AMENDED PROPERTY SECTOR ALLIGNMENT 17 March 2016
Status Update Scope of PSC PSC Deviations ◦ Applicable Elements ◦ Weighting Score ◦ Complex Structure ◦ QSE Threshold ◦ Priority Elements ◦ Ownership ◦ New code: Economic Development ◦ Property Complex Structures ◦ QSE Threshold (code 800
PSC gazetted under section 9(5) – gazette no. 39341 ◦ Public Commentary closed 30 Dec 2015 ◦ Analysis of the comments – done ◦ Report generated and discussed with DTI and our stakeholders ◦ Factored relevant inputs ◦ No major changes PSC to gazette under section 9(1) ◦ Timing – next few weeks- April 2016 ◦ Waiting final for necessary compliance documents for gazetting
Commercial Property • Property Services Industry – Property development ◦ Office Property Industry – Property Ownership ◦ Industrial Property industry – Property Letting ◦ Retail Property Industry – Property Management ◦ Leisure Property Industry – Facility Management ◦ Zoned land – Property Sales Residential Property Industry – Property Broking ◦ Houses – Estate Agents ◦ Community schemes – Property Valuation Flats, Clusters, Town Houses – Asset Management etc ◦ Zoned land
Clause 7.3.1 ◦ If you own property merely for the execution of your primary business – Not included in the scope ◦ If you lease/rent any portion of that property – you are included in the scope (income generation)
Property Sector Code Deviations ◦ Applicable Elements ◦ Weighting Score ◦ Complex Structure ◦ QSE Threshold ◦ Priority Elements ◦ Ownership ◦ New code: Economic Development ◦ Property Complex Structures ◦ QSE Threshold (code 800) Use COGP as base document ◦ Where PSC is silence – COGB applies
PSC – has 7 elements ◦ Split between management Control and Employment Equity ◦ Has new element – Economic Develop ALIGNED NED CURRENT RENT REVI VISED PSC CODES PSC ✓ ✓ Ownership ✓ ✓ Management Control ✓ ✓ ✓ Employment Equity ✓ ✓ ✓ Skill Development ✓ Preferential ✓ ✓ Procurement ✓ Enterprise ✓ ✓ ✓ Development ✓ Socio-Economic Dev ✓ 5 7 Economic Development ✓
PSC DEVI VIATIO ATIONS NS • Aligned PSC Weighting Scores QSE Generic Entities
PSC DEVI VIATIO ATIONS NS • How you arrive at the total Generic Scorecard Weighting points Generic Entities +3% +2% -2% -4% -3% +4%
• Weighting determines the importance of the element Aligned ed PSC Aligned ed Total Weightin ting g PSC Aligned ed points ts Bonus s PSC points ts weighti ting points ts 3 Ownersh ship 30 30 33 33 Managem ement ent Control ol 9 2 11 11 Employment ent Equity ty 13 13 3 16 16 Skill Devel elopm pment ent 19 19 3 22 22 Enter erpri rise se & Supplier er 4 Devel elop opment ent 39 39 43 43 Socio-Eco Econom omic 2 2 Devel elop opment ent Economic Devel velop opmen ent 5 5 TOTAL 117 117 132 132 117 117
Complex lex Struc ructure ture t ent gemen ty Loans d collective tive ent ET ement rnal Managem ent Prop Owners /RIET Prop Management ernally set Managem ted Public c ts ent) erty te Agents ent ement managemen SA Proper ETS ent /RIETS k exter mandated estmen Managem ernal es Unlisted vices SA/RI Investm Interna APUTS Asset Stock Estate (Exter PLSA PLSA servi Ownersh ship ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Managem ement ent Control ol ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Employment ent Equity ty X X X ✓ ✓ ✓ ✓ ✓ Skill Devel elop opmen ent X X X ✓ ✓ ✓ ✓ ✓ Enter erprise se Supplier er ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Devel elop opment ent Socio-Eco Econom omic X ✓ ✓ ✓ ✓ ✓ ✓ ✓ Devel elop opment ent X Economic Devel velop opmen ent X X X ✓ ✓ ✓ ✓
PS PSC DEVIAT VIATIONS IONS Threshold • REVISED ALIGNED PSC THRESHOLD COGP THRESHOLD ASSET BASED PROPERTY ESTATE AGENCIES; COMMERCIAL BROKERS; SERVICES VALUATION Above R400M Above 50M Above R35M LARGE ENTITIES Exceed Rev R50M QSE Turnover R80M-R400M R10M-R50M R2.5M – R35M R10M-R50M EME Less than Below R10M Less than Turnover R80M R2.5M R10M & below
Complex lex Struc ructure ture l rnal T (Externa es s Stock vices ated nt ally management ent servi nt ic mandat agement nt stment y Loans nt rs /RIET Asset Management emen ive Invest al Manag d Public p Managem rty Estate Agents Management) p Owners pert IETS A Prope rnally A/RIET ctive Unlisted rnal APUTS collect extern Intern PLSA/ PLSA Prop Prop Owners nershi hip ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Mana nagem gemen ent t Contr trol ol ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Employ loyme ment nt Equi uity ty X X X ✓ ✓ ✓ ✓ ✓ Skil ill Devel evelop opme ment nt X X X ✓ ✓ ✓ ✓ ✓ Enterp erpri rise e Supplier er Develop lopme ment ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Soci cio-Eco cono nomic mic Devel evelop opme ment nt X ✓ ✓ ✓ ✓ ✓ ✓ ✓ X Econo nomi mic c Develo lopme ment nt X X X ✓ ✓ ✓ ✓
PSC PSC DE DEVI VIATIO ATIONS NS • Ownership ◦ 2 types of companies Property owning companies All other companies ◦ All other companies Follow the ownership as per the COGP ◦ Property owning Companies Have a defined ownership codes with deviations from COGP
PSC SC DEVIATIO VIATIONS NS OWNERSHIP OW ERSHIP OWNERSHIP HIP INDICAT ATOR PROPERTY ASSET OWNI NING NG COMP MPANIES WEIGHTING NG COMP MPLIA LIANC NCE • Ownership POINTS TARGETS Exercisable Voting Rights in the Enterprise in the hands of 4 27% black people Voting g Rights ts Exercisable Voting Rights in the Enterprise in the hands of 2 10% black women 4 Economic Interest of black people in the Enterprise 25% 2 Economic Interest of black women in the Enterprise 10% Economic interest of the following black natural people in Economic the measured entity: Intere rest st 1. black designated groups; 4 2. black Participants in Employee Ownership Schemes; 3% 3. black beneficiaries of Broad based Ownership Schemes; or 4. black Participants in Co-operatives 2 2% New entrants Net Equity ty 8 Net equity Value 1-3yrs 4-5 yrs 4 Financial support to Black owned and controlled companies with at least Financial 1% 2% 51% Black ownership (level 1-3) measured as a % of
PS PSC DE C DEVIATIO TIONS NS OWNE NERSH SHIP IP • Ownership Net Equity Value Schedule Draft aligned COGP YEAR PSC 7% 7% Year 1 3% 10% Year 2 7% 20% 13% Year 3 10% 40% 30% Year 4 15% Year 5 19% 60% 41% Year 6 24% Year 7 30% 80% 50% Year 8 36% Year 9 43% 100% 57% Year 10 50%
HI HIGHLIGHTS GHLIGHTS ON ON KE KEY Y PROP OPOSED OSED DEVIATIONS IATIONS • Ownership Bonus Points BONUS BONUS CRITERIA TARGETS POINTS Disposal of assets to Black owned and controlled company with at least 51% black ownership (level1-3) as a % of total 20% 3 asset disposal
PSC DE PS DEVIATIO TIONS NS Ownership • ◦ Mandated Investment Given that the majority of the listed share register have a mandated investments that are far beyond 40%, a special consent is given for only property listed companies and property unit trusts to cap the mandated investment at 50%. Despite this provision, the cap shall remain 40% as in Generic Codes for those Listed Companies and Unit Trusts, unless there is consistent evidence of 50% or more of the mandated ownership 3 years prior to being verified of their BBBEE status ◦ For verification Requirement: Monthly average share register for 3 years (36 month) from an accredited share reading company ◦ Normalisation Formula Property Listed companies have high level of dilution of Economic Interest than other listed companies – to address this excessive dilution off BBBEE shareholding Yx(1+X) ⁿ Where: Y=number of share in issue at the time of doing direct BBBEE deal X-Average 10 years compounded increase in umber of shares in issue for top 50 listed companies (excl real estate) N=year of measurement X in the formula will be calculated annual by independent external party and published by PSCC at the beginning of each year X=0.8% applicable from 1 Nov 2015-December 2016
HIGHLI GHLIGHT GHTS S ON K N KEY EY PR PROPO POSE SED DEV DEVIATIONS IONS • Ownership ◦ Mandated Investment Gazette 2 Options – Public Commentary 60% mandated Investment 40% mandated Investment 60% Mandated Investment is depended what we give in return Recommendation Develop a programme that the industry supports Presents one common agreed industry view to DTI before public commentary Our response to the Public commentary – an agreed industry position Bonus Points Disposal of assets Venture Capital
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