Ayo’s vanishing billions
The PIC wants its R4.3bn investment back but there won’t be much of it left by the time the court case is over
● The black track shoes gave him away. Sitting at the back of a small courtroom with a “don’t mess with me” look was Bertrandt Delport’s bodyguard, the press decided.
Delport, the head of BT-SA (formerly British Telecom SA), was in the witness box in the Public Investment Corp’s (PIC) civil case against Ayo Technology Solutions.
Delport told the Western Cape High Court he had received a threatening phone call warning him to “speak the truth” or face “consequences”. Hence the bodyguard.
Outside court, Delport wouldn’t comment on the man just inches away. Evidently BT executives don’t like divulging information outside a witness box.
But in the witness box Delport’s information was both fascinating and tedious. For hours, the PIC legal team went through e-mails between various parties at African Equity Empowerment Investments (AEEI) and BT/BT-SA in the months before Ayo’s listing in
December 2017.
By Delport’s telling, the relationship between AEEI and BT/BT-SA was not happy, and BT was particularly irked by AEEI’s plans to draw it into the Ayo listing.
A bit of background: AEEI is planning to ditch Ayo, which looks like a sinking ship. The planned unbundling of its 49% stake will see AEEI shareholders picking up near-valueless Ayo shares directly.
But, crucially, higher up, near the top of this corporate structure is Sekunjalo Investments, controlled by Iqbal Survé, which holds 61.86% of AEEI. One of AEEI’s most valuable assets is (or perhaps, was) its 30% stake in BT-SA that dates from 2008 when Sekunjalo was selected by the British multinational as its BEE partner.
Things seem to have gone well in the early years, though that is not certain because there has never been any disclosure of BT-SA’s profitability. But AEEI is thought to have picked up an annual dividend
Delport of around R20m.
In mid-2017, AEEI reckoned the introduction of tougher BEE requirements presented good growth opportunities as potential customers sought to enhance their BEE credentials. What better way to contract IT services than from a fully empowered entity such as AEEI?
Sasol was one such company. It approached AEEI and BT-SA for proposals. For AEEI it would be a valuable contract with annual revenue of about R430m and gross margin of R121m.
Such a prospect seems to have been crucial in the decision to create a new listing in the form of Ayo, and to do it promptly. Seemingly unbeknown to BT, AEEI’s plan was to sell its BT-SA stake to Ayo for R900m during the listing.
Helped by optimistic projections relating to further BTSA business, Ayo was listed at a gravity-defying R44 a share, giving it a market cap of just over R15bn.
This brings us to the PIC’s case against Ayo.
The PIC pumped R4.3bn into Ayo’s private-placement balloon ahead of the 2017 listing on the JSE, in exchange picking up a 29.3% stake.
However, as it became evident that BT would not agree to Ayo buying the 30% BT-SA stake, and that Ayo didn’t have much else, things took a turn for the worse. Within months the share price had halved, within two years it had slumped to low single figures.
Now the PIC wants its money back.
It claims Ayo fraudulently misrepresented what it intended to do with the funds and
overstated its relationship with BT-SA.
Ayo says there was no misrepresentation and that the PIC CEO at the time, Dan Matjila, signed off on the transaction.
Just over five years later, there is not only “no deal” with BT-SA but the British firm remains intent on ending its relationship with any entity related to AEEI.
A BT spokesperson tells the FM: “On June 1 2021, BT initiated the process of terminating its relationship with the Sekunjalo group. This process is still under way.”
As for
Sasol, which signed a contract with
Ayo in May
2018, it decided by late
2020 that it had had enough and gave six months’ notice.
Meanwhile, most of the PIC’s investment has disappeared. Generous dividend payments (despite little evidence of profitability) and hundreds of millions of rand in loans to related parties have soaked up the largest portion of the R4.3bn.
By the end of financial 2022, bank balances were R1.1bn, down from R2.2bn a year earlier.
Ayo’s independent auditors, Thawt and Crowe JHB, are to be commended for not only pointing out the material uncertainty related to the group as a going concern but for detailing key audit matters.
These included the valuation of Ayo’s unlisted shares, occurrence of related party transactions and completeness of related party disclosure, valuation of intangible assets and goodwill and finance assistance provided to related companies.
Seemingly unbeknown to BT, AEEI’s plan was to sell its BT-SA stake to Ayo for R900m during the listing