Our opinion on the current state of

Transaction Capital (TCP) is a company with two divisions—minibus taxis and risk services. It has unbundled and separately listed WeBuyCars (WBC). Its subsidiary, SA Taxi, specializes in financing, repairing, insuring, and selling minibus taxis in South Africa and completely dominates the entire value chain associated with the minibus taxi industry. The company listed in June 2012 and until 2023, the company generated an annual compound growth in earnings per share of 21% since 2014. That ended abruptly in 2023 when the company revealed that it had to make a R1.8 billion provision for bad debts in its minibus taxi division. About 69% of South African households use taxis with more than 15 million trips per day. Most of this is non-discretionary, which means that this industry tends to be defensive and not generally impacted by the state of the economy at large. The South African Taxi Council (Santaco) acquired a 25% stake in SA Taxi for R1.7 billion in 2018, which is benefiting both parties. The directors of TCP own 32% of the company.

The company is also involved in debt collection in South Africa and Australia through Transaction Capital Risk Services (TCRS). Following the impact of COVID-19, the taxi industry has suffered from a perfect storm of rising interest rates, rising fuel costs, and lower consumer spending resulting in a massive increase in TCP's bad debt provision. The average taxi owner was unable to afford to make repayments of around R6000 a month in the face of steep increases in the fuel price, rising interest rates, and declining commuter traffic. The result was that SA Taxi stopped financing and buying as many as 600 new Toyota minibuses a month and was reduced to selling between 180 and 200 refurbished taxis. The company was owed about R17 billion by taxi owners, most of whom were behind on their repayments. On 15th March 2023, the company reported that the controlling Hurwitz family trust had sold 1.6 million shares in December 2022. In a report in the Business Day on the 12th of December 2023, the company reported that it will no longer finance new minibus taxis—only second-hand ones. SA Taxi attributes its problems to: "...elevated fuel prices, high interest rates, increasing cost of parts and maintenance, record levels of load shedding, persistently lower commuter volumes as a result of depressed economic activity, and taxi operators' inability to increase fares given already financially stretched consumers." On 12th September 2023, the company announced that its CEO, David Hurwitz, would resign with effect from 31st December 2023. On 22nd March 2023, the company announced that it had sold its holding in Nutun Australia for A$58.3 million.

On 11th April 2024, with the separate listing of WeBuyCars, the Transcap share fell to 361c as expected. In its results for the six months to 31st March 2024, the company reported revenue of R981 million down from R1.295 billion and a headline loss of 164.9c per share compared with a loss of 224.6c in the previous period. The company said, "The key highlight of the half year ended 31 March 2024 ('H1 2024') was the successful unbundling, placement, and separate listing of WeBuyCars on the main board of the JSE Limited ('JSE'). This allowed Transaction Capital to return R5.2 billion to shareholders through the distribution of 256.3 million WeBuyCars shares. The group further raised R1.0 billion via the placement." In our view, the share remains risky and difficult to assess. Much will depend on growth in the South African economy following the elections.