SA Taxi Business Overview - Half Year 2019 - Transaction Capital
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SA Taxi
Business Overview
Half Year 2019
Contents
01 Overview of SA Taxi….…………………..………………………………………………………………............... 03
02 Market context………………….………………………………………………………………………………............... 11
03 Offering and business model….………………………………………………………….................. 21
04 SA Taxi’s competitive landscape….…………………………........................................ 42
05 SA Taxi’s impact.………………………………………………..……………………………………………................ 44
06 Industry engagement….……………………………………………..…….…………………………….............. 54
07 Financial performance…………………………………………………………………………………................ 57
08 Funding….…………………………………………………………………………………………………………………................ 62
Confidentiality Disclaimer
This document, including all information regarding SA Taxi Holdings Proprietary Limited and its subsidiaries and associated companies, collectively referred to as “SA Taxi”, is confidential and is not for
discussion, circulation or publication to any third party without the prior written consent of Transaction Capital Limited. The information and financial arrangements outlined herein are for the benefit and
information of the original recipient of this document, who by acceptance of this document is deemed to have accepted responsibility for ensuring that such confidentiality will be maintained at all times.
1
SA Taxi at a glance
The
Empire
Family
Trust
73.88%* 1.12% 25%
Our mission is to provide
finance, insurance and
1 151 30 000m2
Number of SA Taxi Auto
other services that enable employees Repairs
warehouse space
the sustainability of the
minibus taxi community.
31 543 R10.1bn
Number of Gross loans &
SMEs advances
36 000 R401m
Number of Gross written
insurance clients premium
Source | *81.4% consolidation owing to vendor financing provided by SATH as at 6 February 2019
01 Overview of SA Taxi
3
Overview of SA Taxi
Who is SA Taxi?
1 An innovative & pioneering business SA Taxi is a vertically 2
A unique blend of vehicle
model with operations expanding procurement, retail, repossession
throughout the financial services &
asset value chain, building a
integrated taxi platform & refurbishment capabilities, with
financing & comprehensive
utilising specialist
scalable platform that can be insurance competencies for
leveraged in adjacent markets focused vehicle types
Innovative technology, valuable capabilities, enriched Enabling financial inclusion by
3 4 proficiently securing funding from
client & market insights developed
from overlaying granular telematics, proprietary data & both local & international debt
credit, vehicle & other data to enable investors to judiciously extend
precise & informed origination, technology to provide developmental credit to SMEs
that may otherwise not have
collection decisioning & proactive
risk management
developmental finance, access to credit from traditional
financiers
5
Providing complementary business
services that assist SMEs to insurance & other services Empowering under served &
6
maximise cash flow & protect their emerging SMEs to build their
income-generating asset, thus to empower SMEs & create businesses, which in turn creates
improving their ability to succeed as further direct & indirect
well as offering value-added shared value opportunities employment opportunities
services to the wider industry
stakeholders
thus ensuring the Contributing to the
8 recapitalisation & sustainability of
7 Creating shared value opportunities
by providing services to the wider sustainability of the the taxi industry – a critical pillar
of the public transport sector
industry facilitating collaboration &
investment minibus taxi industry servicing the majority of South
Africa’s working population
4
Overview of SA Taxi
Projected growth for SA Taxi
Looking forward, SA Taxi will strive to organically grow its book profitability through:
Continue to
strengthen
relationships with
customers and the
Establish access to wider decisioning
wider customer
base including the
commuter by offering
Invest in systems a range of services
and technology to
optimize business
Leverage vertical efficiencies and
integration and drive more informed
collaboration to credit and
reduce repair and underwriting
claim costs decisioning
Optimise capital and
business structures to
position the business
Increase scale and for long term growth
profitability through a
focused approach to
each business driver
Consistent growth over the next 5 years
5
Overview of SA Taxi
Creating value at new frontiers
To provide finance, insurance & other services that enable the sustainability of the minibus taxi community
Formative years 2019 2020
A finance offering to SA Taxi has expanded its offering and To extend products and services to additional verticals, unlocking value in the
taxi operators. extended its operations into many key industry and provide bespoke services to a wider customer base.
verticals of the finance and insurance value
chains.
Data &
Data & c Telematics
Telematics
Current as at 31 March 2019 Total addressable market
~36 000 Financed & insured clients ~250 000 Minibus taxis ~1 200 Taxi associations Providing vehicles, finance,
insurance, other services,
Creating
opportunities
repairs & parts
R10.1bn Gross loans & advances >150 000 Operators ~R50bn Annual estimated
revenue¹
for operators
to share in
Providing services & products to the prospect
R327m Non-interest revenue
~250 000 Taxi drivers ~3bn Litres of fuel meet drivers’ needs & reward
of accessing
purchased p.a³ good driving
Commuter the driver
15m trips daily¹ Average time & commuter
50min spent travelling
Providing value added
services whilst commuting
Households using to work²
9.9
m minibus taxis²
SOURCE | 1. Reuters 2017 | 2. National Household Transport Survey 2013 | 3. Industry information 6
Overview of SA Taxi
SA Taxi’s journey so far
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 HY 2019
R10 101m
R8 301m R9 402m
FOUNDED IN 1996
First rated
securitisation
programme First DFI investment received R7 151m SANTACO
(SATS) is
established acquires
25% stake
R6 240m R6 238m in SATH
Moody’s affirm senior
R5 529m Parts & Salvage
established
mezzanine ratings
Insurance > R2bn R4 800m Black Elite (renamed to SA
Taxi Rewards) fuel rewards
programme launched
Transaction Over 1100 employees
Capital is formed
R3 807m
Nissan NV350 launched
R4 045m Telematics now applied in Premium vehicles
R3 027m credit vetting, comprise 99.7% of
insurance, collections, loans & advances
repossession (82% in 2012)
Transaction Capital lists Over 500 employees
on the JSE Opened a dedicated taxi
panel repair workshop in
Midrand
R2 276m Dealership is launched
Insurance cell captive Over 800 employees
Taximart (renamed to established
SA Taxi Auto Repairs) Initiated insurance cover to
refurbishment non-financed clients
facility is established
Finance of entry level
R875m Terry Kier appointed as CEO vehicles discontinued
R322m Unrated debt programme (SATF)
established Early adoption of IFRS 9
GROSS LOANS & Portfolio reaches 20 000 Over 600 employees
ADVANCES accounts
Financial highlights 31 March 2019
R230m¹ 11.3% R10.1bn 31 543 3.8% 22.8% 17.9% 3.4%
Gross loans Number of loans Non-performing
Core headline Net interest margin on book Return on assets Return on equity Credit loss ratio
& advances loans
earnings
SOURCE | Transaction Capital Half Year Results March 2019 | 1. Headline earnings attributable to the group, including minority interest 7
Overview of SA Taxi
Our experienced management team
SA Taxi’s executive management team holds extensive experience in the disciplines that make the company uniquely successful as a
developmental credit provider.
Terry Kier Lorenzo Cardoso Mark Herskovits
Group tenure – 12 years Group tenure – 11 years Group tenure – 12 years
Chief Executive Officer Chief Financial Officer Capital Markets Director
BA (Hons); postgraduate diploma in BCom (Hons) in Accountancy; Chartered BBusSci (Finance) Post Graduate Diploma in
Management Studies accountant CA(SA) Accounting, Chartered accountant CA(SA), CFA
• Held executive positions at Softline including part of • Served Articles in Industrials and Automotive at • Served articles at Deloitte & Touche where he
the team involved in its JSE listing, board member KPMG where he remained as a manager remained as a manager
and CEO of Pastel Software • Joined SA Taxi in 2008 as a special projects manager • Joined Rand Merchant Bank as a corporate bonds
• In 2007 started and sold a medical software company • Appointed as SA Taxi CFO in 2013 analyst
to Bytes Technology Group Ltd • Joined Transaction Capital in 2007
• Joined Transaction Capital in 2007 as the CEO of • Currently leads the capital markets team
Mortgage Capital
• Previously Transaction Capital CFO
• Appointed as SA Taxi CEO in 2010
• Currently a shareholder of 1.12% in SA Taxi
Matsidikanye Moswane Maroba Maduma Sibo Dladla
Group tenure – 12 years Group tenure – 4 years Group tenure – 9 years
Taxi Industry & Government Relations Communications Executive Chief Technology Officer
Executive Gordon Institute of Business Science Diploma in IT networking
BCom Economics & Bus Management; Dip Fundamental Management Program
Project Management
Riek Olivier Marco Adaggi Teneale Holley
Group tenure – 7 years Group tenure – joined 2018 Group tenure – 2 years
Insurance Director Executive Chief Information Officer
BCom (Hons) in Accountancy & Finance; BCom (Hons) in Accountancy, Chartered BCom (Accounting), Post Graduate Diploma in
Chartered Accountant CA (SA) Accountant CA(SA) Accounting, Chartered Accountant CA (SA)
Reneka Dayaljee Pumza Seokane Johan van der Merwe
Group tenure – 8 years Group tenure – joined 2018 Group tenure – 1 year
Loan Originations Executive Human Capital Executive Chief Risk Officer
B Compt. Honours (UNISA), Chartered BA; Postgraduate in Organisation and BCom (Hons), MBA
Accountant CA(SA) Management
8
Overview of SA Taxi
SA Taxi is part of the Transaction Capital group
CEO: Terry Kier, 12-year group tenure CEO: Dave McAlpin, 11-year group tenure
CEO: David Hurwitz, 14-year group tenure
R211 million¹ R10.1billion R363 million¹ 59.4 CPS R134 million¹ R1.7billion
Headline Earnings Gross loans & advances Headline earnings Purchased book debts
▲22% ▲14% Headline earnings Headline earning per share ▲13% ▲68%
▲17% ▲17%
R327 million 17.9% 27 CPS 17% 80.5% R437million
Non-interest revenue Non-performing loan ratio Cost-to-income ratio Price of purchased book
Interim dividend per share Foreign investor base debts acquired
▲27% HY18 17.2% HY18 81.0% ▲97%
▲33% HY18 15%
22.8% 3.4% R1.0 billion 810.4 CPS R977million R3.6 billion
Return on equity Credit-loss ratio Non- interest revenue Estimated remaining
Excess capital Net asset value per share collections
HY18 25.7% HY18 3.7% ▲14% ▲62%
HY18 R650 m ▲30%
A vertically integrated taxi platform incorporating a unique blend of A technology-led, data-driven provider of customer management
vehicle procurement, retail, repossession & refurbishment services in South Africa (SA) & Australia. TCRS’ scalable &
capabilities, with finance & insurance competencies for focused bespoke fintech platform improves its clients’ ability to originate,
vehicle types. These competencies combined with its proprietary manage & collect from their customers. The division leverages its
data & analytics skills enables SA Taxi to provide asset-backed technology & data to mitigate risk & maximise value for clients
developmental credit & bespoke taxi insurance, & sell suitable throughout the customer engagement lifecycle.
vehicle models & allied services to taxi operators, delivering
commercial benefits to taxi operators & ensuring the viability &
sustainability of their businesses.
SOURCE | 1. Headline earnings attributable to the group, excluding minority interest 1002 Market context
11Market context
Minibus taxis
The typical minibus taxi is a 16-seater minibus, typically
white in colour. The most common model is the Toyota
Quantum Ses’fikile.
Taxis operate an unscheduled service on fixed routes.
These routes are managed by taxi associations. Taxis will
typically depart from fixed terminals but stop anywhere
along their route to pick up and drop off passengers.
Passengers hail taxis using hand signals to indicate where
they are travelling. Taxi ranks are hives of activity and
market places establish themselves around the ranks to
service the commuters.
Fares for each route are determined by regional taxi
councils. These councils consider; the timing and extent of
prior increases, commuter affordability and operator
profitability when setting the fares. The fares need to take
into account that the industry services the lower income
population of the country.
Fares are paid in cash. In some areas of the country the
taxi owner employs a conductor to manage fares while in
other parts of the country passengers themselves manage
the cash from all passengers in the vehicle and pass the
cash on to the driver.
Estimated new minibus vehicle sales
5%
12%
Toyota
13% Nissan
Other
70% Mercedes
12Market context
Minibus taxis are the dominant mode of public transport
Public transport in South Africa Key statistics
The public transport system is the primary mode of transport in South
Africa and plays an essential part in the daily life of the general South- Minibus taxi
African population. It is critical in providing the majority of the population Other…
Walk Bus 67%
access to jobs, education, health and social activities. 40% of South
21% 20%
Africans make use of public transport to commute, compared to 38%
who use a private vehicle, 21% who walk and 1% who use other forms Share of Public Public
of transport. transport transpor… transport
choices Train choices
13%
The majority of these public transport commuters are low income
Car
earning individuals. Walking and minibus taxis are the preferred modes
38%
of transport for over 50% of the South-African population who earn
under R3 000 a month and are unable to afford private transport.
68% of all public transport trips to work
Overall, 67% of those who utilise public transport choose to 70% of individuals who attend educational institutions are
use minibus taxis. 70% of learners and 68% of workers use estimated to use minibus taxis
minibus taxis to commute.
In the face of limited funding over the past three decades and the
challenges caused by the legacy of spatial dislocation of the poor, the
public transport industry has experienced continued growth. However,
South Africa’s public transport is now faced with increasing network
inefficiencies due to a rapidly growing urban population and aging
infrastructure.
As a core enabler to the country’s economy, an efficient public transport
network is a critical catalyst for development and economic growth.
With over 50% of the South-African population earning
Hence investment is required for initiatives that aim to increase and
under R3 000 monthly, walking and minibus taxis are their
improve efficiencies in the transport network, create sustainable jobs,
preferred modes of transport
improve regulations in the industry and further support the growth of
black-owned SMEs.
SOURCE | National Land Transport Strategic Framework 2015 | National Household Travel Survey 2013 | Census data 2011 13Market context
Minibus taxis are the dominant mode of public transport
The reach of minibus taxis is pervasive and the industry provides a critical service to commuters by integrating with key public transport nodes. The
images below illustrates the footprint covered by SA Taxi’s financed vehicles in March 2019, which represents less than 12% of the national taxi fleet.
Minibus taxi is the dominant mode of public transport In and integrated public transport network
Minibus taxi serves as a trunk service in parallel with train & bus and is also the feeder into these modes
SOURCE | SA Taxi fleet movement on 25 March 2019 14Market context
Minibus taxis are integral to daily commuters
While rail and bus networks serve as a trunk service in parallel with minibus taxis, minibus taxis are a key feeder into these services – transporting
passengers their first and last mile. This service is critical given the context of South Africa’s low population densities, long travel distances as well as
modal and structural inefficiencies. This first and last mile service provides commuters with greater access and convenience. Furthermore, the
Department of Transport’s National Land Transport Strategic Framework includes a move to a corridor and node approach which will continue to create
demand for integrated feeder services.
The majority of commuters who utilise public transport
are heavily reliant on minibus taxis. Usage of minibus
taxis has been consistently high throughout the
Train Minibus Taxi industry’s existence and shows no sign of declining.
200 000 Minibus taxis Arrive Alive
~550 train stations >2 600 Taxi ranks
• 40% of South Africans use public transport
~19 BILLION KM Travelled (per year)
• Minibus taxi is the dominant form of public
transport
Bus • Minibus taxi is an essential service and spend is
Bus Rapid Transport (BRT)
non-discretionary
< 1 million ~120 000
Commuter trips daily Commuter trips daily
Receives 56% of Government subsidy
>19 000 Registered buses 3 Metropolitans
>100 Bus stations ~800 Registered buses
~1 BILLION KM travelled (per year) ~100 Bus stations ;Market context
Brief history of the minibus taxi industry
This industry emerged in the early 1960’s The taxi industry was legalised and This period saw the introduction of the Taxi Ground breaking
with the introduction of pass laws under the recognised by government although the industry transformation: ownership transaction
Apartheid regime. number of permits were restricted. • National Taxi Task Team with the minibus taxi
• Democratisation process industry.
This brought about the need for an The South African Black Taxi Association • Legalisation process
unscheduled transport service for the (SABTA), the first national organisation of
disadvantaged black community that had taxi owners was established and brought The introduction of the National Land and
been forcibly moved to the outskirts of every together hundreds of local taxi associations. Transport Act brought about national operating
commercial hub due to spatial dislocation licenses which would replace the previous taxi
laws. 7 seater vehicles became the dominant permits.
vehicle type within the industry, increasing
This industry was considered illegal as it the number of passengers a taxi operator The Taxi Recapitalisation Programme(TRP)
was not recognised or regulated by the could transport daily. was launched with the view of formalising the
Department of Transport. industry by:
• Introducing safer vehicles onto the road
The 1954 Chevrolet sedan was the • Registering all taxi operators and their
vehicle of choice amongst taxi operators. employees
• Improving the data collected within the industry
1960’s 1970’s 1980’s 1990’s 2000’s 2010’s Today
In the 1970s, prospective minibus taxi This industry played an important role in the The 2010 Soccer World Cup brought
operators found a loophole in the Road country’s first democratic elections by about substantial investments into the
Transportation Act which allowed them transporting a large portion of the population country’s transport infrastructure. This
to apply for a road carrier permit and to the voting polls at no cost. initiated an investigation into
operate legally if they left one seat of a government subsidy grants for the
ten-seater empty. This was because The 16 seater vehicle became the preferred Minibus Taxi industry.
any vehicle carrying ten passengers or and legislated vehicle type. This resulted in
more for reward was defined in the following vehicles becoming the market
legislation as a bus and was therefore leaders within the industry:
subjected to particular controls. • Toyota Hi-Ace Super 16
However the department of transport • Nissan E20
• Isuzu Relay
issued very few permits.
SOURCE | SA Taxi Corporate Affairs | Organizing in the Informal Economy: A Case Study of the Minibus Taxi Industry in South Africa 16Market context
Dynamics of the minibus taxi industry
Association Route Operating licence
Taxi operators must first be a part of Associations are awarded the right to Operating licences, issued by the
an association in order to gain access operate a route by the provincial Operating License Administration
to a route and operating licence. regulating entity (PRE) through a System (OLAS), authorise an operator
registration process. and vehicle to provide a specified
Taxi operators pay a fee to join an
transport service.
association which enables the Route allocations are managed by the
operator to apply for an operating Registrar’s Administration System To apply, prospective operators must
licence. (RAS). The RAS system registers taxi provide the following:
operators, taxi associations and • Association motivation
Taxi associations self regulate the • Route description details
details of their operations, including
servicing of routes to ensure routes • Drivers license
routes.
are not over supplied and that minibus • Vehicle registration certificate
taxis can operate profitably. There are The PRE determines the number of • Roadworthy
Taxi owner currently ~1 200 taxi associations in operating licences to be issued per • Tax registration number.
South Africa. route based on an integrated transport
Licences are tied to an operator,
plan which considers the spread of
vehicle and route and expire after 7
scheduled and unscheduled services
years, but can be renewed based on
required across various transport
roadworthiness, compliance and a
modes.
review of the route.
Operating licences can be transferred
between operators and are therefore
tradable. However, the licences do not
hold significant value and are not
commonly traded.
SOURCE | National Land Transport Act (2009) | SANTACO website | City of Cape Town Operating Licence Strategy 2013 17Market context
Recapitalisation drives higher demand for vehicles
The minibus taxi fleet is characterised by old and poorly maintained
vehicles. In 2006, the government initiated the Taxi Recapitalisation Dynamics of recapitalising the minibus taxi fleet
Project (TRP) in a drive to regulate and improve the industry. The initiative It is estimated that it will take more than 15
was aimed at addressing the ageing fleet within the transportation system. years to recapitalise the minibus taxi fleet of
250 000 vehicles. However, the safe working
It is estimated that only ~10 000 vehicles were recapitalised in the last 3
life of a vehicle is expected to be shorter than
years. Due to the slow rate of vehicles being scrapped through the TRP
15 years.
and continual aging the bulk of the minibus taxi fleet still requires
replacement in order to meet safety standards. This indicates that new vehicle sales need to
increase substantially in order to adequately
SA Taxi still believes that the best mechanism to drive recapitalisation of recapitalise the fleet to meet National Land
the minibus taxi fleet is through economic opportunity and empowerment, Transport Act (NLTA) requirements.
rather than through a forced recapitalisation programme. Assisted finance Additionally, market sentiment is that the fleet is
is a critical catalyst in upgrading the minibus taxi infrastructure. characterised by already aged and un-
roadworthy vehicles, further driving the
Demand for vehicles exceeds the current supply requirement for new vehicles.
The challenge of recapitalising the minibus taxi fleet is exacerbated by a
structural shortage in the supply of new vehicles to address this demand.
The shortage in supply developed as a result of underinvestment by
vehicle manufacturers and a shortage of end user finance. However, in
recent years manufacturers have increased investment in the industry,
as evidenced by Nissan re-entering the market in 2014.
With demand outstripping supply, financiers are well positioned to impact
the industry by applying conservative credit selection and relying upon a
liquid second hand market.
During 2019 the TRP was reviewed and in April 2019 the Transport
Minister announced that the minibus taxi scrapping allowance is to be
increased by 36% to R124 000 per vehicle (from R91 000). This will
assist in making it more affordable for minibus taxi operators to replace
an old vehicle with a newer safer one.
SOURCE | Arrive Alive | National Land Transport Strategic Framework 2015 | Department of Transport Minister Dipuo Peters address at National Council of Provinces | Transport budget vote NCOP 18
2015/16 | Engineering NewsMarket context
SA Taxi is a driving force in the minibus taxi industry
SA Taxi’s portfolio for Half Year 2019
South Africa’s minibus 25 262 owning 31 543
taxi industry Taxi owners Vehicles
>250 000
* Resulting in gross loans
and advances of R10.1 bn
~ 1 397
comprising of
estimated minibus taxis pre-owned vehicles
in the industry
4 262 ~2 865
new vehicles
loans originated
SOURCE | Stats SA National household travel survey 2013 | The market size is SA Taxi’s best estimate through engagement with the industry and extrapolation of internal data | Transaction 19
Capital Half Year Results March 2019 NOTE | Pre-owned vehicles are exclusively vehicles that have been recovered by SA Taxi, and have been refurbished, re-sold and re-financedMarket context
SA Taxi is positioned in an attractive market
Summarising the defining minibus taxi market attributes
As a provider of asset-backed
Minibus taxis are the dominant mode Ageing fleet and recapitalisation has
developmental credit,
of public transport given led to growth in new and quality SA Taxi is thus positioned in a
convenience, accessibility and refurbished minibus taxis and financing market that is growing
integration with other modes of consequently a need for vehicle in a
transport namely rail and bus. finance.
stable defensive industry
The minibus industry is a defensive Demand for vehicles is exceeding where it is able to be
market as public transport is a non- manufacturers and pre-owned supply selective on credit risk
discretionary expense for the which results in superior credit and the financed
majority of the nation’s commuters selection and a liquid second hand
as they are unable to afford private market. asset retains its value.
transport.
20
2003 Offering and business model
21Offering and business model
SA Taxi’s offering for small business entrepreneurs
SA Taxi is a specialist in SME financing in the minibus taxi industry, providing capital to taxi owners to build their own small business. SA Taxi
provides asset-backed financing for the taxi vehicle, an income generating asset, as well as allied services that support these small business
entrepreneurs in building sustainable and profitable businesses. SA Taxi enables and empowers these entrepreneurs as many of them are unable
to access capital through traditional finance providers. Through a comprehensive service offering and innovative risk mitigation approach SA Taxi is
able to provide asset-backed finance to these small business owners by understanding their actual risk profile and underpinning the asset
throughout its economic life.
SA Taxi has established 2 direct dealerships for new and pre-
owned taxis called SA Taxi Direct.
Motor and credit life insurance is specifically tailored Value Proposition
for minibus taxi owners offering comprehensive
cover, through SA Taxi Protect.
Access to credit
Finance SA Taxi offers a much needed opportunity
to minibus taxi owners who would like to
SA Taxi provides
asset-backed own and operate their own SME.
developmental credit
lending for an income
generating vehicle Each vehicle financed is fitted with a tracking Full business offering
predominantly
minibus taxis system that tracks location, mileage of the When engaging with SA Taxi, taxi owners
vehicle and driver behaviour. are able to acquire the vehicle, finance,
insurance, car tracking, vehicle servicing
and other services required to establish
and sustain their minibus taxi business.
SA Taxi Auto Repairs not only refurbishes Customer service
repossessed vehicles but also provides repairs SA Taxi treats each minibus taxi owner as
a business owner and offers a
and maintenance on pre-owned vehicle personalised, professional and friendly
warranties and insurance claims.
SA Taxi Auto Parts provides quality OEM and after market
parts for use in SA Taxi Auto Repairs and the minibus industry. 22Offering and business model
Vertically integrated business model
SA Taxi was initially established as a finance provider but has subsequently vertically integrated across the financial services and vehicle value chain.
Each business element complements the other and has been key to SA Taxi’s success and the empowerment of minibus taxi owners and their
businesses. The integrated business model can be illustrated as follows:
Enabling SMEs Servicing SMEs Managing returns from SMEs
Equity
Logistics and
Allocation and Insurance Collections
FINANCIAL Recoveries
Debt Raising
SERVICES
Conservatively geared with Bespoke taxi insurance for Call centre collecting Management of fleet and
diversified funders financed and non financed ~R310m per month performance
Credit customers
Underwriting
and Loan
Origination
Repairs and
Vehicle Supply Niche credit philosophy
Maintenance Refurbishment Parts and Salvage
and Retail
VEHICLES Services
Dedicated taxi dealership & Enhancing a market for ~20 000m² refurbishment Sell over 500 unique vehicle
relationships with affiliated & quality pre-owned vehicles facility for panel and parts
non-affiliated dealers for new mechanical refurbishments
& pre-owned vehicle sales
PROPRIETARY DATA
Used throughout the value chain providing critical insight for business decisions
CLIENT SERVICE
23Offering and business model
Vertically integrated business model
Finance SA Taxi Protect SA Taxi Direct
SA Taxi Auto Repairs SA Taxi Auto Parts Proprietary telematics data
24Offering and business model
Finance is core to SA Taxi’s offering
SA Taxi enters into a credit agreement with each of the taxi owners. These credit agreements are governed by the National Credit Act (NCA). SA Taxi
is a registered developmental credit provider in terms of the NCA. Under the NCA, SA Taxi is able to charge interest rates of up to the repo rate plus
27% (currently equating to 33.75%). SA Taxi remains well within the maximum.
The standardised agreement is an end-to-end offering which also includes insurance, telematics as well as a rewards programme.
The underwriting process utilises SA Taxi’s bespoke scorecard that has been developed through historic credit experience which enables SA Taxi to
correctly underwrite an underserved taxi owner. As at 31 March 2019 SA Taxi held a book of 25 262 unique clients operating 31 543 vehicles which
results in approximately 1.2 minibus taxis per client.
Average credit agreement Average monthly instalment Approval Rates
Recommended retail price Finance instalment¹ R11 750
(incl VAT) R 444 200
(Toyota diesel) Insurance instalment
(Comprehensive, credit life and R2 100
Average interest charged on
35% - 45%
23.7% other)
origination
Telematics fee (incl VAT) R 300
Typical term in months 72 Average
approval rate
Administration fee (incl VAT)
Origination fee (incl VAT) R69
R2 990 (Regulated by NCR)
(Regulated by NCR)
Total monthly instalment R14 219
SOURCE | Transaction Capital Half Year Results March 2019 | The credit agreement terms and the resulting monthly instalment is based on the average of the existing book | Note 1 This 25
instalment is after the average deposit received.Offering and business model
SA Taxi’s credit philosophy
SA Taxi’s identity To ensure safe lending practises and maintain manageable risk exposure, SA Taxi has developed its own
innovative niche specific credit philosophy and strategy. This approach is built on the proprietary data and
industry knowledge amassed over the years, enabling SA Taxi to differentiate between the perceived and actual
SA Taxi is a vertically risk within the minibus taxi industry. This niche specific risk assessment evaluates each minibus taxi owner as a
integrated minibus taxi small business and not solely the individual’s credit score.
platform utilising specialist
capabilities, enriched
proprietary data and SA Taxi has established an innovative and efficient credit origination and management platform
that is able to assess, originate and manage risks which is continuously improved by incorporating
technology to provide identified trends and insights resulting in enhanced origination and management.
developmental finance,
insurance and other services to
empower SMEs and create Furthermore SA Taxi’s credit philosophy foundation is appropriate governance that ensures the risk appetite is
shared value opportunities thus followed and that all credit decisions are informed. SA Taxi carefully considers the long term impact as well as the
enabling the sustainability of short term when modifications are made to originations – this thinking is embedded in the credit team and
systems through a thorough understanding of the book and continuous stress testing of possible scenarios.
the minibus taxi industry
SA Taxi’s
Niche specific riskcredit philosophy
assessment of loans originated
SA Taxi seeks to provide
lending within a
defensive niche industry
A Niche Industry A credible In a suitable On a profitable Managed by a credible
Operator Vehicle Route Association
Adherence to set risk appetite and risk strategy through appropriate governance
Assurance through independent audit, monitoring specific risk metrics and effective corporate governance frameworks
Informed decisions through consistent analysis of the book and originations
Regular stress testing and evaluation of the book and origination in both the short and long term, embedding scenario based thinking
Managed by a sustainable credit origination and management platform
Managing the team and systems that deliver repetitive excellence at high volumes by mastering their required competencies
26Offering and business model
Understanding operators’ affordability
Comparative modes of transport
Short distance route | SOWETO TO JOHANNESBURG: 23KM
Taxi Train Bus BRT Uber
Station and Scheduled Scheduled
Accessibility On route E-hail
scheduled stops stops
Affordability
R14.00 R9.50 R14.80 R13.50 ~R260
2017
Increase 14% 0% 20% 11% 8%
Affordability
R16.00 R9.50 R17.80 R15.00 ~R280
2018
Every Volume of
1
10 to 20 Only 2 buses <
association
Reliability minutes operating peak On demand
with ~1500
Stops at on the route capacity
operators
7pm required
Efficiency
AVERAGE OPERATOR
PROFITABILITY
~R20 000 PER MONTH
(based on SA Taxi’s Affordability Calculator
at origination)
SOURCE | Industry information | Websites: Metrorail; Bus Rapid Transport; Various bus companies 27Offering and business model
Premium vehicles financed given their retention of value
SA Taxi’s current financed minibus vehicles Recommended retail prices for popular models (excluding extras)
per brand as at 31 March 2019
Toyota Ses’fikile
R444 200
92% 2% This price reflects the recommended retail price for a new diesel unit incl VAT
Toyota Nissan Nissan NV350 Impendulo
R411 900
5% 1%
This price reflects the recommended retail price for a new petrol unit incl VAT
Mercedes Sprinter 515 Panel
Mercedes Benz Other*
R761 176
*This is predominantly made up of entry level This price reflects the retail price for a Mercedes Sprinter 515 Panel van that has been
converted into a taxi.
brands financed pre-2013
28Offering and business model
Profile of SA Taxi’s customer
Demographics
100% 23% 21% 47years
Black owned Women owned Under the age of Average age of
SMEs SMEs 35 years owner
Vehicles on book
1.2 91% 4.1years >85%
Vehicles per Toyota minibus Average age of Insured with SA
customer vehicles vehicle Taxi Protect
Managed by a sustainable credit origination and management platform
Financial highlights 31 March 2019
71 month >R 6 000 12% 39% 23.7% ~600 48 months
Minimum Average Weighted average Average Weighted average
Average loan term Average
monthly profit approval rate interest rate at empirica score remaining term
at origination deposit
origination
29Offering and business model
SA Taxi Direct
SA Taxi established their own direct dealership in 2015,
SA Taxi Direct, which sells both new and pre-owned
premium minibus taxis. Due to strong relationships with
Toyota, This channel offers SA Taxi greater returns on
the entire vehicle deal and provides a profitable and
reliable marketplace for sale of refurbished vehicles due
to the following factors:
• Margin off sale: SA Taxi is able to realise a margin on
the sale as the transaction occurs on their own
dealership and the pre-owned vehicles have been
through SA Taxi Auto Repairs
• Better credit risk screening: Since SA Taxi has greater
control and line of sight of the interaction that occurs at
the point of sale, it is able to ask the required
questions to achieve a better credit risk screening
In October 2018 SA Taxi Direct opened a second
dealership in Polokwane to expand its footprint.
6-9% ~R490 m
Margin on
Total sales value
vehicles sold
30Offering and business model
Distribution channels
SA Taxi’s head office, located in Midrand Johannesburg, acts as the centralised administration centre for all distribution channels. A secondary
office has been established in Durban in order to sufficiently service the large minibus taxi market within that metropolitan area. Origination
processes and decisions such as credit evaluations are all undertaken at the head office and then fed down to each respective distribution channel,
this centralised network allows for greater efficiencies and enables scale as SA Taxi continues to expand its footprint. Three key distribution
channels are utilised which are SA Taxi's own direct channel, badged affiliated dealers and non-affiliated dealers.
SA Taxi Direct Affiliated dealers Non-affiliated dealers
SA Taxi’s direct sales channel targets The affiliate channel consists of Toyota, The non-affiliated market channel is
customers through two approaches. The Nissan and Mercedes franchised comprised of independent dealers that
first is telephonically - a team of FAIS- dealerships. The majority of these stock the full range of taxi vehicles,
accredited tele-sales agents use SA Taxi’s dealerships belong to well-known dealer including entry level vehicles.
existing customer base as a growth groups such as McCarthy, Imperial and
engine. This approach targets performing Halfway, and each of the dealerships SA Taxi has established and continues to
customers to whom SA Taxi would like to focus on one specific vehicle foster relationships with the non-affiliated
extend additional vehicles, thus growing manufacturer. These dealerships receive dealer channel.
the SME. vehicles directly from the relevant vehicle
manufacturer with their allocation of
The second approach is through SA Taxi vehicles being based on their historical
Direct, SA Taxi’s two dealerships based in sales. This channel is only for new
Midrand and Polokwane in which potential vehicles. Over the years SA Taxi has
customers can come view and apply for strengthened relationships with the dealer
new or pre-owned minibus taxis. These groups and dealerships and the affiliate
channels are the most profitable. channel is now the most prevalent.
Distribution channels
2 120 23
Direct Affiliated dealers Non-affiliated
dealers
SOURCE | SA Taxi internal and market data as of the 31 March 2019 31Offering and business model
SA Taxi Protect
SA Taxi Protect has a business relationship with
Guardrisk to provide the insurance that SA Taxi
requires for each vehicle it finances. Each minibus
taxi financed by SA Taxi is fully insured, with minibus
taxi owners choosing to insure with SA Taxi Protect or
with other reputable insurers.
SA Taxi Protect is responsible for designing and
distributing the insurance product, collecting
premiums as well as managing claims including parts
procurement and refurbishment.
SA Taxi Protect has designed bespoke policies
to meet minibus taxi owners’ specific needs and
includes comprehensive vehicle cover including
passenger liability as well as business
interruption cover.
Additionally SA Taxi offers business relevant
insurance such as Credit Life. Furthermore, the credit
agreement enables SA Taxi to pay the premiums on
behalf of each client to mitigate the risk of non-cover.
2 R401m
Number of
Gross written
products per client
premium
32Offering and business model
SA Taxi Protect’s insurance offering
SA Taxi Protect, a subsidiary of the SA Taxi group that offers bespoke products tailored for the minibus taxi industry. This entity insures a majority of
SA Taxi’s client base making this a core offering for the SA Taxi group. These insurance products are also offered to non-financed taxi operators.
Additional optional benefits
Khusela Taxi Business Insurance Deposit Sure
This insurance policy is offered to taxi operators with a financing This policy pays the taxi operator an amount equal to the
agreement with SA Taxi. This policy includes: deposit they paid in respect of their taxi if their taxi is
• Comprehensive motor vehicle cover subsequently stolen or written off.
o Accident damage
o Windscreen damage
Zero Excess
o Theft This policy is taken up by taxi operators looking to manage their
o Hi-jacking cash flow. In the event of an accident they are not required to
o Write-offs pay any excess.
o Fire Personal Accident
• Instalment protection Pays out an amount to the insured if the insured, the driver of
If the insured taxi is damaged in an accident and is not the taxi or a passenger in the taxi dies or becomes permanently
ready for collection within 7 days of the claim being disabled as a result of a motor vehicle accident
authorised, Khusela Taxi Business Insurance pays up to
100% of the customers next instalment to the credit
provider Complimentary benefits
• Third party, passenger and riot and strike cover • 24 Hour Accident Assist Towing
• Credit Top Up • New Taxi Substitution within 6 months for financed
This product includes, inter alia, absconsion and violation clients
cover which covers the credit provider if the insured • Roadcover
violates the terms and conditions of the insurance policy.
Khusela Taxi Insurance
This insurance policy is offered to taxi operators not financed with SA Taxi.
This policy includes:
• Comprehensive motor vehicle cover
Khusela Credit Life • Third party, passenger and riot and strike cover
This insurance policy is offered to all taxi operators with a financing • The option to take-up, Business Protect*, Deposit Protect, Zero
agreement with SA Taxi. All taxi operators financed with SA Taxi are Excess and Credit Top up.
*Business Protect
required to take out credit life insurance. This policy includes:
• Death pay-out This policy covers business interruptions that may be caused due to repairs. This
policy pays out R400 a day for up to 20 days while the taxi is being repaired or
• Permanent disability pay-out R600 a day for up to 20 days which the vehicle is being repaired.
• Temporary disability pay-out
33Offering and business model
SA Taxi Auto Repairs
SA Taxi Auto Repairs (originally know as Taximart), is a
subsidiary of SA Taxi, which was created in 2009 for
insurance claim repairs and the refurbishment of
repossessed minibus taxis in the secondary market to
improve SA Taxi’s recoveries. SA Taxi Auto Repairs’
services include a range of panel, mechanical and
maintenance services that ensure that the taxi owners’
vehicles are repaired timeously and are back on the road
as soon as possible.
Mechanical and Warranties
The mechanical department was established in
Midrand is 2013. It refurbishes over 200 cars per
month, often rebuilding all mechanical parts of a
vehicle.
Autobody
The panel workshop was opened at the beginning
of 2016. It is a state-of-the-art auto body
production centre which allows the business to
rebuild vehicles from the chassis up.
34 34Offering and business model
Mechanical & warranties
The mechanical facility boasts 42 lifts and currently employs
over 60 employees. SA Taxi Auto Repairs mechanical
department has the ability to rebuild over 200 vehicles per
month.
Given the focus on a specific type of vehicle, there have
been numerous and very exciting innovations received from
SA Taxi Auto Repairs which has resulted in greater efficiency
and safety as well as savings in time, labour and costs. SA
Taxi has not only assisted the mechanic in patenting their
innovation but has also paid out over R1m in innovation
incentives.
SA Taxi offers a warranty on all pre-owned vehicles sold.
This warranty is the lesser of 60 000km or 1 year.
42 385
Number of lifts SA Taxi Auto Repairs
staff
35
35Offering and business model
Autobody
In February 2016, the refurbishment capability of SA Taxi
Auto Repairs was augmented through the establishment of
a state-of-the-art auto body rebuild centre which now
allows the business to execute panel rebuilds internally.
The rebuild centre is a dedicated taxi rebuilding centre in
Africa (with a floor area of approximately 20 000 sqm).
The repair facility boasts:
• 130 work stations
• 7 spray booths
20 000m2 220
Internal refurbishment
Workshop facilities capacity per month
36 36Offering and business model
SA Taxi Auto Parts
SA Taxi Auto Parts, the parts and salvage operation, allows
SA Taxi to participate in the minibus taxi parts supply chain.
SA Taxi Auto Parts procures a substantial number of taxi
parts in South Africa. It is therefore critical to the
optimisation strategy to procure and distribute parts as
efficiently as possible to SA Taxi’s own repair centre as well
as its network of preferred panel beaters. To enable this,
SA Taxi has established its own parts procurement
operation. The savings will be a direct result of:
• The importing of quality aftermarket parts (fixed right first
time)
• Sourcing parts at scale (economies of scale)
• Distribution of parts to external panel beaters (managing
cost of repair)
In addition, SA Taxi has extended its business model into
salvage. By entering into this market, the business is able to
optimise the salvage value of a vehicle. SA Taxi realises a
higher recovery value, which benefits both SA Taxi and the
operator by managing the cost of claims. This has a positive
effect on insurance premiums. This will be achieved by:
• Selling salvage parts to the taxi industry retail, thereby
enabling greater value realisation from insurance write-
offs and repossessed vehicles (that are deemed unviable
for refurbishment).
• Consistent supply of quality second hand OEM parts for
SA Taxi Auto Repairs at a reduced price
>500 7 500m2
Unique parts sold Workshop facilities
37Offering and business model
Data & solutions
Through its strong competency in telematics, volume of
customers and its longstanding experience in the industry SA
Taxi accumulates rich proprietary data throughout the value
chain. This enables the company to accurately assess the actual
risk of potential customers. Due to the informal nature of the
industry there is a high degree of perceived risk and data
analytics are therefore a competitive advantage in truly
understanding the customer, the operating environment and the
credit and insurance risk.
Each vehicle is fitted with a tracking device which not only
provides information on mileage and location but also provides
insights on the following aspects in the value chain:
Origination
Data collected is fed into the credit vetting process
allowing SA Taxi to better understand credit risk and
route profitability
Collections
Data is used to obtain an understanding of the how the
minibus taxi is operating before collection action is take.
This background informs how collection agents interact
with the taxi owner.
Insurance
Historical data is used to bolster the accuracy in pricing
a taxi owner’s insurance risk as well as to identify when
there is a lack of movement which could indicate an
insurance claim.
Repossessions
Live location data along with a driver’s historical data
are utilised in aiding the repossession process
Service offering to the client
Data is provided to the taxi owner, enabling them to gain
a greater understanding of their business operations
and further empowering them as business owners
38Offering and business model
Proprietary data provides critical insight for decisions
Examples of telematics data collected
ASSOCIATIONS
Memberships
VEHICLE Permits
Kms driven Routes
Route Profitability
Trips
Health of vehicle
DRIVER
Trips
Projected income
Fuel spend
Maintenance
LANDMARKS TRIP
Stops
Fare
Commuter density
Km
Road conditions
No per day
Working days and hours
Uses throughout the SA Taxi value chain
Vehicle supply and sales Insurance Offering to taxi owners Parts
Originations Media Recoveries Collections
>4 m 4.7 bn
Kilometers driven and Data points collected
tracked every day every year
39Offering and business model
SA Taxi transactions
Management has established that there are multiple commercial opportunities which the business can leverage off through all its verticals. The
following provide a platform for the operator and driver to earn additional income to support sustainability of their SME and the industry.
• Fuel programme launched in April 2018
• Engagement between SA Taxi, the industry and Shell
• Cash back and airtime awarded based on fuel spend
• Enhances instalment affordability
> 14 000 cards distributed
> 40% in active use
> 5.4 million litres of fuel purchased
• Credit life and Road Cover products launched in FY18
250 000 • Highly competitive and affordable
minibus taxi Cash • Launch of new products planned
› Roadside assist
operators • Broadened client base (financed by SA Taxi and open market clients)
> 100 broker network
> 31 000 insurance clients
~2 products per client
• Retailing R3m per month
• Supplying affordable, quality refurbished and new parts
› Reduces maintenance costs
• Reduced cost of claims to manage insurance premiums
4004 SA Taxi’s competitive advantage
41Competitive advantage
SA Taxi’s competitive advantage
SA Taxi has created a robust business model through vertical integration, risk mitigation, focus, specialisation and innovation. A comprehensive
vertical investment into the value chain is required in order to be able to manage the highly specific risks posed by the minibus taxi industry.
SA Taxi’s competitive advantage can thus be summarised as follows:
… Maximising value SA Taxi has developed deep specialisation and competence
through vertical integration throughout the financial services value chain as well as the vehicle
in multiple value chains value chain, optimising margin throughout.
… Extending the life Through significant investments in refurbishments and panel
of the financed asset facilities, SA Taxi is able to extend the life of the income
through refurbishment and generating financed asset through repossession, refurbishment
repairs and resale, mitigating risk.
… Underpinning the
SA Taxi has underpinned the financed by participating in the
financed asset through a
second hand market through supplying and creating demand for
liquid second hand market
has created competitive which retains value
quality refurbished vehicles.
advantage in the minibus taxi
industry through …
… Achieving efficiencies SA Taxi has gained significant scale in a market distinguished by
through scale in limited limited vehicle types - resulting in innovation and efficiencies
vehicle types throughout the asset value chain.
SA Taxi is able to profitably price credit and insurance risk by
… Assessing risks
augmenting deep market insight gained through years of
accurately
experience, proprietary telematics data (both industry and
based on proprietary data
granular route insight) and strong stakeholder relationships.
4205 SA Taxi’s impact
43SA Taxi’s impact
SA Taxi is positioned to make a positive impact
As the primary form of public transport in South Africa, the minibus taxi industry has a significant impact on the environment, society and the economy.
SA Taxi’s unique market position enhances its ability to have a meaningful impact through inclusive economic growth and responsible environmental
initiatives.
Financial SME Sustainable Public transport Environmental
inclusion empowerment job creation infrastructure sustainability
The minibus taxi industry is Minibus taxis are an integral Since inception, SA Taxi has Each minibus taxi financed SA Taxi is aware of its carbon
almost exclusively comprised part of the South African facilitated the creation of over by SA Taxi has a ripple effect footprint and has initiatives to
of black individuals who are public transport infrastructure 76 000 black-owned SMEs for job creation. Minibus taxi minimise its impact. It enables
underserved by traditional and in addition serve as through providing access to businesses create direct the replacement of aged
credit providers. feeders into the rail and bus financing an income employment for drivers and vehicles with reduced
system. generating asset, a minibus conductors whilst providing a emission vehicles as well as
SA Taxi fills a critical funding taxi. SA Taxi’s livelihood for the taxi owner. extending the useful life of
gap, providing credit to Currently SA Taxi finances comprehensive offering vehicles through
entrepreneurs who may not approximately 31 000 supports a variety of taxi Indirectly, minibus taxi nodes refurbishment.
have been afforded the minibus taxis in an estimated owners’ business needs. create a central marketplace
opportunity. market of 250 000 of goods and services where SA Taxi also aims to offset its
representing a significant SA Taxi further provides informal businesses including carbon footprint through
contribution to not only the limited small business retail, food and car washers reforestation, community
industry but also to public training, financial thrive. Further jobs are greening and other carbon
transport. management courses and created due to the need for offset initiatives, responsible
self help tools to SME ancillary services such as disposal of waste and
owners. mechanics. ensuring efficient energy
usage in facilities.
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