Nedbank uses its purpose to do good

Nedbank is positioning itself as a partner for growth for agriculture sector players and associated value chains.

JEANETTE CLARK: In 2020, when the South African economy contracted by a record 7%, the agriculture sector was the only one other than government services to contribute positively to GDP, growing at the time by 13%. In 2021 it looks like an estimated growth of 7%. This is clearly a very important sector for our country’s economy.

We are today joined by John Hudson, national head for Nedbank AgriBusiness, to unpack some of the key issues facing the industry and what we see for the future. John, Nedbank AgriBusiness of course subscribes to Nedbank’s purpose of using the financial expertise the company has to do good for individuals, families, businesses and society. Can you tell us how agri business fits into this purpose?

JOHN HUDSON: It’s really good to be with you, and to share some of Nedbank’s views, I guess. To start off with, we’ve just had confirmation of the 2021 contribution, and it’s 8%. So your 7% that you spoke to up front was very close to it, and that was the estimate. But now we have the final number at 8%, which on the back of 13% is a significant contribution, and as you pointed out, a real value contribution in these difficult times. So yes, Nedbank’s purpose, which is to use our financial expertise to do good for individuals, families, businesses and society, is really what gives us guidance when we are looking at our strategy and our contribution to the country. As Mike Brown [Nebank Group CEO] has put it, Nedbank’s purpose is our north star. It informs us about our strategy, and it really helps [us] look at society in a different way.

For me as a Nedbanker I think one of the most important developments at Nedbank is this purpose-driven approach which really makes us look very deeply [at] what our contribution can be. From an agricultural point of view, I think it’s critically important, because Nedbank’s purpose is actually underpinned by the SDGs – the UN’s sustainable development goals – and I think that gives us a lot of direction as to what we’re trying to do. If you look at the SDGs, many of them do touch on agriculture.

So if you just run through a few, for example, whether it’s SDG6, which is water, SDG7 energy, STG12, [which is] responsible production and consumption – and in fact SDG1 and 2, where 1 is no poverty and 2 is zero hunger – if you look at that, there is a lot to it, which really underpins our purpose, and from an agricultural point of view, we then are really aligned very closely with it.

I think the other important part that I’d like to mention is that when it comes to SDGs and the funding of this, if you look at Nedbank, our CSI funding is a small component of what we spend. Maybe it’s R130 million per annum. We then have a large lending component. We probably lend to our client base between R118 and R200 billion. So if you’re going to drive change, and if you’re going to look at creating a future we want, it makes sense to focus on the lending component. So therefore, in that lending at R180 billion, we then align that with the SDGs. I think that starts to give us real purpose as to how we add value to society at large. So, from a ‘net bank purpose’ point of view, it really does give us good direction.

JEANETTE CLARK: Now you’ve mentioned the SDGs – and SDG2 is zero hunger – agriculture in South Africa is a key industry, especially in the turbulent times we have been experiencing, to assist with food security. I believe at national level we score quite well in terms of food security, but this does not always translate to the household level. We definitely can’t say that we’ve got zero hunger in our country.

JOHN HUDSON: Yes, this is quite true. If you look at the sector, we are a net exporter. So in fact we export more than 50%, or around 50% of what we produce. So in that sense a very well-run, well-structured, vibrant, competitive, [globally] competitive sector, which has the ability to export food. That’s very important from sort of export earnings, et cetera. So yes, national food security is not the main issue. It’s household food security.

We know that there’s a large proportion of our population which goes to bed hungry, and that’s not great because, if you’ve got the ‘1’ at national food security, and you don’t have it at household food security, that can lead all sorts of problems and, quite frankly, that’s the challenge that we sit with. It’s not only an agricultural challenge of course because, yes, while the sector’s been growing at 8% and you’d like to think that we are food-secured at a national level, we need the total GDP of the country to really grow. So we need the total South African economy to grow.

At the rate that we are growing at the moment, less than 2%, and the most recent volatility in Ukraine and Russia is going to put pressure on that, it’s going to put pressure on food prices, it’s going to put pressure on the availability of food at a household level, and, most importantly, it’s going to put pressure on the affordability of food – all of these things are important discussion points when you’re talking about food security, in particular at a household level.

So it does worry me that, while the agriculture sector’s doing well, the country’s not really getting to grips with the zero hunger, zero poverty in terms of those two SDGs. If we get that right – and we can’t do it on our own – we need the whole country to fire [up], we need the whole country to create jobs, etc.

The one thing I will mention around food security, though, is [that] currently there’s a large proportion of food waste. If you look at our food systems – I must also add our food systems are quite fragile – if you look at the current disruptions to world supply chains, if you look at the looting that happened in 2021, it resulted in our food chains being very, very fragile. Of course, when that happens, when that volatility hits, it tends to hit the poorest the hardest, because their access to food and the affordability [of] food becomes an issue.

So food waste is another key component that we need to think about, because up to 30% of our food actually goes to waste. If you can harness that or recover that and then distribute it to needy families, you might argue that that’s a short-term solution. But long term we need to build a stronger base [for] economies to grow, but one company or one non-profit organisation that’s doing fantastic work is FoodForward SA. If you look at their role in terms of recovering surplus food and redistributing it to the needy, I think that’s part of the food security debate. It’s a critical component because we want to, firstly reduce food waste; that has major benefits from a sustainability point of view.

Probably the third or fourth most efficient way to reduce greenhouse gases is to recover food and redistribute it, and [that] also starts to talk to zero hunger.

So yeah, food security is quite a concrete discussion [and there’s] no doubt in my mind: it’s a major, major issue in South Africa and it’s one that we need to continually work on.

JEANETTE CLARK: What role does Nedbank AgriBusiness see for itself in this debate? How do you also approach addressing food security on a national level?

JOHN HUDSON: Well, a national level it is quite easy. If I take a step back, Nedbank [has] had a specific focus in terms of agriculture and the value chain, so both primary and secondary production, as we call it, for the past 10 years or so. So we are fairly recent entrants. But I think 10 years ago we recognised the value that agriculture can bring to the total society and, really, over the last 10 years, Nedbank has worked very hard at its focus on agriculture, whether that’s at the commercial level and whether that’s at the emerging-farmer level as well. I’ll talk a little bit more about that.

But from a commercial point of view, we have steamed ahead. We have continued to support our farmers. We have seen fantastic growth in certain sectors and, quite honestly, the last two years and potentially a third year – 2022 is looking a bit more tricky, but 2020, 2021, as you said, when you opened up, have been very good years. I think the banks have been part of that. We have been part of the support; we’ve been part of the growth. If you look at the citrus sector and the expansion that’s taken place there, and the increasing exports that are going to continue to increase over the next three or four years, those are all fantastic stories.

The one major issue I have, though, is that while we are doing well on that front, we are not necessarily tackling some of the structural issues that face the sector – and this could be land reform, it could be water reform, it could be the investment into infrastructure. We find that the infrastructure’s taking a beating and, quite honestly, the floods of late are not helping with that. The port efficiency, the rail efficiency, the roads, etc, all of these are really important aspects that we need to deal with as a sector.

So I think if we get the structural [aspect] right, there’s enough investment from private farmers and private businesses into agriculture. We need to continue investing in the total sector, which includes government investments into key things like infrastructure, to make sure that we really attract investment into the sector. That to me is critical. We get that, we continue to thrive. I think bringing through emerging farmers and really assisting them in terms of how they participate in the commercial value-change is going to be critical, but we need to do that off a very strong base, and I think we need to do that off a position which is strong as a country. So all of this can contribute.

It’s not about splitting up [the existing] pie into smaller pieces. It’s actually about growing the pie and bringing people on that journey. That’s what’s so exciting for us. There’s a lot of work currently, whether internally with our foundation and Nedbank Legacy, Nedbank Green Trust – sometimes with our partners like the World Wide Fund for Nature, etc – a lot of work in understanding what this means at a small-scale level; we are also engaging with government, for example, on the blended-finance scheme.

Some of those are starting to take hold and we hope the blended-finance scheme comes into being in 2022, because I think that’s certainly a step in the right direction.

JEANETTE CLARK: So John, for a while now our employment statistics have painted a bleak picture, and [we] don’t necessarily see this changing in the short term. But what role does agriculture already play in providing gainful employment, and what role do you think it can play in the future for our population?

JOHN HUDSON: Well, I think you’re quite right. I think one of the challenges that we sit with is that farmers, like most businesses in South Africa, are having to do more with less. So the whole efficiency, whether it’s through precision farming, whether it’s through mechanisation, whether it is through a number of factors, they’re having to be or stay really efficient [in terms of] their productivity levels, and I guess that whole thing of doing more with less is speaking to that. It needs to increase because that’s the only way that they can stay competitive worldwide.

I think unfortunately what we’ve seen with the productivity and with the improvement in precision farming, etc, we haven’t quite seen the same growth in jobs. I think agriculture has held its own and we need to bear in mind that, for agriculture, the latest figures reflect about 850 000 employed in the sector. But it goes beyond it, because it’s all the linkages backwards and forwards which also employ people. So I think its impact is far wider. That’s probably the point I want to make, that [with] the direct employment numbers at, say, 830 000, we need to grow that without a shadow of doubt; but to do that, we need to grow the sector. I think if we grow the sector, it means that there are lot more opportunities up and down the chain. So whether it’s in the manufacturing or agro processing or the input sides, etc, you see more people being employed in the sector, and that’s good.

If you go back to plans like the National Development Plan, it was an excellent plan. I don’t think it quite saw the light of day [but] some aspects came through well. We see some more recent plans, which certainly are focused on employment as part of [the plan], so the agriculture and the agro processing monster plan, and we see the sugar master plan, for example, and the poultry monster plans coming into being. All those do talk to job creation as well as a component. They have to be self-sustaining financially in the longer term, but they need to create jobs as well.

So I see agriculture as almost a glue in the South African economy. If we are investing in agriculture, you are bound to see jobs being created along the entire value chain. So I think agriculture has a massive contribution to play from a job-creation perspective. There are some, and I have spoken about citrus and the extreme growth in the citrus value chain, and that no doubt will lead to more employment. I think the one thing I need to caution [about] is that agriculture can be quite volatile, so it depends on the seasons – if you have good seasons, bad seasons; we’ve had good seasons, but that can also result in numbers shifting up or down.

So sometimes a snapshot can be a bit misleading if you look at it short-term. But there are some new sectors coming to the fore. What I really liked about the Sona speech [State of the Nation Address], and the president spoke about taking away the red tape – I think that is critical if we look at cannabis, for example, which is showing great potential, and we have clients that are investing in that. There is no doubt they are investing because there are potential returns. What appears to me, though, is that the hoops they need to jump through, and the lead time to get into production is three years or more; that’s a long time for people to have capital tied up and invested, and ‘do you get there or don’t you?’

So I think we need to streamline that, we need to look at how we bring some of these high-growth opportunities like cannabis, for example, and how we bring them to an operational point far quicker than we’re doing now. To a large degree governments [have] a major role in that. You know, they’ve got to make sure that the regulatory environment and everything else that goes with it really allows for these emerging enterprises to take hold.

JEANETTE CLARK: There are various other themes around agriculture that we could also discuss today, but what is clear is, whether it’s for food security or contributing to bringing in foreign exchange and working on our country’s current account balance, agriculture definitely plays an important role We hope that we see some of these initiatives, like blended finance, come online, and also the red tape removed, which was promised, to further support the sector which you, John, have rightfully called the glue in our economy.

That was John Hudson, national head for Nedbank AgriBusiness.

Brought to you by Nedbank Agri.

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