SA Taxi, which is owned by JSE-listed Transaction Capital, is vertically integrated into the minibus taxi industry. The South African National Taxi Council (SANTACO), which is a national body which represents the interests of its members who are individual minibus taxi operators, owns 25% of SA Taxi.
Gibela Magazine has lifted Q&A with Terry Kier, SA Taxi CEO from Transaction Capital’s annual report, which was published today.
How did COVID-19 affect SA Taxi and how it recovered?
SA Taxi performed well until mid-March, despite disruptions experienced earlier in the year. Industrial action at the Toyota plant dampened vehicle supply and, as a result, the origination of new loans and insurance policies. Nonetheless, we were on track to grow earnings in line with past years. This changed when the national lockdown was declared on 27 March 2020. SA Taxi Direct, other external dealerships, SA Taxi Auto Repairs and
SA Taxi Auto Parts had to close, which stopped all loan originations, refurbishments and parts sales during April and May 2020. The Toyota plant was also closed, putting further strain on the supply of minibus taxis to the market.
However, we quickly put in place measures to soften the impact on our clients and on us, and both the industry and SA Taxi proved to be remarkably resilient in extraordinary circumstances. As things stand, our core business is performing well. Loan origination levels in SA Taxi Finance remain healthy, and collections on our financed book are recovering within expectation, reaching around 85% of pre-COVID-19 levels in September 2020. Demand for minibus taxis remains strong and in line with pre- COVID-19 levels, as evidenced by the increase in loan applications for both new and pre-owned vehicles compared to last year. To meet this demand, and given pressure on minibus taxi operator affordability due to the rising cost of new vehicles, we will continue to drive the sale and finance of our fully refurbished pre-owned minibus taxis, lowering the cost of ownership for an operator. Our increased refurbishment capacity at SA Taxi Auto Repairs will support a higher supply of pre-owned vehicles to our dealerships and, in turn, increased loan origination activity. Our insurance division, SA Taxi Protect, posted a reasonably good performance for the year. Claim activity was lower, especially at the height of the lockdown, but we did see higher lapse rates as COVID-19 affected the affordability of insurance cover. Despite this, our broader insurance offering and our strategy to target clients not financed by SA Taxi supported high single-digit growth in the number of policies on book. Gross written premiums were up 10% for the year.
What was the most important factor underpinning SA Taxi’s resilience during this period?
The philosophy that infuses the way we run SA Taxi is crucial to our resilience. Looking after our clients, our staff and other stakeholders in our value chain, is very much part of our DNA. I believe this has a lot to do with our ability to adapt quickly both to emerging risks and opportunities. During the initial stages of the pandemic, our partnership with SANTACO and a good working relationship with the National Taxi Alliance (NTA) gave us first-hand insight into what our clients most needed, and how best to accommodate them within our means. As I have alluded to already, the credibility of our commitment to the industry allowed us to get closer to our clients than ever before. Given the uncertainty in the early days of the pandemic, it was crucial to be in constant communication with all our stakeholders, but this really is the way we do things in the normal course of running our business.
For every decision we took regarding payment relief, we consulted with both SANTACO and the NTA. This gave us access to all levels of the industry, from leadership to grassroots level in the regions and associations. We also engaged directly with the Department of Transport and our funders and shareholders on these relief measures. What became clear to us is that SA Taxi is considered a pivotal roleplayer in the industry, and our consultative approach and willingness to listen and take the advice of our partners is recognised and appreciated.
Given the urgent need for financial support across the industry, we took a decision in conjunction with the group to continue paying a dividend to SANTACO. The dividend maintained the deal’s relevance at a critical time for SANTACO and its members and enabled continued repayment to debt investors during this period. Part of the dividend was allocated to COVID-19 related initiatives, including testing and providing personal protective equipment at taxi ranks, which directly benefits the safety of minibus taxi operators and commuters. Ultimately, the support we received from our funders, without exception across banks and debt funders locally and internationally, cushioned us in supporting our clients, staff and other stakeholders.
How did SA Taxi’s focus on technology and data help in responding to the pandemic?
on it.The pandemic put pressure on our timetables for adoption and implementation of new technologies and strategic initiatives, such as our direct sales model that is run remotely from a central location. This has supported our ability to continue working with our dealer network over this period. We have also accelerated some of our initiatives around becoming more digital and more client-centric, utilising social media and electronic contacting, which will improve interactions with our clients and business partners and drive efficiencies.
We adopted an ESE framework for SA Taxi, which has helped to formalise and focus much of the work that was already being done across the division as part of the ethos of the business. It is also enhancing our conversations with and reporting to shareholders and debt providers on an issue that is becoming increasingly material for them.
We have significantly enhanced our ethics, people management and governance processes by strengthening capacity through a number of appointments, including an ethics officer to oversee the ethics management process and the rollout of an ethics plan in the business. We have not seen evidence of any increase in unethical behaviour, fraud or governance breaches, which may accompany a deterioration in the economic environment. Our ethics and risk functions are monitoring our operations to make sure we respond to any changes in this trend, and we continue to monitor claims behaviour in our insurance business, across credit life and comprehensive claims.
We have also made new appointments in our people management teams, including hiring a new people executive in May 2020, who will report directly to me and work with all business leaders to drive the people and transformation agenda for SA Taxi. This role is supported by a transformation manager, appointed in June 2020, who will focus on driving employment equity, skills development, inclusivity and diversity across our business. Our focus on transformation will include the development of a tactical transformation plan underpinned by better transformation data and reporting.
A major initiative on the go is SA Taxi’s job architecture process, starting with a clean-up of people data. The architecture process aligns each role’s requirements to skills and competencies, education and experience of employees to achieve defined role outcomes. This is then connected to the relevant job grade and associated Department of Labour level, which will support employment equity planning. Accelerated leadership candidates are already gaining good exposure across the business, which bodes well for talent development that supports effective transformation in our workforce. We are engaging directly with the Department of Employment and Labour to develop an enabling framework for employment equity outcomes.
The management team and I are obsessed with growing this business in the upper teens. We are in the fortunate position that we do not have to focus on survival, which again speaks to the resilience of our business and our sector. For SA Taxi, our focus is on making sure our platform is cost-efficient, and then adding top-line growth. We are very confident that we are well positioned to achieve both. All indications are that our loan origination levels are coming back quickly and within the risk appetite that we are comfortable with.
There is still real opportunity to grow SA Taxi organically. We are selling more pre-owned minibus taxis, partly driven by the rising costs of new vehicles as well as economic conditions, so our quality re-manufactured pre-owned minibus taxis are hitting the mark. We are also looking to establish a business that combines our telematics capabilities, rewards programmes, client data and finance offerings into a single transactional account relevant to the minibus taxi industry. With SANTACO as a strategic partner, I am confident in our ability to leverage our unique position in the market to drive growth over the medium term, to the benefit of minibus taxi operators and the broader industry.
I am particularly proud of my team because I believe that we conducted ourselves with dignity by showing respect and compassion – not just to our employees and clients, but to our partners and the industry at large in a time when it was most needed. When we speak about resilience in this business, the real test of resilience for me is how you behave as an organisation towards the people who are your business – your employees, clients, business partners and your industry. The culture of this business is key to its resilience, simply by always respecting the people who will sustain us into the future. Ultimately, it is the quality of our relationships with key stakeholders that adds up to future value, way beyond what the balance sheet looks like.