Commercial Property Sector Has Failed Transformation Test

The Commercial Property sector badly lags behind other sectors in transformation. There are those that say the sector has simply failed the transformation test. Minister of Trade & Industry Rob Davies recently gazetted the Property Sector Charter, but the Black Association of Commercial Property Owners (“BACPO”) has already said the charter represents a huge missed opportunity. Their concern is that the new charter has downplayed the importance of ownership as a catalyst for transforming the sector.

BACPO sees direct ownership and control of property assets as the quickest way for Black entrepreneurs to influence and transform the commercial property industry. For this reason BACPO believes ownership has to be at the heart of the new charter as it will achieve the goals of transformation in the most direct manner. BACPO has already held meetings with various players in the property sector to voice its concerns about aspects of the Property Charter and it is hopeful that a solution will be found.

When the word transformation is mentioned, deal making is often the first thing that comes to mind. But the entrepreneurs that got together to form BACPO have long been in the sector, with one of them building his first commercial property, The Mangalani Mall in Soweto in 1982.  They insist that their focus is to create jobs, build great companies, add value to the sector and use transformation as a catalyst to grow the number of Black landlords.

“Our goal is to increase the number of black landlords that own and operate their own properties. Ownership is the key to unlocking value in commercial property. Anything else is window dressing” adds Bruce Zungu, Secretary of BACPO.

Joe Mathebula, a commercial property developer and the president of BACPO says “For too long transformation has been ignored by the commercial property sector. BACPO believes it is time the big players in the sector embraced transformation and stopped with the excuse” It is the snail pace of transformation in the sector that led Mathebula and the other founders of BACPO to set up their organization. Since the establishment of BACPO, Mathebula has called on all those in the sector to unleash its full economic & transformation potential.

“There is more than enough room for the current players to get decent returns on their investments whilst ensuring that this industry promotes transformation by creating capacity for existing and new black landlords in the sector” Mathebula said recently.

Since its founding it is telling that BACPO has taken its vision of what will create meaningful transformation in the commercial property to the key players within the industry. The group travelled to Cape Town to meet parliament’s portfolio committee on Public Works. The discussions looked at ways to speed up transformation in the commercial property sector in line with Public work’s own policies on transformation.

Since its founding, BACPO has hit the ground running and plans to work closely and harmoniously with the key players in the commercial property sector. These include SAPOA, SAIBPP, the banks, municipalities, provincial governments and the private sector especially the retail sector.

Of these organizations, BACPO has said that it believes government holds the key to accelerated growth the commercial property sector. One statistic is a real surprise and shows the room government has to make an immediate impact on transformation

Only 5% of government leases at national level are held by black landlords . Of the nearly 4000 Department of Public Works national leases, only 186 are held by black landlords. If you look at it in monetary terms, only R120m of the R2.4 billion the department spends on leases annually goes to Black landlords.

This explains BACPO’s lukewarm response to the sector charter as the charter gives ownership a surprisingly low weighting of only 20 points out of 107 points in its measure of transformation. It’s understandable that BACPO would be concerned that ownership counts for roughly 15% of the transformation score in the new charter. This does not seem like the kind of recipe that will pull the sector out of its transformation lethargy.

As Bruce Zungu said “As the charter reads, transformation will continue to be slow and painful for Black people in the property industry unless certain amendments are made around ownership and an actual discussion with Government of potential ways to fast track ownership transformation”

“We started our discussions with government because of its potential to unleash substantial value that is locked within its portfolio. We believe that this will create thousands of jobs and unlock wealth for the wider economy whilst achieving tangible transformation,” explains Mathebula. He adds that BACPO supports government’s goals on Black Economic Empowerment and its objectives on transformation.

“The time for unlocking the potential of the commercial property sector is now and we believe that BACPO is well placed to lead this historic drive’ says Mathebula.

“We can no longer stand on the sidelines and watch this sector drag its feet on the non negotiable issue of transformation. The simple truth is that this sector will remain untransformed unless there is drive to increase the number of Black landlords that own and operate their own properties” adds Joe Mathebula.

Like all the other principals of the companies that founded BACPO, Mathebula is a successful property developer. His Deputy President is Mike Nkuna of Masingita Properties, also a successful property developer. Nkuna will be launching the Protea Glen Mall in September, the latest in a string of high profile malls that he has developed in a career of more than 30 years. Others members of BACPO include the Billion Group, founded by Sisa Ngebulana and developer of huge, highly successful properties such Hemingways in East London.

Typical of the unassuming success of the founders of BACPO is Herbert Cedrik Theledi, Managing Director and Chairperson of Nthwese Investment Group and Nthwese Investment Holdings Consortium. The family owned business grew from its roots in Bushbuckridge to national prominence. Theledi’s entrepreneurial flair has seen him hold his own not only in property but in other businesses such as engineering, warehousing, logistics, motor dealership and distribution industries and Telecoms.

“We believe that the sector has enough people of goodwill and they will join BACPO in ensuring that the commercial property sector embraces rather than resists transformation”  says Bruce Zungu, the Secretary of BACPO.

Transformation remains the R1.9 trillion commercial property sector’s Achilles heel, but organizations like BACPO are determined to ensure that sector plays catch up and  improves its transformation credentials. There is a long way to go, black property owners’ share of the sector currently lies at negligible R10bn, a paltry slice of the R1.9 trillion sector.

It is for this reason that the newly gazetted Property Charter has to focus squarely on ownership if it is to move the sector beyond its low levels of transformation.

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