SA Taxi’s difficult road ahead

SA Taxi had a very difficult year, with revenue falling by 40% – from R1.8 billion in 2022 to only R1.1 billion in 2023 – and suffering a net loss of R3.8 billion.

SA Taxi is owned by Transaction Capital which recently released its audited financial results for the year ended 30 September 2023.

Transaction Capital swung from a profit to a loss in the 2023 financial year, which was a result of SA Taxi’s mounting troubles.

What was striking was the huge deterioration in SA Taxi’s profit – a 1,100% decline from a net profit of R365 million to a net loss of R3.8 billion.

The biggest contributor to this poor performance was the colossal R3.7 billion write-down of loans and advances owed to SA Taxi.

Transaction Capital said that the effects of Covid-19 have severely impacted SA Taxi’s business model.

The original expectation that the company would rebound in the short to medium term would most likely not be met, implying that it would take much longer.

SA Taxi has continued to restructure client debt accounts mainly by extending their repayment periods.

There has also been a deterioration of client repayment behaviour in its non-performing loans book, and the company had to increase its loan recovery efforts.

Transaction Capital previously said it would sell its taxi refurbishment company due to having much lower refurbishment volumes.

However, it changed its mind. Transaction Capital said it revisited this strategy and decided to keep this business.

Chief Investment Officer Mark Herskovits said that the revised plan to only sell second-hand taxis made it unfeasible to sell its refurbishment business.

He said SA Taxi will focus on righting past wrongs and that investors shouldn’t expect the company to be turned around immediately.

Despite all the plans and the turnaround strategy, SA Taxi’s balance sheet has experienced a significant deterioration.

In 2022, its assets exceeded its liabilities by R3.3 billion. It has now diminished its equity position to a point where liabilities exceed assets by just over R650 million, making SA Taxi technically insolvent.

Transaction Capital noted that there has been a significant increase in SA Taxi’s credit risk, which has severely affected its ability to repay loans.

This caused Transaction Capital to credit impair a R2.2 billion loan owed to them by SA Taxi to a stage 3 loan, meaning it is a non-performing loan and unlikely to be recovered.

SA Taxi did not have sufficient cash or liquid assets to settle this outstanding loan at the end of the financial year.

Transaction Capital noted that SA Taxi’s ability to repay this loan has diminished, and it does not expect to recover this amount. 

Transaction Capital raised the probability of default on this loan to 100% and expects a credit loss of the full R2.2 billion owed to them by SA Taxi.

SA Taxi Core Earnings

Gross loans and advances