PIC ordered to recover R4.3bn Ayo investment

In an unprecedented move, the organisation that administers and enforces the Companies Act has instructed the Public Investment Corporation (PIC ) to recover the R4.3bn it invested in Ayo Technology Solutions.

In making the investment, directors had knowingly caused harm to Africa’s largest asset manager, the Companies and Intellectual Property Commission (CIPC) said in a compliance letter sent by commissioner Rory Voller on Thursday.

It is the latest in a snowballing series of disasters for Ayo and Iqbal Survé, who holds a large indirect stake in the company.

The investment is also under scrutiny at the Mpati commission of inquiry into the PIC, which is probing allegations of wrongdoing at Ayo.

Two weeks ago tape recordings emerged that show that Survé had misled the PIC about Ayo’s assets, though he vehemently denies having done so.

The PIC is the single-biggest investor in the SA economy with more than R2 trillion of assets under management, owned mainly by the Government Employees Pension Fund. “Within 15 business days of this Compliance Notice, the board of directors of the PIC must recover the capital investment of R4.3bn made to Ayo,” reads the notice.

It is unusual for the CIPC to issue a compliance notice of this sort as its activities are normally confined to the administrative compliance requirements of the Companies Act, related to registration.

Several lawyers expressed surprise that it had ventured so far as to make a judgment call on an investment decision by an individual company.

But the commission, which has become more active over the past five years in investigating directors where corruption and fraud is suspected, said it had become difficult for it not to act in light of the background information it has on the annual turnover of Ayo and the information about the PICAyo transactionthat is now in the public domain.

The key issue, said the CIPC, was the extraordinary high valuation the PIC placed on Ayo’s shares at its listing in December 2017, when it bought a 29% stake at R43 a share, implying a valuation of R14.8bn.

At end of August 2017, financial statements showed Ayo had assets of R292m and a book value of R67m. On Monday, the share was trading at R17.99.

The CIPC said the valuation the PIC placed on Ayo did not square with its own data, which showed a company that at no time in its history had realised a turnover of more than R12m.

The Companies Act empowers the commissioner of the CIPC to issue a compliance notice to any person where there are “reasonable grounds” to suspect a contravention of the act.

The directors of the PIC are seen to have contravened section 76 of the act in which it is stated that a director may not use his position to “knowingly cause harm to the company”. ● An amendment bill that strengthens accountability, transparency and corporate governance of the PIC was adopted by in parliament on Tuesday. This was despite four opposition parties decrying its provision that the deputy finance minister or a deputy minister from the economic cluster – chair the board.

Within 15 business days of this ... notice, the board of directors of the PIC must recover the capital amount of R4.3bn that was invested in Ayo