Weekend Argus (Saturday Edition)
Structural and societal barriers hinder transformation of property industry
TRANSFORMATION in the South African property industry is a burning issue, and professionals agree it must be addressed.
However, some have highlighted challenges in achieving the targets set about by the Amended Property Sector Code. These include both structural and societal barriers.
Announcing the approval of the code last month, Trade and Industry Minister Rob Davies said one of the aims was transformation of the industry as it was estimated that only 13% of the country’s 38 000 estate agents were black.
The amended code has set a black ownership target of 27% for property-owning companies.
However, while agreeing transformation is needed, the Real Estate Business Owners of South Africa Association (Rebosa) says the figures “do not make sense”, and without the facts, the targets may not be achievable.
“The minister is correct that the majority of estate agents are white, and Rebosa recognises the necessity of pushing the transformation agenda to address this,” says Rebosa chief executive Jan le Roux.
“It must, however, be noted that the numbers don’t always make sense. While the minister says 13% of 38 000 agents are black, another quoted figure refers to 17% of 30 000 agents. We have been informed PrivySeal have verified the legitimacy of 30 000 agents.”
Le Roux says the previous chief executive of the Estate Agency Affairs Board had been quoted saying 15 000 estate agents were not registered.
“The chief executive confirmed that 85% of estate agencies had a turnover of R2.5 million per annum and therefore would not qualify for BEE certificates. This statistic proves the majority of estate agencies are very small businesses – often sole proprietors or couples. These factors make the employment of additional agents, black or white, problematic.”
Le Roux says the property code in respect of residential property agencies has “not taken the nature of the industry into consideration”.
“Rebosa believes real strides can be made in transformation if a number of compliance issues can be addressed.
“Given that 90% of the population is black, one can assume 90% of entrants into the industry should be black, hence high entry levels and compliance issues affect black people the most.”
Le Roux says registration fees are high at R1 200 for a sole proprietor, and continu- ous professional development fees are high at R2 500 per sole proprietor. Employed agents pay R2 000, but entrepreneurs wanting to work for themselves have to pay a higher fee.
Trust accounts are required, even if dormant, to be audited by chartered accountants at a cost of about R15 000 a year. Business accounts must also be audited at a cost of about R15 000 a year.
There are other challenges to transformation in the industry, says the Youth in Property Association (Yipa), which promotes the active participation of young black people in the property sector.
Challenges range from structural barriers, such as availability of finance, to societal barriers like lack of awareness of the sector among black people.
The initial cost of entering the industry is a barrier, says Tozamile Macozoma, vice chairman of Yipa.
“The initial requirements to become an estate agent include having a car and cellphone. One’s own transport means the ability to finance and maintain a vehicle and pay for petrol, with no guarantee of income for months, due to commission-based earnings.
“Many white agents or non- disadvantaged individuals begin with financial support from families, have access to a family vehicle, and cut costs by living at home. Com- mission-based income makes it unfeasible for many black people, who often support extended families every month.
“Upon graduating, black youth want a steady job with a pre- determined monthly salary. The risks of a commission- based income are too high,” says Macozoma, adding that these barriers are as insurmountable for black people without tertiary education qualifications.
Black youth interested in the sector would rather enter with a property studies degree which provides opportunities for fixed salaries.
Most real- estate companies and franchises are familyowned, meaning “the wealth creation, resources and referrals of business stay pooled in a reservoir of white families”.
“This makes it difficult for new entrants, especially black entrepreneurs. A black-owned agency or agent in Sea Point faces great competition against a white-owned agency or agent who grew up in the suburb with their resultant networks.
“White clients are also not very receptive to having a black agent sell, rent or manage their home or investment.”
The property sector also has a “stigma” among black people and is not highly regarded as a career.
Macozoma says Yipa’s concern with the charter is how companies will be held accountable for failing to adhere to the code.
“The government and private sector need to work together to create solutions around commission- based incomes and barriers to having a car and cellphone.”
Macozoma believes the charter and the property sector focus too much on a topdown rather than a bottom-up approach and solution for transformation.