Will the PPA give black estate agents a bigger slice of the cake?
MAIN IMAGE: Mashilo Pitjeng, managing director of TseboREAL Asset Management; Xoliswa Tini, CEO Xoliswa Tini Properties
To succeed an estate agent needs three things, the right attitude, access to stock and to know the right people in the real estate industry. The first is a person’s own responsibility, but how can the regulations of the new Property Practitioners Act address the other requirements?
Much has been said about the need for more rapid and visible transformation of South Africa’s lucrative real estate industry. The often-quoted statistics speak for themselves – in contrast to the country’s demographics most estate agents and it’s top leadership are still majority white. This despite millions of rands spent, on training and recruiting programmes.
Now all hopes are pinned on the new Property Practitioners Act as the vehicle towards effecting transformation in the real estate sector. The PPA will replace the Estate Agency Affairs Act, 112 of 1976.
At a recent virtual town hall meeting hosted by the National Property Practitioners Forum (NPPC), this was the question posed. It is a matter that worries veteran real estate doyen Xoliswa Tini, founder and CEO of Xoliswa Tini Properties, the first local real estate franchise owned by a black woman. As one of the speakers, Tini said while she welcomes the changes that the new legislation will bring in terms of exemptions on having trust accounts etc, however, added she is worried that real transformation will not be addressed properly. She said the legislation provides the bones, in other words the structure within which to operate and that is good but black agents also want the “flesh” with reference to the stock and the profitable relationships.
Sharing the cake
The concept of owning real estate as a financial investment is relatively new for black people in South Africa. Prior to 1994 they were not able to own let alone practice in property. Since 2006 that picture has changed dramatically. TPN statistics indicate that for the last couple of years most residential property are to young black women. According to Mashilo Pitjeng, managing director of TseboREAL Asset Management, since 2006 black property buyers account for up to 90% of activity in the property market up to date.
However, as black estate agents claim they don’t have equal access to property stock, Tini says this is one of the reasons why black estate agencies fail. She referred to the oft complained about practice of developers to be exclusive about the estate agencies they allow to operate in their housing schemes. “Transformation is about how we restructure the industry in such a way that we can all share the cake,” says Pitjeng. As board member of the Property Sector Charter Council, Pitjeng was also actively involved in the drafting of the new Act. He is also chairperson of the policy and advocacy committee of the South African Institute of Black Property Practitioners (SAIBPP).
Property Professional asked Pitjeng how the Act’s regulations could be structured to open the way for more black property practitioners to gain access to a greater slice of the available stock on the property market?
Access to the market is key
“All we need is stock and to form that relationships,” said Tini. According to Pitjeng access to market is about the capability of any company to efficiently enter a marketplace and being enabled to sell their goods or services with minimal barriers. Accordingly, he says the Act should be designed in such a way that it minimizes the barriers of entry into the property sector for entrepreneurs and aspirant business owners. This is done by making sure the regulations and licencing rules, that are needed to be followed to trade or practice as a property practitioner, are process efficient and less financially burdensome.
Incentives. Pitjeng makes the suggestion that some form of tax or monetary rebate can be used as an incentive to encourage consumers to choose practitioners or businesses that are black-owned. For example, through the regulations a certain percentage of monies or taxes payable on property transactions can have a rebate if a transaction was concluded through a black practitioner or conducted by a black-owned business.
Transformation Fund: The Act provides for the establishment of a Transformation Fund within six months after a new regulatory body, the Property Practitioners Regulating Authority (PPRA) is established to replace the old Estate Agency Affairs Board (EAAB). The Fund will be funded by the Fidelity Fund, government grants, fees and fines paid by property practitioners as well as monies and investments donated or bequeathed to the PPRA. The Fund will be used for the advancement of property practitioners from disadvantaged backgrounds by way of training, development and education of the general public.
Pitjeng says in his opinion the Fund should not be used for skills training, particularly candidacy training, as there is already a learning and skills development environment in existence for this purpose. “The Fund should focus on supporting practitioners to become business owners (principals) and help emerging business to scale up (grow).
“We know that becoming a property business owner require business skills, human and financial resources, and development support (particularly in managing licencing, compliance and other forms of regulatory and legal requirements) AND emerging businesses require primarily access to markets and injection of funding to gear up to access larger markets and to grow the business.”
The Fund should, thus, primarily focus on supporting the development of business owners in the value chain and making access to market feasible, says Pitjeng.
The draft regulations to the Act was published in March 2020 but, due to the Covid-19 restrictions imposed, the commentary period was extended till 20 November. It is expected that the PPA may come into effect early in 2021.