SA Taxi beats big four banks on loans
Transaction Capital’s SA Taxi, which finances more than 10% of SA’s minibus taxis, continues to defy the ailing economy, posting double-digit loan growth over the past year, as demand for taxi finance remains robust among entrepreneurs who do not qualify for bank finance.
SA Taxi grew gross loans 16% to R8.3bn over the year to September, belying the domestic economy’s pedestrian economic growth rates and supporting a 22% increase in headline earnings over the period to R303m.
Nonperforming loans declined from 17.4% to 17.1%.
By contrast, SA’s big four banks posted a 0.7% year-on-year increase in loans in the first half of 2017, according to PwC.
About 90% of SA Taxi’s customers did not qualify for bank finance, according to Transaction Capital CEO David Hurwitz.
Yet 69% of all South African households relied on minibus taxis for daily transport, he said.
SA Taxi granted 7,480 new loans in 2017, a 9% increase on the previous year.
The company finances nearly 29,000 minibus taxis, or about 40% of the financed market. It estimates that 70,000 to 80,000 of SA’s 200,000 minibus taxis are financed.
While SA Taxi could see dramatic upside if the economy improved, as this would lead to job creation and higher demand, it remained defensive in this environment, due to the non-discretionary nature of transport spend, said David Talpert, an analyst at Avior Capital Markets.
Protest action in the minibus taxi industry in June — partly against financiers accused of charging excessive interest rates — prompted SA Taxi to reduce its highest interest rate from 28.5% to 26.5% on future loans.
"While this will hamper SA Taxi’s ability to grow its loan book, I don’t expect the impact to be material. What happens to vehicle prices, or potential changes in the cost of funding on the back of upcoming rating agency decisions, will likely be more impactful," said Meyrick Barker, investment analyst at Kagiso Asset Management.
The protest action spurred closer collaboration between SA Taxi and the South African National Taxi Council, which had in turn improved its engagements with local development finance institutions (DFI), such as the Industrial Development Corporation, said Hurwitz.
SA Taxi was in talks with original equipment manufacturers to sell more vehicles through its dealership at lower prices.
The group, which secured more than R2bn in debt facilities from US-based DFIs in 2017, was fully funded for the 2018 financial year, said Hurwitz.