Property sector showdown: Sakeliga challenges South Africa’s PPRA regulation

South Africa’s property sector faces a significant legal challenge as business interest group Sakeliga moves to contest the 2022 Property Practitioners Act. Sakeliga claims the Act enforces burdensome regulatory overreach and unjustly mandates Broad-Based Black Economic Empowerment (B-BBEE) compliance across the sector.

Sakeliga argues that successfully contesting these provisions could significantly impact thousands of businesses by potentially eliminating the need for mandatory BEE certification, allowing them to operate more freely. The legal battle traces its origins to changes initiated by the Property Practitioners Regulatory Authority (PPRA) in April 2024. These changes required property practitioners to achieve a BEE compliance score of at least Level 8, equating to 40 points, as a prerequisite for obtaining Fidelity Fund Certificates (FFCs), which are crucial for legal operations in the industry.

This marked a shift from prior requirements, where businesses had to possess BEE certificates without stringent compliance enforcement. The heightened enforcement threatened non-compliant businesses with exclusion, prompting a significant backlash culminating in Sakeliga’s legal intervention. By September 2024, a notable victory for Sakeliga saw the PPRA reversing the enforcement policy, allowing the issuance of FFCs regardless of BEE compliance. However, the underlying legislation remains, leaving the potential for future enforcement.

Central to the dispute is the Act’s broad definition of “property practitioner.” When replacing the Estate Agencies Affairs Act in 2022, the new Act expanded the term to include roles such as estate agents, property developers, management agents, bond originators, auctioneers, and more. This broad categorization has been criticized, with claims it unnecessarily entangles diverse entities in complex compliance requirements, hindering their ability to generate value.

Sakeliga’s court case targets two main points: the definition of “property practitioner” under Section 1 of the Act and the BEE compliance linkage in Section 50(a)(x). The organization contends that the broad definition unjustly extends the regulatory scope to transactions and businesses that were not intended in the original mandate. By narrowing this definition, Sakeliga aims to free many businesses from what it sees as excessive regulation.

Additionally, Sakeliga challenges the requirement linking FFCs to BEE certificates. It argues this ties unnecessary BEE compliance to FFCs, which are intended to ensure property professionals’ ethical handling of client funds. Sakeliga claims this requirement serves no legitimate government purpose, violates constitutional rights, and improperly imposes on businesses. The group advocates for voluntary BEE participation, allowing companies to allocate resources as they see fit without undue statutory obligations.

Sakeliga seeks to have these specific legislative provisions declared unconstitutional, aiming to foster a business-friendly environment and enhance economic vitality. They argue that lifting these regulatory burdens will bolster industry innovation, provide financial benefits, and improve living standards across communities.

As the case unfolds, it could set a crucial precedent for the property sector and other industries facing similar regulatory challenges. Sakeliga maintains that state interference has broader costs, reducing economic opportunities and lowering living standards, and argues for the autonomy of businesses in navigating these waters without onerous compliance mandates.