COURT VICTORY: Sakeliga defeats BEE licensing in the property sector

Sakeliga has secured a major court victory against BEE in the property sector. The Pretoria High Court has declared unconstitutional the requirement that estate agencies and other property businesses possess a BEE certificate to obtain permission to operate.

The ruling is a significant setback to the South African government’s attempt to make BEE a precondition for economic activity in a sector that generates upwards of R60 billion per year. It immediately frees all those defined in the legislation as property practitioners from compulsion to participate in BEE, and saves millions of rands in resources that would otherwise be wasted on BEE compliance and certification.

Sakeliga brought the case in 2024 because the Property Practitioners Regulatory Authority (PPRA) had refused to issue operating licences – formally called Fidelity Fund Certificates (FFCs) – to businesses unless they first provided a BEE certificate. Operating without an FFC is a criminal offence.

The High Court has now struck down the statutory foundation of that requirement, section 50(a)(x) of the Property Practitioners Act 22 of 2019. The PPRA must also pay Sakeliga’s costs, including the costs of two counsel.

Racial preconditions confirmed in court

The PPRA’s own court papers demonstrate that the requirement was intended to do more than collect statistics. In its sworn answering affidavit, it stated that the purpose of the limitation was to “ensure that those who pay lip service to transformation are not permitted to practice as property practitioners and earn an income from it.”

In heads of argument, counsel for the PPRA even emphasised how intentionally it sought the ability to compel: “A purely voluntary transformation-reporting system would undermine the Act’s statutory design and the Authority’s ability to monitor and implement transformation measures.”

Sakeliga reiterates its caution that the government and regulators are actively working to make participation in BEE and other race-restrictive government programmes, such as Employment Equity’s racial hiring quotas, a precondition for economic participation across all sectors. We call this the 3rd Wave of BEE.

Sakeliga considers the use of licensing for race-restrictive purposes an unacceptable barrier to and infringement on the freedom to trade. Ultimately, a B-BBEE certificate is a political instrument of the state, not a business requirement – it is not a valid precondition for economic participation or for serving customers, clients, and communities.

Overbroad definition

The court also partly agreed with Sakeliga that the definition of "property practitioner" in the Act is irrational and overbroad and declared certain elements of it unconstitutional. The constrained definition means that several categories of persons engaged in property-related business now justly enjoy freedom from the government’s overreach.

Sakeliga obtained significant relief against this overreach, but not the full narrowing of the definition sought. We are assessing further legal options.

What the order means

• Effective immediately, the PPRA may not refuse a Fidelity Fund Certificate on the grounds that an applicant does not hold a BEE certificate.
  
• Effective immediately, private owners, certain advertisers, and persons dealing with specified property interests outside the ordinary course of business are no longer regarded as "property practitioners".
  
• Since the judgment concerns findings of unconstitutionality of an Act of Parliament, it will be referred to South Africa’s Constitutional Court for confirmation. Upon confirmation, Parliament will have 24 months to correct the overbroad definition.

This victory demonstrates that compulsory BEE is not an inevitable condition of doing business. Its expansion can be resisted, its enforcement stopped, and the freedom to serve customers without the state’s racial preconditions restored. Sakeliga will continue that work.

Resources:

• Judgment and order