Property Goes BEE
As one of the leading lights of the real estate sector, Rali Mampeule is showing
South Africa that Black Empowerment can be successfully achieved in the real
estate industry.
Mampeule is the CEO of Phadima Group Holdings (Pty) Ltd, a black-owned and managed
investment holding company with interests in financial services, property and
consulting in the real estate, infrastructure, industrial and construction sectors
of the market.
Phadima is the first black-owned company to hold a franchise of the internationally
acclaimed real estate company, Chas Everitt International, and aims to be the
market leading, black-owned investment holding and specialist within the built
environment.
In addition Mampeule was awarded the most prestigious title in the industry – the Nedbank Property Professional of the Year for 2006/2007. It has been a 100 days since he received this award, but just how does this property professional view the market and what is his perception of the world of estate agents?
Although Mampeule believes that the property market in South Africa is a stable one that holds much promise, there are some issues that need to be addressed. Transformation is perhaps the biggest of all the challenges this industry faces.
"There is a danger that the importance of transformation may be sidelined through compliance. If transformation in South African residential property is to succeed, it needs to be become more personal (emotional), organisational (involving all stakeholders), and national (the celebration of our achievements) and it needs to be broad based," notes Mampeule.
He says people need to realise that much of the driving force behind the stable growth in the residential property market comes from the increasingly affluent black middle class. Mampeule cites a clear example of this growth driven by the new black middle class - the ownership of homes by black people in Johannesburg's influential northern suburbs, which he notes has increased by 700% in the last five years.
Looking at the residential property market as a whole, Mampeule distinguishes two primary income businesses that generate wealth: the financial institutions and franchised real estate groups.
He says that in the last year, mortgages worth around R115 billion have been granted by the major South African banks with approximately R1.4 billion earned through commissions.
Then there are the many South African real estate franchising groups which are predominantly family owned businesses. The current retail market GDP that arises out of franchises is 12 %, but Mampeule believes it could be higher with the South African property industry participation.
"Franchising within the property market could be another avenue for BEE. With the high success rate of this form of business already proven in our country, and the fact that franchised businesses definitely create new jobs at a rate of around 10 to 15 new jobs per franchise, all stakeholders need to push for the right conditions to be put in place to promote the franchise models among the emerged market," he says.
Mampeule goes on to say that research shows that people believe there are good opportunities for growth in the emerging market. "This will also help South Africa in terms of creating an environment for black business people to participate in the economy in leading roles. After all, the South African residential property group is a R7 billion industry."
But, he says, there are too many frustrations for both franchisors and franchisees at the moment which include access to finance as bank's credit processes tend to slow things down; the fact that the commission based industry is not cash flow friendly; the cost of setting up a franchise structure can be prohibitive and a general lack of willingness to transfer skills and effect transformation.
Mampeule is concerned that the Property Charter may not affect these franchise operations to the point where they will have to transfer skills, with the danger being that the residential property industry will remain unchanged.
This begs the question: How many previously disadvantaged individuals are participating in the mortgage originating business or the real estate profession and are the channels open for them to participate?
The demographics tell their own story. They show that the South African population is made up of 79% Black people, 9,6% Whites, 8,9% Coloureds and 2,5% Indians. The demographics of the real estate industry however show the complete opposite with Whites representing the bulk of the industry (94,2% to be exact), while the majority of the South African population only represents 5,8% of the real estate pie.
One of the most hotly debated topics in the real estate market at present is the issue of education and skills transfer. A factor limiting the country's ability to excel on the global stage is the lack of certain skills. "We need to look for innovative ways to promote and increase proficiency in particular industries," Mampeule says. "Since our economy is unlikely to provide the millions of jobs needed, self-empowerment is a crucial factor. Yet, entrepreneurial and business skills are not nearly as developed as they could be and this is something we need to address."
He says that in the long run our skills shortage will always make space for people with talent. It is with this mandate that the Rali Mampeule Learnership was created in 2005. The learnership provides opportunities and discussions among the stakeholders who are core to resolving the concerns currently prohibiting the opportunities for the majority of South Africans getting into real estate.
"It makes commercial sense for every business leader to not only identify growth opportunities, but to also ensure employees are in touch with the target market, to ensure that businesses deliver brilliant mixes that are relevant, and grow top-line results.
So just what is the way forward according to Mampeule? One of the biggest challenges facing South Africa today is unemployment. And although there are various initiatives under way to try and increase the rate at which jobs are created, there is still a great deal that needs to be done.
Mampeule believes that the franchising concept should be seen as a means of addressing these challenges. "All sorts of factors suggest that the time is ripe for black owned national franchising to become a significant force in the South African residential property market.
"The enormous growth in the property industry, especially from the emerged market, has created the perfect backdrop for expansion of the franchise industry in the South African real estate sector."
He says that it would be ideal to use the franchising model and to enlarge the operations and number of black owned real estate business for as long as the economy remains so buoyant.
Mampeule sees the future of South African property as positive, with his short term view being that 2007 is going to bring stability to the industry. "We will see a slowdown in the higher price brackets, but a growth curve in your middle income price range, which will undoubtedly be driven by the emerging markets."
He also looks forward to Phadima creating end-user value in the market place in terms of ownership for new property entrants and providing market leading return on investment.