SA taxi financier eyes Europe

Financial services group Transaction Capital, which finances the taxi industry, is targeting growth opportunities in the European debt-collection market as part of its international expansion.

Financial services group Transaction Capital, which finances the taxi industry, is targeting growth opportunities in the European debt-collection market as part of its international expansion, says CEO David Hurwitz.

The expansion into international markets will mitigate the company’s overexposure to a single geographic market. The SA market remains weak, with relatively high ratios of household debt to disposable income and high unemployment.

Transaction’s businesses include Transaction Capital Risk Services, a debt-collection service. It established a new entity called TC Global Finance (TCGF) in 2019 to pursue debt-management opportunities in selected international markets.

“The fragmented European specialised credit market, which is many times larger than the SA and Australian markets, presents attractive growth opportunities,” Hurwitz said.

In the statement ahead of the company’s annual general meeting on Wednesday, Hurwitz said TCGF is targeting niche, higher-yielding assets. “To date, we have deployed €10.7m [R194m] in TCGF, up from €1.4m at 30 September 2019,” he said.

In a circular on TCGF’s establishment, published in August 2019, Transaction Capital said it already had the infrastructure to identify and assess investment opportunities in Europe. “The network of relationships with highly skilled expertise allows Transaction Capital to accelerate its entry into this market,” the company said in the circular.

The European distresseddebt market could deliver double-digit euro-denominated returns, providing an attractive rand hedge, Transaction said.

Hurwitz flagged unfavourable conditions in SA.

“Economic growth is weak and retrenchments are exacerbating already critically high unemployment. With low wage growth, rising costs of household essentials and high household debt, consumer and business confidence is low. Accelerated structural reform of the economy and of the electricity supply sector is required for any meaningful improvement in economic growth over the medium term,” he said.

Economic conditions in SA favour the acquisition of nonperforming loans, which are loans that are either in default or close to default, from risk-averse clients, said Hurwitz.

Unsecured consumer loans make up the largest portion of the Australian collections market, “an asset class in which [subsidiary] Transaction Capital Risk Services [TCRS] has almost 20 years’ experience in SA”.

In the first quarter of 2020, TCRS will be cautious in its growth in the Australian collections market, Hurwitz said.

“The division plans to accelerate the acquisition of [nonperforming loans] portfolios, underpinned by its growing Australian database and analytics and pricing expertise.”

Commenting on SA Taxi,, Transaction Capital’s minibus finance and insurance business, Hurwitz said the minibus taxi industry is under strain from macroeconomic factors such as high vehicle and fuel prices.

“Despite strong demand, the industry has been mindful of the economic hardship faced by commuters and fare increases were kept moderate in 2019, with increases expected this year,” he said.

Transaction Capital is one of the JSE’s better-performing stocks. In the past five years, the company gained 124.78% while the JSE’s financial index and all share were down 33.25% and 5.84% respectively.

Transaction Capital’s share price was up 5.04% on Tuesday.