Legal Articles

After being published in June last year, the Amended Property Sector Code and Scorecard, which highlight the changes made with regard to BEE compliance, there was a sense of disinclination from members of the property industry.

This resistance towards the amendments may have emanated, in part, from the Code’s imperfections which still needed ironing out. However, it is in the best interest of the property sector to support the Code as well as the transition towards it.

There has been an ongoing misunderstanding of the Property Charter and its faults have been criticised. Consequently, it has been highlighted that the property industry is not thoroughly understood and the proposed remedy is not considered practical.

There are statistics discussed that indicate lack of adequate research which further contributes to the overall resistance to the new Code and its matters related to BEE compliance.

BEE Compliance

Upon publication of the code last year, the proposed target of black ownership within the property sector was set by the minister at 26%.
The state of Transformation Report for the Property Sector and the gazetting of the Code were published concurrently.

Despite the attempts already made to render the industry more inclusive, the Council discovered that black people as well as people with disabilities are particularly under represented.

Investigations carried out by the Council indicates that majority of the property sector enterprises are owned by white people.

Although this is a flawed attempt to implement a necessary transformation, it is important to remember that the country is moving away from informal and formal job reservation for white people only. In certain occupations, job reservation completely excluded black people from being employed.

However imperfect laws and regulations may be, it is the duty of the members of the property to support the transformation to the best of their abilities.

BEE Certificate

The new Property Practitioners Bill is currently pending, but when it becomes law, a Fidelity Fund Certificate will only be issued after obtaining a BEE certificate.

Complying with BEE requirements will make meeting other relevant requirements within the sector much easier for the members involved.

It is believed that BEE certification will be a definite requirement stipulated in the new Bill. The date on which the Bill will be set into action is still uncertain.

However, it is becoming increasingly difficult in some instances for property practitioners without BEE certification to conduct business. This is especially true when practitioners are dealing with major property developers.

In addition, business transactions between property practitioners and big corporates, banks and government bodies are becoming almost impossible to achieve without the possession of a BEE certificate.

Property practitioners must be aware of the following:

• Exemption from BEE compliance applies to companies that have a turnover of less than R2.5 million per annum. These are called Exempted Micro Enterprises (EMEs). An affidavit is required to apply for exemption.
• Different levels of BEE status are awarded to EMEs for different reasons. Level 4 BEE status is automatically awarded to EMEs without any black ownership. 51% black ownership gains level 2 status and level 1 status is given to 100% black owned enterprises.

Despite the above discussed guidelines, it is still recommended that owners of EMEs implement the necessary plans to achieve BEE compliance as these guidelines may change.

Undertaking any activities which assists any company in avoiding the need for BEE compliance is considered a criminal offense. Should a person be found guilty of this offense, he or she may face a fine calculated according to their annual income or worse, up to 10 years in prison as punishment.

Skills development is a key element on the scorecard and upskilling current black staff provides the best solution.

Rebates and tax deductions may negate considerable portions of the company’s expenditure which is spent on learnership programmes and skills development.

In conclusion, the government is aiming towards a faster transformation with regards to BEE compliance in the property sector.

With black ownership at 17% so many years after democracy, it is clear that the there is much improvement to be made within the property sector and its compliance with BEE requirements.

Property Attorneys in Johannesburg and Cape Town – Van Deventer & Van Deventer Incorporated

For more information regarding the requirements for BEE compliance in the property sector, give our property lawyers in South Africa a call today.