FNB Enterprise Development Strategy
ESD strategy designed to unlock growth in FNB’s SME customer base.
First National Bank (FNB) is one of South Africa's "big four" banks. It is a division of First Rand Limited, a large financial services conglomerate, which trades on the Johannesburg Securities Exchange (JSE). FNB is one of the three major divisions of the First Rand Group, and the others being Rand Merchant Bank and Wesbank.
FNB commissioned Edge Growth to assist them in enhancing and developing new elements of their Enterprise Development Strategy. Funding and growing SMEs is a core element of FNB’s business as it directly impacts the success of their suppliers and customers. Embarking on effective Enterprise Development was therefore a strategic imperative that could have a significant impact on FNB’s bottom line. Boosting their overall BEE score was also a business priority and Enterprise Development was the most cost effective source of gaining BEE points available to them. FNB had been complying with the Financial Services Charter and had developed a solution tailored to the requirements of the charter. With the introduction of the Broad Based codes, FNB found they had to restructure their approach to comply with the more rigorous legislation.
Edge Growth therefore assessed their current ESD programs
and interventions to determine the gaps between what FNB were currently doing and best practice. As with the majority of corporate South Africa, despite a lot of good work having been done there were significant gaps between interventions that would deliver high impact and their current processes.
Edge Growth therefore did an investigation into the different options available to FNB to improve the structure of their program and deliver on their objectives; there were four available options;
- Develop their own Enterprise Development Fund at a First Rand Group level
- Grow external partnerships
- Invest in existing Private Equity or Venture Capital Fund
- Build their internal competence
The benefits of partnering to build their own ED fund significantly outweighed the other options available to them and as such, Edge Growth and FNB jointly developed the Vumela ED Fund, on behalf of First Rand. The Fund has R200 million under management, and provides a cost efficient outsourced approach to delivering the highest return their ED investment. The process of developing the Fund included;
- Developing an ED strategy
- Translating the strategy into an SME investment mandate
- Identifying high potential SME’s aligned to the investment mandate
- Structuring the investment financing with the SME
- Structuring required on-going support for SME
- Monitoring results
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