Having cognizance of the Government’s big drive to generally create economic opportunities as well as transforming certain sectors, including the property sector, understanding the EAAB’s 2019/2020 report gives some perspective with regards to the overall size of this sector together with the distribution of the Fidelity Fund Certificates issued for 2020. This is where you, as a property practitioner, finds yourself.
Some definite changes can be expected as soon the Property Practitioner’s Act becomes effective somewhere during 2021. In particular, the provisions related to transformation contained within the PPA read together with the latest Amended Property Sector Code and the The Amended Codes of Good Practice for Broad-Based Black Economic Empowerment offer guidelines of the push to render the property industry more inclusive. The 2019/2020 report refers extensively to this issue and it is worth taking the time to understand the goals which are sought to be achieved in future especially when and how BB-BEE certification will be required and the guidelines for exempt, qualifying and generic entities in the property sector. For advice in this regard, contact firstname.lastname@example.org.
A total of 47,356 FFCs were issued during 2019/2020 which is indicative of the reduction in the number compared to the previous year. This is an interesting fact and will be even more relevant when the 2020/2021 report is published considering the onset and effects which were experienced through the Covid 19 pandemic.
Of the 47,356 FFCs issued, only a total of 7,862 Principal Estate Agents were registered, another reduction in the number from the year before. The number of African, Coloured and Indian female principals increased year on year which is an interesting and encouraging fact.
Another interesting fact is the provincial distribution of the Principal Estate Agents. Gauteng still leads with the total number with the Western Cape following on its heels. KZN and the other provinces make up the smaller numbers.
The distribution of non principal FFCs also tell a story. The number of white estate agents have declined but the numbers for all the other groups have increased.
In as far as intern estate agents are concerned, the distribution of the registrations are divided more equally amongst the groups but with a marked decline in white estate agents, male and female. What is interesting, is the total number: 20,858 interns registered for 2020 as opposed to 25,031 registered in 2019. This is possibly indicative of the effect that Covid 19 has had on the industry. There has also been quite a big decline of intern agents’ registrations in the Western Cape as opposed to an increase in Gauteng.
Legislative compliance is a rather important issue for the EAAB. Until the recent amendments to the FIC Act, the EAAB acted on behalf of the FIC in respect of FICA inspections at estate agencies who are defined in the FIC Act as “accountable institutions” and are therefore obliged to conduct Client Due Diligence processes and verify the source of funds in property transactions.
During 2019/2020, the EAAB reached its target of 150 inspections successfully and found 81 contraventions. It is worth noting that the FICA Amendments became effective in April 2019 so the FICA Compliance function shifts from the EAAB directly back to the FIC which means that the Financial Intelligence Center will be doing its own inspections going forward. Estate Agents are advised to review their Risk Based Approach as the FIC is out to ensure that estate agencies identify risky clients and risky money. Email: email@example.com for assistance with a full review of your existing Risk Based Approach.
With reference to the actual amount in total claims lodged against the EAAB’s Fidelity Fund for monies “misappropriated” by estate agents, very little detail is given in the report. Only the total amount brought forward from the previous year is confirmed, the value of the claims received and the value of claims approved or rejected. The overall value of outstanding claims continues to alarm.
All in all, most of the EAAB’s focus areas have remained similar in the 2019/2020 report as the years before. Going forward, the introduction of the Property Practitioners Act will most definitely shake things up in the property industry and there is hope that the speed at which the FFCs are issued, the proposed upgrading of the operating systems, the focus to drive the transformation in the industry and the formal introduction of the BB-BEE requirements will aid with proper governance and a reduction in the value of claims against the Fidelity Fund.
We intend introducing a series of interesting information sessions regarding the Property Practitioners Act and the BB-BEE goals and dates for these will be published shortly.