Real Estate Investor Magazine South Africa December - January 2014 | Page 40

SMART MOVES

BY GINA MENITJIES

New Legislation Challenges
Adapt and you will thrive

R

eal estate business organisation Rebosa’s
chief executive officer, Roy Leigh, says
that while there is overwhelming support
for the need to transform the residential real
estate sector, it is fraught with challenges. There
is an alarming lack of understanding of how
the industry works on the part of the Property
Sector Charter Council (PSCC) and there is
no cognisance of the fact that the industry is in
the midst of a significant slump and unable to
accommodate a growth in agent numbers, let
alone attract further investment.

Small Entity) less than R35 million and a Large
Entity, a turnover in excess of this. There is
some debate around this, and the PSCC looks
set to raise this to between R2.5-R5 million for
EME’s and to R10 million for an EME and
R50 million for a QSE.

The reality is a global and national market
that is growing extremely slowly or in a decline
with a domestic outlook that is, at least for the
foreseeable future, rather uninspiring. The
prolonged economic downturn and embattled
mortgage lending landscape continues to
significantly impact on the industry with overall
sales volumes, agent numbers and the GDP
contribution still down by about 40% since
2007/8, says Leigh. As an industry, real estate
is grappling with a number challenges, not least
of which is the introduction of around ten new
pieces of legislation that affect our businesses
quite dramatically.

The Code of Good Practice covers six essential
elements (Ownership; Management control
and Employment Equity; Skills Development;
Preferential Procurement and Enterprise
Development; Socio-Economic Development;
and Economic Development) and, while still
‘ just codes of good practice’, the real fear is
that these become mandatory. This will be a
significant challenge for small and mediumsized businesses that more than likely will have
to close their doors as they just do not have the
resources to handle such onerous obligations.

The real challenge therefore is how do we
adapt and incorporate all of these new measures
while still sustaining, never mind growing,
our current businesses to accommodate the
aspirations of the previously disadvantaged.
One of the most immediate challenges insofar
as transformation is concerned, is defining what
level of turnover is appropriate for an estate
agent to fall under the definition of an exempt
micro entity (EME). Under the previous Codes
of Good Practice (BEE guidelines), an EME
(Exempt Micro Entity) had to have a turnover
of less than R2,5 million, a QSE (Qualifying
40

It needs to be borne in mind that about 80%
of real estate businesses are in fact small and
medium-sized enterprises; quite often one and
two-man operations. Raising the level will have
a significant impact, he says.

Leigh says that rather than introducing
what amounts to a ‘top-down’ approach to
transformation, R EBOSA would urge a
‘bottom-up’ approach. For most sellers and
buyers, transformation unfortunately ranks as
a rather low priority; they are more concerned
with the selling and buying of a property and
working with a professional estat e agent that is
credible and skilled.
There is some indication that the Estate
Agency Affairs Board (EAAB) will be funding
a development programme for up to 10 000 new
BEE candidates and that this would include
basic salaries paid by them. Leigh says that
while this will be an opportunity, providing

December January 2013/4 SA Real Estate Investor

that agencies select judiciously and that new
entrants understand that it takes many years
to earn a decent income, the chances of failure
is high.
While incentives such as this will assist in
drawing candidates to the industry and provide
training, the job of an estate agent is still vastly
misunderstood, he says. School leavers are often
attracted to the industry under the misguided
notion that they can earn huge commissions
for very little effort. In fact, right now, the
low levels of mortgage granting is severely
impacting the financial position of estate agents
and is certainly not conducive to attracting top
class candidates to the industry, adds Leigh.
Statistically, over 90% of all estate agents fail
within the first year as they were not suited to
the profession in the first instance, nor did they
grasp what it takes to succeed. While many
previously disadvantaged candidates have
entered the profession and are successful, just
as many have unfortunately failed realising that
this is not a profession for mere wage earners,
says Leigh.
The Property Sector Charter (PSCC) is an
integral component of BEE legislation that is to
be enacted in the next year. What we need is a
workable solution with legislative measures that
will give effect to meaningful transformation
t hat enables, rat her t han ha mpers t he
sustainability and growth of the sector, says
Leigh. The Property Sector Charter Council
needs to engage and work with the industry;
operators that have critical insight into how the
industry works to then flesh out a strategy that
develops and recognises that estate agents are
entrepreneurs.

RESOURCES

Rebosa

www.reimag.co.za