The industry is on the brink of a crisis as the PPRA persists in its stance on requiring ‘compliant ‘, not just valid, BEE certificates. Numerous agencies face the prospect of not obtaining compliant certificates and consequently losing their FFCs in 2025. The industry, already grappling with escalating interest rates and a stagnant housing market, is now at risk of witnessing the closure of several agencies, all in erroneous hope of transformation.
Rebosa (Real Estate Business Owners of South Africa) has been relentless in its critique of the PPRA’s new interpretation (announced this past March) and has now presented its case against it in a letter to the PPRA Chairperson, Dr Steven Ngubeni, which has been shared with this publication.
In the letter, Jan le Roux, Rebosa’s CE, explains that Rebosa believes the PPRA’s “interpretation is not legally sound, will bear no positive results and will seriously harm the industry” and has indicated that Rebosa would take ‘whatever action needed’ should the PPRA not revise its stance. “We cannot be spectators to such a devastating deregistration of real estate businesses. I had a meaningful discussion with Dr Ngubeni in this regard and am hopeful for a positive outcome”, says le Roux.
Rebosa’s case against ‘compliant’ BEE certificates in four points
1) It’s not called for in either the Act or Regulations
There is no mention of certificates having to be “compliant” in the Act or Regulations. The only reference made is that of a “valid” BEE certificate.
Until recently, the PPRA has accepted non-compliant certificates for this purpose—a practice deemed correct. It cannot be argued that the PPRA used its “discretion” not to apply the terms of the Act (should its interpretation have been correct), as it has no such discretion. This is confirmed by the fact that, until now, BEE certificates were required, and no mention was made of “compliant.”
In fact, according to Rebosa, one could argue that the Act itself makes acknowledgement of the fact that not all agencies are BEE compliant: Section 20(2) of the Act reads, ‘When procuring property related goods and services all organs of state must utilise the services of property practitioners who comply with the broad-based black economic empowerment and employment equity legislation and policies’. “It follows that there are property practitioners (i.e. registered) who do not comply (i.e. non-compliant) and will not benefit from dealing with organs of state. This is what we always understood the objective of this legislation to have been”, says le Roux.
Section 20(3)(b) reads that the ‘Authority must implement appropriate measures and assess the state of transformation within the property sector.’ “Should ‘the Act has mandated compliant’ certificates, this section would have been superfluous – the Authority in such an instance would have had all the information, and no further steps would have been necessary”, he continues.
2) Industry bodies don’t agree with the PPRA’s interpretation either
According to Rebosa’s missive, the question of ‘valid versus compliant’ was put to the Property Sector Charter Council “PSCC” CEO in a council meeting on the 8th of May 2024. The CEO, Portia Tau-Sekati, said, “For me, we do know what valid and compliant means from a BEE perspective; they mean two different things at this current point. It is not the same and cannot be used interchangeably……”. Not one member of the council disagreed with her. Le Roux believes that it is clear that the PSCC does not concur with the interpretation of the PPRA.
Regarding the South African National Accreditation System (SANAS), Rebosa indicates that it agrees with the PSCC. The recognition levels shown in paragraph 8.21 of the Government Gazette number 36928 of 11 October 2013 include “non-compliant contributor”, and Ms Lindiwe Ncube, Accreditation Manager at SANAS, wrote, “Non-Compliant Status is indicated as a level that can be provided to the measured entity that has achieved less than 40 points. This means that a Non-Compliant Status BEE Certificate is a valid BEE Certificate”.
3) The PPRA’s stance is not informed by law
Le Roux also quotes Vukani Mbatha, PPRA registrations manager, as having replied to a question about BEE compliance during a PPRA webinar on 6 June 2024, saying, “I think from where we are sitting, the thing is it is not articulated in the Regulations, regrettably so, but the Regulations is a guide and the requirements they filter through from the Property Sector Charter Council, and then it feeds to the PPRA. So, this forms part of the policies within the PPRA”.
“Clearly, regulations are not merely ‘a guideline’. This is an admittance that the PPRA’s interpretation has no basis in law”, says le Roux.
4) Two-thousand-four-hundred firms could shut their doors
Approximately 3,800 firms out of 6,200 will be exempted due to annual turnovers of less than R2,5 million. However, that means that around 2,400 firms will be affected and de-registered because of the interpretation of the PPRA.
As achieving the minimum score required without significant Black ownership is virtually impossible, almost all of the above firms will be negatively affected. Even if these business owners were willing to sell equity in their businesses, achieving it in any significant manner would be impossible before October next year.
Le Roux believes that the de-registration of successful businesses will destroy them and cause financial hardship. The agents employed will, however, easily join smaller firms or form smaller businesses as they will not stop trading for apparent reasons. The result would be not transformation but the destruction of existing successful enterprises capable of employing and training candidates. The ratio of white and Black estate agents operating in the industry will not change.
Property Professional – “Rebosa tackles PPRA ‘misinterpretation’ of BEE requirements”. Web blog post. 18 June 2024