JOHANNESBURG – SA Taxi, the asset-backed lender in the Transaction Capital stable, believes all is not lost for the metered taxi industry. By consolidating and formalising the industry, it wants to become the dominant player in the market.
“The metered taxi industry has not changed the way it operates for decades, and has been weakened by the lack of a national brand with standardised vehicles, pricing levels and service levels,” says David Hurwitz, Transaction Capital group chief executive.
Yet despite the onslaught of Uber, and with no app at all, there are 17 000 profitable metered taxis on South African roads, he notes.
Having spent roughly R6 million in the last four months on acquiring three small metered taxi businesses – including their fleets of drivers and call centre infrastructure – SA Taxi’s Zebra Cabs has a fleet of 100 Toyota Corollas operating in Gauteng.
The plan is to expand into the Western Cape and then KwaZulu-Natal so that by 2020 Zebra Cabs has 3 000 metered taxis in its portfolio.
Zebra Cabs offers drivers and commuters multiple booking options, including via its own Zebra Cabs app, Uber, call centre channels or the traditional ‘hail’ method at areas such as airports and Gautrain stations.
Different billing options are available too, including via the app, a credit card payment on a Point of Sale device in the vehicle or a cash payment.
SA Taxi hopes to professionalise the metered taxi industry by encouraging drivers to work towards owning a vehicle and then training driver-owners to run small businesses.
Zebra Cabs will seek a Sector Education and Training Authority (SETA) accreditation for its driver academy.
If a metered taxi operator doesn’t qualify for conventional vehicle finance, they have the option of a six-month incubation period, where they can accumulate the required capital by saving a portion of their monthly revenue to make a down payment.
Interest rates on these vehicle finance loans will be similar to those charged in the minibus taxi industry, Hurwitz says, ranging from 18% to 26% a year.
SA Taxi does not claim a portion of revenue from Zebra Cabs drivers and earns its revenue off profits on the financing and insurance provided to these vehicles, as well as via a standard service fee, Hurwitz explains.
Zebra Cabs are more expensive than Uber for the commuter.
“We believe it’s better to charge more, for the sustainability of the taxi business. It’s very difficult for taxi operators to sustain themselves on the pricing that Uber is set at,” he argues, noting that, after deductions to Uber, the taxi owner is paid about R4.50 per active kilometre.
With a new auto body repair facility to service its existing minibus taxi fleet, SA Taxi will be able to service Zebra Cabs vehicles “cheaper and quicker than anybody else”, Hurwitz adds.
For the six months to March, SA Taxi’s gross loans and advances grew 12% to R6.7 billion, comprising 25 591 vehicles or roughly one third of financed minibus taxis in South Africa.
SA Taxi opened a dedicated minibus taxi vehicle dealership over the period, which it anticipates will sell, finance and insure roughly 2 000 vehicles.
“This dealership is considered to be one of the largest dedicated minibus taxi dealerships in the country selling new and pre-owned Toyota minibuses, Nissan minibuses, Toyota bakkies and the bespoke Toyota Corolla metered taxi vehicles,” the group said.
SA Taxi increased headline earnings attributable to the group by 23% to R118 million for the period under review.
Transaction Capital reported headline earnings growth of 19% to R210 million for the six-month period, with improvements in its credit loss ratio and non-performing loan ratio. Non-interest revenue climbed 7% to R611 million, driven by growth in SA Taxi’s direct vehicle sales.
Keith Mclachlan, fund manager at Alpha Wealth, said that the credit metrics of Transaction Capital’s book were largely improving, despite the macro issues in South Africa. “Management continue to cleverly deploy capital and generate growth,” he said.
The group’s share price gave up 3.17% on Tuesday to close at R11 a share.