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The Property Practitioners Act and BEE – Ownership for QSE and Generic Enterprises

The Property Practitioners Act of 2019 (“PPA”) was signed into law by the President on 19 September 2019, with a recently defined commencement date of 01 February 2022. The PPA has as one of its main objectives the transformation of the property sector.

Herewith a quick recap for the reader (from previous articles):

Section 50 of the Act states that a fidelity fund certificate may not be issued to a person or entity that is not in possession of a valid BEE certificate.

This article deals with the Ownership requirements for Generic Enterprises by use of tables. For the reader’s info, a table for QSE enterprises is included too.

To obtain a BEE certificate is important to determine in which category your business falls.

QSE (R2,5 million – R35 million turnover). A QSE needs to go through a BEE audit and will need to have its status verified against scorecard verifying elements such as ownership, management, employment equity, skills development and others. QSE entities have lower targets and less stringent requirements compared to Generic entities. QSE entities which are 51% black owned will be exempt from going through a full BEE audit and can receive a level 2 BEE level via an affidavit.

Generic (R35 million and above turnover). A generic company has to undertake a full BEE audit with comparatively high targets for each of the elements.

The Ownership element, measures effective ownership of entities by Black people.

For a Generic Enterprise: 30 points on the scorecard (the total scorecard score is 117 points)

The maximum weighting points available under the Amended Property Sector Code, including Bonus Points are:

Generic Entities 132 (117 + 15)

CODE 100 OWNERSHIP GENERIC SCORECARDS – 30 POINTS

OWNERSHIP BONUS POINTS FOR GENERIC SCORECARD

There has been limited support by the sector of entrepreneurial development and both public and private sector disposal strategies have in general inadequately incorporated B-BBEE objectives.

The sector commits to utilise property disposals to increase property ownership amongst black people and to contribute towards the growth of sustainable enterprises. In pursuit of this commitment, when an enterprise engages in the above activity in the sector, it commits to target 35% of total disposals to Level One (1) to Level Three (3) B-BBEE enterprises which are 51% black owned over a five year period from the effective date of this sector code. The enterprises should be independent from the measured entity and the disposed assets must result in the creation of sustainable businesses or business opportunities in the hands of black people as well as the transfer of specialised skills or productive capacity to black people.

Contributions will be measured using a rolling 5 year period commencing on the effective date of the revised Codes of Good Practice being 2015. This means that the 35% target must be achieved at any time in a rolling 5 year period as a percentage of the total disposal of assets during that same period. A sale of fixed property may not be simultaneously counted towards the ownership score under sale of Assets, regardless of the fact that an actual business unit may have been sold.

In each year a sub-minimum of 20% of 35% i.e. 7% must be achieved before any bonus points are awarded.

Where greater disposal on any year are achieved, they can be carried forward as contribution to the next years.

The bonus points will be calculated for the organisation that make disposal in line with the above clauses.

For info, the QSE Ownership table is given below for comparison purposes with a Generic enterprise.

OWNERSHIP QSE SCORECARD – 27 POINTS

The following table represents the indicators and method for calculating score for Ownership used this statement:

A further article dealing with Skills Development will be published too.

Author CL Tonkin

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