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The 2016 financial year was characterised by heightened concerns regarding South Africa’s economic potential and socio-political stability, with the concomitant risk of a sovereign ratings downgrade a central theme of national discourse. Systemically, employment levels remain low with little or no real wage growth, with consumers and smaller businesses being most vulnerable to the effects of inflationary pressures and currency volatility.

In this environment, Transaction Capital’s divisions again demonstrated the resilience afforded by their defensive positioning, with the group achieving headline earnings growth of 17% to R458 million. In anticipation of the potential deterioration in South Africa’s credit rating, the group was successful in securing the funding required to drive growth and enhance the competitive position of its divisions, while at the same time continuing to diversify its funding base.

Transaction Capital has made strong progress in enhancing the organic growth potential of its divisions, within both existing and adjacent market segments, and announced three strategic acquisitions that will augment its capabilities and give effect to the group’s ambition to expand internationally.


On 1 August 2016, Mark Herskovits assumed the role of capital management executive for Transaction Capital, having served as group chief financial officer since January 2014. Mark will be exclusively responsible for Transaction Capital’s funding and capital markets engagements, with a predominant focus on SA Taxi. Mark will remain an executive director of Transaction Capital and a member of the group’s asset and liability committee (ALCO). With effect from 1 August 2016, Ronen Goldstein was appointed as financial director of Transaction Capital.

The board welcomed two new independent non-executive directors in the year. Moses Kgosana, appointed to the board on 14 March 2016, brings over 34 years of accounting, audit and advisory experience to the board, and chairs the group’s audit, risk and compliance committee. On 1 August 2016, Kuben Pillay was appointed to the board, bringing a wealth of business experience. Kuben has served as chief executive officer and non-executive chairman of the Primedia Group, and was a founding executive of the Mineworkers Investment Company Proprietary Limited. The board looks forward to the contributions of its new directors.

David Woollam, who has served on the board since February 2012, and Dumisani Tabata, who has served on the board since February 2010, have indicated that they will not be available for re-election at the next annual general meeting. The board thanks them both for their valuable contribution to the board, and wish them well in their future endeavours.

On 1 April 2016, Transaction Capital’s ALCO was constituted as a formal committee of the Transaction Capital board. The ALCO, elevated from its previous status as a management committee, will continue to oversee and monitor the activities and risks arising from the management of Transaction Capital’s assets and liabilities.

The annual performance evaluation of the board, conducted in November 2016, reaffirmed the effectiveness of the board in its direction of the group.

The King IV Report on Corporate Governance, released in November 2016, further advances South Africa’s leadership in corporate governance and places the spotlight firmly on ethical and effective leadership. Transaction Capital is in the process of performing a gap analysis against King IV, and will aim to adopt King IV in the next financial year, to the extent possible.


The restructure of shareholding was approved by shareholders at the general meeting on 20 October 2016, resulting in JMR Holdings Proprietary Limited, a company controlled by Transaction Capital’s founding shareholders, now owning approximately 43.5% of the company. This increased investment and commitment of the founding shareholders will facilitate continued confidence in Transaction Capital, thus enhancing its debt and equity capital market activities and ability to attract and retain management talent and skills.

The implementation of the Transaction Capital Limited Conditional Share Plan (CSP) was also approved by shareholders at the same meeting on 20 October 2016. The CSP strengthens Transaction Capital’s ability to attract and retain key employees while providing them with the opportunity to share in the success of the relevant division in which they are employed, and creates alignment between their interests and that of shareholders.


Transaction Capital’s intentional positioning in market segments perceived to be of higher risk, and its ability to apply its specialist capabilities to mitigate this risk and to create an avenue for providers of capital to invest in niche asset classes, are defining features that will continue to serve the group well even as challenging economic conditions persist.

The management team of Transaction Capital have the depth of skill, entrepreneurial flair and sense of strategic clarity to conduct the business of the group in a manner that will continue to create value for its stakeholders. I extend my appreciation to the group’s leadership, and thank the board for their ongoing guidance and commitment. I also thank our bankers, funders and advisers for their continued support.

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The board maintains a high level of individual and collective responsibility, accountability, fairness and transparency, which together drive a culture of risk awareness, ethical behaviour and value creation.

The board is responsible for strategic direction and sets the group’s values and ethics charter. The group’s values provide the foundation for effective leadership and are the basis for all deliberations, decisions and actions at board level as well as within every area of the business.


The board provides effective and responsible leadership based on an ethical foundation by directing strategy and operations in a way that supports sustainable business, while considering the short- and long-term impacts on society, the environment and stakeholders, as per the group’s sustainability policy.

The board is responsible for appointing the chief executive officer (CEO) and for monitoring his management of the performance of Transaction Capital’s assets and resources against approved strategic and financial objectives.

The board recognises that strategy, risk, performance and sustainability are inextricably linked. The board informs and approves the strategy and ensures that it is aligned to the purpose of the group, its value drivers and the legitimate interests and expectations of its stakeholders.

The board is specifically responsible for monitoring the management of risks in the reputational and sustainability risk categories of the enterprise- wide risk management framework.

Details of risk categories managed by the board sub-committees are included in the risk report.

The board delegates specific responsibilities to appropriately mandated and constituted sub-committees, The audit, risk and compliance (ARC) committee and the social and ethics committee both fulfil the statutory governance requirements on behalf of Transaction Capital and its divisions.

The board acts as the custodian of governance and has approved a formal charter that sets out its responsibilities in this regard.

The board is satisfied that it has discharged its duties and obligations effectively during the year under review.


Transaction Capital’s governance structures are in accordance with the principles and recommended practices, where applicable, of the King Code on Governance Principles for South Africa 2009 (King III).

In addition, the board is committed to complying with all legislation, regulations and best practices relevant to the group. The board regards the process of analysing and monitoring adherence to adopted governance standards as dynamic and endeavours to continually improve the governance structures within the group.

The directors are not aware of material non-compliance with the principles as set out in King III, other than the following exception:

  • Principle 9.3 Sustainability reporting and disclosure should be independently assured.

Although a process for independent assurance of sustainability-related information and disclosure has not been implemented, a sustainability policy has been approved by the board and adopted by the group. In addition, the ARC committee oversees the preparation of the Integrated Annual Report, with certain sections being reviewed by the external and internal auditors where appropriate. External verification will be sought at an appropriate time.

The King Committee published the final King IV Report on Corporate Governance for South Africa (King IV) on 1 November 2016. King IV replaces King III in its entirety. King IV is effective in respect of financial years commencing on or after 1 April 2017. Transaction Capital is in the process of performing a gap analysis and will aim to adopt King IV in the next financial year, to the extent possible.


Transaction Capital’s governance and compliance framework facilitates the board’s role of providing direction and oversight. It sets a high level of accountability to support consistent compliance with regulatory requirements and the group’s risk appetite, and at the same time encourages an entrepreneurial mindset as a key driver of performance.

Each of Transaction Capital’s divisions has its own board of directors, with each division’s governance processes being aligned to Transaction Capital’s governance framework, thereby appropriately allocating various levels of authority to individuals and committees throughout the group structure. The activities of each business’s board include reviewing and providing opinions on the corporate strategy, business plans, risk propensity, budgets and sustainability of their respective divisions. The strategies, business plans and performance criteria for each division are clearly defined, with appropriate key performance indicators having been implemented to measure and monitor performance against their strategies.

The composition of each division’s board includes non- executive directors, some of whom may be executive or non-executive directors of Transaction Capital. Directors of these boards are of sufficient calibre, experience and number for their views to carry significant weight in the decisions of the group and divisional CEOs.

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For more on regulatory developments impacting the financial services environment in which the group operates, see the CEO’s report.

For an overview of funding markets, see the
financial director’s report

Download more on credit performance

For more on the macro-economic environment and its impact on the group, see the CEO’s report

IFRS 9 was early adopted in the 2015 financial year, resulting in a higher quality of earnings as a result of a more conservative provisioning methodology against loans and advances, and the amortisation profile of purchased book debts being better aligned with the collection profile. This early adoption has reduced balance sheet risk for Transaction Capital and removed uncertainty relating to the implementation of IFRS 9 on future financial results and ratios.


Transaction Capital defines risk as uncertain future events that could influence its ability to achieve its objectives. Risk is quantified by the combination of the probability of an event occurring and the consequence thereof.

Risk is a condition in which the possibility of loss is inextricably linked to uncertainty. Thus a detailed framework for managing risk is required to facilitate rational decision-making under uncertain circumstances.

Risk management entails the deliberate planning, arranging and controlling of activities and resources to minimise the negative impact of all risks to tolerable levels, and to maximise potential opportunities and positive impacts of all risks in the pursuit of achieving the group’s strategic objectives.

Risk tolerances are determined by each of the group’s divisions and approved and monitored by the audit, risk and compliance (ARC) committee.


The board is ultimately responsible for the governance of risk. The board delegates the responsibility for managing risks appropriately to respective board committees, divisional boards and management, and monitors risk identification and management quarterly.

In terms of the enterprise-wide risk management framework, the board itself retains responsibility for monitoring reputational and sustainability risk, while the monitoring of all other risks is assigned to sub-committees with continuous board oversight, in line with the overall governance structure. The risk framework specifically identifies the risk categories that comprise the group’s risk universe.

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These principles are reflected in Transaction Capital’s fifth strategic objective, which emphasises the group’s commitment to investing in human and intellectual capital. This investment is informed firstly by the view that in every field of endeavour there is a normal distribution of talent, and secondly that the performance and sustainability of Transaction Capital will correlate highly with where its employees rank within that distribution. Put simply, the better Transaction Capital’s people, the better the company.

Attracting and retaining high-calibre talent depends on providing both intrinsic and extrinsic rewards. While this remuneration report deals with the latter, intrinsic rewards are reflected in the Transaction Capital employee value proposition, which strives to provide talented individuals with good leadership, personal development and support, and meaningful work in an intellectually stimulating environment. To complement this, compensation policies are directed at sustaining a performance-driven culture such that the most talented people at all levels consider Transaction Capital and its divisions an employer of choice.


    The success of Transaction Capital and its divisions relies on a wide range of leadership, managerial, functional and technical skills. Many of these skills are unique to specific subsidiaries, departments or organisational levels. The features of the group’s approach to compensation are as follows:
  • Compensation is defined on a cost to company basis with all benefits included and fully taxed.
  • Any change to the compensation of any individual at every level of the group must be approved by the supervisor of the individual’s supervisor, with the remuneration committee recommending the compensation of the chief executive officer (CEO), his direct reports and certain functional specialists.
  • As part of the annual budgeting process, the group executive office provides guidelines on the percentage increase of fixed compensation to be applied throughout the group. These percentages generally take into account increases in consumer price inflation (CPI), individual performance and level in the organisational hierarchy, with percentages decreasing at higher levels.
  • Formal and informal research and benchmarking are performed to determine market norms for similar positions.
  • Remuneration is aligned to individual outputs measured through performance management systems that focus on goals achieved and exceeded.
  • Incentives and bonuses at executive level are aligned to profit growth and relevant returns in addition to personal performance.
  • Performance incentives are used to drive specific behaviours supportive of group, business or departmental performance. In certain instances, a portion of these incentives may be deferred to support retention.
  • Transaction Capital attempts to eliminate differential compensation related to gender, race and location.
  • The remuneration policies of the divisions are approved by the remuneration committee and the board. In those instances where an executive’s decisions are likely to have a material impact on shareholder value, an element of their compensation may be aligned with the medium- to longer-term value of Transaction Capital or each respective division, specifically through defined long-term incentive schemes (LTIs) (see compensation principles below).
  • No employees or directors have employment terms that exceed six months’ notice.



Throughout Transaction Capital, fixed and variable compensation policies and practices are structured to attract, motivate and retain the specific talent and skills required at each level for the progress of the group and its divisions. For the most part, these policies are determined by, and according to, divisional or departmental requirements within the governance guidelines described previously.


Transaction Capital regards the individual and collective intellectual acuity, education, experience and industry knowledge of its most senior leaders and talent pool as a core capability and a source of competitive advantage. As such, the compensation, recruitment, performance, development and succession of the group’s top executives is monitored directly by the CEO together with his direct reports, and indirectly by the remuneration and nominations committees.

Executive compensation strives to attract, reward and retain the highest calibre of individuals in terms of education, expertise and experience, using three forms of compensation:

  • Total guaranteed pay (TGP) around the 60th percentile of the market. The TGP provides executives with a competitive stable income.
  • Variable short-term incentives (STIs) for individual quantitative and qualitative performance aligned to corporate and individual objectives, paid annually with a deferred portion where appropriate. STIs are bespoke in nature, and are specifically designed with individualised qualitative objectives to promote performance and/or achieve pre-defined performance requirements. In addition, quantitative STIs may be awarded to reward superior performance. The annual STI requirements are approved by the remuneration committee. STIs reward specific behaviour and promote retention.
  • LTI plans relate to the valuation of the company or its divisions, realisable over the medium to long term. The LTI plans create alignment with shareholders and are the major retention mechanism:

Share appreciation rights (SAR) plan
The SAR plan allows executives and senior managers to participate in the appreciation of Transaction Capital’s share price over time. Subject to specific performance criteria, which is the achievement of continuous growth in group headline earnings per share of over CPI +5%, the SARs vest in full after four years of award date and are exercisable for a 12-month period. SAR awards granted until May 2014 were awarded with a three-year vesting period. The share price growth over the SAR period will be settled in Transaction Capital ordinary shares, with the gain subject to income tax. To the extent that the SAR grant price exceeds Transaction Capital’s share price at the time of exercise, no gain or cost is realised by participants.

The first tranche of the SAR plan vested on 12 July 2016. During the 2016 financial year a total of 7 344 576 SARs were exercised by participants resulting in 4 902 334 Transaction Capital shares being issued in settlement of the SAR obligation.

While the SAR plan has been a very successful retention mechanism since listing, the conditional share plan discussed below is favoured as a more appropriate retention and alignment tool for the purposes of incentivising employees. As such, it is anticipated that no new SAR awards will be granted in the forthcoming period. The remuneration committee will assess future use of SARs on a periodic basis as required. Those SAR awards already in issue will continue to vest as per the SAR plan.

Conditional share plan (CSP)

The CSP was approved by shareholders at a general meeting held on 20 October 2016. It is anticipated that annual CSP awards will occur in November/ December each year, with May awards catering for new joiners and special circumstances. The first issue of CSPs was awarded in November 2016. All awards are subject to remuneration committee approval.

It is believed that the CSP is a superior long-term incentive for Transaction Capital’s objectives. The CSP offers participants certainty in that it comprises a fixed number of conditional shares. While its ultimate value will depend on performance, CSP awards will always have a value, unlike the SAR awards.

The CSP will operate as a specific and direct LTI scheme that links to the performance of each division. It will cater for divisional executives who are believed to be in a position to directly impact and shape the performance of a division, while delivering on the division’s strategy. Transaction Capital group executives will be incentivised based on the performance of the group as a whole.

The remuneration committee has approved a policy that the number of Transaction Capital shares issued in terms of the CSP awards will not exceed more than 5% of the issued ordinary shares of Transaction Capital at the time of approval of the CSP by shareholders.

The CSP mechanism, which is overseen and approved by the remuneration committee, will operate as follows:

  • A valuation of each division will be performed by an independent expert on the date of CSP award (to obtain a valuation per notional share of each division). Transaction Capital executives will be awarded CSPs at the prevailing share price of Transaction Capital on date of award.
  • Key executives will be awarded notional CSPs in each division (or Transaction Capital) for zero cost, based on retention and/or performance criteria set by the remuneration committee. The CSPs awarded to executives will be based on a notional share held in each division, giving executives direct exposure to the performance of that division (or based on Transaction Capital’s share price for its executives).
  • An updated valuation of each division will be performed by an independent expert on the date of vesting of the CSP.
  • The remuneration committee approved the following criteria for the first tranche of the CSPs awarded. The following requirements will be assessed by the remuneration committee on an annual basis, and may be adjusted as necessary:
  • Vesting period:
    • Retention element (30% of award): to vest in full after three years, subject to continued employment.
    • Performance element (70% of award): to vest in equal proportions in years two, three and four, and linked to performance requirements.
  • Performance criteria: the following performance criteria have been set (per division for divisional executives, and on a consolidated basis for group executives):

    • Employees are required to remain in the employ of the group to be eligible for CSP vestings (subject to standard “good leaver” rules).
    • Employees who resign or are dismissed will forfeit any CSP awards that have not vested.

> Once the vesting period has passed and/or performance criteria are met (where relevant), the participant will receive shares in Transaction Capital to the value of the notional CSP on date of vesting.

The CSP achieves the following objectives:

> It will motivate and reward participants for creating long-term value through the opportunity to earn significant reward for superior performance.

>It will create a direct line of sight between the performance of each division and the incentive earned.

>Participants receive a right to receive a full share as opposed to the increase in value of a share.

>The CSP directly aligns the interests of the participants with those of shareholders.

General share purchase scheme
The general share purchase scheme facilitated voluntary investment whereby executives were able to receive loan funding to purchase shares at market value. The scheme was largely wound down in the 2014 financial year. No further allocations will be made in terms of this scheme, which is expected to terminate in December 2018.

Direct investment
In appropriate circumstances, senior executives of a business may be afforded the opportunity to subscribe for direct equity in that business, thereby incentivising and aligning their long-term interests with those of the business, Transaction Capital and its shareholders.

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