold for an Exempt Micro Enterprise (EME) is set at less than R2,5 million, from R2,5 million but less than R35 million for a Qualifying Small Enterprise (QSE), and R35 million and above for Generic entities. This is significantly less when compared to the Amended Codes (and most other sectors) which set the thresholds at less than R10 million, between R10 million and R50 million, and R50 million and above respectively for these three classifications.
Read more on EME’s here
Whilst EME’s qualify as automatic Level 4 contributors to B-BBEE, all other entities must comply with the applicable scorecard in the Property Sector Code. There are a total of 6 scorecard elements which an estate agency has to comply with. These elements are Ownership, Management Control, Employment Equity, Skills Development, Enterprise and Supplier Development, and Socio-Economic Development. An estate agency is not afforded a choice of which elements to comply with and failing to comply with an element will result in scoring zero for that element.
It needs however to be borne in mind that the Property Sector Code has identified 3 priority elements for estate agencies, namely Ownership, Management Control, and Skills Development. The concept of priority elements entails that an entity has to comply with the sub-minimum (at least 40% of the target) of such priority element, failing which the entity will be discounted by one B-BBEE level overall.
A Generic entity must comply with the sub-minimum for each of the 3 priority elements, whilst a QSE has to comply with the sub-minimum for Ownership and one of the other two priority elements.
The Property Sector Code has also extended the enhanced recognition for black-owned QSE’s and EME’s which was first introduced by the Amended Codes. Any QSE or EME which is at least 51% black-owned qualifies as an automatic Level 2 contributor to B-BBEE, and 100% black-owned QSE and EME’s qualify as automatic Level 1 contributors to B-BBEE. Enhanced recognition for Generic entities is currently not possible.
All entities not qualifying for automatic contributor status or enhanced recognition have to comply with the 6 scorecard elements which will be unpacked in a series of articles to follow.
This is the third article in a series of 9 articles that Adrian Frewen wrote for Property Professional on B-BBEE compliance according to the Amended Property Sector Code. Next week he will focus specifically on the priority element Ownership. You are welcome to email questions about BEE compliance to firstname.lastname@example.org.
Previous articles in the series: To BEE or not: no longer a question; What must estate agencies do to be BEE compliant (Part 2)