Banking on change

Nedbank’s Level 1 B-BBEE status is the culmination of years of unwavering commitment to transformation

When Nedbank embarked on its transformation journey, the bank and the country were not quite sure what the end result would be. They were setting the benchmark.

The bank – along with the rest of South Africa’s financial sector – knew it had to, among others, bring more black people, particularly black women, into the economy but it was embarking on a process that would have far-reaching implications.

The Financial Sector Charter came into effect in January 2004 as a result of a voluntary offer by the industry, at the National Economic Development and Labour Council’s (Nedlac) financial sector summit, to develop a transformation charter. This was a way for the industry to demonstrate that it was committed to putting its resources into changing South Africa for the better.

Nedbank did not wait for the codes to be introduced before embarking on its transformation journey – it had seen the need for change a few years earlier.

‘Our transformation journey preceded the promulgation of Broad-Based Black Economic Empowerment [B-BBEE] legislation. Transformation has always been one of the key strategic focus areas for our business,’ says Kershini Govender, Nedbank executive head of group transformation. This would eventually see Nedbank bring in empowerment partners such as Wiphold and Brimstone, which were part of its Eyethu share scheme. The maturity of this scheme in 2015 unlocked ZAR8.2 billion in value for more than 500 000 direct and indirect South African shareholders.

Nedbank also created an incentive scheme for senior black staff. Transformation of its management structure resulted in the bank becoming a lot more reflective of South Africa in terms of gender and race. For Nedbank, however, transformation does not stop at addressing the country’s social ills created by apartheid. The bank also included tackling green issues as part of its transformation efforts. In short, at Nedbank, empowerment is working. Transformation is indeed happening.

Kershini Govender, Nedbank executive head of group transformation

Intrinsic part of the culture
For Nedbank to make a success of transformation, it had to internalise the ethos of the change it was meant to bring, by going beyond the objects of the empowerment codes. It had to make transformation an intrinsic part of its own culture and values. ‘One of the principles that we continue to be guided by is that transformation is a moral and business imperative that transcends mere compliance,’ says Govender. In line with this, the bank supports multiple initiatives that do not give it points towards its transformation scorecard. These include the SA SME Fund as well as the Nedbank and Old Mutual Black Business Partners (BBP) Legacy Programme, which continues to forge strong relationships.

Nedbank established the Nedbank BBP Legacy Trust to manage its ZAR100 million contribution to the BBP Legacy Programme post vesting of the group’s B-BBEE Eyethu deal. The programme comprises three broad-based investment streams: the commercialisation of small-scale farming and food security, led by Wiphold; job creation and support of entrepreneurs, led by Brimstone; and the development of township economies and urban renewal, led by Izingwe.

The parties have committed a total endowment of ZAR300 million – to date, ZAR161.43 million has been disbursed in patient-capital loans across the streams.

‘We do it because it’s the right thing to do,’ says Govender. Nedbank’s commitment should also be seen as part of the country’s broader efforts to give people who were locked out of opportunities the chance to prove themselves.

‘Our aspiration is to make our fair share of contribution towards sustainable economic outcomes that create wealth and meaningful opportunities for all South Africans, especially black African South Africans,’ says Mpho Makwana, chairman of the bank’s transformation, social and ethics committee.

This understanding of transformation is reflected in the bank’s 2018 Transformation Report, which reads: ‘Transformation must be a catalyst for the higher levels
of inclusive growth our country needs. Nedbank is committed to playing its part, working together with business, government, labour and civil society to address structural socio-economic challenges in the country and improve the lives of all South Africans.’

Leading transformation
Nedbank’s dedication to transformation is demonstrated by its Level 1 B-BBEE contributor status under the Amended Financial Sector Code (FSC). Achieving Level 1 status is not easy. For example, it requires a company to change its ownership structure and management control, to invest in skills development, and to empower its suppliers.

For companies in the financial services sphere, sector-specific codes also require them to provide access to financial services and consumer financial education, and to offer empowerment financing. Under the FSC, a company can be awarded a cumulative total of 120 points for achieving transformation goals. It can earn a further 19 bonus points for exceeding its targets.

Nedbank has demonstrated its dedication to transformation for years – it accumulated 117.60 points for the 2018 financial year, up from 109.97 points in the 2017 financial year. The bank has shown a steady increase in its empowerment ranking since the first codes were introduced in 2007. Back then it only had a Level 5 status and 67.49 points. It did not take long for it to improve its performance. By 2009, it was the third-most transformed company listed on the Johannesburg Stock Exchange (JSE), and the number one financial services group in the Empowerdex annual survey of the top 200 JSE-listed companies. This was a vast improvement on the 15th spot it held in 2008.

Nedbank has increased its total training spend for black staff from ZAR171 million to ZAR370 million

Despite its success in climbing up the empowerment ratings, Nedbank views the ranking as a means to an end and not its primary goal. ‘Although the FSC targets are an important guide, it can never be about the numbers alone, the FSC is only one instrument used to effect transformation,’ according to Govender.

She says an organisation should not lose sight of the fact that the rankings are there to drive real change. But for this to happen, the whole organisation has to buy into it. ‘You need commitment from your leaders and clarity on your purpose. You need to get buy-in from all your stakeholders. It is very important to see the integration between all the elements and not see them from a singular perspective. For example, procurement cannot be seen in isolation of enterprise and supplier development, which is the difference between redistribution of wealth relative to creation of wealth.’ Transformation and growth are two sides of the same coin.

A decade of change
Nedbank’s efforts have reaped multiple benefits over the years, achieving numerous milestones in empowerment, transformation and excellence, including:

  • Retaining Level 2 status for the past 10 years, and currently achieving Level 1
  • Increasing its percentage of black employees from 58% to 77%
  • Raising its total spend on training for black staff from ZAR171 million to ZAR370 million
  • Boosting its procurement spend at suppliers with a 51%-plus black shareholding from ZAR662 million to ZAR4.393 billion
  • Growing its black retail client base from less than 50% to 62%
  • Spending ZAR72 billion on empowerment financing
  • Contributing a cumulative ZAR1.1 billion to socio-economic development and consumer education
  • Providing (in partnership with the Nedbank Sports Affinity and the Sports Trust) three schools with state of-the-art, multipurpose sports courts and handing over soccer kits and training equipment to more than 500 schools across South Africa
  • Creating value of ZAR8.2 billion for more than 500 000 beneficiaries when the Nedbank Eyethu Share Scheme matured after 10 years in 2015. Market cap grew from ZAR44.8 billion to ZAR138 billion.

Looking forward
Nedbank’s belief in transformation did not waver even when the bank was navigating a challenging period. Shortly after the B-BBEE codes were adopted in 2007, the world was rocked by the 2008 financial crisis. Despite the financial pressures placed on it, Nedbank did not stray in its pledge to meet its transformation goals.

It also did not allow its complex unbundling from Old Mutual over the past few years to distract it from reaching major empowerment targets. ‘We acknowledge that B-BBEE Level 1 is a significant milestone in our journey and testament to our sustainable approach to transformation. We also acknowledge that we have not arrived, and we will continue to be a change agent in driving SA’s economy forward while addressing the social challenges that exist,’ says Govender.

In Q1 2019, Nedbank committed to supporting the Youth Employment Service (YES) initiative, announcing that it would be ‘investing approximately 1.5% of its three-year average South African net profit after tax per annum to provide employment opportunities for some 3 000 youth, either through internal placements or sponsored placements with YES implementation partners’.

Nedbank’s transformation policy has indeed transformed the institution. However, ‘it’s a journey; not a destination’, according to Govender. ‘We operate as a microcosm of the broader society. We need to transform to remain relevant in the societies in which we operate’.

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