Transaction Capital Struggles with Financing Minibus Taxis Amid Economic Woes and Rising Fuel Prices

Transaction Capital

Johannesburg – Transaction Capital Ltd., a financial services provider that finances minibus taxis, is facing challenging times in South Africa due to rocketing fuel prices and a stagnant economy. The company’s shares, valued at over R21 billion at the market’s opening, fell sharply to R16.83 by 11:00, hitting levels last seen in late 2020. The news has left investors and shareholders feeling uncertain about the future prospects of the company, especially given the challenging economic climate in South Africa, including rocketing fuel prices and a stagnant economy.

Transaction Capital woes

Transaction Capital’s difficulties in financing minibus taxis, which are an essential part of the transportation system for millions of South Africans, have put the company under intense pressure. Rising costs, flooding at the manufacturer’s site, increasing fuel prices, and lower commuter volumes have all contributed to the company’s financial woes.

Transaction Capital has responded to these challenges by reorganizing management at SA Taxi, its financing arm, and simplifying the business model while reducing the cost base. The company has also decided to switch to higher quality credit risk loan origination and plans to sell its auto refurbishment and repairs business and related assets to a strategic partner.

Despite the company’s current struggles, it remains committed to finding solutions to support the minibus taxi industry in South Africa. Transaction Capital’s largest shareholder is the Public Investment Corp., followed by Coronation Fund Managers Ltd., and Rand Merchant Bank is its debt sponsor. The company’s funders include over 20 debt investors, ranging from development finance institutions to banks, impact funders, institutional investors, fixed income funds, and asset managers.

As Transaction Capital navigates through these challenging times, it remains to be seen whether the company can bounce back and regain investor confidence. The future of the company will depend on how effectively it can adapt to the changing economic landscape and manage the risks associated with financing the minibus taxi industry in South Africa.

Transaction Capital and Taxi Industry Challenges

The minibus taxi industry in South Africa is facing several headwinds, including increasing costs, rising interest rates, fuel costs, lower commuter volumes, and the inability of fleet owners to increase fares for cash-strapped commuters. Furthermore, power blackouts in South Africa are slowing traffic, reducing the number of trips drivers can make.

Transaction Capital has increased its bad debt provisions for SA Taxi by more than 1.8 billion rand, while writing down the value of repossessed vehicle stock by 150 million rand. This is a bad time to be talking about bad loans, as investors are already spooked following the failure of Silicon Valley Bank and Signature Bank in the US, sending shock waves through lenders across the globe.

Transaction Capital Plan

Despite the challenges, the Johannesburg-based company has bonds or loans maturing only in 2025, according to data compiled by Bloomberg. The minibus taxi industry in South Africa is still an important sector, and about 250,000 taxis travel the country’s roads, providing affordable and reliable public transport to millions of people every day.

In response to the challenges, Transaction Capital is reorganizing management at SA Taxi. It is simplifying the business model and reducing the cost base while switching to higher quality credit risk loan origination. SA Taxi is also planning to sell its auto refurbishment and repairs business and related assets to a strategic partner. Transaction Capital’s largest shareholder is the Public Investment Corp., followed by Coronation Fund Managers Ltd.

Despite the difficult economic environment, Transaction Capital remains committed to managing the challenges and finding solutions to help the minibus taxi industry in South Africa.

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