SIKI MGABADELI: Transaction Capital has reported that headline earnings from continuing operations grew by 19% from R330m to R393m. Net interest income up by 13%, driven by a 10% growth in gross loans and advances. Chatting to us now is David Hurwitz, who is CEO of Transaction Capital.
David, thanks for your time this evening. A solid performance there. What’s been your major driver, then?
DAVID HURWITZ: Yes, we are very happy with the performance, growing headline earnings by about 20%. In both of our divisions we have a taxi-finance division and a risk services division, and both of those division performed particularly well, one growing earnings by about 20% and the other growing earnings in the high teens. So both of our divisions actually performed pretty much in line with expectation and pretty similar to each other.
SIKI MGABADELI: Let’s talk about taxi finance then. A lot still to come for your SA taxi division. I see you are entering the metered taxi market. Tell us about that.
DAVID HURWITZ: Yes. Historically we had already serviced what we call the fixed routes or minibus taxi market, which accounts for about 70% of our public transport trips. In order to do this you need to have a skill set. You have to procure vehicles, you have to have financing skills, you have to have insurance skills and you have to be able to repossess and refurbish and then resell these vehicles.
So what we’ve realised is that the skill set that we have in the fixed-route minibus taxi industry we could actually apply to the metered-taxi industry. In South Africa there are about 20 000 metered taxis. We believe that Uber is changing the way people think about taxis. There really is a cab…If you go to New York or London people are used to travelling around in cabs, and in South Africa that hasn’t been the case up until recently. We think with Uber coming into this market it will really create a fantastic opportunity (a) for this market to grow and (b) for us to finance operators to buy and start taxi businesses.
SIKI MGABADELI: So how will it work then? Will you own the vehicles, will you sell them to them? How are you structuring it?
DAVID HURWITZ: Well, we have two models. First of all what we’ll do is aligned with our close relationship with Toyota South Africa. We will buy Toyota Corollas, we will modify them to be bespoke taxi vehicles, with leather seating, blue tooth billing systems, on-board cameras, etc. And then we’ll have two models.
On the one hand, if you are an experienced taxi operator with a track record and with the ability to pay down a deposit, then we will provide you with finance and insurance immediately.
If you are a new entrant to the market – and there are many new entrants into this market – then what we will do is we’ll sign a short-term six-month contract with that operator, where he will drive one of our vehicles that we will own. And if after six months he has shown that he has a good track record and the ability to put down a deposit, then we will let him buy the vehicle and we’ll obviously provide him the finance and insurance in order for him to do so.
SIKI MGABADELI: So far as a business how many taxi owners would you say you’ve assisted with SA taxi?
DAVID HURWITZ: Well gosh, SA Taxi – this year alone we put 6 000 new taxi vehicles on the road. We currently have about 25 000 taxi vehicles which we have financed, which are currently on our books. And over the years we must have, I would estimate, put at least 40 to 45 thousand new taxis on the road. So a huge driver of our business is to take older minibus taxis off the road and replace them with newer, safe and more reliable taxis.
And of course the metered taxi business has a similar environment because, when you looked at most metered cabs prior to the introduction of Uber, those metered cabs are really old Mercedes Benzes and old Toyota Camrys that really needed to be off the road and replaced with newer vehicles.
SIKI MGABADELI: And it’s a market that is quite steady, because people have to get to work.
DAVID HURWITZ: Well, certainly in the minibus taxi industry. So the minibus taxi industry accounts for 68% of all trips to the workplace. And while the South African consumer is under huge financial pressure, as you say, his spend on travelling to work and back is non-discretionary. They have to go.
SIKI MGABADELI: Thanks to David Hurwitz.