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Bronwyn Nielsen spoke to Zhann Meyer, head of Agricultural Commodities at Nedbank Corporate and Investment Banking, to explore what it means for Nedbank CIB to be ‘purpose led’. Meyer explained how the bank is working towards the alignment of its purpose to be money experts who do good by using their expertise in an environmentally safe and strategically sound manner. Meyer also expanded on the nature of Nedbank CIB’S role in sustainable agricultural finance.
On what it means when a bank is purpose led
Nedbank has gone a bit further than making money experts who do good for individuals, families, communities and businesses; merely a strategy or a vision. It is the reason why Nedbank exists. It is extremely important to align whatever we do in terms of our thinking and our facilitation of lending transactions to think about our purpose. The reason we exist is actually to be money experts who do good. So, from our clients’ perspective, once we get that alignment right, it’s quite an easy process to align our clients towards this as well and make sure that our clients understand that we are here for good. We get to use our expertise in an environmentally safe and strategically sound manner and to make our clients understand that we differentiate ourselves through what we do and who we are, not merely talking the talk.
On Nedbank’s role in sustainable agricultural finance
Agriculture has been extremely resilient through the last 2 to 3 years during COVID, and it proves that people need to eat. We’ve shown multi digit growth figures in 2020. So, from an agricultural perspective, banks play a much more important role than just providing funding. The primary funding needs for the agricultural sector in South Africa now exceeds R200bn . As we know, there are some players that left the sector. There are some new players entering the sector and for us, that’s exciting times – to get this facility and our funding aligned to where our clients are. Unfortunately, R200bn is not going to be enough going forward. Banks have to realise that it has an important role in terms of agriculture,using the largest use of resources, and those are soil and water. So, that R200bn needs to be applied very carefully and very responsibly towards the right types of agriculture in the right sector and at the right time.
On Nedbank delivering positive returns in sustainable finance
From a CIB perspective, we’ve been very fortunate with initiatives like National Contributor, which allows us to think a bit differently about credit and the way we lend to our clients in the agricultural sector. We started out with simple solar financing for one of our clients – a packhouse in the apple and pear business in Grabouw – and they save up to a thousand tons of carbon released into the atmosphere on an annual basis, purely because of that simple, yet very efficient solar plant that we finance. More detail goes into our financing of BEE farmers where we use wholesale conduits like cooperatives that assist us in funding these BEE farmers. Those farmers don’t necessarily own the land, so the conventional approach: “Give me a mortgage of security and I lend against that,” is simply not workable here. One needs to think of it differently and say, if I want to form an inclusive agricultural sector, I need to include all the members, all the farmers, including commercial farmers, as well as these upcoming farmers.
We’ve managed to put lending facilities in place for some of these farmers and it’s going extremely well. Another example is one of shade netting; financing of shade netting construction for our clients in the citrus sector. Nedbank is closely aligned to United Nations social development goals, particularly goal number 12, which is responsible consumption and responsible production. This leads us to looking at shade netting and say, how can I assist my citrus farmers to produce more with less? Shade netting saves up to 30% water in the citrus sector. What we’ve seen is that some of our clients have experienced up to a 20% increase in gross profit per hectare. It comes back to that alignment with the use of capital? The conventional approach would be for the farmer to provide a mortgage for the netting. You need to look at it from a farmer’s perspective. Am I making my farmer more productive and am I reducing my farmer’s risk profile through the shade netting? If the answer is yes then surely that should be a good rationale for providing these loans.
On the importance of Nedbank measuring its sustainable finance initiatives
For us, to measure is to know. When our clients accept loans from us, they need to realise that they’ve got more than just the responsibility to repay the money. Their responsibilities lie not only within repaying the loan, but also making sure that the application of those funds are done in the right way. We’ve gone further than just merely drawing up a facility agreement; we’ve included reporting parameters both for frequency and for quality of data. We measured that against the norm. We also talk about education of the BEE farmers and we want our clients to come back to us and tell us that the money that we’ve advanced has done much better and much more than just providing liquidity in the banking system. That measurement is critical and we monitor that. We also report that in the Nedbank sustainability papers.
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