SAs listed property sector failing to transform
There is little commitment to real transformation from the executive leadership of Africa’s listed property sector and it’s time for a change in mindset, or for new leaders that will make transformation a priority.
That’s the view of Marius Muller, CEO of Pareto Limited, who is one of the few outspoken property industry leaders on the slow pace of transformation in the listed property sector.
“It’s time for us to be frank about the situation. The fact is that BEE executive directors make up just 15.7% of the leadership of the listed property sector. This is a clear indication of the slow pace of transformation at executive management level in the burgeoning listed property sector,” he says.
Muller cites the latest results of a study by MSCI subsidiary, IPD South Africa, which analyses the composition of the leadership of South Africa’s listed property sector. Of the 89 executive managers at JSE-listed property companies, 75 executives or 84.3% are white. Black executives make up just 14 positions, with only one of these being female. The study excluded dual listed and internationally domiciled companies.
“Executive directorship level is where the executive decisions of companies are made. This is where real transformation needs to take place and the skills and property expertise of new black directors needs to be fostered,” says Muller.
“Of the 14 BEE directors, only four hold positions within previously established white businesses. Surely one would have expected greater transformation at the leadership level after 21 years of democracy. Those who are intimately involved with the industry also know that this lack of transformation is as real at the next tier of senior management within the listed sector,” he adds.
“If you dig a little deeper, you’ll also discover that one of the 14 BEE executives is featured twice and two executives are in acting CEO positions. The majority of these black directors did not rise to their positions as part of established business. In fact, most of them have come from black business and largely on the back of government transformation initiatives through, for example, the Department of Public Works,” explains Muller.
“It is time for some serious introspection by the listed property sector, because frankly the jockeys leading the industry are clearly not driving the real transformation of the sector. Often the argument is that the effort is made to train and foster black executives, but they then leave. You have to question how much water this argument actually holds, because you would then surely find these black executives in other organisations in the industry.
“It can’t be a case of them all leaving the industry altogether. Certainly, I believe that there is not sufficient commitment by those in key positions for serious transformation to take place in the sector, particularly at executive management level,” he adds.
According to the study, in terms of composition of both the boards of companies and at executive level in the listed property sector, there were 277 directors across 30 listed property companies. During the analyses period, from October 2014 to 13 May 2015, the BEE director count decreased by 1 to 87, while the number of non-BEE or white directors declined from 207 to 190. This was largely due to mergers and acquisitions. Currently the percentage of total BEE directors stands at 31.4%, while the percentage of white male directors stands at 62%.
“Of the 87 BEE directors overall at board and executive level, only 10 are in the position of chairperson, with the large majority of 63 being non-executives on the boards of companies,” says Muller.
“Unfortunately, I don’t believe the current white dominated executive leadership of the listed property sector has reason to transform. Most of these companies don’t deal with government, so there is no business imperative to undertake serious transformation. Considering the growth of the listed property sector and number of new listings, it is a sad reflection on the industry that the number of BEE executives is still in the lower double digit range.
“The only way things will change is if there is a commercial benefit and, for example, the government introduces tax incentives to foster greater BEE. Another more stringent approach would be to make BEE mandatory for companies,” he adds.
Last year Muller raised concerns about the deadline to align the Property Sector Transformation Charter with the Department of Trade and Industry’s (DTI) Revised B-BBEE Act and Codes. The deadline was April 2015, but Muller reports that the revised charter is currently sitting with the DTI.
“Now more than ever, the property industry really needs to openly and honestly discuss its contribution to transformation, particularly given the sensitivity and legacy of property ownership in South Africa. Added to this is the fact that the listed property sector has been one of the best performing and growing sectors on the JSE, so how do we then justify lower transformation targets,” he questions.
Muller is unequivocal that transformation needs to be driven by the executive leadership of the property industry. As CEO of Pareto and under his leadership, the group has a Level Two BEE rating. All members of its executive team are black and Pareto also has female and disabled representivity.
Source: Property24