Big turn for BEE in South Africa’s property sector – BusinessTech

Business group Sakeliga has claimed victory in one of three major issues facing property practitioners in South Africa, reporting that the Property Practitioners Regulatory Authority (PPRA) has reversed a decision to enforce high-level BEE requirements.

The group said that the PPRA had written to industry body Rebosa walking back on a change communicated since April.

The issue relates to a new policy that came into effect in April 2024, where Fidelity Fund Certificates (FFCs)—required for property practitioners to operate—would be denied if applicants did not meet BEE requirements.

The need for a BEE certificate has been part of the Property Practitioners Act since it was enacted in 2022; however, until April 2024, FFCs were issued based on the requirement of having a BEE certificate, not necessarily being BEE compliant.

In April, the PPSA reminded practitioners that BEE compliance was required and that FFCs would not be issued unless they met the “accepted level of compliance” of 40 points or more (BEE Level 8).

“You will not be issued a BEE certificate if you score below 40 (making your BEE certificate non-compliant),” it said at the time.

The PPRA described the policy as “non-negotiable”.

“It is imperative to underscore that compliance with regulations such as those set forth by the PPSA is non-negotiable,” it said.

Now, Sakeliga said, the PPRA has received legal advice that the initial interpretation may be correct.

“The letter relayed that the PPRA had sought legal advice and would no longer be requiring level 8 B-BBEE certificates with new FFC applications.

“Its counsel had confirmed what our legal team had spelt out in letters of demand to the PPRA: that the Act’s reference in section 50(a)(x) to a valid BEE certificate cannot be construed to mean a certificate of BEE compliance – not at level 8 nor at any other level,” Sakeliga said.

The group noted that the PPRA has not a public statement about the policy shifts, which could fuel confusion.

Before the apparent turn, property practitioners who failed to renew their FFCs by the specified deadline of 31 October of the relevant year, while still actively practising, faced penalties.

The apparent shift in policy was met with immediate backlash by the sector, with property groups raising concern over the impact on small businesses, sole proprietorships, and “one-man” or “mom-and-pop” operations.

While industry bodies like the Real Estate Business Owners of South Africa (Rebosa) opted to consult with the PPRA over the policy, others, like Sakeliga, pursued the legal route.

Sakeliga said that, even though the most urgent aspect of the regulations has been walked back “for now”, two other problems remain:

First, there is the Act’s requirement that not only estate agents, but all property practitioners must have a fidelity fund certificate. The group said this should be reversed as it gives the PPRA reach over thousands of businesses.

Second, the Act still stipulates that fidelity fund certificates may only be issued to applicants with a valid B-BBEE certificate.

“At least for now, the PPRA is reverting back to accepting that ‘valid’ cannot be taken to mean ‘compliant’ with B-BBEE, yet the certification demand is itself an unjustified, costly, and harmful infringement on the freedom to do business and serve society.

“The certificate requirement serves no legitimate government purpose, since there is no relationship between fulfilling the inherent requirements for a fidelity fund certificate and having a B-BBEE certificate or not,” the group said.

PPRA responds

The PPRA is registering and issuing FFCs to all sectors of the property industry within its regulatory scope, and the BEE certificate required from all property practitioners when applying for an FFC is required to be valid but not necessarily compliant in terms of the applicable legislation.

“In order to give effect to our transformation mandate, the PPRA will launch compliance programmes in terms of section 20(1) and 20(3) of the Property Practitioners Act,” it said.

The group said that there is “no policy to withdraw” or put on hold, as it were, given that it has not yet taken an official stance on how to interpret legislation.

“The interpretation of the use of the word “valid” and whether it should be interpreted in the narrow sense of ‘properly issued’ or in the wider sense of ‘compliant’, is the legal question which is being addressed and which will found the PPRA’s policy on implementing section 50(a)(x),” it said.

However, this does contradict the communication to Rebosa in April, where the group specified the level 8 BEE compliance was necessary for certificates to be issued.

The PPRA confirmed that no certificates have been denied so far on the basis of this requirement.

Read: Storm brewing over BEE in South Africa’s property sector