Hardie Minute

We recently reported the PPRA’s intention to require valid, compliant BEE certificates to be submitted with the next round of FFC renewal applications in 2025 and with new applications with immediate effect. Every business property practitioner has needed to submit a BEE certificate to obtain their FFC since 2022. The issue now is that this certificate must be compliant, not just valid.

The implication is that any real estate business achieving more than R2.5 million in annual turnover will need to submit not only a valid BEE certificate but one that shows it is BEE compliant (meaning it is, at minimum, a Level 8 BEE contributor) before it can receive its FFC.

Depending on the agency’s financial year end, this must be achieved before 31 October 2025 (before FFC renewals). Simply put, these agencies have, at best, 17 months to become compliant.

What’s the difference?
In the past, estate agency owners could deal with a verification company accredited with SANAS (the South African National Accreditation Systems) and submit the resulting certificate to the PPRA, whether or not the agency met the minimum BEE compliance level as outlined in the amended Property Sector Code. This certificate was seen as compliant and was accepted as adequate in 2023.

“Until very recently, we were told that these certificates were for data-gathering purposes and that there was no minimum requirement. It was a shock to Rebosa and the rest of the industry that the PPRA now intends to enforce compliance. It is interesting to note that the PPRA only found it necessary to start using the term ‘compliance’ six weeks ago – until then, the only reference ever in this regard was about validity,” shares Jan le Roux, CE of Rebosa.

Who is affected?
Any estate agency achieving more than R2.5 million (though not a majority black-owned estate agency, as they are automatically BEE compliant) will be affected. Of the around 6,200 estate agencies registered in South Africa, 3,807 achieve less than R2.5 million in turnover (and so do not need to be BEE compliant), leaving around 2,400 estate agencies that will likely be impacted by this decision.

Compliance vs validity
We reached out to the PPRA regarding this seeming change of heart. PPRA CEO Thato Ramaili has responded that “Since the implementation of the Property Practitioners Act 22/2019 (the PPA), been required to implement the provisions of Section50(x) of the Act and to ensure that no registration or FFC application is processed without the required valid BEE certificate. The PPRA has partially implemented this provision to date and has recently engaged with BEE experts to advise on such implementation and how to assist property practitioners best to ensure that they are in a position to obtain a fidelity fund certificate on registration or renewal”.

The Regulator is of the opinion that, given the time frame, the industry should be able to comply with its enforcement of Section 50(x).

The implications of enforcing compliance by 2025
Rebosa engaged the services of PH Attorneys to explore the various ways in which BEE points can be accrued and the feasibility for small to medium estate agencies (many of which are family-run businesses) to obtain these points within the next few months. A detailed presentation is available to Rebosa members.

The short answer is that it might be possible for some, but it will require significant financial and time investment, changes to their business structure, and some very fancy footwork.

This is because two of the main areas where agencies can gain BEE points are ownership and education. “Based on our research, there is unfortunately almost no way a small to mid-sized estate agency will be able to gather enough BEE points without selling some of the shares in their business,” shares le Roux. This option may not be ideal in terms of desire or financial feasibility for the estate agency.

When it comes to education, agencies need to submit an education plan (meeting a certain amount of financial spend) to Services SETA for approval. The deadline for submitting education plans is 30 April 2024 (i.e. tomorrow). It is possible for agencies to request an extension until the end of May, but to obtain this, they will need to approach Services SETA directly. Should agencies miss the deadline and the possible extension, it would mean that almost all education they do will not count towards their BEE points next year.

“At present, not being BEE compliant could mean that the PPRA will withhold these agencies’ FFCs, which would obviously be the worst possible outcome, and seriously damage the industry while doing absolutely nothing to transform it”, believes le Roux.

“While the odds are that the number of affected agencies that will be compliant by 31 October 2025 will be small, we encourage them to do what is possible. Trying to achieve the targets in the Property Charter is the right thing to do and will move transformation forward. It might well count in their favour in the future. In the interim, Rebosa continues to engage with the PPRA to seek a solution while also getting a legal opinion,” says le Roux.

“The PPRA did not take this view last year and is not compelled to do so next year. That would be advisable, as the deregistration of more than 2,000 firms will not serve transformation in any manner. It will, at worst, force a massive restructuring and a breaking up of successful businesses, but the number of white agents versus black agents actively involved in the real estate industry would not be affected. This is really avoidable, and they are more constructive means to promote transformation,” le Roux concludes.

Property Professional – “Can your agency become BEE compliant in 17 months?“. Web blog post. 29 April 2024.