Sakeliga, a business lobby group, has chosen to go to the Constitutional Court to further its fight against broad-based black economic empowerment (B-BBEE) overreach in the property sector.

Although Sakeliga has already won the first stage of its campaign, with the Gauteng High Court having ruled in September that the B-BBEE requirements of the Property Practitioners Act of 2019 were unconstitutional and invalid, it seeks greater clarity on a number of critical issues.

The immediately contested clause in the Act (Section 50(a)(x)) requires property practitioners to submit a B-BBEE certificate to the industry regulator, the Property Practitioners Regulatory Authority (PPRA). The PPRA announced in early 2024 that it would not issue a Fidelity Fund Certificate (FFC) to any property practitioner who failed to comply.

For property practitioners, the FFC has to be renewed every three years. It is illegal to operate in the South African property market without such a certificate, which effectively turned holding a B-BBEE verification into a hard trade barrier. By law, small enterprises in South Africa do not need a formal (and expensive) verification. They automatically qualify for B-BBEE status level 4 simply by submitting a sworn affidavit.

It is true that the Act requires the PPRA to “drive transformation” in the property sector and has created a dedicated Property Sector Transformation Fund with start-up capital of R80 million. However, further actions appear to be at the discretion of the regulator. It took it on itself to require at least a level 8 B-BBEE rating.

Regarding its September legal win, Sakeliga says, “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.”

The business organisation is opposed to BEE, pointing out that it is not only a drag on the economy but also that it transgresses individual rights. It says that it is even more resolutely opposed to B-BBEE where racial categorisation is used as a requirement for “the mere exercise of an occupation or profession” and where, as in the property market, it impacts disproportionately on small enterprises and individual practitioners.

The Gauteng High Court found that the Act was poorly drafted in specific areas, explicitly striking down sections for vagueness, legal uncertainty, and being “irrationally overbroad”. It found that the text of the Act itself is poorly written regarding what kind of BEE compliance is required.

The court also found that blocking a person’s statutory right to practice their trade or profession simply over a vague certification requirement is an unjustifiable limitation of constitutional rights.

Because the legislation was so vaguely drafted, the High Court has stripped the regulator of its power to enforce it while the matter awaits final confirmation from the Constitutional Court. The B-BBEE requirement is thus suspended pending a Constitutional Court ruling.

Sakeliga wants two aspects of the High Court judgement confirmed. It wants the confirmation in the practical matter of severing B-BBEE from licensing in the property sector via the issuing of an FFC. It also wants the Constitutional Court to affirm a matter implicit in the September ruling, that forcing businesses to satisfy racial compliance metrics as a legal precondition to work in an occupation violates Section 22 of the Constitution (the right to choose a trade, occupation, or profession freely).

Beyond these two clarifications, Sakeliga also wants the Constitutional Court to provide a tighter definition of the notion of “property practitioner” to avoid arbitrariness in practice. While the High Court agreed to narrow down the definition (for example, excluding private individuals selling their own homes from being defined as property practitioners) Sakeliga is pushing the Constitutional Court to go further.

The organisation’s goal is to ensure the law is cleanly cut back so that only businesses engaging in actual, high-risk fiduciary real estate work are regulated, leaving digital platforms, homeowners, and incidental service providers free from state-licensing bottlenecks.

It would be risky to second-guess a Constitutional Court decision. But, historically, it has taken a dim view of vague laws that leave citizens guessing about how to comply. Based on the Affordable Medicines precedent (Affordable Medicines Trust v Minister of Health (2005)), where the Court held that the Constitution protects both the freedom to choose a trade, occupation, or profession and the practice of the chosen vocation, it would be a surprise if it were not to back Sakeliga’s case.