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South Africa’s transit sector secures more than US$100 million AfDB loans

Mass public transportation is crucial to South Africa’s social and economic system. (Image source: Paul Saad/Flickr)

The African Development Bank (AfDB) has approved more than US$100mn in loans to SA Taxi Development Finance Limited, a wholly owned subsidiary of SA Taxi Finance Holdings Proprietary Limited, to provide a comprehensive financial services offering to minibus taxi operators

The minibus taxi system accounts for about 69 per cent of all public transport trips in South Africa. The financing will support the Company’s growth plans and initiatives to support Small and Medium Enterprises (SMEs) in the country’s mass transit segment.

The financial package comprises of a senior loan of US$10mn and an associated facility of US$$97mn with an eight-year tenor, including six-month grace period. In addition, the board also cleared the proposal to undertake a syndicated loan with commercial banks through the Bank’s A/B loan structure. The asset-backed financing operation is expected to attract funding interest from international commercial banks for the benefit of South Africa’s mass transit sector.

Mass public transportation is crucial to South Africa’s social and economic system. The demand for commuter transit minibuses is strong, as approximately 69 per cent of public transport commuters opt for this transport mode (compared to 20 per cent for bus and 11 per cent for train). The country’s 16-seater minibus taxis do approximately 15mn commuter trips per day, which services about 40 per cent of the population.

SA Taxi currently has 30,000 customers who have financed on average 1.2 minibuses. While approximately 90 per cent of SA Taxi clients are unbanked and may not ordinarily qualify for the formal banking sector, under the AfDB-led financing arrangement, approximately 20 per cent of direct beneficiaries will continue to be women and approximately 16 per cent youth under 35 years old. The financing to the mass transit financial solutions provider supports the Government’s Green Transport Strategy. The Bank’s facility is expected to contribute a significant component of SA Taxi’s funding requirement over the next three years.

Since 2008, SA Taxi’s financing activities have supported the creation of an estimated 72,000 SMEs, and more than 130,000 direct and 220,000 indirect jobs in a country with an unemployment rate of nearly 27 per cent, according to Statistics South Africa. The Bank’s funding will ultimately support SA Taxi’s continued investment in the taxi industry and its strategy of enabling taxi operators to replace old vehicles with new, safer and lower emission minibus taxis improving this critically important component of South Africa’s integrated public transport network.

In addition to minibus vehicle retail and financing services, the SA Taxi group also provides specialised minibus taxi insurance, tracking, maintenance and refurbishment services to taxi operators through Taximart and SA Taxi Protect, its wholly-owned subsidiaries.

The facility is also aligned to the Bank’s High 5 priorities, including improving the quality of life for the people of Africa through improved safety and roadworthiness for commuters. It is in line with the Bank’s private sector development strategy, SME support agenda and the green growth initiative.

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