Savings is where the first and second economies meet
SA Taxi, a gateway financer of minibus taxis, believes that the debate about developing a savings mentality among South Africans should include the role played by the impulse for expansion among grass roots entrepreneurs.
Bonisile Makubalo, Director of Corporate Affairs at SA Taxi, says that when the complex funding mechanisms of the international capital markets are made accessible to the informal economy in the form of investment in entrepreneurs, saving is the instinctive response of the small business owner.
“We see it clearly in the minibus taxi industry, where an operator steadily graduates from borrowing money in order to fund his first vehicle to saving enough money to expand his micro business into something that goes beyond a hand to mouth existence.
“His ability to save is made possible by the application of developed economy finance in funding his first vehicle. But his will to save is instinctively entrepreneurial. When he realises that he’s not just operating a taxi, he’s running a small business, his horizons widen and he begins to accumulate the means to expand.
“He moves relatively quickly from a position of debt into sustainable profitability, with early savings being the means by which he transitions out of debt.”
SA Taxi cites the example of a customer who borrowed money to buy his first minibus taxi but stayed in his own job as a university librarian in order to save his taxi operation profits and uses them to set up his own construction business.
In other cases, operators have opened spaza shops or expanded into the small businesses that surround and serve taxi ranks. Some operators choose to stick to their knitting and expand their taxi fleets.
“Whatever the operator’s method of extending his business interests, there is invariably a point at which he puts away money and, thereby, becomes an acceptable risk to conventional financial institutions. He matures into access to funding for a business rather than simply funding for a vehicle.”
Mr Makubalo says that SA Taxi’s role in supporting growth among taxi entrepreneurs is seminal.
“SA Taxi is an accredited developmental credit provider because we don’t simply provide vehicle finance. We understand that each taxi operator is a micro business that makes a profound contribution to the functioning of the entire economy. Just by getting 15 million people to work every day, taxi operators are key to the way the formal economy operates.
“They are also the heartbeat of the second economy, putting food on the table for their own families and generating income for the thousands of informal businesses dependent on taxi ranks.
“However, while most operators are astute managers of cash flow in a cash based industry gaining an ability to understand an income statement and other business fundamentals, gives them the tools with which to measure and, therefore, improve their success as business people. So, we help to professionalise the industry by providing free business training that enables operators to plan for the future and for growth. Their ability to execute on that plan is dependent on savings.”
Once taxi operators expand into additional revenue generation, they migrate into the first economy.
“The fact that our triple AAA rating positions us to access local and foreign direct investment and channel it towards the minibus taxi industry has a transformational effect on the economy as a whole,” Mr Makubalo says. “But where the first and second economies actually meet is the entrepreneur’s savings account. That’s where seed money is converted into tangible growth; where potential is converted into reality.”