After riding out the Covid pandemic, businesses in South Africa have been battered by waves of turmoil, relating to stagnant economic growth, violent unrest, unemployment and inefficient ports. Then, over the past nine months, power supply disruptions were ramped up, which for many businesses, has become the proverbial last straw.

Nedbank Commercial Banking has found clients are really struggling with load shedding. Even before load shedding was ramped up, commercial clients were battling to keep their doors open, stay productive and to service their own clients, and maintain suppliers. To tide themselves over, they purchased generators but then the diesel price went through the roof. Now, clients are literally starting to fall over. 

For a small company that might supply fresh fish to restaurants, sushi bars, and country clubs, diesel can cost upwards of R70,000 a month just to keep their fridges cold, to prevent losing stock, which would close their business down. Some of our farmers have similar issues: chicks are dying because they’re not warmed and thousands of litres of milk are going to waste because of power outages. One dairy farmer client told us he spends more than R1.7-million a month on diesel. 

These extra expenses have had a devastating impact on our clients, large, medium and small. 

Nedbank Commercial Banking was starting to see defaults on loans and real hardship among clients, which is why we had to step in not only to protect our book, but to also assist clients to manage the situation.

In the renewable energy space, Nedbank Commercial Banking has designed a product that factors in the savings clients would make on electricity bills, knowing that inverters, solar installations, generators and the like are grudge purchases, much like insurance. Clients were struggling to afford their repayments because they were forced to take cash flow that would have been used for expansion to use on staying afloat.

In effect, through our Sustainable Funding Offering, we are redirecting our clients’ electricity bill to the bank to pay off the loan, and clients get “free” electricity. With the diesel price that has gone through the roof, the savings on diesel alone covers the battery and the solar panels, inverters, and other equipment.

We have extended the loan period for up to 10 years because this equipment takes a bit longer to become economical, although most clients opt to pay it back over seven years. Typically, we do not require a deposit unless there is a real risk in the client but we do not want to put them in a worse situation than they are. We also allow the clients to use their 15% VAT rebate as a deposit, which reduces the financing to 85% as opposed to the 100%.

We do not get involved with the section 12B accelerated depreciation (increased this year to 125%), which can make a difference to the client’s tax payable, because it’s not a rebate, it’s really an allowance that they can deduct from the taxable income and pay less tax. 

We offer our product as asset-based finance, on a term loan, as you would finance a motor vehicle. It could also be added to your commercial bond.

If clients do not own their property, their landlords need to be made aware that solar equipment remains the property of Nedbank. 

It’s a beneficial product that is assisting clients.

Nedbank Commercial’s Sustainable Funding Offering covers renewable energy and water, along a similar principle: If clients recycle their water, they would then obviously need to pay less but at this stage, the energy crisis is top of everybody’s mind. 

What we try to instill in our clients is how to keep their doors open and their business thriving, because the bank is also reliant on businesses being viable and loans being repaid. Not only do we keep ourselves sustainable and resilient, we also try to assist our clients as much as possible. DM