Taxi business to boost Transaction Capital, says CEO
The company posted 17% growth in half-year profits, thanks to its tie-up with Santaco, and is eyeing new markets
Minibus taxi financier Transaction Capital said the involvement of the taxi industry association has opened growth opportunities for the business. Transaction Capital, which delivered double digit growth in half-year profit, said the partnership with the SA National Taxi Council (Santaco) was already delivering benefits to both parties, allowing the company to reach new markets.
Santaco acquired a 25% stake in Transaction Capital’s minibus finance and insurance business, SA Taxi, for R1.7bn in 2018. The other shareholders at SA Taxi are the parent company Transaction Capital, which owns 74%, and SA Taxi CEO Terry Kier, who owns 1%. The biggest shareholders at Transaction Capital are its directors, who own 32%.
Transaction Capital CEO David Hurwitz said with Santaco’s help the company can start competing with traditional vehicle financiers.
Transaction Capital CEO David Hurwitz joins Business Day TV to discuss the group's interim results
“Because of our cost of funding in the past, it was very difficult for us to compete in the bankable segment. We were only financing higher risk customers because we knew we could manage that risk. Now with our total offering, the finance, insurance and rewards programme, we are able to attract taxi operators who qualify for bank finance and thus compete with the banks,” Hurwitz.
He said the priority now for SA Taxi was to deliver cheaper finance to the taxi industry .
SA Taxi has had a longstanding relationship with Santaco. Over the years, before becoming a shareholder, the taxi association helped Transaction Capital establish new revenue streams. It was instrumental in growing SA Taxi’s insurance client base by mobilising a broker network which now exceeds 100 insurance distribution agents.
Apart from financing and insuring minibus taxis, Transaction Capital’s other operations include minibus retail shops, vehicle parts distribution, car refurbishment centres as well as a debt collection business Transaction Capital Risk Services (TCRS). Since its listing on the JSE in 2012, Transaction Capital has successfully run a profitable business in an area not served by traditional financial services companies.
On Wednesday the company posted a 17% growth in profit for the six months to March 2019 while traditional vehicle financing businesses such as Wesbank struggled in the past year. The company posted a total shareholder return of 32%.
“Because it’s a much focused business, only serving minibus taxis, we’ve benefited from the fact that this particular industry is doing well despite the negative macroeconomic trends because of structural elements in our country. Forty percent of the population use public transport and the minibus taxi is the major form of public transport because it is more affordable, reliable and more accessible than other modes,” said Hurwitz.
Transaction Capital’s share price spiked by close to 240% in the five years to March.