Integrated Annual Report
2020

SA TAXI

Performance overview

CORE PRE-PROVISION PROFIT
R1 117 million
11%
CORE HEADLINE EARNINGS
R221 million
57%
NON-INTEREST REVENUE
R609 million
4%
CORE COST-TO-INCOME RATIO
43.2%
from 44.2% in 2019
CREDIT IMPAIRMENTS
R836 million
160%
CORE HEADLINE EARNINGS ATTRIBUTABLE TO THE GROUP
R181 million
59%
PROVISION COVERAGE
6.7%
from 4.8% in 2019
CORE RETURN ON AVERAGE EQUITY
8.1%
from 24.6% in 2019
 

Strategic and operational highlights

WELL PLACED TO RESUME LONG-TERM TRACK RECORD OF GROWTH
AS THE DOMINANT MODE OF PUBLIC TRANSPORT, THE MINIBUS TAXI INDUSTRY CONTINUED OPERATING AS AN ESSENTIAL SERVICE
  • Operated throughout lockdown, even during level 5.
  • Minibus taxi industry has recovered quickly and is transitioning closer to normal activity as the economy reopens.
  • Commuter mobility is a precursor to economic activity.
  • Minibus taxi spend is non-discretionary for commuters, making the industry defensive.
  • Minibus taxi operators were thus able to afford loan and insurance instalments, supported by fare increases and lower interest rates.
BUSINESS MODEL WILL GAIN IN RELEVANCE IN A POST-COVID-19 ENVIRONMENT
  • The minibus taxi industry is indispensable to economic activity in South Africa.
  • SA Taxi remains well positioned to serve our clients, based on the strength of our track record and vertically integrated business model.
  • Strategic initiatives remain valid as market conditions settle.
COLLECTIONS ACTIVITY ALREADY RECOVERING
  • Collections activity recovered to ~85% of
    pre-COVID-19 levels by September 2020.
  • Collections expected to normalise in early 2021 calendar year.

Expressed as a percentage of pre-COVID-19 levels.

RESILIENT PERFORMANCE DESPITE MARKET CONDITIONS, WITH CORE PRE-PROVISION PROFIT UP 11%
  • Quick alignment of operating models, financial structures and growth plans preserved profitability.
  • Positive operational leverage maintained and core cost-to-income ratio further reduced to 43.2% (2019: 44.2%).
REMAINS CONSERVATIVELY CAPITALISED WITH UNFETTERED ACCESS TO LIQUIDITY
  • R2.7 billion of equity capital on balance sheet.
  • Capital adequacy ratio of 20.9%.
  • Undrawn facilities covering funding requirements for loan origination into the
    2022 financial year.
CONSERVATIVE APPROACH TO THE ANTICIPATED IMPACT OF COVID-19 ON FUTURE CASH FLOWS WAS APPLIED, PROTECTING
THE BALANCE SHEET
  • Impairment of loans and advances increased 160% to R836 million (2019:
    R322 million).
  • Provision coverage increased to 6.7% (2019: 4.8%) to protect the balance sheet.
  • Absolute value of cash received is not expected to decrease.
  • Useful life of the asset for our clients is longer than the average loan term at 71 months.
  • SA Taxi leverages its vertically integrated business model to limit loss in the event of default by recovering over 75% of the loan value.
DELIVERED VALUE FOR THE MINIBUS TAXI INDUSTRY, ENHANCING OUR REPUTATION
  • ~R400 million formal payment relief provided to clients:
    • Relief programme for loan repayment and insurance premiums in April 2020 for ~25 000 clients.
    • Specific payment relief for ~3 000 qualifying clients in May and June 2020.
  • ~R9 million contributed towards health and safety for the minibus taxi industry and its commuter base.
PROGRESS MADE ON IMPLEMENTING ENHANCED ESE FRAMEWORK
  • Formalises a shared-value model for delivering commercial returns and social benefits.
  • Informs strategy development and sustainability initiatives.
  • Provides measurable ESE reporting to stakeholders through an objective view of corporate impact.
Market context

MINIBUS TAXIS ARE THE LARGEST AND MOST VITAL MODE OF TRANSPORT WITHIN THE INTEGRATED PUBLIC TRANSPORT NETWORK

MINIBUS TAXI INDUSTRY – defensive and growing
  • Dominant form of public transport
  • Number of commuter trips increased more than 20% since 2013
  • 69% of households use minibus taxis (59% in 2003)
  • ~15 million commuter trips daily
  • Increasing commuter density due to urbanisation
  • Essential service with spend non-discretionary
  • Currently no government subsidy
BUS AND RAIL
  • Number of commuter trips continue declining
  • Together account for only ~1.0 million trips daily
  • Subsidised by government
E-HAILING SERVICES
  • Small proportion of public transport trips serviced due to higher costs

Commuters continue to rely on minibus taxis given their accessibility, affordability, reliability, convenience, flexibility and competitive pricing.

DEMAND FOR MINIBUS TAXIS STILL EXCEEDING SUPPLY

Total demand
>250 000
Minibus taxis
~80 000

Financed and/or insured


~170 000
Unencumbered and thus aged
With a large portion of the vehicles in the industry fleet above nine years of age, the ageing fleet requires replacement and recapitalisation.
Total monthly market
supply versus
SA Taxi’s monthly
demand
~1 300
Total market
supply¹ down
(2019: >1 800)
~5 900
SA Taxi’s total
applications increasing
(2019: ~5 300)
Supply and demand of major
premium brand minibus taxis

Total monthly market supply1
~1 100
New vehicles
(2019: ~1 600)
~185
Pre-owned vehicles
(2019: ~215)

SA Taxi's monthly applications

~4 000
New vehicles
(2019: ~3 750)
~1 900
Pre-owned vehicles
(2019: ~1 550)
~35%
Approval rate
(2019: ~42%)
~25%
Take-up rate
(2019: ~33%)
Effect on SA Taxi
  • Strong demand for minibus taxis continues.
    • In line with pre-COVID-19 levels.
  • Credit granting criteria tightened in response to COVID-19.
    • As a result, approval rates reduced in the second half of the financial year.
  • Liquid and active market for SA Taxi’s high-quality pre-owned refurbished vehicles due to their affordability.
  • This supports higher recoveries as the asset retains value in an environment where demand exceeds supply.
1. Total monthly market supply of minibus taxis comprises ~950 Toyota vehicles with the rest made up of Nissan and Mercedes vehicles, and excluding Chinese vehicles. This represents SA Taxi’s best estimate based on monthly NAAMSA reports, internal data and Lightstone data.
Environment for SA Taxi operators
THE CHALLENGING ENVIRONMENT FOR MINIBUS TAXI OPERATORS WAS EXACERBATED BY COVID-19, WITH LOWER COMMUTER MOBILITY AND RESTRICTED OPERATIONS IMPACTING PROFITABILITY
Lockdown restrictions resulted in:
  • Reduced activity per vehicle
  • Reduced passenger loads.

However, the minibus taxi industry has recovered quickly and is transitioning closer to normal activity as the economy reopens. Due to the defensive nature of the minibus taxi industry, minibus taxi operators are still able to afford loan and insurance instalments supported by fare increases and lower interest rates.

SA Taxi’s fleet movement (compiled from telematics data – 2020 compared to 2019)
Demonstrates recovery in activity of minibus taxi fleet benchmarked against pre-COVID-19 levels.
During the pandemic, the minibus taxis industry was shown to be indispensable to economic productivity
As the dominant mode of public transport, the industry continued operating as an essential service throughout the government-mandated lockdown, including during level 5.
The industry has also been an early beneficiary of economic and social recovery, demonstrating that commuter mobility is a precursor to economic activity.

1. Vehicles in the fleet that have travelled more than 10 kilometres during the day. | 2. Total kilometres travelled by the fleet/number of operating vehicles. | 3. Time elapsed while the vehicle is moving. | 4. Calculations are based on a new Toyota HiAce diesel and profitability after all expenses, including loan and insurance instalments, have been deducted.

Industry is defensive and growing with resilient operators, despite the challenging economic environment

REPO RATE

5.1%

Average repo rate1

(2019: 6.7%)

3.5%

Current repo rate2

(2019: 6.5%)
  • Repo rate currently at lowest level in five decades
  • Down 3% in 2020
 
 

SA TAXI’S INTEREST RATES

 

22.4%

Average interest rate at loan origination

(Since 2015: Down 1.5%)

~R412 reduction

Impact on monthly instalment3

14.5% to 26.75%

Risk-based pricing interest rate range

Supports affordability of instalments, including existing loans on book
 
 

VEHICLE PRICES

 

R477 000

Toyota HiAce (diesel) price4

(Since 2015: Up 31%)

5.6%

Increase in Toyota vehicle prices (with further 1.5% increase in October 2020)

Resulting in ~R3 813 increase in monthly instalment since 20153
 
 

FUEL PRICES INCLUDING FUEL LEVIES

 

R14.84 per litre

Petrol price5, down 4%

 

R13.23 per litre

Diesel price5, down 8%

~2 – 3 billion litres used by taxi industry per year, costing ~R30 billion6
  • Fuel prices currently down ~20% from all-time high (November 2018)
  • Additional ~R0.80 per litre decline (September 2020 to date)
 
 
 

MINIBUS TAXI INDUSTRY TAX CONTRIBUTION7

~R1 billion

VAT contribution on vehicle sales per year

~R7 billion

fuel levies paid per year

~R4 billion

Road Accident Fund contribution per year

MINIBUS TAXI FARE INCREASES IN 2020

Up ~7%

Average fare increases

Supports operators’ profitability and ability to pay finance and insurance instalments

TAXI RECAPITALISATION PROGRAMME

R124 000

Minibus taxi scrapping allowance

Increased 36% in April 2019

Taxi Recapitalisation Programme initiated by government in 2006

 
 

1. Average repo rate for the year ending 30 September 2019 and 2020. | 2. Repo rate at 30 September 2019 and 2020. | 3. Calculated only for new loan originations. I 4. Toyota recommended retail price, including VAT, at 30 September 2020. | 5. www.energy.gov.za; 12-month rolling average fuel price (September 2019 to September 2020). | 6. 12-month rolling average petrol and diesel price (September 2019 to September 2020) multiplied by SA Taxi’s estimates for number of litres used. | 7. SA Taxi’s internal estimate.

Business activities

SA Taxi’s vertically integrated business model enables it to participate in margin across the minibus taxi value chain. SA Taxi applies and deepens its specialist competencies into adjacent market sectors, underpinned by its data and telematics capabilities, to deliver a comprehensive service to the minibus taxi industry, supporting its growth and sustainability.

Taxi

Mechanical refurbishment, autobody repair, parts procurement and distribution, and salvage

SA TAXI AUTO REPAIRS

Dedicated autobody and mechanical refurbishment facility, servicing SA Taxi Finance and SA Taxi Protect.

Rebuilds high-quality pre-owned minibus taxis, and mitigates credit risk and insurance losses by lowering:

  • The cost of refurbishment.
  • The loss given default in SA Taxi Finance.
  • The claims ratio in SA Taxi Protect.

~20 000m2

Workshop facilities

~250 per month

Internal vehicle refurbishment capacity

>75%

Recovery rates on repossession, refurbishment and resale

Down ~4 to ~6%

Average refurbishment cost

Procurement, salvage, distribution and retail of well-priced new and refurbished vehicle parts for distribution into SA Taxi Auto Repairs and to external repairers, and retail to minibus taxi operators.

Supports lower cost of refurbishment through:

  • Importing and locally procuring new parts from source.
  • Salvage operations that recover and refurbish used parts to a high quality.

~R14 million per month

Supplied to SA Taxi Auto Repairs in 2020 (2019: ~R6 million)

~R2.8 million per month

Retail sales revenue to minibus taxi operators (2019: ~R3 million)

~R2.4 million per month

Retail sales revenue to external autobody repairers (2019: <R1 million)

~7 500m2

Workshop, storage and retail space

DATA AND TELEMATICS OPERATIONS

Data and telematics capabilities are core to SA Taxi’s business activities and are key to mitigating risk. The division continues to enrich its proprietary database with data accumulated daily from each minibus taxi and applied to credit decisions, collections, repossessions and insurance activities.

In addition, SA Taxi continues to invest in IT, data management and predictive analytics, as well as technologies that improve processing capabilities and extract operational efficiencies.

SA Taxi has been tracking minibus taxis for ~13 years.

On average, each of SA Taxi’s vehicles travels ~6 100 kms per month.

SA Taxi’s vehicles operate on ~5 500 routes covering ~800 000 kms.

Finance

SA TAXI FINANCE

Developmental credit provider, offering bespoke vehicle finance for the minibus taxi industry. Finances new vehicles and high-quality pre-owned minibus taxis refurbished by SA Taxi Auto Repairs.

R12.2 billion

Gross loans and advances

Up 14%

32 890

Loans on book

Up 1%

~1.2

Vehicles per client

(2019: ~1.2)

9.8%

Average cost of borrowing

(2019: 11.1%)

11.8%

Net interest margin

(2019: 12.2%)

32.3%

Non-performing loan ratio

(2019: 17.9%)

7.3%

Credit loss ratio

(2019: 3.2%)

4.5%

Risk-adjusted net interest margin    (2019: 9.0%)

Insurance

SA TAXI PROTECT

Bespoke, comprehensive vehicle insurance and value-added products, tailored for the minibus taxi industry.

  • Provides insurance to SA Taxi financed clients and the open market via its broker network.
  • Lower cost of claim supported through SA Taxi Auto Repairs due to efficiencies in operations, lower cost of parts procurement and savings via salvage.

~31 000

Insurance clients

>100

Brokers in broker network to expand total addressable market

>2.0

Products per client

Majority of financed clients choose to be insured by SA Taxi1.

Retail

SA TAXI DIRECT

Procurement and retail of new and pre-owned minibus taxis. SA Taxi Direct’s pre-owned minibus taxis are rebuilt to a high quality and are mechanically robust, providing a reliable and affordable alternative to buying new vehicles in this challenging environment.

~R600 million

Vehicle turnover in 2020

Down 36%

>7%

Average retail margin per vehicle

Vehicles sold through SA Taxi Direct results in product margin earned, a high take-up of SA Taxi insurance and allied products, and an improved credit performance due to a better-informed customer.

Connected services: targeting transactions and rewards programmes

SA TAXI REWARDS

Rewards programmes, including fuel, tyres and parts for the minibus taxi industry.

Launched April 2018 in partnership with

Launched October 2019 in partnership with

>10 000

Cards issued in 2020

~21 million

Litres of fuel purchased in 2020

~R1 800

Original tyre purchase price

~R1 400

Reduced price for taxi operators2

~44 000

Number of tyres sold in 2020

1. All taxis financed by SA Taxi are fully insured and the majority of SA Taxi’s financed clients independently elect to be insured by SA Taxi. | 2. Price agreed per contract.