By Vuyiswa Ramokgopa
As part of its mandate to transform the sector, the Property Practitioners Regulatory Authority (PPRA) recently announced a proposal that all real estate agents should meet a level 8 Black Economic Empowerment (BEE) requirement to be eligible to receive a Fidelity Fund Certificate certificate.
While level 8 is the lowest level of BEE compliance possible, with level 1 being the highest, many small and medium-sized entities have expressed concerns about the new proposal, stating that failure to comply could lead to business closures.
It’s no secret that the fiercely competitive nature of the real estate market presents significant hurdles for black real estate brokers seeking entry into profitable sectors, hindering their growth potential and undermining principles of inclusivity and fairness. If BEE is not the answer, what can be done?
The National Property Practitioners Council (NPPC) is at the forefront of advocating for transformation within the real estate industry.
In a recent proposal to the PPRA, the NPPC outlined steps that can be taken now, without further damaging the industry to effect lasting change.
We support the PPRA’s desire and legal mandate to promote transformation within the real estate industry. Our proposal aims to demonstrate that there are actionable steps that can be taken now, with a lasting impact.
Where to get the funding from
Transformation will cost money. And the NPPC’s proposal suggests sourcing the funds from the Property Sector Transformation Fund (PSTF), which was established in accordance with Chapter 4 of the Property Practitioners Act (PPA), which mandates the creation of the fund, as well as declaring that it must be used to oversee transformation through the implementation of diverse programmes, while simultaneously monitoring the sector’s transformational progress.
In terms of section 39 of the PP Act and Regulation 41.29, the Property Practitioners Fidelity Fund should be able to transfer around R80 million to the PTSF. This will provide adequate funding to make a difference.
What are the challenges to transformation in the real estate industry? These challenges include the competitive nature of the market, the difficulty for black real estate brokers to enter profitable sectors, and the potential closure of small to medium-sized agencies due to new regulatory requirements.
How can these challenges be met?
The NPPC has identified 10 areas that present challenges to transformation, namely market access, soft skills, networking skills, compliance/red tape, cash flow, resources, principalisation, recruitment, acquisition of going concerns, and funding.
Market access
MLS: Black agents do not have the financial means to pay the once-off joining fee, followed by a monthly membership fee with the multilisting service (MLS). MLS operations in certain areas control vast numbers of property mandates, excluding many black agents. There also are instances where agents who can pay the requisite fees face discrimination and are not given access.
We believe that the PSTF could be used to provide funding for black agents to join the MLS, while the PPRA can investigate and enforce anti-discriminatory practices within the MLS.
HOAs: Black agents are excluded from participating in marketing properties in gated/security estates through high costs fees for “accreditation” and other guises employed by HOAs. We are pleased to note that the PPRA has already begun employing the remedy to enforce section 63(1) of the Property Practitioners Act read with Regulation 35.1, in which the human settlements minister declared these business practices undesirable and prohibited.
Soft skills and networking skills
The absence of mentorship networks or support systems specifically designed to nurture the talents and capabilities of black estate agents can exacerbate historical feelings of inadequacy and hinder their ability to navigate client interactions and negotiate deals effectively. Consequently, without adequate support and resources to bolster their confidence and refine their soft skills, black estate agents face considerable challenges in fully realising their potential and achieving success within the competitive real estate landscape.
The PTSF can fund training currently available at training institutions, and the PPRA can negotiate the creation of appropriate courses when none are available, as well as bulk discounts for training and conferences.
Compliance challenges/red tape
Navigating compliance requirements and bureaucratic processes present a significant hurdle. Overcoming this challenge necessitates a multifaceted approach, including streamlined regulatory processes and providing educational resources on industry regulations. The PPRA is in a position to streamline bureaucratic processes and eliminate unnecessary red tape to facilitate compliance.
Importantly, we encourage the PPRA to launch an amnesty programme with a non-negotiable cut-off date enabling those currently trading illegally to come forward and comply. The “illegal businesses” are to be registered and allowed to continue trading, with the PPRA providing a principal to oversee trading until compliance has been achieved. Immediate steps are to be taken on non-compliance/adherence to the code of conduct.
The PTSF can be used to fund the appointment of care-taking principals and all qualification requirements of said individuals. The PPRA would need to write-off all outstanding fines/penalties due to non-compliance to facilitate the legalisation of black property practitioners after the launch of an amnesty, using the PTSF to fund payment of all outstanding fines/penalties due to non-compliance.
Cash Flow
Cash flow is the lifeblood of any business because it provides essential resources for day-to-day operations. Black estate agents, like any entrepreneurs often encounter hurdles in sustaining a steady and robust financial flow.
The PTSF would fund the growth of black enterprises by approving business plans submitted by black individuals, which must be reviewed annually.
Principalisation and recruitment
Qualified black estate agents who want to launch their estate agencies lack the necessary funding.
This is partly because property sales have been commission-driven for decades, and all attempts to institute fixed salaries or stipends came to nought. The results from the PPRA’s first “One Learner One Agency” programme were dismissed, and came at the expense of almost R40 million. This has a double impact on new entrants to the industry in that it takes time to achieve success in sales and then four to six months before a transaction is registered, leading to the payment of commission.
The PTSF can be used to fund business owners to enable them to assist new entrants with cash-flow requirements. Business owners can use these funds to capacitate new entrants in technology, travel connectivity etc. They could be afforded a bonus, ie the writing-off of loans applicable to this endeavour should the new entrant after two years have obtained the necessary qualifications and an FFC.
Unlike the one learner one agency programme, this will make the principal/business owner responsible for making better choices in appointing potential agents and ensuring their continued success.
Making the PTSF work today, but also in the future
The PTSF shouldn’t be used only for the current generation. To ensure that the fund is maintained for future generations, the NPPC recommends that the PPRA appoints a fund manager and constitutes a funding committee consisting of a PTSF manager, a successful and prominent real estate business owner, and a representative from the PPRA (or two from each). Appointing a NPPC nominee would ensure industry support. This committee can determine requirements concerning business plans, applications etc.
The PTSF is enshrined in the PPA, and significant funds have been allocated. Three years into the PPA’s enactment, it’s time to use those funds to implement tangible transformation. We believe that the suggestions outlined by the NPPC provide a far more realistic roadmap to transformation as opposed to enforcing an expensive, time-consuming, bureaucratic tool as a quick-fix, and at the expense of the very industry it aims to transform.
Vuyiswa Ramokgopa is chairperson of the National Property Practitioners Council.
BUSINESS REPORT