By Sibonelo Radebe

Despite the reported fireworks, there's little to differentiate this charter from others     
 
Discussions during the drafting of the property sector charter were accompanied by rumours of fireworks and violent disagreements at the negotiating table. But when the draft appeared last week, it was hard to see what the fuss could have been about. It looked like any other charter document. 

The property scorecard has been designed to transfer 25% of the industry to black hands within five years. With that as the base, the charter looks like those of many other industries, some of which overlap with the property sector.  The argument for separate sector charters is based on the theory that empowerment should take into consideration sectoral differences. But it's often difficult to differentiate one charter from another. 

Andy Tondi, chairman of the property charter steering committee, says: "The property charter provides an effective framework to guide the industry in the transformation process." He adds that it will guide black economic empowerment and transformation in the commercial property sector, encourage property development in underdeveloped areas and promote employment equity.  Tondi says the response to the peculiar demands of the property industry is in the detail. The general industrial charter guidance codes provide guidelines with minimum targets.

Taking into consideration unique features of the industry, "we have had to give more emphasis to certain elements of empowerment compared to other sectors".  Elements that have received more emphasis include the disposal of assets to broad-based empowerment groups. Tondi says this area poses a unique opportunity for speedy empowerment. Owners of property portfolios constantly review investments, which leads to the frequent disposal of properties.

The draft charter proposes the award of nine scorecard points to groups which, through disposal of assets, allow transfer of property to empowerment groups.  A detailed specification on procurement further distinguishes the property charter, says Tondi.

"We needed to put emphasis on certain critical procurement areas of the industry. These include property and facilities management, which dominates procurement books of property companies."  Tondi says this will also connect to enterprise development of black entities who specialise in the property management area. "We have come up with a higher target that requires companies to procure 70% of their services from black-owned entities, compared with 60% in the codes," says Tondi. 

This has not deterred critics. They say key aspects of the charter are barely different from the codes and other charters. These include a target to transfer 25% of economic interest to blacks in the next five years. The target for black women is 10%, while the target for black board members is 40%. The charter also aims for 30% black senior management in the period. The target for black women is 10%. The black middle-management target is set at 35% and that of junior management at 50%.  Some observers say the property charter supports the view that SA should get rid of sector charters and monitor empowerment with the overriding codes. 

"This charter applies to the SA property sector, including but not limited to all property-owning and property services enterprises," says the property charter draft in defining its coverage. The problem with this definition is that it covers only part of what makes the property industry tick. 

Some would argue that US fast-food chain McDonald's is a property investment business masquerading as a food retailer. The company generates much of its income from rentals charged to franchisees. It owns many retail outlets around the globe. The 2004 McDonald's annual report showed that of R30bn total assets, property represented about 74%.  It's a similar story in SA for many retailers.

Should they subject themselves to the property charter or the codes? Like other property investors, they straddle more than one sector of the economy.  Significant chunks of commercial property are also owned by financial institutions, which have their own financial sector charter.  Discussions on property transformation, and the draft charter, have been useful in getting the industry to talk about its future. But it should be only the start of the discussion.