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Presentation to the Parliamentary Portfolio Committee

12 September 2007

Presentation by:

Mrs N T Mapetla

Chief Executive Officer

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BACKGROUND

• The EAAB is a REGULATOR of the real estate industry in terms of Act 112 of 1976 as amended.

• Governments (the world over) intervene with economic regulation when self-regulation has failed.

• As a Statutory Body, the Regulator can only be dissolved by the an Act of Parliament.

• August this year, was the Thirty First Anniversary of the Board’s existence.

• The question to ask is, “what has been achieved in the past 30 years?”

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• When I took over as CEO, the Board did not have in

place a number of basic organizational requirements

such as an Organogram, Job Descriptions, HR policies,

Financial policies, systems of internal financial control,

strategic planning processes and statutory reporting

mechanisms to the DTI and National Treasury as

required by law (PFMA). Staff performance and

professional discipline were problematic.

• Skills/Qualifications audit also revealed several cases of

misrepresentation of qualifications. The affected people

have since left the employ of the Board.

BACKGROUND Cont…

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• The Board had not been audited for three (3) years

preceding my arrival. Hence the qualified audit

with a Disclaimer for that period. All that has since

been rectified.

• We have had unqualified audit reports for two

successive years despite the challenges that we

faced regarding staff capacity. These challenges

are being addressed through both training and

recruitment of qualified staff.

BACKGROUND Cont..

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The organisational structure of the Board, indicating the diverse functions and activities that it performs on a continuous basis, is reflected in the organogram below:

FINANCE & ADMIN

HUMAN RESOURCES

CUSTOMER INFORMATION AND

IT

INSPECTIONS

CLAIMS

CHIEF EXECUTIVE OFFICER

BOARD OF DIRECTORS

MINISTER OF TRADE & INDUSTRY

TRAINING DEPARTMENT

ACCREDITATION SERVICE

PROVIDERS

ASSESSMENT & MODERATION

EXECUTIVE MANAGER COMPLIANCE

EXECUTIVE MANAGER CORPORATE SERVICES

EXECUTIVE MANAGER EDUCATION & TRAINING

PERSONAL ASSISTANT

TO CEO

COMPANY SECRETARY

DISCIPLINARY

STRATEGY MANAGER CEO’S OFFICE

THE ORGANISATIONAL STRUCTURE OF THE BOARD

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The Graph below indicates the growth of the industry in the past sixteen years as represented by an increase in the number of registered estate agents:

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

Registered Agents

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Year

Total Principals Total Employees Total Employees and Principals

GROWTH OF THE INDUSTRY

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• This year we have 84 000 registered estate agents and 18 000 firms.

• Despite the increase in number of registered estate agents there has been a reduction in the number of claims lodged and paid out. This phenomenon may be due to an increase in customer awareness or the reverse in the case of new PDI first time buyers. Whatever the cause the Board continues with its awareness campaigns through the radio and other media.

• The following graphs reflects this trend:-

GROWTH OF THE INDUSTRY Cont..

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0

200

400

600

800

1000

1200

1991 1993 1995 1997 1999 2001 2003 2005Years

Claims Lodged

Claims Lodged

R 0

R 2,000,000

R 4,000,000

R 6,000,000

R 8,000,000

R 10,000,000

R 12,000,000

1991 1993 1995 1997 1999 2001 2003 2005

Years

Claims Paid Out

Claims Paid Out

GROWTH OF THE INDUSTRY Cont..

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• The industry remains largely untransformed, 96% white and about 4% Blacks (Africans, Coloureds, Indians).

• As part of its contribution towards transformation the Board was one of the founding members of the Property Sector Transformation Charter Process – R350 000 contribution.

• The Property Charter Council is currently housed at the EAAB offices. The Board also provided office furniture and fittings, two computers and one fax as well as monthly secretarial support costs of the PCC – totalling to R342 375 per annum.

TRANSFORMATION

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• A Board of Directors has since been appointed by the Minister following the dissolution of the previous one.

• The new Board held its induction meeting on Monday and Tuesday (10 & 11 September 2007) this week.

CORPORATE GOVERNANCE

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• These emanate from the Act and remain unchanged until the Act is either changed or amended.

• A review process was undertaken by DTI in this regard last year – we await its finalization.

• Key elements to be reviewed include:

– Enabling the Board to increase fees by regulation.

– To appoint the CEO as an ex-officio member of the Board.

– Giving Board decisions on disciplinaries the legal status of a court award.

CORE FUNCTIONS OF THE BOARD

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• Regulation in the public interest through:-

Registration;

Education / Exams;

Disciplinaries;

Claims (Fidelity Fund);

Inspections;

CORE FUNCTIONS OF THE BOARD Cont..

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• We have implemented SAP CRM system to manage financial and business systems of the Board.

• Disciplinary hearings – 390 Cases were heard

resulting in 242 convictions, 41 acquittals, 63

withdrawals and 44 settlements.

0

100

200

300

No. of cases

Jan-Apr May-Aug

Months

Disciplinary Hearings

Cases heard

Convictions

Withdrawals

Settlements

Acquitals

ACHIEVEMENTS FROM JANUARY 2007 TO 30 AUGUST 2007

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• The intent here is to professionalize the industry and make estate agency a career of choice rather than a career of last resort.

• Issues of ethics of the profession will come into play more definitively, as will the creation of a body of subject knowledge.

• The agreement between Services SETA and ourselves giving us the mandate to be the Certification Partner of the SETA has been signed.

EDUCATION & TRAINING

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• Syllabus drafted jointly with SAQA & SETA is in place and is being finalized.

• Content Review Task Team was formed and is finalizing the review work.

• Regulations relating to the new education program submitted to the DTI have been approved and gazetted for public comment before finalization.

• Consultations have been held with training Service Providers and estate agents.

EDUCATION & TRAINING Cont..

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• Accreditation Regulations for service providers are being drafted and will be finalized shortly.

• The new syllabus and exam will come into effect next year (2008).

• So far this year about 15 334 prospective estate agents wrote the Board Exam compared to 3 500 for the same period last year.

EDUCATION & TRAINING Cont..

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• Mandate to conduct inspections derives from Section 32A of the Estate Agency Affairs Act 112 of 1976, as amended.

• These are done in the public interest and to protect consumers.

• To date seventeen (17) inspections have been conducted jointly with the Financial Intelligence Centre (FIC) as part of inter governmental cooperation. These were in Johannesburg, Cape Town and Pretoria. We also cooperate with SARS regarding estate agency compliance.

• The negative findings shown below are of great concern to the Board, to put it mildly.

INSPECTIONS

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Only one (1) agency (Gilbert Estates) was compliant with applicable sections of the Act (Sections 26, 29(a), 29(b), 32, 34(d)(1) and 34(b)(2).

Three (3) agencies were served with notices to close down their businesses.

Two (2) companies had submitted audit reports that contradicted the findings of the Inspections on the ground. Consequently the said companies had to withdraw their audit reports.

This is not only unprofessional, it is illegal and totally unacceptable. In future the Board will apply the law on such matters.

INSPECTIONS Cont..

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• All agencies that were illegally operating were disqualified in terms of Section 27 of the Act, because of the outstanding Auditors Reports.

• To date almost all of them have corrected their errors and have been re-issued with practice licenses (FFCs).

• In general the common trend is that of mismanagement of Trust Funds, which is illegal.

INSPECTIONS Cont..

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• In terms of Section 32 read with Sec 29 of the EAAB Act of 1976, submissions of Audit Report is MANDATORY- NO ONE IS EXEMPT.

• Imperative that Estate Agents maintain TRUST Accounts in the legally prescribed manner so that they can be audited and submitted to the Board timeously.

• These should be submitted within four months of the end of the financial year – Note that estate agencies CHOOSE the financial year end and inform the Board accordingly.

OUTSTANDING AUDITORS REPORTS

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• Non-submission of auditors’ reports by principals impacts on the registration status of employees i.e. even if the individual estate agent is paid up, non submission of the Trust Account by the principals blocks the issuing of an FFC to the individual.

• Failure to submit auditors’ report carries a fine of R500.00.

OUTSTANDING AUDITORS REPORTS Cont…

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• The key focus areas for current financial year are reflected in more detail in the Business Plan in the Board Pack.

• Briefly this include the following:-

– Skills development and capacitation of staff – Finance and registration in particular.

– Performance Management systems cascaded from corporate scorecard to all departments.

– Improvement in efficiency, turnaround times and overall customer service delivery.

FUTURE PLANS

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– Education and Training alignment with the SAQA requirements and NQF standards as a way of professionalizing the industry and attracting/fast tracking entry of PDIs into the property industry.

– Higher frequency of claims processing, thanks to the appointment of the Board.

– Targeted awareness campaigns for PDIs and other stakeholders about the role of the Board.

– 1000 Unemployed graduates will be targeted for learnerships and will undergo SEDA entrepreneurship test.

FUTURE PLANS Cont…

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– Increasing the ratio of recoveries to claims i.e. pursue collections from errant estate agents through legal processes.

– One of our focal points is to improve communication with stakeholder through an sms system.

– We will partake in a take a girl child project.

– Increased communication with the DTI especially office of the DG.

FUTURE PLANS Cont…

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• CALL CENTRE

– We have addressed public complaints on this one.

– The average answering time has been dramatically reduced from approximately 45 to 4 minutes

• WEBSITE - Redesigned and continuously update

information on our website. Display registration

status and exam numbers, etc on website

• AGENT MAGAZINE - Continue to publish the Agent quarterly. Last year, Agent won the ARELLO Communications Award, competing against international publications

COMMUNICATION

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We look forward to your support

in these endeavours

THANK YOU

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QUESTIONS??