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The move by the SA National Taxi Council (Santaco) to buy a quarter of major taxi finance company SA Taxi could be viewed as a sign that the minibus taxi sector has achieved a solid asset base, or it could be seen as a stepping stone for it to pursue ownership of the entire transport value chain.
So said transport economist Ofentse Mokwena.
Given the fact that the deal was entirely funded by financial institutions, he added, it was important for Santaco to build on all the capital that it had accumulated via the deal.
Santaco also needed to increase its liquidity, and that meant getting more infrastructure investments to increase its asset base, Mokwena said.
Ironically, the move by the minibus taxi association to buy a stake in SA Taxi comes more than a year after it staged one of the biggest strike actions ever against SA Taxi – for charging Santaco members exorbitant interest rates, which were as high as 28% at the time, for vehicle loans.
The strike happened in June last year and the parties eventually reached an agreement after intervention by the government.
Santaco bought the 25% stake in the company for R1.7 billion. However, it did not use any of its own money.
Regarding the R1.7 billion purchase price, Santaco spokesperson Thabisho Molelekwa said that about R1.2 billion would be funded jointly by Standard Bank and Old Mutual’s Futuregrowth Asset Management.
These loans will be repaid using the dividends from Santaco’s stake in SA Taxi.
The remaining R500 million will be loaned to Santaco by SA Taxi.
A statement from SA Taxi reads as follows: “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 are significantly accretive to SA Taxi’s earnings and are expected to support higher growth rates over the medium term.”
Molelekwa said Santaco opted to partner with SA Taxi, which funds the majority of taxis on South Africa’s roads, because it had a better vehicle loan model than that offered by the major banks.
He said Santaco members would benefit from discounted rates on some of the services offered by the company as well as from having access to products such as insurance.
This according to transport economist Ofentse Mokwena.
Given that the deal was entirely funded by financial institutions, it was important for the Santaco to build all the capital that it accumulated through the deal, he added.
Santaco also needed to increase its liquidity and that meant getting more infrastructure investments to increase its asset base, Mokwena said.
Ironically, the move by Santaco to buy a stake in
SA Taxi comes more than a year after it staged one of the biggest strike actions ever against SA Taxi for charging Santaco members exorbitant interest rates, which were as high as 28% at the time, for vehicle loans.
The strike happened last year in June and the parties eventually reached an agreement after intervention by the government.
Santaco bought the 25% stake in the company for R1.7 billion. However, it did not use any money of its own.
Santaco spokesperson Thabiso Molekwane said of the R1.7 billion purchase price, about R1.2 billion would be funded jointly by Standard Bank and Old Mutual’s Futuregrowth Asset Management.
These loans will be repaid using the dividends from Santaco’s stake in SA Taxi.
The remainding R500 million will be loaned to Santaco by SA Taxi.
“SA Taxi will use approximately 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,” according to a statement.
Molekwa said Satanco opted to partner with SA Taxi, which funds the majority of taxis on the country’s roads, because it had a better vehicle loan model than that offered by the the major banks.
He said the that Santaco members would benefit from discounted rates on some of the services offered by the company as well as access to products such as insurance.
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