BEE compliance (Part 5): Elements Management Control and Employment Equity
Trade and Industry minister, Rob Davies, remarked in 2017 when the Property Sector Code came into force, that only 13% of estate agents are black. The second and third elements to which the compliance of estate agencies are measured in the Property Sector Code, namely Management Control, and Employment Equity, aims to address this imbalance. Adrian Frewen, associate with the Phatshoane Henney Group of attorneys explains how this works.
To obtain a compliant B-BBEE level, estate agencies need to comply with the six scorecard elements applicable to estate agents in the Property Sector Code. The Code has three priority elements, the first being Ownership with Management Control second. Management Control measures the number of voting rights of black men and women at board level (directors of a company, members of a close corporation), as well as the voting rights of black men and women at executive management level (e.g. CEO, CFO, COO).
A target of 50% is set for exercisable voting rights of black board members, measured as a percentage of all board members, and 25% for voting rights of black women as board members. The target for black women as board members is inclusive of the 50% target for black persons, and not additional to last mentioned. For example, if you have 4 board members (2 white, 2 black male), you will score 4 points on board participation. If you have 4 board members (2 white, 1 black male, 1 black female), you will score 6 points on board participation. Whilst separate targets are set for board members and executive directors in other industries of the property sector, the Property Sector Code recognises that estate agencies do not differentiate between various levels of board participation, and as such board participation is measured as a whole.
The Property Sector Code differentiates between three categories of enterprises: Exempt Micro Enterprise (EME), Qualifying Small enterprise (QSE) and Generic. Any agency that qualifies as an EME (agencies with an annual turnover of less than R2.5 million) are seen as B-BBEE compliant. QSE’s are agencies with an annual turnover upwards from R2.5 million but less than R35 million while Generic refers to large firms with annual turnover of R35 million and above. Read more on what is meant by EME, QSE and Generic groups here.
All Generic entities must comply with the sub-minimum for the element of Management Control, and QSE entities will have to meet the sub-minimum for either this element or the Skills Development element. Failing to meet the sub-minimum will result in being discounted by one B-BBEE level overall. The sub-minimum in this instance means at least 40% of the total available points on this element.
Estate Agencies seeking to comply with Management Control should guard against hollow external appointments, as the Estate Agency Affairs Board (EAAB) requires a director of an estate agency company to be in possession of an NQF Level 5 real estate qualification and to have passed the Professional Designation Examination for principal estate agents. Estate agencies will therefore have to ensure the correct candidates are identified, alternatively focus on the training and development of current black practitioners into the required senior positions if they are to score any points on the priority element of Management Control.
Whilst Management Control measures the voting rights of board members and the executive management of an estate agency, Employment Equity measures the number of black employees and agents. Note that Employment Equity is a separate element, and it is not a priority element subject to a sub-minimum or the discounting principle.
Unlike other sectors which measure the percentage of black employees based on management level such as junior, middle or senior managers, the criteria for measuring Employment Equity in estate agencies is broken down into the following three categories: practitioners, management, and administration. A target of 50% is set for the number of black practitioners as a percentage of the total number of practitioners of the applicable estate agency, with a target of 35% for black women practitioners. A target of 35% is set for black management, 18% for black women in management, 30% for black people in administration, and 40% for black women in administration.
The above targets are not broken down into separate demographic targets, and therefore these targets can be achieved by employing African, Coloured or Indian persons. As with the other elements, an estate agency will earn points pro rata toward the achievement of the applicable targets, and need not achieve the full target in order to earn any points.
The above targets for both elements are the same for Generic and QSE entities.
The biggest hurdle faced by many estate agencies in complying with the Employment Equity targets is the relatively small number of black practitioners currently in the industry. The only solution and a vital tool in complying with this element is the implementation of proper skills development initiatives, in order to upskill current black employees as well as train external black persons. Skills Development is indeed also a further element of the Property Sector Code which will be unpacked in the articles to follow.
All the prior articles can be found on the Property Professional website.
The legal requirements around B-BBEE compliance can be complicated to understand and put into practice. Send any questions you may have on this to firstname.lastname@example.org.