Time running out for BBBEE code consent
Johannesburg – Prominent property developer and investor, Pareto Limited, has lamented the slow pace of transformation in the sector.
Marius Muller, the chief executive, has also expressed doubts about the deadline being met for the sector’s charter to be aligned with the trade and industry department’s revised broad-based black economic empowerment (BBBEE) generic codes.
“We’re running out of time to ensure compliance with the revised BEE codes for the sector. Given the lack of progress in our sector, it may be of greater national interest for us to rather, as a sector, revert to the generic BEE codes.”
Muller’s comments coincided with Public Works Minister Thulas Nxesi this week expressing his concern at the slow pace of transformation in the property and construction sectors.
Nxesi told an SA Council for Project and Construction Management Professions conference of a renewed and sustained programme of action to transform the built environment in partnership with the Construction Industry Development Board, the Council for the Built Environment, the charter councils and all relevant stakeholders.
“There is a mounting sense that the charter councils have been frustrated in their work by non-compliance and non-cooperation and that, in general, the pace of transformation is too slow,” he said.
Nxesi added that in pursuit of transforming the built environment, he called a meeting with stakeholders earlier this year with a view to analysing “where we are now with transformation, the progress made and barriers to transformation to drive a debate in the sector around possible solutions”.
He said this meeting was initially for the construction industry but subsequently expanded to include the property sector and the objective was to develop concrete workable plans, which would be fully consulted throughout the sectors, to put in place the necessary regulatory, monitoring and evaluation processes to ensure implementation took place.
“I am looking at a five-year time frame for this with measurable milestones.”
Muller said that if the sector ran out of time to align its charter with the generic charter by April, the property charter would fall away and the industry would have to automatically adopt the revised Department of Trade and Industry BEE codes, which would place it under immense pressure to speed up transformation.
Attempts to obtain comment from Property Sector Charter Council chairman Saul Gumede and James Templeton, the chairman of the property sector charter committee of the SA Reit (real estate investment trusts) Association and chief executive of listed property fund Emira, about the status of the process to align the sector’s charter with the generic codes were unsuccessful.
Muller said the property charter allowed for a gradual implementation of BEE, compared with the revised codes, which would result in greater and faster transformation.
He said the big change in the codes was the adherence to a minimum score in three areas: ownership, skills development, and enterprise and supply development. A business must score a minimum of 40 percent of its target in the each of these areas, or it will drop a BEE level.
Most companies outside the property sector must achieve a black ownership level of more than 25 percent to be considered transformed.
Business outside the property sector have generally been given 10 years to reach 15 percent black ownership targets while listed property companies have 20 years to achieve a reduced target of 7.5 percent.
Muller said the property sector was nowhere near its halfway mark of black ownership despite it being nearly 10 years into the process. “It is clear there is a lack of transformation in the sector. From a sustainability perspective, this puts the sector at a disadvantage.”
He added that there was little transformation in executive teams in the listed property sector today. He cited a recent International Programme Development study, which excluded dual listed and internationally domiciled companies, that revealed only 11 of the 78 listed property executive director positions were filled by black persons and only one was female.
“Dig deeper and you’ll discover only two of these black directors have risen to their positions as part of an established business. The others have come from black business and most of them on the basis of government backed initiatives.
“Transformation is about changing the status quo rather than diluting it. Black leadership is the most economical and effective way of achieving transformation, we should be seeing more.”
Growthpoint Properties previously criticised the Department of Public Works for giving the listed property sector the cold shoulder by not awarding companies in the sector any long term leases because the companies were not 100 percent black owned.
Norbert Sasse, Growthpoint chief executive, said at the time the department’s stance caused confusion because property owners started questioning why they should bother trying to comply with the charter.
Several listed property firms have sold office buildings they leased to the government to black-owned companies because they could not secure a long term renewal of the lease.
Estienne de Klerk, an executive director of Growthpoint and past chairman of the Property Loan Stock Association, which last year was renamed the SA Reit Association, and of the SA Property Owners’ Association, said on Friday the disregard by the public works department of the property charter in terms of the department’s leasing strategy had “massively undermined” the charter.
He added that it was difficult from a BEE scorecard perspective to have “one size fits all” across different industries. He stressed the real estate sector was not labour intensive and there were organisations with only a few people running the business with a huge amount of capital investment while local and foreign institutions owned 70 percent of the sector .