Entities of a certain size are considered to be exempted micro enterprises and thus deemed to be B-BBEE 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 B-BBEE 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 B-BBEE 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 B-BBEE 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 B-BBEE 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 B-BBEE Codes which came into effect on 1 May 2015.
(by Adam Ismail, a Partner at Webber Wentzel)