An innovative and pioneering business model with
operations expanding throughout the financial services
and asset value chain, building a scalable platform
A unique blend of vehicle procurement, retail,
repossession and refurbishment capabilities, with
financing and insurance competencies for focused
Valuable client and market insights developed from
overlaying granular telematics, credit, vehicle and other
data to enable precise and informed origination and
collection decisioning, and proactive risk management
Enabling financial inclusion by proficiently securing
funding from both local and international debt investors
to judiciously extend developmental credit to small- and
medium-sized enterprises (SMEs) that may otherwise not
have access to credit from traditional financiers
Providing complementary business services that assist
SMEs to maximise cash flow and protect their incomegenerating
assets, thus improving their ability to succeed
Empowering under-served and emerging SMEs to build
viable and sustainable businesses, which in turn creates
further direct and indirect employment opportunities
Contributing to the recapitalisation and sustainability
of the minibus taxi industry, a critical pillar of the public
transport sector servicing the majority of South Africa's
22% HEADLINE EARNINGS ▲ R303 MILLION¹, 53% OF GROUP
16% GROSS LOANS AND ADVANCES ▲ R8.3 BILLION
36% NON-INTEREST REVENUE ▲ R427 MILLION
NON-PERFORMING LOAN RATIO 17.1%, FROM 17.4% IN 2016
RETURN ON EQUITY 25.3%, FROM 25.5% IN 2016
CREDIT LOSS RATIO 3.2%, FROM 3.1% IN 2016
1. Headline earnings attributable to the group.
In June 2017,
factions in the minibus
taxi industry embarked
on mass protest action.
What was SA Taxi's
response to the concerns
The protests were directed
at a number of industry
government for the lack of
subsidies and funding,
OEMs for vehicle price
institutions for insufficient or
costly finance and
insurance products, fuel companies, and retail malls for
inadequate infrastructure to accommodate minibus taxi ranks.
The protests were also fuelled by frustrations at the industry’s
lack of participation in the full value chain, along with
economic pressures being felt in the industry and country more
Although SA Taxi did not anticipate the protest, given no
evidence of undue stress in the loan book, we immediately
intensified engagement with industry leadership to understand
Despite being well below the regulated maximum interest rate
of 33.75% for developmental credit providers, SA Taxi, in
consultation with the industry, agreed to reduce its highest
interest rate from 28.5% to 26.5% on future loans originated to
assist its clients.
An unfortunate outcome of reducing the top interest rate is that
clients in the highest risk segment have become unviable for
finance, thereby impeding SA Taxi's ability to facilitate financial
inclusion in this segment.
We also quickly introduced other relief measures, such as
assisting clients who had their vehicles repossessed to clear their
credit records at bureaus, and instituting a 60-day moratorium on
repossessions, which ended on 9 August 2017.
SA Taxi's response was positively received by the market and
we continued to originate at forecasted market share.
Encouragingly, a direct outcome of the protest action has been
deeper collaboration between industry leadership and SA Taxi,
who are working together to achieve sustainable benefits for
the industry. Initiatives include discussions with OEMs to
procure larger quantities of vehicles to be sold directly through
SA Taxi’s dealership, which will enable it to hold retail prices
as low as possible by limiting unnecessary charges and
add-ons to vehicles that add no income producing value.
Finally, one of the specific requirements of the industry was for
a full credit life insurance product that would extinguish the
capital outstanding on a loan in the event of the death of an
operator. Working with the industry, we managed to rapidly
build and launch a credit life product in October 2017, in
response to this demand. Credit Life is a client-centred and
Is there a need for
further financial support
in the industry?
As a long-standing
participant in the industry,
we understand its
importance as the primary
network and mode of
transport for the majority of South Africans. In effect, the minibus
taxi industry is completely embedded into the economic
framework of the country, and is by far the most flexible and
cost effective from an infrastructural point of view.
The industry has achieved this even with no subsidy from
government, unlike bus and rail. While this makes it a highly
defensive industry that has remained self-sustaining through
numerous economic cycles, we believe that more direct support
is certainly required to enhance its sustainability. Whether it is
an economic model to support the scrapping of old taxis, a
direct or fuel subsidy, or access to cheaper funding for funders,
or indeed a hybrid of all of these, support is required. SA Taxi
is playing its part by working alongside the industry to lobby
for this support.
As David has mentioned earlier in his Q&A on page 24,
Transaction Capital raises its debt capital from local banks,
asset managers and institutional investors, as well as
international development finance institutions, which determines
our cost structures. SA Taxi and industry leadership are also
lobbying government to channel funding into the minibus taxi
industry. SA Taxi could play a central role in passing on the
benefits of this funding to the operators if this support is
provided. As the backbone of South Africa’s public transport
network, our objective is to support operators with relevant
products and services that ensure the sustainability of
What have the broader
impacts of the protest action
been for SA Taxi?
The one undoubtable
positive outcome of
the protests has been
a closer working
SA Taxi and the industry. While we were close to the industry
before, we are now seeing benefits through initiatives and
coordinated approaches across the value chain. These will
continue to strengthen the industry and deepened our ability to
provide relevant and targeted products to support growth.
Understanding the social relevance of our business has always
been pronounced and embedded in the DNA of SA Taxi, but
the protest action served as a reminder for SA Taxi and indeed
the whole value chain that the sustainability of the industry
depends on all participants being able to generate value.
This year, we have become more involved in building up the
industry alongside our business.
The essence is that we have a responsibility in creating shared
value by enabling real benefits for participants across the
industry. This is not done for charity, but in a proper
understanding that shared value is only possible if the
commercial health of your own business is maintained.
If we continue to grow a good socially relevant business
that provides competitive and appropriate products to our
constituents, we can support the sustainability of the industry
and various stakeholders.
That is now part of the journey for SA Taxi – to leverage the
business we have built to ensure that the entire industry
benefits. We can only do this by continuing to collaborate
and connect with the industry as it evolves in South Africa.
What is on the horizon for SA Taxi?
Over the next two years, the
main transition for SA Taxi
will be shifting the business
beyond our focus on the
operator as our only market. Effectively, we also see the
minibus taxi as a catalyst in accessing the driver and commuter
market. This would include utilising the operator and the driver
as commissioned agents in expanding our product offering to
the much wider commuter market. This also builds on our
shared value approach by opening new revenue streams for
operators and drivers, and further reduces risk for SA Taxi.
It is another step in deepening the vertical with the taxi at the
centre. Ultimately, our ability to access and engage with the
commuter base will allow us to transform the business from
having a client base of more than 200 000 taxi operators to
15 million commuters.
This approach is set out in our vision statement for SA Taxi:
The minibus taxi is the catalyst for extending our customer
base, creating value at new frontiers, and digitising the industry
to unlock value from data and insights.
Download SA Taxi’s divisional overview including societal relevance, market context, business activities and Q&A
Minibus taxis are fundamental to South Africa’s public transport network - view SA Taxi telematics data
Innovative technology systems drive superior
performance and efficiency
Generating in-depth insights from collecting
accurate and valuable data to develop a
consolidated view of individuals that enables
precise and informed internal and external
Assisting clients by accelerating cash flow as
an agent on an outsourced contingency or
fee-for-service basis, or as a principal in
acquiring and collecting non-performing
Proactive workforce management and
technology facilitate a flexible and dynamic
servicing capability able to meet the unique
requirements of diverse clients
Regarded as a trusted partner by large
consumer-facing businesses and credit providers
across multiple industries
Enabling clients to generate higher risk-adjusted
returns through their engagements with their
customers at the point of origination,
management and collection
39% CORE HEADLINE EARNINGS ▲ R233 MILLION, 40% OF GROUP
93% VALUE OF BOOK DEBTS ACQUIRED ▲ R356 MILLION
22% PURCHASED BOOK DEBTS ▲ R891 MILLION
27% ESTIMATED REMAINING COLLECTIONS R1.7 BILLION
CORE COST-TO-INCOME RATIO¹ 79.3%, FROM 77.4% IN 2016
CORE RETURN ON EQUITY¹ 22.2%, FROM 31.5% IN 2016
Core financial ratios exclude once-off acquisition costs of R22 million incurred during 2017.
1. Diluted due to acquisitions in 2017.
Download the Transaction Capital Risk Services review including Q&A
The acquisition of
in Australia was effective
1 January 2017. What
synergies are there
between this business
and the TCRS stable in
Recoveries Corporation in
Australia is a very strong
business with a 25-year
history and an experienced
management team. It’s a
collection business that has
been particularly successful
in the government,
insurance, utilities and
For TCRS, we have bought a good platform to serve as a
springboard to move into the purchased debt ledger (PDL)
sector. Referred to as NPL portfolio acquisitions in South Africa,
it’s an area where we are an industry leader locally, reflected
in increased NPL portfolio acquisition activity this year within
Transaction Capital Recoveries. This shift is largely due to the
South African economic environment, where more clients are
looking for the certainty of a return on their NPLs. In Australia,
despite it being a developed market with many competitors
across listed players, we see a big opportunity in the hybrid
model of contingency collections and book buying. Also, with
only four or five established book buyers in the market, sellers
are eager for new entrants to drive competition.
Our local capabilities in valuing, buying and debt funding NPL
portfolios can be leveraged in Australia, utilising Recoveries
Corporation’s well-established platform to collect on those
portfolios. And as Recoveries Corporation has strong expertise
in doing work for the sellers on a contingency basis, they
already understand these clients and have experience
collecting on their books.
We also see an opportunity to leverage technology in
Recoveries Corporation, specifically in using enhanced
business intelligence (BI) to create a leaner business in a
competitive and tight first-world market. As we have seen in our
operation in South Africa, investing in the right technology is key
to lowering costs and increasing revenue.
In South Africa, we are looking to grow our insurance vertical.
Recoveries Corporation’s success in this sector is backed by
well-honed insurance systems; we certainly stand to benefit
from their expertise in growing locally.
of majority stakes in
Road Cover and
The Beancounter were
completed in December
2016. How do these
Road Cover is a focused
business with a socially
relevant product, which
also stands as a natural
extension of our outbound
call centre. Road Cover
brings a strong understanding
of product development
expertise in that space,
which we see supporting
our focus on developing
and bringing more value-added services to the market.
The Beancounter is a cloud-based accounting business that is
providing cost-effective technology-enabled solutions in the SME
space. We see it having a key role as a fintech incubator to
further develop and automate our business solutions business.
Last year, TCRS
made major investments
in the predictive dialer
and master data
universe. What progress
has been made in 2017?
We have spent this year
settling and optimising
the dialer, and integrating
it with the recently
management and right time
to call systems. These are
driving further operational
continues to protect revenue in a tough economic environment.
Building on these major investments, we have also made
great strides in building our analytics and data capabilities,
thus increasing the quality of our data sets.
With real-time data on a wide variety of metrics, we are
generating enhanced BI that is enabling quick decisions and
giving us the information we need to make further
improvements to business processes.
Also, better analysis of our data means that we are better able
to evaluate books and thus buy better quality books. This builds
its own momentum, as we are able to win more books
because we can pay more for quality books that further
support higher revenue earnings.
In the contingency space, our technology platform and
enhanced BI is supporting our ability to tailor new and
innovative services for our clients. And as the position you
hold on the panels is key to winning contracts, this is helping
us maintain and improve our collections performance; in 2017,
we were ranked as either the top or second-best recoveries
agent in 89% of 231 outsourced collection mandates. With the
market contracting, maintaining a leading position means we
will continue to win more of the mandates in a smaller pool.
As the tough economic environment in South Africa persists, we
continue to focus on achieving incremental gains by managing
the factors in our control. Our technology platform and BI is key
to finding new ways to keep our business lean. To protect
revenue, we are maintaining and improving our collections
performance in both the contingency and principal space.
In a market where success is increasingly about specialism,
Transaction Capital Recoveries’ increasing data volumes and
analysis are driving our ability to deepen and expand our
expertise. As an example, we are moving into asset-backed
books (vehicles and asset management, and home loans),
where the depth and quality of our data is supporting our
ability to value these books more confidently.
Across TCRS, our technology-led orientation means that we can
leverage different specialisms to develop our complementary
businesses. For example, Principa is developing deep expertise
in providing solutions in big data, a key aspect of the massive
changes facing the world in what is being called the fourth
industrial revolution. They provide many innovative ideas that
are beneficial to Transaction Capital Recoveries and, by
extension, Recoveries Corporation in Australia. And as
mentioned, The Beancounter is supporting developments in
Transaction Capital Business Solutions as it moves deeper into
the fintech space.
were there during the
year with regards to
As discussed last year, we
rationalised our call centre
locations to focus on
Johannesburg, Cape Town
and Durban. The retrenchment
process is always a difficult
one, but I’m glad to report that we minimised the number of
retrenchments by moving over 250 of our staff to the main
metros, with the move well managed and completed smoothly.
People development is a strategic and highly demanding
focus in our business, with dedicated resources and
We have many programmes in place to build a high performance
culture by developing and rewarding our people.
Also, within the collections space, our managers work the call
centre floor with tablets that provide a straight line of sight into
live data to support real-time performance management.
Where agents are missing targets, they are given immediate
support and provided with further training where necessary.
TCRS’ investment in people was affirmed in January 2017,
with Transaction Capital Recoveries being accredited as an
Investors in People organisation.
In Australia, Recoveries Corporation has excellent people
practices in place and they have built a strong and cohesive
culture in the business. Leveraging our experience of optimising
TCRS with technology, we will support Recoveries Corporation
in retraining their teams to adapt to new ways of working and
to ultimately provide better career opportunities.
What are the
priorities for the
Considering the stricter
requirements of the revised
B-BBEE codes, we are pleased
that our commitment to making a
meaningful contribution to
empowerment has seen us achieve level 3 under the revised
codes. We are working diligently to achieve level 2, by
looking at new structures that will allow us to work with
like-minded partners and entrepreneurs in the areas where we
want to grow the business – specifically in the public sector in
areas such as SOEs, government entities like municipalities and
metros, and tertiary education institutions. This falls in line with
our strategic objective of driving organic growth.
We will also continue to leverage our diverse but
complementary capabilities across the business. For example,
Transaction Capital Payment Solutions has developed deep
expertise in managing debit orders, and we are leveraging this
core competency across the division, particularly in Transaction
Capital Recoveries and for some of its clients.
Transaction Capital Business Solutions had a successful year
providing working capital financing and receivable
management solutions to SMEs in what has been a tough
environment for its clients. As mentioned previously,
The Beancounter will be leading the development of fintech
solutions in further enhancing the value proposition.
We will continue to be opportunistic and pursue opportunities
for acquisitive growth, both in South Africa and Australia,
where we are looking to expand our operations. And as data
and technology remain a key part of our efforts to optimise our
operations, we continue to monitor developments in related
industries. We are cognisant of the risk of potential
disintermediation or disruption that global fintech developments
present, but with our growing focus and capabilities in this
space, we see opportunities to lead the market.
Against the backdrop of a competitive market in Australia and
sustained stress in the South African economy, our deep
analysis of increasing volumes of data is growing our
understanding of the business and our clients. We will use this
to drive incremental operational improvements and tailor
innovative solutions to deepen our relationships with our clients.