Transformation in the property sector is absolutely necessary – but achieving it is unlikely to be possible unless the state provides some form of mentoring subsidy for trainees, says Tony Clarke, Managing Director of the Rawson Property Group.
Recapping on what has been gazetted on this subject thus far, Clarke said that the Property Sector Charter, as published in the June 2012 Government Gazette, requires that the entire property industry must abide by certain new rulings.
These stipulate that by 9th February 2017 all property agencies and companies with an annual turnover in excess of R2,5 million must be submitting financial BEE certificates approved by the IRBA (the Independent Regulation Board of Auditors) each year.
Micro enterprises, i.e. those with turnovers below R2,5 million, do not have to submit BEE Certificates, but they have to apply for and obtain an Exemption certificate. This will automatically entitle them to B-BBEE recognition at Level 4, and if their black ownership exceeds 50% at Level 3 (these are fairly high ratings).
If an agency is not exempted and its turnover is from R2,5 million to R35 million it will be classed as a QSE – a qualifying small enterprise. Agencies with turnovers above R35 million will be classified as Large Enterprises.
QSEs have to meet only four of the eight components on the B-BBEE score card, but Large Enterprises have to meet all eight conditions that range from ownership and management control, which receive high points, to socio-economic and economic development. Each category carries its own score card weighting its Code of Good Practice that is set out clearly and also weighted.
Clarke said that the chief difficulty facing the property sector in achieving transformations is not reluctance on the part of the brand owners, but the fact that the new recruits are expected to live purely on the commissions they earn – as is traditionally the practice in all estate agencies.
“This, in effect, means that a new agent still undergoing training does require considerable financial support for anything from three months to a year. This is simply not possible for the majority of those coming to the industry from previously disadvantage backgrounds.”
If the real estate sector is to adopt the new code wholeheartedly, said Clarke, it will have to accept that its entire remuneration system, will now have to be changed – at least in the initial years of the agent’s employment.
“To meet the objectives of the new transformation code,” said Clarke, “it will almost certainly be necessary to pay those from disadvantaged backgrounds, starting out as agents and undergoing training, a small monthly salary plus a much reduced commission on any sales achieved if they are to survive. We have to realize that even in the unlikely event of their signing up sales successes early on, it takes three months for a property transfer to go through and during that time, under the current commission only system, traditionally no remuneration is customarily paid out. This condition would be a barrier to someone coming to the industry without resources.”
The sums of money required to pay new recruits in this way before they are self-supporting would, said Clarke, be completely beyond the industry’s ability to meet.
“This transformation will, therefore, have to be government subsidized,” said Clarke. “However the subsidies need not always be too extended – if and when a new recruit does start becoming successful he could revert to the standard commission system which, even under training conditions, can be quite remunerative.”
Asked if subsides might not lead to incompetent staff being paid small salaries for a year or longer despite achieving very little, Clarke said that South Africa’s bigger estate agency groups have efficient selection tools and performance monitoring systems that help them to weed out unsuitable applicants at the start and to assist young recruits to make good progress in their training.
However he repeated his warning that the amount of cash required for a full-on transformation campaign is too great for the property sector to carry on its own.
“No senior person with whom I have dealings in the property sector disputes the need for transformation, but, as always, those advocating it need to be reminded of the very serious financial realities which would accompany such a radical change,” said Clarke.
