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Investec Property aims to break transformation barriers with Izandla

Plans for the BEE group to grow into a black-owned JSE-listed company in the next five years.

In politically-charged times where the concept of “radical economic transformation” has gained popularity, attention is shifting to the skewed patterns of ownership and management in South Africa’s listed property sector.

While black property professionals sit on company boards and occupy management roles, few successfully launch and manage their own property companies. In fact, out of 50-odd listed property companies, only three are black managed. These include Dipula Income Fund, Rebosis Property Fund and Delta Property Fund.

However, Investec Property Fund (IPF) has brave ambitions of changing this.

In a rare deal for the sector, IPF established a Black Economic Empowerment (BEE) group Izandla Property Fund, which plans to grow into a black-owned JSE-listed company in the next five years.

Investec Property, an arm of Investec Bank, will support Izandla with the skills, expertise and knowledge, while Investec Property Fund will provide capital for future property deals.

This model is the antithesis of the usual BEE deals whereby black individuals purchase discounted stakes in blue-chip companies, leading to a coterie of politically connected and wealthy individuals.

IPF CEO Nick Riley said the company didn’t want to only create an empowerment shareholding structure, but it wanted Izandla to use the skills of IPF to create a company that would raise capital and purchase sizable properties on its own. “We are trying to break down the barriers of entry to the property sector,” Riley told Moneyweb.

Izandla’s major shareholders include charitable trust the Entrepreneurship Development Trust (EDT) and IPF, which will own a 65% and 35% stake respectively.  Izandla has a black female ownership of greater than 30% and has a level two BEE rating, which is considered to be substantially empowered.

An Izandla CEO will be appointed and the board will include Sthembile Nkabinde, an accountant who founded black-owned private equity and investment vehicle Khulasande Capital.

Izandla will initially start with a commercial property portfolio worth R580 million, mostly properties transferred from IPF’s property portfolio. Izandla’s initial property deal will be announced in July. Riley said upon listing on the JSE, Izandla could have a property portfolio worth R5 billion. The deal will also boost the empowerment credentials of IPF, which currently has a level three BEE rating.

Slow start for transformation in listed property

Riley said because the property industry is capital intensive many emerging black property entrepreneurs are finding it difficult to enter the industry. “I don’t think the industry has done a great job in terms of transforming, educating and upskilling professionals. We don’t have black professionals in the industry that are able to raise capital to get into property.”

Supporting Riley’s views is research from the Property Sector Charter Council (PSCC), which measured the state of transformation against the Property Sector Transformation Charter. 

On a yearly basis, the PSCC conducts research into listed property’s performance on transformation. The sample in its 2015-2016 research includes listed property companies and their BEE scorecards are measured against ownership, management control, employment equity, skills development, preferential procurement, enterprise development, socio-economic development and economic development. See results below. 

Property Sector Charter Council research

   

Transformation pillars

Score achieved

Score target

Ownership

16.5

20

Management control

5.96

10

Employment equity

8.22

15

Skills development

10.41

15

Preferential procurement

16.44

20

Enterprise development

11

10

Socio-economic development

2.29

2

Economic development

8.07

15

Source: PSCC.

Portia Tau-Sekati, the CEO of PSCC, said more focus is required on skills development, management control, employment equity and economic development when it comes to transformation.

“You need to have black people and women in management and invest their talent to achieve skills development targets. By the same token, you need to invest in skills management to achieve your targets for talented black management in the future,” said Tau-Sekati.

But for Vuyiswa Mutshekwane, the CEO of the South African Institute of Black Property Practitioners, the biggest challenge to transformation in the industry is the lack of passion for committing to it. “There is a lot of lip service paid to transformation and that’s why we see an industry that is male and pale. There needs to be the will from the private sector to say ‘we are not just going to give 1% equity but we are actually going to develop companies’.”

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I am becoming worried that the socialist rhetoric of equality of outcome has infiltrated even the minds of otherwise smart and savvy people. Once you make policies and laws striving for equality of outcome, you inevitably have policies that are unfair and discriminatory in nature. There is nothing fair or just about transformation. The government’s role was to create an environment where all people regardless of race or gender if able and willing could have access to education, the economy, housing, etc. But the word able is of paramount importance.

It is unfair and discriminatory to force people to sell stakes in their own hard built companies only to certain people and to also buy from companies that are owned by certain people. The laws currently are biased against white businesses and people in general, and the reason given is our past or that equality of outcome has not been achieved. Spoiler alert but true equality of outcome will never be achieved, thus we have now a “justified” system of bias and discrimination which can never achieve its goals and thus never end.

Agreed. Political agendas and business are like oil and water – they do not mix. ‘The Business’ is race agnostic. It is like your pet labrador. It does not see, understand or care about transformation. It only knows that if it fed well, it will prosper and in return give back to you – in abundance.

No wonder investors are jumping the ZA ship with these clowns raiding the larder…

I think, any potential investor must read the small print pertaining to their rights as shareholders very well…just ask the Randgold Minority Shareholders …Investec claimed certain shareholders don’t have any rights, and are still fighting for millions!

So what – who cares ,

This transformation thing is over rated,

Ethnic groups are judged according to their behaviour and performance.
As a white i am sick of hearing this GIMME GIMME AND GIVE HIM ANOTHER CHANCE RHETORIC.
Business is tough and not everybody is entitled or expected to succeed. when you fail , try again.
Instead of complaining about lack of funding for capital intensive industries why not ask the PIC , Tokyo , Cyrel and the other BBEEE beneficiaries (thieves) for help.
Don’t keep leaning on ”white colonial capitalism”
You can’t beat a dog with a stick today and expect him to love you tomorrow

End of comments.

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