Survé & Co in the naughty corner
AEEI is at odds with its overseas investors while billions are ebbing from its PIC piggy bank
A little over one month into 2022, and African Equity Empowerment Investments (AEEI, previously Sekunjalo Investments) already has four Sens statements under its belt. It is on track to beat the 29 issued in 2021. That’s a lot of Sens for a company with a market cap of just R442m.
The most benign of the four Sens statements relates to the appointment of a new director. The other three deal with worrying developments at the Iqbal Survécontrolled investment company. At issue are two of AEEI/Sekunjalo’s partnerships with the profitable SA subsidiaries of three high-profile European companies — British Telecom (BT), Saab and Siemens.
Companies controlled by Survé, who has made no secret of his close ties with former president Jacob Zuma, were selected as the SA BEE partner by these European groups. The Siemens shares are held far from public scrutiny in unlisted Sekunjalo Investments, whose controlling shareholder is Survé. Sekunjalo Investments holds 61.86% of AEEI.
A Sens announcement on January 27 related to public censure by the JSE for AEEI’s failure to inform shareholders in 2015, when it acquired a 25% stake in Saab Grintek Defence, that Saab had a right at any time after 60 months to repurchase the stake. Saab exercised that right in December 2020.
The JSE also censured AEEI’s sponsor, PSG Capital, for incorrectly advising that the listing requirements meant disclosure had to be made only when the right was exercised. (PSG Capital terminated its relationship with AEEI shortly before the aborted listing of Sagarmatha in 2018.)
To its credit, AEEI issued a Sens notice within hours, explaining the circumstances to its shareholders and assuring them it takes its responsibilities seriously.
This was in contrast with the group’s previous pugnacious stance. In March 2021, during a presentation, Ayo Technology, which is 49.36% held by AEEI, called on the parliamentary standing committee on finance (Scof) to investigate the JSE, banking institutions, the Companies & Intellectual Properties Commission and the Financial Sector Conduct Authority, as well as the role of Public Investment Corporation (PIC) and National Treasury officials in their interactions with Ayo.
However, much less clear-cut than the Saab relationship was the Sens notice issued on January 19. It seems the spat with BT, which owns the valuable 30% stake in British Telecoms SA (BTSA), has rolled over into 2022. That battle started in June 2021 after BT reviewed some of the dramatic statements made by Ayo during its Scof presentation. It turns out BT hadn’t realised that the BTSA stake had been sold down to Ayo for a cool R990m. This was almost a quarter of the R4.3bn the PIC had pumped into Ayo on its listing in December 2017. For that investment the PIC got a 29% stake in Ayo, currently valued at R348m.
In June 2021 BT said it was terminating its relationship with Sekunjalo/AEEI because of the “misrepresentation of facts” to the Scof. A Sens notice issued by AEEI at the time informed shareholders that BT wished to exercise its call option “due to a breach as defined in the shareholders’ agreement”.
But AEEI wasn’t going to give up this stake without a fight. In the June Sens notice it advised shareholders to be cautious when trading, “until the validity of the exercise of the BT call option can be determined, and [whether] it was validly exercised”.
Eight months later it is still advising caution. In a January 19 Sens notice it informed shareholders it is “dealing directly with the board of directors of BTSA and with BT to resolve the issue of the BT call option”.
AEEI is adamant it owns the shares. In her statement, contained in the annual report released late in December, CEO Valentine Dzvova says that despite reports to the contrary, “we continue to hold shares in [BTSA]”.
AEEI’s woes don’t end with the challenges it has with its profitable international partners. Not only is subsidiary Ayo involved in a long court battle with the PIC, last year FNB said it was terminating Ayo’s banking facilities. This was months after Absa gave notice it was doing the same to any companies directly or indirectly controlled by Survé.
Ayo abandoned its legal challenge of FNB’s decision after losing the first round in the Western Cape High Court.
The R4.3bn the PIC poured into Ayo in 2017 is fast disappearing. Cash resources at endAugust 2021 were down to R2.1bn from R3.2bn a year earlier and R3.7bn in 2019.
It’s easy to see where the money is going. During 2021 Ayo advanced R94m in loans to related-party companies and, despite making a loss of R258m, hiked its dividend payments to
R433m from R168.7m in 2020. The dividend payment certainly justifies the group’s claim that it was able to pay excellent dividends “even in this tough economic climate”. But it seems at odds with Dzvova’s statement that Ayo was preserving cash for the sustainability of its businesses.
AEEI got R214m of the dividend, which helped it fund its own generous payout of R194.6m, with R120m going to Survé’s unlisted vehicle. In financial year 2021 AEEI reported an attributable loss of R85m; in 2020 it was barely in the black, with attributable profit of just R4.5m — a dizzying fall from the R495.5m attributable profit it reported in 2019.
The PIC says it has taken all the necessary steps to pursue its claim against Ayo, which it considers the best way to recoup the R4.3bn it has invested. It says the the matter is expected to be ready for trial from March 7 2023.