Listed property sector still in white male hands

THE South African listed property sector is lagging far behind when it comes to transformation, according to an MBA thesis written by a property player .

Marius Muller, a director of Kagiso Intaprop, says in his thesis, which he researched at the beginning of this year, that out of 138 directors on the boards of 14 listed property companies studied, only two were black and three female.

Muller says that although financial disclosure met legislative requirements, transformation performances were "dismal".

He says there were no black females on the boards of the listed property companies he studied .

Muller's research also found that investors' greatest concern regarding corporate governance in the listed property sector was related to the independence of the board of directors and the subcommittees of the board.

"Investors want to see a board of directors where the number of independent nonexecutive directors exceeds the sum total of nonexecutive and executive directors serving on the board," says Muller in his executive summary.

The most important aspect of financial disclosure, he says, is for companies to provide more detailed information on expenditure and to be more transparent with regard to financial gains from which related parties benefit.

The thesis recommends that property companies increase the number of independent directors on their boards and that this be done in a manner that will aid the transformation process.

Angelique de Rauville, MD of listed property portfolio management company Provest, which is part of the Investec Property Group, says she concurs with most of Muller's findings.

De Rauville says that as far as full disclosure is concerned, Provest would like to see total transparency when it comes to property acquisitions and disposals by listed property funds, as well as disclosure by sellers in property sales.

"Historically, there has not been a sufficient degree of transparency, particularly on relatedparty transactions," she says.

"There has been an improvement and shift towards greater transparency. There is still room for improvement, particularly relating to the composition of the boards of directors."

However, De Rauville says most of the listed property stocks are struggling to find suitable board representatives.

"Property skills at board level are limited to a handful of individuals who are often represented on more than one board in the listed property sector, which gives rise to potential conflicts of interests."

She says people are reluctant to accept board appointments given the increased responsibility and accountability they carry.

"You can't sit on boards these days as a nonexecutive and wash your hands of any responsibility."

De Rauville says that, from an employment equity point of view, there is not enough black or female representation at board level within the real estate sector.

Mariette Warner, fund manager of Stanlib Property Income Fund, says listed property funds are focusing on increasing the number of independent nonexecutive directors. They are also focused "on the transformation process".

Warner expects to see significant changes in the makeup of these boards in the near future.

Article by: Business Day - http://www.sapoa.co.za