Being able to understand BEE compliance and the 2017 Property Sector Code is very important for estate agents, franchisees and franchisors.
Even though it may not personally affect you, it is still essential to know why BEE was introduced and what it means for the country.
Put simply, in order to have access to government contracts, rights or spend, you will need to be BEE-compliant. To do this, your business needs to meet the criteria for racial transformation.
Your business can build up its level of compliance based on points accumulated for meeting that criteria.
While it is not obligatory to be BEE compliant, you will need to be if you wish to have access to companies which require BEE compliant contractors.
There is a code of good practice which applies to each sector, although if there isn’t one available for your specific sector then you should apply the amended generic code.
In June 2012, the code of good practice used for the property sector was set up. This applied new changes to calculations of BEE compliance score for this sector.
However, it is merely a revised version of existing codes and in that year there were amendments made to the generic codes of 2007. These amendments were made in hopes of achieving the desired transformation within the deadline period of 10 years.
Now in order to become BEE compliant, there are a lot stricter criteria to meet. How, though does this affect the property sector?
Well if you wanted to source a rented premises for the government, you will only be granted that mandate if your BEE level is high enough.
But, if this is not something you intend on doing then you as an agent or agency are not obliged to follow the BEE laws. It is, however, considered the right thing to do.
It is worth considering the ripple effect regarding this subject. While it is not necessary for a company to be BEE-compliant, this may affect them in instances where they need to avail of services from BEE-compliant businesses.
As such, companies who do business with the government or those dependant on government would seek to only deal with companies that are following these compliance laws.
That ripple effect could thus extend far down the chain and could prevent, for example, a company from supplying stationery to you.
As previously mentioned, if an estate agency isn’t functioning in a sector where customers or clients don’t require BEE compliance, then they are not legally obliged to have it.
This is because when selling directly to the public they don’t really care about your BEE status.
Rather, they are interested in your favourable commission structure and expertise. Estate agents can piggyback off of the BEE-compliant status of the agency they work for.
Which means that they don’t have to individually meet BEE compliance. Of course, this means that if an agency wishes to have dealings with the government or corporate South Africa, then it will need to be BEE-compliant.
There will most likely be a large gap between the rich and poor of South Africa for a few years, compliance aims to try as best as possible to even out the chances for everyone.
Some companies choose to be BEE-compliant in order to benefit their business model, while others are aiming for one that represents the demographics of the country.
Building the country up has been the main focus for many companies and industries. And it while it will take a lot of work, such industries, including the property sector, can benefit from embracing the transformation.
Small businesses are granted BEE level 4 which means they are 100% compliant. This provision was extended to property service businesses which includes estate agencies, brokers and property valuers.
If such businesses have a turnover of less than R2.5 million then they are BEE-compliant.
However, if the turnover is more than R2.5 million then a qualifying small enterprise scorecard will be needed for them to earn BEE points.
And if that value is greater than R35 million then, the company will need to comply with the full scorecard in order to be compliant.
Contact us for expert legal advice.
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