Pareto Limited

Putting the real meaning of empowerment back into BEE

If there are still concerns that black economic empowerment (BEE) compromises performance, they should dissipate at the mention of property loan stock company Pareto.

Under the stewardship of Alex Phakathi, Pareto has at breakneck speed transformed itself into one of the most BEE friendly mainstream corporations in the country without compromising its core business and performance standards. In fact Pareto's performance has improved with its BEE record.

WHAT IT MEANS
Has a 100% black executive team
BEE part of key strategic goals

Pareto has gone further by using its muscle to promote transformation among third-party service providers, thereby becoming the paragon of BEE in the property industry.

"We do not treat BEE as a by-the-way factor," says Phakathi. "BEE forms part of our key strategic goals. We live and breathe BEE."

Pareto, which is owned by the Eskom Pension & Provident Fund (EPPF) and the Public Investment Corp (PIC), has already achieved the 70% preferential procurement level demanded by the property sector transformation charter over five years. Though Pareto would not score much on the ownership element due to the nature of its shareholders, excellent transformation of its management, employment equity and a remarkable corporate social investment programme boost its BEE contributor status.

Pareto was established in 1998, but its BEE journey entered a new phase with the installation of Phakathi as CEO in 2004. Phakathi was appointed amid misgivings about the readiness of black candidates to assume such responsibilities in the private sector.

Though the argument about the dearth of skills and experience can be real, it tends to be abused by groups who are fundamentally opposed to BEE. However, Pareto's BEE record proves prophets of doom wrong as far as BEE is concerned.

Recent changes in Pareto's top management have left the property fund with a 100% black executive team looking after assets valued at about R10bn. The team is made up of highly gifted individuals who can stand their ground in every corner of the corporate world.

The core of the team includes Nomzamo Radebe, who serves as the chief financial officer. A qualified chartered accountant, Radebe joined Pareto in 2006. There is also Osafo Gyimah, who joined Pareto this year. Coming with an excellent academic record and work experience, Gyimah serves as the acquisition manager, which gives him the critical responsibility of driving Pareto's growth. Pareto has recently acquired Nozuko Mxunyelwa, an admitted attorney, who serves as legal & compliance manager as well as the company secretary.

"Our varying teams over the years show that we do not just look at the colour of the skin," says Phakathi. "We have always pursued the establishment of a super-skilled and transformed team."

Says Mxunyelwa: "One of the things that captured my attention when I joined Pareto was the unapologetic endorsement of BEE." As compliance manager, she is now behind the wheel, steering the BEE process with exuberance.

To the annoyance of many in the property industry, Pareto has always insisted on giving business to BEE-compliant service providers. This extends to key services like property management. Pareto is known to fire high-profile service providers for lack of BEE credentials. This has driven some service providers to improve their BEE record in order to stand a chance of getting business from Pareto.

Mxunyelwa points out that Pareto is far ahead of its peers on affirmative procurement. She cites the 70% preferential procurement achievement. Included in this affirmative procurement book are key services such as property management, security, cleaning, maintenance and marketing of centres.

Pareto has been a catalyst in the advancement of BEE in the property management field. The now established black-owned and operated property management firm Motseng Property Services was to a large extent jump-started by Pareto's affirmative procurement policy.

Motseng runs with a Pareto contract to manage two of the largest shopping centres in the country, The Pavilion in Durban and Westgate Regional Shopping Centre in Roodepoort. Valued at R2,6bn, The Pavilion has 115 323 m² of lettable retail space. It was this contract that delivered a landmark development in the property management industry - the first black woman to become the manager of a super-regional shopping centre. Her name is Lynette Ntuli and she is employed by the 85% black-owned Motseng.

Pareto complements its hard-line stance on preferential procurement with a remarkable training programme meant to produce bona fide black retail property managers. It funds a programme that inserts black candidates in its service providers to understudy shopping centre general managers.

These trainee GMs are stationed within independent property management firms who look after Pareto's properties, but the trainees are paid by Pareto for the duration of the two-year mentorship programme.

"With this programme, we are aiming at producing candidates who can manage the largest shopping centres in the country," says Phakathi. The programme accommodates six people at a time.

Besides the property sector charter, the pressure from groups like Pareto served as a catalyst for the transformation of property management giants like Broll and JHI.

Featured in the Pareto service providers' list, the two groups have in the past few years overseen significant BEE initiatives within their ranks. Broll manages Cresta Shopping Centre and Southgate Malls on behalf of Pareto and has teamed up with a black women-led group called Akhona Properties. The latter owns a significant stake in Broll.

Through its CEO, Pareto has played an activist role where BEE is concerned. It was during Phakathi's presidency of the SA Property Owners Association that the property sector charter was finalised and signed. He serves on the Charter Council.

The charter has imposed a broad-based BEE scorecard to enforce and measure BEE in the property industry. Installed last year, the scorecard comes with clearly defined and dated BEE implementation targets. These include a target to transfer 25% of the industry's assets to black hands in five years and to achieve 70% procurement from BEE compliant entities in the same period. It also carries internally focused transformation measures including targets to transform management and the general workforce of property entities to mirror the demographics of the country.

The charter has since been followed up by the inception of more stringent BEE implementation measures by the department of public works, which is a surrogate regulator of BEE implementation in the property industry. The department, which manages government immovable property assets valued at more than R120bn, is establishing a BEE guideline that favours 100% black-owned entities for its portfolio. This has caused an outcry in the property industry, with allegations that the department's initiatives go against the spirit of the charter.

Phakathi is one of the few people who is supportive of the department's initiatives. "The charter prescribes minimum BEE targets," he says. "There is nothing wrong if other parties are raising the bar. We have done the same and found that people can meet our demands."

By Sibonelo Radebe, Financial Mail