Integrated Annual Report
2020

Material matters

For Transaction Capital, material matters are the issues we consider most relevant in ensuring that we continue to create value sustainably.

In determining the group’s material matters, we consider factors that may create and protect value, but also destroy value. These included immediate and longer-term exogenous and endogenous factors. Our material matters thus represent the top drivers of value that inform our strategic decision-making and can influence stakeholders’ assessment of the group’s ability to create value over time. The material matters represent the synthesis of information that key individuals within the group and its divisions deem relevant for elevation to board level, including information from stakeholder interactions.

In 2020, the determination process was conducted by an independent service provider using a clear and transparent process for data inclusion, exclusion, analysis and evaluation, to ensure the rigour of the process and produce results that are evidence-based and verifiable. On completion, the material matters were assessed against the group strategy, with high correspondence found between the material matters and the group’s strategic priorities. This indicates that the group’s strategy is appropriate for driving sustainable value creation.

The material matters were considered and approved by the board in March 2020. A subsequent assessment by group executives concluded that they remain relevant given the impacts of COVID-19 and following the group’s investment in WeBuyCars.

Our definition of value

Transaction Capital creates value for stakeholders by sustainably generating good commercial returns and positive social impact (shared value).

1Ability to consistently create shared value by assessing, mitigating and pricing credit-related and other specialised risk.

HOW WE ADDRESS THIS MATTER

  • Proven ability to identify opportunities in highly specific alternative asset classes, and to manage the attendant risks to acceptable levels.
  • High degree of expertise and market understanding applied to manage alternative assets in highly specialised market segments.
  • Ability to identify, assess, develop and partner with entrepreneurial, innovative and experienced founders, owners and managers of businesses with the potential for growth and scale.
  • Track record in building diversified, specialised and highly efficient business platforms to manage the group’s assets.
  • Ability to build and expand specialised data sets and analyse data at a granular level to inform our credit philosophy and mitigate risk.

Core concept: SPECIALISM

LINK TO STRATEGY

Strategic objective 2

Risk and capital management

Strategic objective 3

Data, technology and analytics

Strategic objective 4

Acquisitive growth

Strategic objective 5

People

2Maintain sustainable, high-quality earnings growth in variable conditions.

HOW WE ADDRESS THIS MATTER

  • Proven track record of strong performance, even in challenging macroeconomic conditions.
  • Diversified revenue drivers that perform differently in variable market contexts.
  • Deliberately positioned divisional business platforms with business models that remain relevant in a post-COVID-19 environment and which maintain strong medium-term organic growth prospects in defensive markets.
  • Business platforms focus on enhancing competitiveness and resilience through deeper vertical integration in their value chains, with new product and service offerings, and high levels of operational agility.
  • Technology investments facilitate growth and improve business processes, enhancing efficiencies and reducing costs.
  • Ability to enter complementary adjacent market segments or new geographic markets, to support longer-term growth. This is achieved through value accretive bolt-on acquisitions, and by applying existing competencies and data sets in adjacent markets.
  • Priority given to higher-quality credit and debt purchases.
  • Deepening social relevance to support market penetration, innovation and growth, and mitigate market and reputational risk.

Core concept: RELEVANCE

LINK TO STRATEGY

Strategic objective 1

Organic growth

Strategic objective 4

Acquisitive growth

3Provide strategic flexibility and operational resilience through sophisticated capital management.

HOW WE ADDRESS THIS MATTER

  • Robust balance sheet with ample capacity to fund organic growth.
    • R1 billion undrawn approved facilities at holding company to fund medium-term organic growth initiatives.
    • Raising additional capital to accelerate growth in line with emerging opportunities.
  • SA Taxi loan origination funding requirements into the 2022 financial year already secured.
  • TCRS’s funding requirements for acquiring NPL Portfolios into the 2022 financial year already secured.
  • Adequate access to liquidity facilities to cover any potential cash flow disruption in the short term.
  • Generating appropriate risk-adjusted returns on the capital deployed within the divisions remains a key strategic focus.
  • Ability to drive down the cost of debt and optimise funding mix due to investor appetite for the group’s high-quality risk profile.
  • Financial position allows robust access to capital, despite challenging market conditions.

Core concept: FLEXIBILITY

LINK TO STRATEGY

Strategic objective 1

Organic growth

Strategic objective 2

Risk and capital management

Strategic objective 3

Data, technology and analytics

4 Attract and retain the best leadership and operational management.

HOW WE ADDRESS THIS MATTER

  • Specialised nature of businesses makes sourcing and retaining intellectual capital a key requirement.
  • Investment in best practice human capital management to ensure a competitive employee value proposition.
  • Commitment to accelerating transformation in our South African operations, including linking executive remuneration to transformation targets.
  • Efforts to profile and identify leadership candidates for succession planning and internal promotion.
  • Identifying and appointing new independent non-executive directors with specialised financial and credit experience to augment the skills, independence and diversity of the board.

Core concept: EXCELLENCE

LINK TO STRATEGY

Strategic objective 5

People

5Ensure integrity through good governance.

HOW WE ADDRESS THIS MATTER

  • Apply the highest standards of corporate governance in a way that adds strategic value to the business.
  • Deepening application of King IV and responding to concerns raised by stakeholders.
  • Increasing resources in the key functions of ethics and internal audit at group and divisional level.
  • Ongoing monitoring and assessment of regulatory changes.
  • Continuing to drive a transformation agenda and considering ways in which to develop and attract black talent.
  • Driving application of group sustainability policy and performance against divisional economic, social and environmental (ESE) frameworks and indicators.

Core concept: TRUSTWORTHINESS

LINK TO STRATEGY

Due to the oversight function performed by the board, all strategic objectives relate to this material matter.