Strategic and operational highlights

Accretive utilisation of capital via three acquisitions within Transaction Capital Risk Services (TCRS):
International
> 100% of Australian-based Recoveries Corporation Group Limited (Recoveries Corporation)
South Africa
> Majority share of RC Value Added Services (Pty) Ltd (Road Cover)
> Majority share of The Beancounter Financial Services (Pty) Ltd (The Beancounter)
Acquisition search continues.

Uninterrupted access to debt capital markets:
> Near fully funded for 2017
> SA Taxi:
– Raised R3.5 billion in the 2016 financial year
– R513 million Transsec 2 tap issuance
Future initiatives:
> Created Transaction Capital’s R2 billion Domestic Note Programme
> Accessed over R1.5 billion of debt funding from the European Development Finance Institution (DFI) capital market since 2010
> Strategic imperative to further penetrate global DFI markets
Credit ratings:
> S&P Global upgraded Transsec 1 (SA Taxi)
> Global Credit Ratings Co. awarded a zaA- rating to Transaction Capital’s Domestic Note Programme

After acquisitions:
> Capital adequacy ratio of >35%
> Liquid capital of ~R300 million remaining
> Continue to invest in organic and acquisitive opportunities

> Dividend policy amended to 2.5 to 3 times
> Previously 3 to 4 times
> Total dividend cover of 2.7 times

> More conservative provisioning methodology resulting in a higher quality of earnings
> Removes uncertainty regarding implementation of IFRS 9 on future results and ratios

Founders’ individual shareholdings consolidated into a single holding structure:
> Committed shareholder of reference
> Displays founders’ continued confidence in Transaction Capital
> Enhances Transaction Capital’s rating in capital markets

Independent non-executive directors:
> Appointment of Kuben Pillay and Moses Kgosana
> Appointment of Funke Ighodaro effective 1 April 2017
> David Woollam and Dumisani Tabata not available for re-election at the annual general meeting in March 2017
Executive directors:
> Ronen Goldstein appointed as financial director
> Mark Herskovits appointed as executive director with responsibility for group capital management (previously group chief financial officer)

> Approved by shareholders on 20 October 2016
> Mechanism to attract and retain key executives
> Creates alignment with shareholders
> Executives participate in value created within their division and at a group level

OPERATING CONTEXT

Gross domestic product (GDP) growth in South Africa remains constrained due to a combination of global and domestic macro- and socio-economic factors:
> Global: developments such as the slowdown in Chinese economic growth, the UK’s decision to leave the European Union and an anticipated increase in US interest rates impacting the performance of developing economies.
> Political: political instability and concerns around a potential sovereign ratings downgrade resulted in lower business and consumer confidence.
> Social: persistent low employment levels, low real wage growth and social unrest.
> Economic: higher inflation caused by currency weakness and food inflation due to the ongoing drought. Household debt-to-disposable income ratio remains elevated at 75%.
The combination of these factors means that consumers and the small- and medium-sized enterprise (SME) sector in South Africa remain vulnerable



The defensive and market-leading positions of Transaction Capital’s divisions enables them to grow earnings despite a challenging and low-growth economic environment.

See the SA Taxi and TCRS divisional reviews for an overview of their market positioning.

REGULATORY ENVIRONMENT

The regulatory environment in South Africa is more stable, with the pace of new regulations and amendments to existing regulations impacting financial services providers moderating. Key regulatory developments in 2016 include:

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INTRODUCTION