News

Long way to go with Transformation for Property Sector

Dec 11, 2014
The transformation of listed property has slowed over the past few years and improvements are needed. There are only a few black professionals heading funds and not enough black people working in the sector.
The transformation of listed property has slowed over the past few years and improvements are needed. There are only a few black professionals heading funds and not enough black people working in the sector.

SA Commercial Prop News has learned that black property leaders would like to see more black people included in potential property deals. Also they want more measures to encourage blacks pursue careers in listed property.

Even though the sector is small relative to the whole JSE which is worth about R9.7 trillion, it has grown dramatically over the past decade from about R30bn to R360bn. 

The South African Institute of Black Property Practitioners (SAIBPP) argues that more black people need to benefit from this growing sector.

According to research by the Investment Property Databank for 2013 and 2014, out of a total of 261 non-executive and executive directors in the sector, only 53 are black and 189 are white. 

“Black people are over-represented as non-executive directors, meaning they don’t play a role in operational management of these companies. The report shockingly shows that there are only six black executive directors on the boards of listed property companies,” SAIBPP president Thomas Matlala says.

He says the government has crafted but not implemented the required policies such as Broad-based black economic empowerment (BBBEE) codes for the property industry.

“The era of government crafting wonderful and enlightened policies that are the envy of the world but failing to implement and enforce them is over. It’s time to act two decades into our democracy,” Matlala says.

He says at an academic level, talented black individuals should have the property industry better advertised to them and incentives offered to them so that they pursue studies and then careers within it.

Property asset manager at investment bank, Stanlib, Kgaogelo Mamabolo, a former president of SAIBPP says too many black people have made money in property but then sold out of the industry.

“A few years ago, there were BBBEE deals and so on which saw black professionals launch funds and take up positions at other funds or start development companies. Many of these people have made wealth but since left the industry. We need ways of bringing the skills back. Also new skills must not just end up in other sectors,” she says. 

Nevertheless, transformation has seen some successes too. Of the various listed property stocks, three are led by black property managers.

Izak Petersen has turned Dipula Income Fund into a large success in a short span of time, listed property manager for Old Mutual Investment Group's MacroSolutions boutique, Evan Robins says.

“The fact that Arrowhead Properties is trying to takeover Dipula is tantamount to Petersen’s success,” he says.

The fund is worth some R4bn and contains excellent and revered retail and residential properties.

Rebosis Property Fund has also been successful. This fund was started by entrepreneur Sisa Ngebulana; a man looking to improve the lives of previously disadvantaged masses by developing and redeveloping properties that serve communities.

Ngebulana will use the Billion Group, the property development group he founded, to build malls in Africa.

Delta Property Income Fund led by Sandile Nomvete has benefited from its government tenanted assets. Many non-BBBEE funds have struggled to acquire government tenants. The likes of Redefine Properties sold their government tenanted offices over the past four years. Chairman Marc Wainer says he found state tenants too often paid late and Redefine’s business model had not functioned well with them on board.

But Delta has to the contrary, got its government tenants to boost its returns. In its most recent financial results for the six months to August, it managed to increase its distributable income by 23.1% compared with the comparative period last year, earning R180.5m. 

Delta has also launched Delta International to expand its businesses into Africa, by starting with buying malls in Morocco and Mozambique.

Mr Petersen says the barriers that prospective black property professionals face must be removed or “listed property will remain one of the least transformed sectors”>

“There are old well entrenched and carefully guarded relationships amongst the existing players that make it impossible for black companies to compete in a meaningful way. 

“These are at all levels of the game, that being with tenants, funders, service providers and with investors. There is also the self-fulfilling prophecy that blacks can’t do it,” he says.

Ipeleng Mkhari, the Chief Executive Officer at Motseng Investment Holdings, says BBBEE Codes alone are not sufficient to transform the sector.

She said there may be intent from the private sector but intent is not enough.

“It is imperative that as SA business leaders we lead the INTENT of BBBEE to systematically drive the inclusion of as many players as possible. Unfortunately, once BBBEE and the codes are seen as compliance requirements we stifle the potential of SA INC. by design, the property sector. So as a sector I do think the agenda of BBBEE is a firm priority for the industry, however, I don’t think it’s far reaching enough, much more still needs to be done,” she says.

Mkhari added that gender parity in SA property sector is also low. "Women bring an efficient talent pool to the economy and should be representative of at least 30-40% at senior and middle management levels in our sector."

“The development of women in the sector has been a priority for almost a decade, so I don’t think the intent is lacking. We have seen some of the leading companies and industry associations led by women at the most senior levels. The issue of gender parity across the sector still remains slow, where you may not necessarily see the speedy ascension of women into leading and influential roles across the sector,” she says.

Response from the South African Property Owners Association (SAPOA) 

SAPOA remains committed to the transformation agenda and will continue exploring ways to accelerate transformation in all areas, according to CEO, Neil Gopal.

“SAPOA fully subscribes to the principles of transformation in the sector. We acknowledges the need for demonstrable transformation in the property sector, particularly since property ownership is a pillar of societal inclusion,” says Gopal.

SAPOA is the voice of commercial property. Its members control about 90% of all commercial and industrial property in South Africa.

The sector contributes approximately 6% to the RSA’s GDP per the Bureau for Economic Research, similar to that of the mining sector.

The representative body is held in high esteem by the relevant sectors of government and is consulted on matters about the property industry. SAPOA also enjoys representation on key South African bodies essential to the country's property sector development.

Motseng Investment Holdings CEO, Ipeleng Mkhari and SAIBPP President Thomas Matlala have concluded that would like to see more black people included in potential property deals and want more measures to encourage blacks pursue careers in listed property.
Motseng Investment Holdings CEO, Ipeleng Mkhari and SAIBPP President Thomas Matlala have concluded that would like to see more black people included in potential property deals and want more measures to encourage blacks pursue careers in listed property.