Storm brewing over BEE in South Africa’s property sector

Business group Sakeliga says it is preparing to launch a legal challenge against the Property Practitioners Regulatory Authority (PPRA) over the latter’s BEE enforcement policies that could see businesses forced to shut down.

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.

“PPRA plays a vital role in ensuring compliance, and it is incumbent upon all industry stakeholders, including REBOSA, to proactively work towards meeting these requirements,” said Ramaili.

Property practitioners who fail to renew their FFCs by the specified deadline of 31 October of the relevant year while still actively practising face 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) have opted to consult with the PPRA over the policy, others, like Sakeliga, are pursuing the legal route.

The groups hosted webinars on the issue in June, where Rebosa said that consultations with PPRA have already led to positive changes in the sector—such as the scrapping of historical penalties—which makes it hopeful that costly and time-consuming legal action can be avoided.

However, it still remains an option.

Sakeliga, meanwhile, has been eyeing legal action for some time, describing the policy as unlawful and an overreach by the government to take control of the property sector.

Legal storm brewing

According to Sakeliga, the PPRA has confirmed to it that its policy still stands and that its board is expected to deliberate on the matter.

As a result, the group has issued a final letter of demand to the PPRA, demanding that the authority commit to reversing the policy, failing which it would launch legal action.

“This will include, among other things, an application for judicial review of the PPRA’s decision, over and above any further constitutional or other challenges regarding the validity and constitutionality of the Property Practitioners Act,” the group said.

Sakeliga said that the demand for a BEE certificate and/or affidavit—regardless of the BEE level—is a “crucial juncture for the industry since it seeks to normalise unacceptable political interference”.

“BEE has nothing to do with a candidate’s suitability to receive an FFC and be a ‘property practitioner’ and should, therefore, not be entertained as a requirement for FFCs.

“The requirement of a BEE certificate and/or affidavit represents a Trojan horse by which the state is introducing political licensing for economic participation,” it said.

BusinessTech contacted the PPRA for comment on the threat of legal action, but the group did not respond by the time of publication.

source:Storm brewing over BEE in South Africa’s property sector – BusinessTech