OPINION: Property industry is on the cusp of real transformation
BUSINESS LIVE / 27 JUNE 2019 - 05:06 / SHAWN THEUNISSEN
Developing SMEs, and the industry working closely with the government and its agencies, will raise the value of property in the hands of the black majority
The SA property industry is on the cusp of real economic transformation of the sector through small and medium enterprise (SME) development. The industry’s biggest players will have a chance to contemplate how to accelerate this transformation at the industry’s biggest annual gathering, the SA Property Owners Association (Sapoa) conference in Cape Town this week.
The Property Sector Charter Council (PSCC) says the sector is making reasonable efforts towards transformation, but it needs to accelerate its efforts. Its “State of Transformation Report” released last year found that the sector had achieved excellent scores in enterprise development and socio-economic development, and scored well on ownership and preferential procurement; but it scored poorly in skills development and management control, as well as employment equity and economic development.
In my view, having worked with SMEs in the property sector over the past 10 years, there are several areas that require attention to drive the effective transformation of the sector through the development of black SMEs, with the most pressing detailed here.
Too often the development of black SMEs is viewed as a box-ticking exercise by corporates eager to fulfil the requirements of the government’s codes for broad-based BEE
The conference is an ideal opportunity for SMEs in the sector to network with the industry’s leading companies. Sapoa management agrees and has indicated that the conference is working on ways to bring together big business and SMEs.
This is a step in the right direction as the conference will provide a platform for SMEs to connect with potential partners or clients that they would not otherwise have had the opportunity to do so. The cost of attendance, logistics and exhibiting are some of the most prohibitive factors for SMEs and need to be addressed in the future. In addition, there is also a need to disseminate the content of the conference to broader audiences for the benefit of players throughout the sector.
Big businesses and small companies
Global research indicates that big business connections can be critical for small companies. For example, a study by the Centre for an Urban Future, a New York-based think-tank, found that small companies that became suppliers to large firms more than doubled their revenues, compared to small companies that did not become suppliers. Property Point’s research over the past 10 years has shown similar trends.
It is clear the Sapoa conference has the capacity to be developed into the most efficient platform to drive mutually beneficial relationships between big property and SMEs.
Too often the development of black SMEs is viewed as a box-ticking exercise by corporates eager to fulfil the requirements of the government’s codes for broad-based BEE. While the PSSC found that the sector achieved excellent scores in enterprise and socio-economic development, little is known about the substantive, tangible benefits for SMEs. Metrics, such as how much is being spent on SMEs, how many companies have obtained significant growth in revenue and net profit, and how many jobs have been created, are the only real indicators that these programmes are having any real impact.
How many companies conducting transformation programmes such as enterprise and supplier development in the sector can accurately quantify the real tangible returns? More importantly, how many SMEs can tell of the real impact on their lives?
The sector seems to be doing well in ownership compliance, hitting its BEE requirements, according to the PSCC data. However, the value of black-owned property remains miniscule. Real property ownership relies on the leveraging of wealth and capital, and alternatives need to be devised to raise the value of property in the hands of the black majority.
One alternative is to reconsider supplier and enterprise development to better facilitate a holistic, long-term journey that takes these enterprises all the way from SME to a significant player in the property development and ownership space. Structurally, this will take time and the sooner it is implemented the better.
The current SME players that have built a track record of delivery in the property sector are ideally placed to build long-term wealth and transition into property development. A holistic development culture for SMEs will seek to transition these companies through the supply of services, to facilities management, and eventually gear them up to the ownership and development stage.
Imagine towering office blocks, mega-shopping malls and residential apartments completely developed and owned by black businesses and entrepreneurs.
There is a case to be made for better working relationships between industry players themselves, and external partners such as the government and regulators. This means better partnerships need to be formed among leading property companies, relationships in which transformation, enterprise and supplier development programmes are refined according to best practice.
Better synergy between industry associations such as the PSCC, the SA Institute of Black Property Practitioners, Sapoa and the like, can drive holistic development and inclusivity. We need to build an improved working relationship with the government and its agencies to ensure that together we create a conducive environment for growth and sustainability in the sector in which transformation can thrive.
• Theunissen is corporate social responsibility executive at Growthpoint Properties.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER