Last month, the Property Practitioners Regulatory Authority (‘the PPRA’) held a webinar on the current state of Black Economic Empowerment (‘BEE’) compliance within the property industry. During this virtual gathering, representatives from the PPRA asserted that the possession of a valid – and compliant – BEE certificate is a statutory prerequisite for the issuance of a Fidelity Fund Certificate (‘FFC’), without which property practitioners may not trade.
The Property Practitioners Act (‘the Act’) explicitly identifies the transformation of the property sector as a core objective. Stressing its commitment to inclusivity, the PPRA used the webinar to emphasise BEE compliance as a critical mechanism for transformation. Pursuant to its statutory mandate to promote the transformation of the property sector, section 50(x) of the Act specifies that the PPRA may refuse to issue a FFC to property practitioners who are not in possession of a valid BEE certificate. A valid BEE certificate, which is effective for the financial year in which the firm was rated and must be generated by an accredited verification agency, is thus a prerequisite for first-time applicants and those seeking to renew existing FFCs.
Crucially, the PPRA clarifies that the possession of a valid BEE certificate means being BEE-compliant. Until recently, the PPRA has only ‘partially implemented’ section 50(x) by accepting applications for the registration and renewal of FFCs without insisting on compliance with minimum BEE requirements. BEE compliance is determined in accordance with three categories: Exempt Micro Enterprises (those entities with an annual turnover of less than R2.5 million), Qualifying Small Enterprises or ‘QSEs’ (those entities with an annual turnover of more than R2.5 million but less than R35 million), and Generic Enterprises (entities with an annual turnover in excess of R35 million). Currently, the minimum level of compliance for QSEs and Generic companies is 40 rating points to secure Level 8 BEE status, with firms scoring below the 40-point threshold deemed non-compliant. Sole proprietors are automatically exempt from applying for BEE certification.
Previously, the PPRA issued FFCs without requiring qualifying entities to be Level 8 BEE contributors. The PPRA has since consulted BEE experts with a view to fully implement section 50(x) and ensure that property practitioners, who are at risk of being declared non-compliant, are able to obtain their FFCs on registration or renewal. On 10th April 2024, the PPRA issued a notice reminding property practitioners of the requirement of possessing a valid BEE certificate, and that failure to adhere ‘may result in the inability to obtain or renew a [FFC]’. According to the PPRA, the next round of FFCs will be issued in late 2025. Those entities which earn above the stipulated threshold and do not meet minimum BEE requirements will not be issued with FFCs.
In the interim, industry bodies are engaging with the PPRA and consulting affected role players to reach a workable solution that will both lessen the pejorative financial impact on the industry and meaningfully and constructively promote transformation. Other stakeholders have indicated that they will pursue legal action, if necessary.
Watch the PPRA’s webinar here.
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