The property sector code (PSC), modelled around the Codes of Good Practice on Broad-Based Black Economic Empowerment (B-BBEE) issued by the Department of Trade and Industry (DTI Codes), was published in the Government Gazette and became effective on 1 June 2012.
The targets set in the PSC are valid for 10 years and will be reviewed by the DTI after five years in order to set further targets.
One of the overarching objectives of the PSC is to promote economic transformation so that significant and meaningful participation by black people, including woman and people with disabilities, can occur within the sector.
Other complimentary objectives include promoting property development and investment in under-resourced areas; achieving a substantial change in the gender composition of ownership, control and management of property; and facilitating the accessibility of finance for property ownership and property development.
The PSC applies to all privately owned and public enterprises who own property or who are engaged in providing property services. This includes estate agents, property managers, developers and valuers. The PSC is also binding on all organs of state and communities involved with or interested in the sector.
The PSC will not apply to property that is subject to:
- mortgage loans;
- securitisation of mortgage loans;
- bank possession;
- ownership, leasing or use for conducting the business of a company or holding company; and
- in-house property management services.
Notwithstanding the above, the PSC has the following distinguishing features:
- Exempted Micro-Enterprises (EMEs) are defined as businesses with a turnover of less than ZAR5 million. However, this threshold is ZAR2,5 million for estate agents and property brokers and ZAR30 million for property asset owning businesses; and
- Qualifying Small Enterprises (QSEs) are defined as businesses with a turnover ranging between ZAR5 million and ZAR35 million. This range is between ZAR2,5 million and ZAR35 million for estate agents and property brokers and between ZAR30 million and ZAR280 million for asset owning businesses.
The PSC contains all seven elements of the generic scorecard in the DTI Codes, namely: ownership, management control, employment equity, skills development, preferential procurement, enterprise development and socio-economic development. The PSC contains a further element of economic development which requires that:
- 10% of total new property development is spent in under-resourced areas, which did not receive adequate infrastructure development, investment or attention from the previous dispensation or private sectors; and
- 35% of property disposals are to black-owned enterprises with a B-BBEE status of level one to level three.
A property sector Charter Council (Charter Council), representing all stakeholders in the sector will oversee and monitor the implementation of the PSC and will also be responsible for issuing guidance notes on the interpretation and application of the PSC.
The Charter Council must also prepare an annual report on the progress made in implementing the PSC. To this end, each enterprise must submit an annual B-BBEE) report to the Charter Council.
Property sector enterprises need to commit to achieving the following targets over a five year period:
- at least 25% of ownership and economic interest is held by black people and 25% plus one vote is exercisable by black people;
- at least 10% of ownership and economic interest is held by black women and 10% of votes are exercisable by black women;
- at least 2.5% participation in ownership and economic interest is held by broad-based ownership schemes and/or designated groups;
- 3% black disabled employees (as a percentage of all employees);
- 60% black senior management (as a percentage of all employees using the adjusted recognition for gender);
- 75% black middle management (as a percentage of all employees using the adjusted recognition for gender); and
- 80% black junior management (as a percentage of all employees using the adjusted recognition for gender).
Property sector enterprises need to further commit to achieving the following targets within 10 years:
- 50% of voting rights for black people at board level, using adjusted recognition for gender;
- 50% black executive directorship, using adjusted recognition for gender;
- 40% black senior top management level, using adjusted recognition for gender; and
- 40% black other top management level, using adjusted recognition for gender.
A unique employment equity scorecard, which focuses on management and practitioners, has been provided for property brokers and estate agents.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.