The South African National Taxi Council (SANTACO) has acquired a 25% stake in SA Taxi, a major subsidiary of Transaction Capital.
The deal is valued at R1.7 billion.
SANTACO is a national body which represents the interests of its members who are individual minibus taxi operators.
SA Taxi delivers tangible commercial benefits to taxi operators beyond relevant and affordable finance and insurance products.
SA Taxi and SANTACO have engaged over several years to formalise the industry’s participation in revenue streams of the minibus taxi industry value chain and to achieve meaningful and sustainable commercial benefits for industry participants.
The proportional ownership structure, allocated to SANTACO and a trust representing broad-based provincial structures, will ensure that ownership and associated economic benefits of this investment accrue to all levels. 90% of future dividend flows will be applied towards reducing debt, with a 10% trickle flowing from the outset and allocated and administered according to a predetermined charter.
This dividend income will support relevant infrastructure and other developmental projects designed to create sustainable value for minibus taxi associations, operators, commuters and other stakeholders.
Partnerships with local government will be sought to leverage this investment in infrastructure for greater socio-economic impact.
Of the R1.7 billion purchase price, about R1.2 billion will be funded jointly by Standard Bank and Futuregrowth Asset Management, with the remainder facilitated by SA Taxi in the form of vendor funding.
SA Taxi will use about R1 billion of the net proceeds of R1.2 billion to settle interest bearing external and shareholder debt, with the remainder retained by SA Taxi to fund growth.
In the medium-term, SA Taxi will continue to grow earnings organically at rates similar to prior years.
However, the financial benefit of the transaction and the operational benefits of a stronger enhanced relationship with SANTACO is significantly accretive to SA Taxi’s earnings and expected to support higher growth rates over the medium term.
“We are immensely proud of this transaction which is the culmination of several years of engagement with SA Taxi to formalise our participation in the revenue streams of the minibus taxi industry’s value chain,” said Philip Taaibosch, president of SANTACO.
“The proportional ownership structure will ensure that the economic benefits of this investment flow through to all broad-based provincial structures of SANTACO via a trust which will receive dividends from SA Taxi.”
The transaction remains subject to certain conditions and approvals.
South Africa’s taxi industry has, for many decades, been a core pillar of the South African economy and is responsible for connecting millions of South Africans to various centres of the economy every day.
However, due to the historical and political realities that shaped the formation of the sector, the industry has often lacked meaningful partnership opportunities with other industry participants or financial institution.
“At the core of our business model is a commitment to support an entirely black-owned industry, comprised solely of SMEs, which has developed without government subsidy into the most critical component of the South African integrated public transport system,” said David Hurwitz, CEO of Transaction Capital.
“This transaction provides broad-based participation and a framework for wide-reaching initiatives that will grow and support the sustainability of the minibus taxi industry at every level into the future,”
Since 2008, SA Taxi has provided loans of more than R21.9 billion to taxi operators, supporting the creation of an estimated 72 423 small SMEs resulting in more than 130 000 direct and more than 215 000 indirect jobs created. Of the 7 734 SMEs created by SA Taxi in 2018, 100% are black-owned, 23% are women-owned and 23% of these SME operators at the date of origination, are under the age of 35, all contributing to SME empowerment