“I am the head of a small local estate agency. We are doing well and hope that our annual turnover will go over R3 million this year. I’ve heard that an amended Property Sector BEE Charter has been issued. What should I expect under this charter and has the threshold for qualifying as an EME been increased above R2.5 million?”
The amended Property Sector Code for Broad-Based Black Economic Empowerment (“Amended Property Charter”) was gazetted on 9 June 2017. The Amended Property Charter applies to the residential and commercial property industry and also to property services such as property management, broking companies, estate agents, and property valuation professionals.
The amended Property Charter has to a large extent remained similar to the previous Property Charter, however certain provisions, targets and point allocation have been aligned with the more stringent Amended Generic BEE Codes of Good Practice (“Generic Codes”).
With regards to eligibility as an EME, the amended Property Charter has adjusted some of the thresholds. For asset based entities the threshold is R80 million and R10 million for service based entities, however the threshold has remained at R2.5 million for estate agencies, broking companies and valuation companies. The QSE thresholds have been adjusted to R400 million for asset based companies, R50 million for service based companies, and R35 million for estate agencies, broking companies and valuation companies.
The provisions contained in the Generic Codes relating to enhanced recognition for EME’s and QSE’s have also now been incorporated into the Amended Property Charter, with the effect that 51% black owned EME’s and QSE’s automatically qualify as Level 2 contributors to BEE, and 100% black owned EME’s and QSE’s as Level 1.
If your turnover exceeds R2.5 million, you will therefore have to report under the QSE scorecard. Although you cannot elect which elements to report under as with the previous Property Charter, provision is once again made for divergent enterprises in the property sector that will not be able to report under certain elements due to the nature of the enterprise. For example, a property owning company usually has very little or no employees other than management, and is therefore exempt from the Employment Equity and Skills Development elements.
It is however important to take note of all the elements and which of them may be applicable to your estate agency, and ensure that proactive planning is done for when your turnover exceeds the applicable threshold. Below is a summary of the core changes which has been brought about by the amended Property Charter, along with unique provisions which may need to be noted:
Save for an adjustment of the allocated points for each indicator, the Ownership element has remained mostly unchanged, and continues to differentiate between property owning companies and all other companies. For property owning companies the target for Black ownership has increased to 27% (25% plus one vote for QSE’s), whilst the target for black women ownership has remained at 10%. For all other companies the targets for black and black women ownership has remained unchanged at 25% plus one vote and 10% respectively.
2. Management Control
Unlike the Generic Codes, the Amended Property Charter continues to have separate Management Control and Employment Equity elements.
The Management Control scorecard measures exercisable voting rights of black and black female board members, as well as black and black female executive directors and executive management. Recognising that estate agencies, broking companies and valuation companies do not differentiate between various board levels, there is a separate scorecard for these entities, which only measures black and black female board members and executive management. The QSE scorecard also only measures black and black female board members and executive management, with no differentiation between board members and executive directors.
3. Employment Equity
Both the Generic and QSE scorecards have aligned the targets for black and black female managers in senior, middle, and junior management categories with the targets set in the Generic Codes. A separate scorecard is applicable to estate agencies, property brokers and valuation companies due to the fact that these entities usually do not differentiate between various management levels. For these entities the scorecard measures black and black female employees on practitioner, management, and administration level.
4. Skills Development
The Skills Development element is similar to that contained in the Generic Codes, however the target is slightly less at 5% of the leviable amount (3% for QSE’s). Mandatory training for estate agents or property practitioners as defined by the Estate Agency Affairs Board may qualify as skills development contributions.
5. Enterprise and Supplier Development
Save for slight differences in point allocation, all principles relating to this element are the same as under the Generic Codes. The targets for all sub-elements, namely Procurement, Supplier Development, and Enterprise Development, are also the same as in the Generic Codes. As with the previous Property Charter, an additional indicator on the Procurement scorecard is included, which measures procurement spend with 51% black owned property service enterprises.
6. Socio-Economic Development
This element has remained unchanged.
7. Economic Development
This element is unique to the Amended Property Charter, and has deviated slightly from the previous Property Charter. The element now only measures economic development investment in under-resourced areas. Generic entities may also elect to contribute towards economic development programmes. Where a QSE has not engaged in property development for that year, this element will not be applicable.
As an estate agency that does not qualify as an EME, all of the above elements have to be complied with, with the exception of Economic Development as an estate agency is not involved in actual property development. The total available points of the other 6 elements are then simply adjusted in order to achieve a certain recognition level.
Given the Amended Property Charter’s differences when compared to the Generic Codes, it is advised that a BEE professional is consulted in order to provide you with the necessary guidance to navigate the peculiarities of the amended Property Charter and ensure your agency is prepared to be verified under the QSE scorecard of the Amended Property Charter.