Amended BBBEE Property Sector Code

Adam Ismail

9 years ago

Entities of a certain size are considered to be exempted micro enterprises and thus deemed to be BBBEE compliant as a Level 4 contributor (100%).

These are entities or persons:

with an annual turnover of less than R10 million per annum (if services based); or
with a net asset value of less than R80 million (if asset based); or
estate agencies, brokers or valuators with an annual turnover of less than R2.5 million.

The 2017 Property Sector Code replaces the BBBEE Property Sector Code, which was published by the DTI on 1 June 2012 (2012 Property Sector Code).

The following are some key observations in relation to the 2017 Property Sector Code:

The ownership element ‘aims to address the low levels of black ownership’ in the sector and has set a black ownership target of at least 27% to be achieved for each property owning company. It also includes specific targets for ownership by black women, broad-based groups and black new entrants in order to score the maximum points possible for ownership.
The 2017 Property Sector Code has created a ‘normalisation formula’ to address the dilution of BBBEE shareholders in property listed companies due to frequent capital raisings that the industry sees. There is a formula, which counteracts this dilution in order to ensure no material prejudice to property companies in the listed environment due to the dilution of its black shareholding over time.
The generic scorecard in the 2017 Property Sector Code differs in relation to the allocation of points on the scorecard from the 2012 Property Sector Code.

A measured entity must achieve a minimum of 40% in all three priority elements, namely net value on the ownership scorecard, skills development and enterprise and supplier development. This was not a requirement of the 2012 Property Sector Code. Non-compliance with any one of these priority thresholds will result in the measured entity’s BBBEE status level being discounted by one level down.

In regard to non-compliance, measured entities must obtain at least 40 points under the 2017 Property Sector Code in order to be BBBEE compliant as opposed to the minimum of 30 points in terms of the 2012 Property Sector Code.

The 2017 Property Sector Code has been updated in a manner consistent with the principles in the Amended Generic BBBEE Codes which came into effect on 1 May 2015.