Banking on inclusive, sustainable financing
The SVAI connects with Khensani Nobanda, Group Executive for Marketing and Corporate Affairs at Nedbank, on the group’s Shared Value journey. We explore key social impact initiatives supported by Nedbank and learn more about the group’s inclusive banking solutions for SMMEs.
Q1: What are some of the notable highlights and milestones realised on Nedbank’s Shared Value journey in recent years?
A sustainable world is not possible without the considered and sustainable use of resources. This calls for a significant paradigm shift. For too long, our economy has been structured in a linear chain of take, make and waste, and this linear economy is simply not sustainable. As a society we must stop wasting resources as this fuels further inequality.
As a bank we need to help to facilitate this paradigm shift to a balanced economy – an economy that ensures that all in society have their needs met rather than contributing to the fulfilment of “wants” that are attainable only by the few. We need to work with our clients using finance and investment to prevent waste by reusing materials and by designing and making products that are meant to last and are easy to reuse and repair.
Key milestones on our Shared Value journey include Nedbank’s support of a range of SA’s prominent recycling businesses, with our most recent lend of R122m further increasing the installed capacity of Extrupet’s recycling plants. In fact, the facility is involved in the conversion of over three million PET and HDPE bottles per day into quality flakes and pellets. It successfully supplies high-quality recycled products that meet the rigorous food safety requirements of multiple local and multinational blue-chip manufacturers who understand the need for a sustainable solution to the waste issue.
Another milestone is our partnership with FoodForward South Africa (FFSA), including support for their Second Harvest Programme, which encourages large commercial farmers to donate their agricultural surplus to address hunger and reduce the environmental impact by diverting good-quality edible surplus food. During 2020, we provided a donation of over R1,5m that went towards FFSA’s operational costs, effectively supporting the provision of over R1,7m meals. FFSA’s work will also be bolstered by a R6m donation over a three-year period from the WWF Nedbank Green Trust.
Financing sustainable agriculture is another social impact highlight and a key focus areas for Nedbank. To mitigate the risks and challenges for farmers associated with rising temperatures and lower rainfall we developed an innovative funding solution in 2019. It is designed to support farmers directly (or through a financing arrangement with their local cooperative) with sustainable farm interventions, ranging from water storage maximisation solutions and soil health interventions to cutting-edge irrigation equipment and shade netting to reduce evaporation. We have seen significantly positive results for farmers who took the loan to implement these farming solutions, which, in some instances, translated to an increased on-farm revenue of R120 000 per hectare for the 2020 season.
We also helping to advance the use of renewable energy sources in agriculture. In 2019, we enabled long-standing agriclient Ideafruit to install a PV energy plant that enables the fresh produce exporter to refrigerate up to 70 000 bins of apples and pears in controlled-atmosphere cold rooms using the sun’s energy. One year on, the solar plant at Ideafruit’s Vyeboom facility is a great success and has saved the business about R1m in energy costs in 2020. In addition, the solar plant has prevented an estimated 778,5 tons of carbon emissions from being released into the environment thus far.
Still on the subject of agriculture, Nedbank is very committed to providing innovative support to emerging and small-scale farmers under its ‘commercialisation of small-scale farming and food security’ funding stream. In fact, two projects currently supported by the Nedbank Old Mutual BBP Legacy Programme are the Centane and Mbashe Agricultural Initiative (CMAI) and the Agriqua incubator in the North West Taung region.
The first project, CMAI, was started by WIPHOLD to demonstrate that rural communities can profitably and sustainably farm communally-owned land. The project benefits over 3 000 community members and has been delivering steady progress and growth over the past five years. Social benefits include a more united local community with a common purpose and increased employment opportunities as well as anecdotal reports of a drop in crime and a higher rate of children attending school.
The second project focuses on commodities grown in the Taung region of North West, namely cotton, wheat, barley, sunflower and groundnuts. Agriqua Holdings Proprietary Limited is an incubator providing business development support and specialist technical support to 65 emerging farmers with 700 ha under management. Each farmer is allocated a minimum of 10 ha with the objective being to support these emerging agribusinesses to achieve commercialisation and have complete control of the value chain.
A total of R6m over three years (2019-2022) has been provided for input costs for the farmers. Business management and financial farm management are areas to be focused on in the future.
Q2: Please elaborate on Nedbank’s support for small businesses during the past year amidst tougher trading conditions brought about by the pandemic.
The small, medium and microenterprises (SMMEs) sector is a vital contributor to SA’s sustainable economic growth and key to the creation of sustainable employment.
Covid-19 had a significant knock-on effect on unemployment, pushing the already unacceptable numbers of people without work or a steady income to all-time highs. At the same time it created untold challenges for small businesses, many of which struggled, or failed, to survive the economic hardships of 2020.
Against this difficult backdrop, the importance of financial institutions supporting, funding and partnering with SMMEs to enable them to stay in business, retain profitability and continue to deliver employment was significantly highlighted. We offer an array of banking, lending and investment solutions as well as business education support through our Small Business Services (SBS) division.
Today, SBS offers this service and support to 210 000 businesses with an annual turnover of up to R30m, while Nedbank Business Banking partners with over 15 000 larger businesses with turnovers of R30m to R750m each.
In addition to the extensive Covid-19 support and relief provided to small businesses during the national lockdown (see below) in 2020, SBS continued to deliver the valuable business support, advancing R3,5bn (2019: R3,4bn) to clients.
Aa key part of helping our business clients through the pandemic and its challenges was to ensure they do not become over indebted or take on excessive financial risk. Our efforts with regards to close management of risk and collections environments meant that we saw less impairments than we expected. We also experienced a good recovery in new credit applications and approvals, despite tightening our credit policies to protect our clients and our business.
Q3: Do you think collaboration with other organisations, and across sectors, plays a role when one is addressing social impact initiatives? Any highlights for Nedbank here?
In December 2020 we partnered with the International Finance Corporation (IFC), a member of the World Bank Group, under a US$200m climate finance loan mechanism, demonstrating our commitment to develop markets further and support projects aligned with positive environmental impacts.
We have directed part of the climate funding raised under the loan towards financing a combination of solar, wind and biomass projects that are reaching their commercial operations date, and will be using the balance of the funding to support the construction of new projects under government’s REIPPP Programme, which are aligned with the IFC’s Equator Principles.
This initiative lends support to government’s plan to shift to a low-carbon economy and will drive further growth in clean energy generation and access.
Q4: Nedbank’s purpose is to use its financial expertise to do good for individuals, families, businesses and society. Tell us about that.
Nedbank is aware that we, alongside our stakeholders, operate in a nested, interdependent system. This means that for our business to succeed, we need a thriving economy, a well-functioning society and a healthy environment. We also recognise that sustainability issues such as climate change, inequality, social justice and, most recently, pandemics are playing an increasingly material role in shaping this system.
Within this context, our purpose guides our strategy, behaviours and actions towards the delivery of long-term systems value for us and our stakeholders.
We use the Nedbank Sustainable Development Framework to focus our efforts and identify strategic focus areas with business opportunities and risks as well as cost savings. While the exact size of these savings and opportunities may differ across geographies at a global level, they are substantial. The Business and Sustainable Development Commission estimates them to be over US$12tn annually by 2030.
We have prioritised nine of the 17 SDGs where we believe we have the greatest ability to deliver meaningful impact through innovation in our banking products, lending and investment practices. These nine goals are being championed by nine group executives. These executives have to ensure that the percentage of our lending and investment towards sustainable development finance grows in a manner commensurate with the needs of our clients, the size of the strategic opportunities offered and our desire to lead in this area.
At Nedbank we recognise that without the continued transformation of the formal economy, more than 50% of our population will continue to live in poverty. We require a nation that is united towards economic and social prosperity to transform the economy.
Our focus remains on heeding the call of President Ramaphosa to support the national agenda and ‘take the lead in transformation as we repurpose the economy for growth’. As a brand anchored in its purpose we strive to create long-term value and not to maximise short-term profits and enhance shareholder value at the cost of other important stakeholder groups.
We continue to work incredibly hard to make sure we play our part in ensuring that we leave no-one behind by enabling transformation holistically, beyond a scorecard or any other measurement indicator, to deliver value to society.
More examples of small-business support and mentorship are detailed in the Transformation Report 2020 (https://www.banking.org.za/wp-content/uploads/2021/04/BASA_Transformation-in-Banking-Report-2020_.pdf)