3 - Nedbank
Sector: Financial services. Revenue: R22,4bn (Dec 07); Total BEE score: 82,45%; Ownership: 16,81; Pref proc: 17,98
When asked what is behind Nedbank's sharp improvement in the Top Empowerment Companies (TEC) rankings this year, CEO Tom Boardman says: "It's amazing, but people do what they get incentivised to do."
For years, Boardman has talked about how to make Nedbank the most "transformed bank" in the country, saying that "if we don't, we run the risk of being irrelevant". But this is a sentiment easy to voice and one often seen as a fluffy goal.
Boardman says the incentive scheme works by having a pool from which you pay bonuses. The size of this bonus depends on how you score on a "balanced scorecard", which includes transformation. "Last year, we increased the weighting for transformation in this scorecard."
It's clearly working. Last year on the TEC ratings Nedbank scored 67% and was 15th on the list of most empowered companies in SA. This year it climbs to third place overall, with a score of 82%.
Though the TEC rankings were done using the department of trade & industry (DTI) codes, Nedbank achieved a score of 96,2% under the financial sector charter. As the charter is a better indicator of true empowerment for banks, this is arguably a more significant achievement.
When it comes to lending to the poor, Nedbank has also improved. Its market share of the Mzansi low-income accounts has improved from 12% in 2003 to 16% last year.
Says Empowerdex project manager Stephen Hawes: "The percentage of black management increased, and employment equity improved from seven points to 10. The good part about that was that it was an improvement in senior management representation." He says Nedbank also poured a lot more money into skills development and preferential procurement compared to its peers.
When it comes to black ownership, Nedbank also benefited by being the last of the big four banks to complete its empowerment deal in 2005. Its deal, Eyethu, gave three distinct groups shares : staff, clients and community, and strategic partners, led by Brimstone and Wiphold. The clients and community offer meant 40 000 black South Africans who were Nedbank clients could participate by buying 9m shares (2% of the company).
Shares were offered to black clients who had to hold them for three years and keep their primary account at Nedbank. After the third year, they would get a fourth share for free. Effectively, this four-for-three offer was a 25% discount. Though Nedbank shares have fallen marginally in the past three years, the black parties would still have made a profit. The shares were bought for between R83,75 and R94, and the stock is now at R93,25.
The structure of the retail offer has been replicated by other companies. MultiChoice, Sasol and Naspers have all included a "broad-based" retail share, sucking a range of new black investors into the stock market.
Among the banks, the highest ownership scores went to FirstRand (17,9) and Nedbank (16,8) - a cut above Standard Bank (12) and Absa (12,8).
But as Boardman says: "Ownership isn't really where you see the biggest effect of empowerment anyway, it's far more important to ensure you've got things like employment equity and procurement right." The score for black management has improved from 6,6 last year to 8,1 and its spending on skills development nearly doubled to 9,1.
