Transaction Capital’s earnings slump on COVID-19 lockdown

Transaction Capital, a prominent South African financial services company, reported a significant 65% drop in core headline earnings from continuing operations due to the impact of COVID-19 restrictions on the taxi industry. In an exclusive interview with CNBC Africa, CEO David Hurwitz shed light on the company's performance and future outlook. Despite the challenges posed by the pandemic, Hurwitz highlighted the strong operational performance of Transaction Capital prior to the need for credit provisions. Earnings before provisions had shown promising growth, with the taxi business expanding by about 11% and TCRS business by approximately 12%. However, the necessity of credit provisions to account for potential credit losses resulted in a decline in earnings. Hurwitz acknowledged the higher credit provisioning seen in lending businesses globally, emphasizing the prudence of absorbing the impact in the current year to pave the way for future growth. The company's proactive approach in building provisions has fortified its balance sheet and positioned it for future expansion. Transaction Capital experienced a substantial increase in provisions, with TCRS provisions soaring by 277% to 588 million rand and SOTC provisions escalating by 160% to 836 million rand. Hurwitz rationalized the conservative approach of the company, opting to anticipate potential defaults as the economic landscape evolves.