SAIBPP’s campaign, as reflected in a recent newsletter, is to create an awareness to aspiring and potential black entrepreneurs , of key Government and State Owned Organisations with the potential to unlock BEE opportunities. These institutions include the National Department of Public Works which in its role of administering state owned immovable property has assets under management of more than R120bn. Other names in the picture are Transnet, Intersite, the SA Post Office, Joburg Property Company etc. See later sections for potential opportunities in the broader public sector.
Together with skills development, the call for the revival of the PPP’s will form the core of a message to be carried in the forthcoming SAIBPP annual convention. To mark SAIBPP’s 12th year anniversary, the convention is to be held in Johannesburg on the 30th - 31st of July 2008.
SAIBPP was established in 1996 by a group of black property professionals to promote transformation in the real estate sector of the South African economy. The organisation has grown to play a significant role in crucial transformational matters including forming part of the process which produced the property sector transformation charter.
While a lot has been achieved in the past twelve years, there remains serious challenges facing the transformation agenda in the property industry, says SAIBPP president Nyameka Madikizela. A significant portion of activity in the industry remains in the hands of white players while our members and black players in general continue to struggle on the sidelines, she says. "Our black practitioners are still frustrated and cannot break the glass ceiling that continue to exist in the industry," she says.
That means black practitioners have to a large extent missed out on the receding property boom seen in the past 10 years or so.
"Its crunch time," says Madikizela. Its now or never, she says.
PPPs programmes have long been touted as thee magic bullet for SA’s economic redistribution programme but the concept is yet to take off in a meaningful way, more so in the property industry. And yet the few projects which have trickled in over the past few years, came to show the unquestionable strength of PPP’s in unlocking economic value and mainly BEE value.
In the face of state facilitated BEE programmes such as Built Operate and Transfer (BOT) and leaseback sales, endemic BEE challenges such as funding pale away into insignificance.
SAIBPP’s intervention in the PPPs space will be two fold. In addition to engaging relevant stakeholders, the institute plans to provide a facilitative platform where its members can network and engage PPP’s opportunities. Our membership base is mainly made of people who have been denied opportunities to run and manage operations in the past, says Madikizela. We can override that weakness through alliances and partnerships, she says. We edge people break out of their silos, she says. The challenge facing us requires of us to work together rather than compete," she says. “During the month of March, SAIBPP launched its SAIBPP Champions Initiative, where individuals nominated by its Board are to be the voice of black business, within the property sub-sectors. This was featured in the June Commercial and Industrial Property News. The strategy encourages coalitions among black business and individuals”, says Madikizela. SAIBPP will also campaign for improved flow of information. Poor flow of information together with abuse of power by corrupt officials may come to defeat the potential effects of PPP’s by limiting its opportunities to a few individuals. We need to ensure that the process is fair, says Madikizela. Corruption must be nipped in the bud, as it will only promote elitism rather than competition between black business and individuals, she says. “There seems to be an underlying dissatisfaction with delivery, by Government, on empowerment deals. Corruption will only increase the snippets of resistance we are witnessing with the well talked about xenophobia”, she argues further
"We are inclined to look more towards the state for BEE opportunities for our members who have been frustrated by the largely pedestrian pace of transformation in the private sector," says . That view comes as an indictment to the private sector which has through the property sector transformation charter committed itself to BEE.
One has to look at the JSE’s property sector to comprehend what Madikizela is on about. While it should not be treated as a proxy of the entire property sector, the listed property sector of the JSE offers a sobering view of how some of the key industry players have treated empowerment. For that matter, the BEE picture of the listed property sector could be better than the broader picture because it is subject to higher level of public scrutiny. Privately held property portfolios can continue with business as usual away from the public eye.
The BEE credentials of JSE listed property funds lags other sectors of the SA’s equities’ market. The progress has been slow and only half of the listed property companies have concluded BEE deals despite the conclusion of the property sector transformation charter, says Thabo Ramushu an executive of black owned property asset management firm Meago. Of the companies that have concluded BEE deals none of them have concluded the maximum 25% of the equity ownership as required by the charter, says Ramushu.
Another depressing picture emerges from the figures released recently by the Department Public Works which is one of the largest property trader in the country. The department has set its eye on using its property portfolio to facilitate BEE in the property industry. After years of trying to entice traditionally white establishments into BEE, the department seems to have lost patience and is putting in place stronger BEE measures. Current figures show only 10% of its business (—mainly lease deals— is accounted for by BEE players.
A combination of factors have colluded to frustrate transformation in the past few years. These include a lacklustre approach to empowerment undertaken by many of our counter parts in the industry, says Madikizela. Many have no desire to transform which makes the environment with high barriers of entry even more difficult for emerging black entrepreneurs, she says. Until they are incentivised to do so, there will be no transformation in the sector, she says. There is also the funding hurdle which bedevils emerging black property entrepreneurs. With no track record to speak of, no collateral let alone cash, the aspirations of many emerging black entrepreneurs remain just that, aspirations.
Madikizela also points towards the culture of entitlement among some black players as a contributing factor to the slow pace of transformation. "We need a new kind of entrepreneurship," she says. We need individuals who are prepared to go out there and take risk as opposed to hoping for a windfall from playing a passive BEE partnership approach. This view flies in the face of a trend which has come to dominate South Africa’s economic redistribution programme, BEE. The programme has been reduced into passive equity transfer deals which in many cases offer little economic value let alone exposure and experience of how these assets are managed. BEE deals in the property industry tend to go to BEE high flyers who are nevertheless newcomers in the property industry. Our members feel that this is because white corporations would prefer individuals who would take them head-on. A few of us have been offered positions where we are not supposed to fight the process, even if it opposes the very principles of empowerment, only promoting affirmative action with no real participation, argues Madikizela.
The only way to make a meaningful break through is by skilling ourselves so that we are not taken for a ride in these headline catching BEE, but largely meaningless deals, says Madikizela. We need to engage in meaningful partnerships where all parties come to the table to add value, she says.
That is why SAIBPP has also pledged to step up its skills development efforts.
"If we are to succeed with the BEE project in the property industry, we need to make it our business to acquire enough depth of knowledge," says Madikizela. In order to move the transformation agenda into another level, added Madikizela, we need to let go, the culture of entitlement which has been rampant in the BEE space. A strong skills base which allows for innovation will have to be our answer particularly in the prevailing difficult trading conditions characterised by hyper inflationary pressures and high interest rates, she says.
In all this, the role of the state will be critical.
