South Africa’s taxi industry was given a boost with the signing of an agreement between Absa Vehicle and Asset Finance (AVAF) and the Industrial Development Corporation (IDC) on Wednesday.
In a statement, Absa said the new arrangement would also see millions of commuters enjoy new standards of safety when thousands of new, legally compliant, taxis entered the market.
The deal, the first of its type in South Africa, sees the bank undertaking to provide up to R300-million in funding to emerging taxi operators and black entrepreneurs wishing to enter the industry.
The IDC has agreed to underwrite up to 50% of any losses incurred by Absa, if clients financed under the scheme defaulted on their payments.
”We’ve been a strategic partner of the IDC since 2006, so this joint initiative is a perfect fit for us,” Marcel de Klerk, managing executive of AVAF said.
”It is in line with our goal of doing all we can to support the Taxi Recapitalisation Project’s objective of putting compliant taxis on the roads.
”It will also lower barriers and make it easier for operators to enter the market,” De Klerk said.
In addition the agreement would enhance the travel experience and safety of millions of commuters who make use of taxis.
Katinka Schumann, divisional executive for services sectors at the IDC, said the corporation recognised the positive contribution the product will make to developing emerging transport entrepreneurs and the growth of the taxi industry in particular where the potential for creating new job opportunities was greater.
”This is in line with the IDC’s ‘Leadership in Development’ strategy where we seek to stimulate the creation of jobs by funding opportunities that promote entrepreneurship, BEE and SME development,” Schumann added.
She added that the IDC was focused and dedicated to nurturing and supporting the development of the South African taxi industry and to building partnerships in aid of stimulating a competitive economy.
In terms of the agreement, AVAF will, in cooperation with the IDC, offer funding to emerging or established black taxi operators, black-owned companies and taxi associations.
The interest-rate on loans granted will be capped at a maximum of Prime + 4% and applicants must have a deposit of between 15% and 20% of the total loan value.
”Before any loan is granted, we will undertake a detailed analysis, to ensure the projected route-income generated by the taxi to be financed will be enough to cover the expenses of the taxi operator, as well as the monthly loan-repayments,” De Klerk said.
Clients would be subject to normal AVAF credit-worthiness ratings and the maximum finance term was 54 months but AVAF said it might restructure the agreement for a longer or shorter term.
”The black taxi industry is vital to the growth and prosperity of South Africa’s economy and it is therefore imperative that everything possible be done to support it,” Schumann said. — Sapa