16 October 2009
In a first-of-its-kind deal, banking group Absa has teamed up with the Industrial Development Corporation (IDC) to provide up to R300-million in funding to emerging taxi operators and black entrepreneurs wanting to enter the industry.
For its part, the IDC has agreed to underwrite up to 50% of any losses incurred by Absa, should clients financed under the new scheme default on their payments.
Absa Vehicle and Asset Finance’s Marcel de Klerk said the joint initiative was a “perfect fit”, with the bank having been a strategic partner of the IDC since 2006, adding that the deal was in line with the bank’s support of the government’s taxi recapitalisation project, entrepreneurial development and black economic empowerment.
“It will also lower barriers and make it easier for operators to enter the market,” De Klerk said in a statement earlier this month. “In addition, the agreement will enhance the travel experience and safety of millions of commuters who daily make use of taxis.”
Funding offer, requirements
In terms of the agreement, Absa will, in co-operation 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 plus 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 will be subject to normal Absa credit-worthiness ratings, and the maximum finance term is a maximum 54 months, although Absa might restructure agreements for longer or shorter terms.
Creating job opportunities
The IDC said it recognised the positive contribution the financing would make to developing emerging transport entrepreneurs and the growth of South Africa’s taxi industry, in particular where the potential for creating new job opportunities was greater.
“It is yet another shining example of how [the] government and the private sector can form partnerships that benefit and develop our country,” said the IDC’s Katinka Schumann.
“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.”
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