Causes

According to the 2018 Property Sector Charter Council (PSCC) State of Transformation Report there is very little progress on the implementation of B-BBE in the property sector in both private companies and government (state) entities. In terms of the same report only 12% of procurement spend in the sector went to majority black-owned (51%+) companies and a meagre 5% to black women-owned companies.

Representation of black people in executive management structures in the sector continues to be unacceptably low with black executive directors and senior managers accounting for at most 15%. The PSCC report states that, “Black people have not penetrated to executive management or any other senior management position in the property sector. This means that Black people do not have effective control of economic activities and the resources of the enterprises in the property sector.”

INHIBITORS OF TRANSFORMATION THROUGH SECTOR SPECIFIC SCORECARDS

1. Narrow Equity focus of B-BBEE ownership score: the narrow focus on equity transactions results in prioritisation of point scoring to the ignorance of economic benefits.
2. Poor and ineffective implementation of B-BBEE in the private sector: there is little consideration for the development impact of B-BBEE in the commercial private property sector. B-BBEE is still viewed as a tick-box compliance exercise. Consequently, monies continue to be poured into tick-box programmes that achieve compliance by focusing on endless and unnecessary activities designed to keep Black-owned businesses unsustainable and small.
3. The zero-sum mentality of established players: The fear that investment in growing black businesses is equivalent to creating your competitor who will then easily compete for the same business or cause the demise of older businesses results in emerging black businesses being stifled and not prevented from having access to market opportunities.
4. The incentive structure of the BEE points system results in SMMEs being forced to remain “perpetually small” to ensure that corporates are still able to claim the BEE points required.
5. The focus of B-BBEE commissioner and industry on maximising compliance has led to corporates avoiding certain actions when point scoring does not seem feasible.
6. Fronting: B-BBEE relationship(s) with a black person(s) for the purpose achieving a certain level of compliance without granting that black person(s) the economic benefits that would reasonably be expected to flow from such a relationship.
7. Poor record of consequent results of actions arising from B-BBEE scorecard congruent to the industry practices and economic flows from the industry value chain.

REQUIRED AMENDMENTS TO THE CURRENT BEE SCORECARD

Ownership

1. Ensure minimum black majority participation in the commercial property sector (listed and unlisted).
2. Black people must be part-owners or shareholders, to participate in the enterprise’s core activities, and/or in the running of the business at a level commensurate with their on-paper level of involvement, such as their level of shareholding.
3. At least 30% of all commercial disposals must go to black-owned and controlled companies with at least 51% Black ownership (level1-3).
4. There must be alignment with the financial services sector and support from the private property sector to achieve the creation of the financial product(s) or acquire a commitment to changes in certain disadvantageous lending processes and practices.

Management Control

1. Decision making and governance structures, board members and executive management, to comprise of at least 50% black people, in particular favouring employment of black women.
2. Publicly reporting on property company-specific management control practices and the implementation against property sector scorecard targets.

Preferential Procurement

1. Government with sizeable property holdings to procure at least 60% of all property services and professionals from majority black-owned companies, suppliers and service providers.
2. Private sector to improve the transparency of procurement processes by publicly advertising all opportunities on a centralised directory/ online portal.
3. All companies in the sector to have a B-BBEE procurement policy in place that has been approved by their relevant governing authority for execution.
4. All major companies in the sector to have in place and implement an annual survey to publish a report(s) on property sector’s procurement practices to ensure that a minimum of 50% of all procurement of property and professionals services benefits majority black-owned companies, suppliers and service providers, in particular women and youth-owned and/or controlled companies.

Enterprise Development

1. Corporate tax incentives must be implemented to encourage private corporates to issue large long-term contracts to professional services or property services based EME’s.
2. All procurement spend on long-term contracts issued to EMEs should remain in place until the EME grows annual turnover to R2,5m for professional services (estate agents, valuers and brokers) and R10m for service-based companies.
3. Any company with an enterprise development programme (or any company who sponsor/ fund same) to absorb into to their value chain at least 1 of every 3 of their Enterprise Development beneficiaries that are within the property sector code scope.
4. Enterprise development programmes must focus on venture capital and/or equity financing to EMEs and QSEs or provides financial support to acquire property by majority Black-owned and controlled enterprise.

Skills Development

1. Increased investment in career development is required at the secondary school level to pipeline black students in senior years into the sector.
2. Professional development programmes must focus on growing a pipeline of technical and professional skills in the sector.
3. Mentorship and internship opportunities must be provided for tertiary students to provide real-life work experience and strengthen the opportunity for employment.
4. Property related studies must be made available across all universities particularly the predominantly black and previous homeland institutions where such studies are currently unavailable.

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