The structural headwinds facing the taxi industry have seen Old Mutual impair millions of rand in loans granted to Bridge Taxi Finance, which — like SA Taxi — has run into financial trouble as the industry’s challenges persist.
In its financial statements for the six months to end-June, Old Mutual said it experienced credit losses in its lending business in the first quarter of the year.
“This was exacerbated by a one-off impairment on our secured loan exposure to Bridge Taxi Finance as the taxi industry continues to be severely constrained within the current economic environment,” the group said.
“Banking and lending activities profits declined due to higher credit losses, including a one-off R155m impairment of the Bridge Taxi Finance secured loan, resulting in a reported credit loss ratio of 10.4%. We tightened our lending criteria as we adjusted our risk appetite.”
Bridge Taxi Finance provides a full suite of services, including vehicle finance, day-to-day tracking, advice and management, and vehicle repairs and services. It was established a decade ago.
The minibus taxi industry remains indispensable to SA’s economic productivity, with most citizens relying on public transport. According to the Stats SA 2020 household survey, taxi operators transport more than 15-million commuters a day.
Taxi owners have been struggling to repay loans they took with financiers, sending companies such as Bridge Taxi and SA Taxi to the brink.
Mi-Plan Enhanced Income Fund said in February that it would ring fence nearly R1bn in debt assets exposed to Bridge Taxi Finance.
SA Taxi, part of financier Transaction Capital, which is owed more than R17bn by taxi owners and has R5.3bn in debt that it is unable to service, has been frank about the “structural” challenges facing the taxi industry.
At the time it presented its results for the 2022 financial year, Transaction Capital had anticipated that SA Taxi’s earnings in 2023 would be on par with those of 2022.
However, the company conceded that the headwinds facing the taxi business ran deeper and had become more structural in nature. It had based its recovery assumptions on the expectation that the taxi industry and commuter density would recover from the effects of Covid-19.
The woes facing the industry forced Transaction Capital to unbundle its cash cow, WeBuyCars, earlier this year.
In a bid to keep SA Taxi afloat, Transaction Capital converted the existing intercompany loan of R2bn from the group holding company into equity. It also increased its bad debt provisions for SA Taxi by R1.8bn, taking provision coverage from just more than 4% in 2022 to about 15%.
SA Taxi at one point accounted for 70% of group revenue.
The taxi industry’s profitability has over the past four years been stressed due to stubbornly elevated fuel prices, vehicle price increases, sharp interest rate hikes and the lack of corresponding fare increases.
The price of a Toyota Hi-Ace has gone up more than 45% since 2015, with taxi owners now paying R6,000 more in instalments per month than they did eight years ago. More than 90% of the minibuses that SA Taxi finances are Toyotas.
The rise of ride-hailing apps such as Uber and Bolt has disrupted the traditional taxi industry in SA, leading to increased competition and improved convenience for passengers.
The industry in the economic heartland of Gauteng has responded to competition from the e-hailing industry by launching its own e-hailing service, Sesha.
Sesha is a collaboration with local industry leaders such as the SA National Taxi Council and Gauteng National Taxi Association, backed by the Gauteng department of transport.
Since its launch in April, Sesha has not gained much traction. /With Michelle Gumede
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