Ayo ex­ecs blew whis­tle over Survé-linked con­flicts of in­ter­est

Sunday Times - - Business Times - By SAM SOLE

● A leaked let­ter writ­ten to the board of Ayo Tech­nol­ogy So­lu­tions by its ex­ec­u­tive team re­veals a host of con­cerns re­gard­ing cor­po­rate gov­er­nance is­sues at the com­pany.

Ayo is con­trolled by African Em­pow­ered Eq­uity In­vest­ments (AEEI) which owns about 49% of the shares. Iqbal Survé’s Sekun­jalo In­vest­ment Hold­ings in turn con­trols 61% of AEEI.

The damn­ing let­ter al­leges “lack of pro­fes­sion­al­ism” and in­ter­fer­ence in the af­fairs of the com­pany by board members and ex­ec­u­tives linked to Survé-con­trolled en­ti­ties.

Ayo was listed on the JSE in De­cem­ber last year fol­low­ing a con­tro­ver­sial pri­vate place­ment that saw the Pub­lic In­vest­ment Cor­po­ra­tion (PIC) sub­scribe for the en­tire pri­vate of­fer­ing at a price of R43 a share — a R4.3bn in­vest­ment for a 29% stake.

The of­fer raised eye­brows as the net as­set value of Ayo at the time was just 15 cents per share. Ayo shares are barely traded, but on Fri­day were of­fered at R23.65 a share.

In Au­gust, Ayo is­sued a Sens an­nounce­ment stat­ing its CEO Kevin Hardy and chief in­vest­ment of­fi­cer Siphiwe Nod­wele had re­signed, with­out giv­ing an ex­pla­na­tion.

The let­ter, dated Au­gust 7, was signed by Hardy, Nod­wele and CFO Nahied Gamiel­d­ien, who has stayed on as act­ing CEO.

The let­ter lists 14 points of concern re­lat­ing broadly to con­flicts of in­ter­est be­tween Ayo and AEEI and to ques­tion­able de­ci­sions that ap­pear to be driven by those con­flicts.

Hardy and Nod­wele re­ferred ques­tions to Ayo. Nei­ther the com­pany nor Survé re­sponded to re­quests for com­ment.

The let­ter com­plains of the “con­tin­ued in­ter­fer­ence” of AEEI CEO Khalid Ab­dulla and his ex­ec­u­tives in the daily op­er­a­tions of Ayo, warn­ing this “could lead to a breach of the Com­pa­nies Act and the JSE list­ing rules”. Survé is Ab­dulla’s brother-in-law.

The let­ter de­cries “res­o­lu­tions … sent to the board for sig­na­ture with­out any con­sul­ta­tion with the Ayo ex­ec­u­tives” and notes con­cerns “around the lack of in­de­pen­dence on the board and the sig­nif­i­cant rep­re­sen­ta­tion in par­tic­u­lar from INL”.

INL refers to In­de­pen­dent News & Me­dia SA (INMSA), of which an­other Survé-con­trolled ve­hi­cle, Sekun­jalo In­de­pen­dent Me­dia, owns 55%.

The Gov­ern­ment Employees Pen­sion Fund (GEPF), on whose be­half the PIC in­vests, an­nounced this week that its R1bn loan to In­de­pen­dent had been fully im­paired af­ter INMSA and Sekun­jalo “did not hon­our their pay­ment obli­ga­tions” when they be­came due in Au­gust. It is un­der­stood that about R400m was due.

At the heart of ques­tions about the PIC’s in­vest­ment in Ayo was the sus­pi­cion it was partly aimed at al­low­ing Survé com­pa­nies to meet their obli­ga­tions. The let­ter ref­er­ences two trans­ac­tions that might have a bear­ing on those obli­ga­tions.

One was a concern raised by the ex­ec­u­tives about a de­ci­sion to trans­fer R400m of the PIC in­vest­ment in Ayo at the in­struc­tion of the board to 3 Laws Cap­i­tal, a com­pany of which Survé is a direc­tor.

The let­ter notes: “The re­quire­ment for the R400m in­vest­ment/loan im­posed onto the com­pany by AEEI into 3 Laws Cap­i­tal Pro­pri­etary Lim­ited (a re­lated party) to be re­turned with in­ter­est in our bank ac­count by the due date of 31 Au­gust … (note var­i­ous at­tempts to gain vis­i­bil­ity on state­ments of the ac­count have failed to date which has given us much con­ster­na­tion).”

The other trans­ac­tion in­volves BT Com­mu­ni­ca­tions Ser­vices SA (BTSA), the South African arm of BT Group. AEEI owns 29.9% of BTSA and wanted to sell its stake to Ayo for al­most R1bn.

In pre­vi­ous re­ports amaBhun­gane ques­tioned the val­u­a­tion and sug­gested the trans­ac­tion was aimed at un­duly ben­e­fit­ing AEEI.

Now the let­ter shows the three Ayo ex­ec­u­tives shared those con­cerns. Hardy was pre­vi­ously BTSA CEO.

As one concern, it lists: “The na­ture of the BTSA trans­ac­tion and in par­tic­u­lar the in­flated val­u­a­tion of R990m for a 29.9% stake. It is noted that a com­mit­ment was made by AEEI that they would with­draw from this trans­ac­tion given the state of the BT re­la­tion­ship and our con­cerns as the AYO ex­ec­u­tive.”

BT Group said it would not com­ment on “what ap­pears to be con­fi­den­tial cor­re­spon­dence be­tween third par­ties” but em­pha­sised it was fully committed to BEE trans­ac­tions that “also sat­isfy the high­est lev­els of gov­er­nance”.

Ad­di­tional re­port­ing by War­ren Thomp­son, Craig McKune and Su­san Com­rie.

The amaBhun­gane Cen­tre for In­ves­tiga­tive Jour­nal­ism, an in­de­pen­dent non-profit, pro­duced this story. Like it? Be an amaB sup­porter to help it do more.

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