How will the amended BBBEE property sector codes affect businesses?

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Entities of a certain size are considered to be exempted micro enterprises and thus deemed to be B-BBEE compliant as a Level 4 contributor (100%), these are entities or persons:

  • with an annual turnover of less than ZAR10 million per annum (if services based); or
  • with a net asset value of less than ZAR80 million (if asset based); or
  • estate agencies, brokers or valuators with an annual turnover of less than ZAR2.5 million.

The 2017 Property Sector Code replaces the B-BBEE Property Sector Code, which was published by the DTI on 1 June 2012 (2012 Property Sector Code).

The following are some key observations in relation to the 2017 Property Sector Code:

  • The ownership element ‘aims to address the low levels of black ownership’ in the sector and has set a black ownership target of at least 27% to be achieved for each property owning company.  It also includes specific targets for ownership by black women, broad-based groups and black new entrants in order to score the maximum points possible for ownership. 
  • The 2017 Property Sector Code has created a ‘normalisation formula’ to address the dilution of B-BBEE shareholders in property listed companies due to frequent capital raisings that the industry sees.  There is a formula which counteracts this dilution in order to ensure no material prejudice to property companies in the listed environment due to the dilution of its black shareholding over time. 
  • The generic scorecard in the 2017 Property Sector Code differs in relation to the allocation of points on the scorecard from the 2012 Property Sector Code  

 

  2017

Property Sector Code

2012

Property Sector Code

Ownership Code 100 30 points Code 100 20 points
Management Control Code 200A 9 points Code 200 10 points
Employment Equity Code 200B 13 points Code 300 15 points
Skills Development Code 300 19 points Code 400 15 points
Preferential Procurement Code 500 20 points
Enterprise Supplier Development Code 400 39 points Code 600 10 points
Socio-Economic Development Code 500 2 points Code 700 15 points
Economic Development Code 600 5 points 15 points

A measured entity must achieve a minimum of 40% in all three priority elements, namely net value on the ownership scorecard, skills development and enterprise and supplier development. This was not a requirement of the 2012 Property Sector Code. Non-compliance with any one of these priority thresholds will result in the measured entity’s B-BBEE status level being discounted by one level down. 

In regard to non-compliance, measured entities must obtain at least 40 points under the 2017 Property Sector Code in order to be B-BBEE compliant as opposed to the minimum of 30 points in terms of the 2012 Property Sector Code.

The 2017 Property Sector Code has been updated in a manner consistent with the principles in the Amended Generic B-BBEE Codes which came into effect on 1 May 2015.

Adam Ismail, Webber Wentzel Partner 

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About Author

Bontle Moeng is the Founder and Managing Director of BizNis Africa. Moeng has spent 16 years working in the digital and online media industry across Africa. She applied her trade at True Love magazine prior to discovering her passion for Investment news in key sectors across Africa. Moeng previously worked for ITWeb, Starfish Mobile Technologies, ITNewsAfrica, AVATAR Agency, eNitiate, Global Interface Consulting and Havas Johannesburg. Her primary focus is to provide solid and valuable content on investment opportunities for the ICT, Energy and Mining sectors across Africa. In addition, the online news publication assists global companies to expand their presence in Africa. Email: news@biznisafrica.co.za

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