SOCIAL SUSTAINABILITY

SOCIOECONOMIC DEVELOPMENT

Integrating economic and social sustainability

The global economic crisis of 2008 and 2009 saw much of the world facing recessionary conditions, which resulted in the closure, or near closure, of a number of well-known and highly regarded international financial institutions. Despite having managed through the resulting financial crisis, Nedbank Group was left in no doubt regarding the importance of ensuring that its economic sustainability does not depend solely on external factors or the state of the economic environment in which we operate. This understanding that inherent economic sustainability is the bedrock of any viable and resilient business has led us to focus on developing and implementing worldclass governance and compliance practices and honing our risk management skills to ensure that, regardless of external forces, Nedbank Group is well-positioned to continue growing shareholder value, protecting the financial interests of our clients, employees and suppliers, and contributing positively to the economic future of the country.

EMPOWERMENT FINANCING

The global financial crisis resulted in capital scarcity during 2009, despite this Nedbank Group exceeded its empowerment financing targets:

Description	Nedbank internal target 2009	Achieved
Targeted investments (Rm)	R1 137	R2 319
BEE transaction financing (Rm)	R911	R1 362

 

NEDBANK’S INTERNAL TARGETED INVESTMENTS

The commitment by Nedbank Group to originate loans under the access pillar of the Financial Sector Charter (FSC) is mirrored by a commitment to hold a portion or all of the originated loans on the balance sheet. The only addition in targeted investment that is not mirrored in origination is transformational infrastructure.

BEE TRANSACTION FINANCING

BEE transactions are defined in the charter as:

• all transactions for the acquisition, by black people, of direct ownership in an existing or new entity [other than a small and medium enterprise (SME)] in the financial or any other sector of the economy; and
• joint ventures with debt financing of or other forms of credit extension to and equity investments in BEE companies (other than SMEs).

The challenges impacting Nedbank’s ability to reach the target include the financial market meltdown, resulting in capital scarcity to finance black businesses and the higher risk requirements.

ACCESS TO FINANCIAL SERVICES

Over the last three years Nedbank Retail has invested significantly in a range of banking channels, most notably ATMs and low-cost physical distribution points. This has led to a considerable improvement in our banking footprint, particularly in the mass market areas, where we were previously underrepresented. During 2009 Nedbank Retail rolled out 153 ATMs, of which 65% were deployed in so-called mass market areas. The intention is to continue expanding into these areas while maximising new developments for the benefit of the middle market.

During the year under review Nedbank Retail also reengineered and increased the presence of the mobile sales team and the sales team’s product offering from four products to 12, and increased community-based product sales with a view to encouraging clients to reduce dependency on cash through the use of appropriate and affordable banking products.

Intermediaries are an integral part of the Nedbank Retail sales distribution strategy. During 2009 Nedbank Retail reviewed its mortgage originator agreements and pricing structures. Given our focus on meeting the needs of the mass market in particular, Nedbank Retail grew its direct sales capabilities in the Personal Loans Division and implemented an electronic interface to afford merchants easier credit applications and quicker turnaround times.

Description	Nedbank target 2009	Achieved
Access to financial products (Mzansi Accounts)	78 261	317 286
Access to financial services – Reach (FSC sites)	7	0
Origination: Affordable Housing (Rm)	R1 290	R841
Black agriculture financing (Rm)	R45	R20
Black SME financing (Rm)	R200	R759
Client education – % of retail net profit after-tax spend per annum	0,20%	0,29%

 

CONSUMER AND COMMUNITY EDUCATION

Nedbank Group is aware of the need for effective financial education among South African consumers – particularly given the current difficult economic conditions.The group places a high priority on educating consumers and clients and a number of initiatives were undertaken in this regard in 2009 including:

• The Boxer Project – delivers consumer education via Boxer stores and facilitates staff training.
• The In-workplace Project – provides training in the workplace and utilises consumer education as a complementary skills development programme.
• The In-community Project – offers training for people in community organisations and empowers the general public with critical literacy skills required to manage their daily financial needs.
• Community Integration Project – establishes and maintains strategic relationships in communities with key and influential stakeholders ie government and municipal officials, organised labour and other relevant structures in order to facilitate and identify mutually beneficial business opportunities including consumer education.
• Special projects: Teach Children to Save South Africa™ (TCTS SA™) – teaches children to save by fostering a culture of saving. TCTS SA™ highlights the important role that volunteer bankers and financial sector professionals can play in educating our nation’s youth to become lifelong savers.
• Websites – our websites hold vast amounts of information that assist our clients in all areas of integrated sustainability:
  – www.nedbank.co.za
  – www.nedbankgroup.co.za
  – www.nedbankgreen.co.za

All consumer training initiatives run by the bank are outcomes- based and aligned to the agreed industry standards. The group developed an education video in five official South African languages and partnered with many of its corporate banking clients to provide education to their staffmembers. As part of our general service to communities, Nedbank Group also provides entrepreneurial and business financial planning services, and HIV/Aids awareness training.

The aim of consumer education is the development of consumers’ skills, attitudes, knowledge and understanding of the financial sector and its products and services so that consumers are able to use consumer information effectively. Consumer education empowers consumers with knowledge and skills to enable them to make more-informed decisions about their finances and lifestyles. The resulting benefits include the correct use of financial products, greater confidence in making financial decisions and improved financial wellbeing.

SUSTAINABILITY EDUCATION AMONG CLIENTS

A focus for 2010 is the design, development and implementation of a multifaceted learning and skills development programme aimed at creating awareness of issues around sustainability, and helping to modify the behaviour of individuals and communities where Nedbank Group has a footprint. The content will be designed to equip community leaders to set up, manage and sustain community-based projects that reinforce the benefits of sustainable living.

 

ENTERPRISE DEVELOPMENT

Enterprise development is considered a groupwide imperative and forms part of Nedbank Group’s commitment to the sustainable growth and development of the SA economy. A number of initiatives and projects, across the group, are aimed at promoting enterprise development, particularly in terms of supporting the development of smaller businesses in line with stated government objectives in the small-to-medium- enterprise space.

Nedbank Small Business Services, in particular, focuses on supporting and empowering businesses with a turnover of up to R7,5 million per annum. Through its commitment to the small-business market and its understanding of this market and the small-business owners who operate in it, this business delivers specific banking and non-banking solutions that enable the success of the small-business owner. These range from free banking for startup businesses that apply for a loan of at least R100 000 to an array of value-added services, including:

• Free business management seminars – These are free seminars that are specifically aimed at providing small-business owners with practical value-added information that can assist them in running their businesses. A total of 26 seminars were offered in 2009, with 6 775 seats booked in the following areas: Johannesburg, including Soweto and Tembisa, Tshwane, Durban, Umlazi, Port Elizabeth, Cape Town, Khayelitsha and Bloemfontein.
• Business registration – Through our association with Swiftreg, we offer a convenient and efficient business registration service to clients within our branch network. Separating business and personal banking in this way assists business owners in running their businesses more successfully.
• Mentorship – Through our strategic partnership with Business Partners, we offer business mentorship where required – with R5 000 of the cost of such mentorship covered by Nedbank.
• Free financial training to franchisees – Through Franchise Plus, we offer free financial training to franchisees, aimed at providing them with insight into the complexities of finance and using finance as a management tool.
• Financial assistance: Khula – Businesses that do not qualify for loans due to a lack of security can often access finance through an arrangement with Khula Enterprise Finance Ltd. The Indemnity Scheme targets historically disadvantaged South African small businesses, with a particular focus on developmental loans of under R250 000, women in business, specific geographical development regions and black business empowerment.

Nedbank Business Banking’s enterprise development proposition provides an enabling environment for emerging businesses by offering easier access to finance and relevant support, training and capacity building across the business value chain. The slowdown in economic activity during 2009 led Nedbank Business Banking to implement a number of initiatives as alternative opportunities to support entrepreneurial development and transform the Nedbank Business Banking client base. These included various partnerships and alliances with emerging enterprises, engagement with a number of industry participants, and specialist support for agricultural operations, including:

• Municipality engagement – Through a process of participative engagement with the municipalities, key stakeholders and roleplayers, sustainable enterprise development initiatives were identified, with the objective of facilitating job creation and assisting with the further development of the economy within these municipalities.
• Partnerships and alliances – Ongoing engagement with the Hope Factory and other job-creation-focused NGOs ensures that Nedbank Business Banking provides a complementary support role by way of financial and non-financial support to the NGOs and emerging black enterprises.
• Industry engagement – Engagement with various industry players are conducted to investigate the potential for partnering on job creation programmes.
• Collaboration with Group Procurement – It offers suppliers easier finance and access to mentorship and capacity building, verification agents and BEE partners for those wanting to become compliant in the ownership component and specialist expertise.
• Agriculture – Nedbank Business Banking has rolled out and embedded a national footprint of specialists supporting business units within the bank. A new client value proposition for agriculture has also been developed and embedded, including a specific focus on BEE funding.

More details and case studies regarding Nedbank Group’s Enterprise Development are included in the Nedbank Black Economic Empowerment Report available at www.nedbankgroup.co.za .

AFFORDABLE HOUSING

As a consequence of the effective suspension of the FSC and the exclusion of affordable housing from the Department of Trade and Industry (dti) Codes, the sector is legally unable to set an industry affordable-housing target. Notwithstanding this impasse, Nedbank has agreed its own internal five-year target. The target market for 2009, as agreed by the Operating Board, was a gross monthly income of R15 142, which will escalate in 2010 by the mid-point of the consumer price index (CPIX) and the building cost index for 2009.

Nedbank continued to be actively involved on the Banking Association’s Affordable Housing Committee, with the specific intent to develop the affordable-housing market by undertaking research and working closely with sector stakeholders, particularly the Department of Human Settlements.

 

PREFERENTIAL PROCUREMENT

In the Financial Mail/Empowerdex 2009 survey published in the first quarter of 2009, Nedbank was first in preferential procurement among the five top banks, ahead of all the financial services companies surveyed.

Throughout the year the group continued to focus strongly on the achievement of predetermined preferential-procurement targets and subtargets for 2009. In 2009 Nedbank again managed to raise its overall BEE spend, in spite of stricter expiry date conditions on suppliers and vendors.

• Overall BEE spend is 83,5%, against a Nedbank target of 60% and a dti target of 50%. The dti target for the years 2011 to 2016 is 70% and we are already achieving that target.
• In terms of the SME spend, the group is at 21,2%, which is above the industry target of 10% and our Nedbank target of 15%. The dti target for the years 2011 to 2016 is 15% and we are already achieving this target.
• Spend with black-women-owned (BWO) businesses was 12,1%, against a group target of 10%, and a dti target of 9%.
• Spend with BWO organisations increased eightfold from 0,29% in 2008 to 2,4% in 2009, against a Nedbank Group and dti target of 6%. This area of procurement spend remains a challenge, but Nedbank continues to focus on realising its objective of supporting these businesses, wherever possible.
• The procurement contribution to the Nedbank scorecard is 18,79 points out of a possible 20 points, which represents a 93,5% achievement. Nedbank is striving to raise this contribution level. Through the work of the group’s BEE Procurement Unit, preferential procurement policies and procedures continue to be embedded and implemented across the bank.

Nedbank’s greatest current preferential procurement challenge is that of procuring from BWO suppliers. There are few large female-owned suppliers, and the majority of BWO suppliers are investment companies, as opposed to operating entities. Nedbank has thus enhanced efforts to source BWO suppliers through setting targets and subtargets at individual and business unit level.

Nedbank is partnering with two businesswomen organisations that will assist it to source BWO suppliers based on a number of identified opportunities such as facilities management, recruitment and catering. Nedbank will work with these organisations to assist in development areas and has assigned a senior commodity manager to this. Nedbank has identified the need to raise the number of black SMEs and the value of their spend through preferential selection.

The Nedgroup Investments Fundisa Fund

Nedgroup Investments, in collaboration with government and the Association for Savings & Investment South Africa (ASISA), has developed a savings product called the Nedgroup Investments Fundisa Fund. It aims to incentivise people to save for tertiary education.

How does it work:

• You can invest from as little as R40 per month.
• Your money is invested in an income unit trust that offers competitive returns.
• A bonus of an additional amount of 25% of your contributions – to a maximum of R600 every year – is added to your investment.
• You do not have to be related to the child and you can change your nomination during the course of the investment.

It was launched in November 2007. The total portfolio size at the end of December 2009 was R5,1 million. The number of accounts at the end of December 2009 was 3 766 (2008: 1 630) (year-on-year growth of 131%).

 

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