The Sekunjalo companies received notice from Nedbank 15 November last year, more than a year after Absa, in late 2020, became the first major South African bank to cut ties as first revealed here.

Read: Absa does a Gupts on Iqbal Survé

FNB followed suit in March last year but the true extent of Survé’s banking woes have only now become clear due to his failed bid to interdict Nedbank’s account closures — which was dismissed in the Western Cape High Court this week. It was his third defeat after also attempting to challenge Absa and FNB.

Read: Another bank abandons Iqbal Survé

According to court papers Investec started closing Sekunjalo accounts in April last year. In May Mercantile Bank as well as Sasfin followed suit.

Additionally, a total of 28 banks and representative offices of foreign banks have turned down Sekunjalo’s business, making the banking sector’s boycott very nearly universal.

The first of the Nedbank closures came into effect on Tuesday, while others will kick in between now and May, progressively pulling the rug out from under most of Survé’s private holdings but also his major JSE listed companies and their subsidiaries.

That includes the JSE-listed African Equity Empowerment Investments, Premier Fishing and Brands — and the jewel in the crown, the cash-flush Ayo Technology Solutions, which is still clinging to the remainder of the R4.3-billion irregularly invested in it by the Public Investment Corporation (PIC) in late 2017. At last count this was down to R2.16-billion.

Ayo did not have a Nedbank account in its own right although its subsidiaries and parent company which did have Nedbank accounts have lost these. According to court papers Ayo has also tried and failed to find new banking facilities since FNB closed its accounts last year. In an affidavit Survé claimed that “AYO is only in business because some of its subsidiaries still have banking facilities which are themselves in danger of being closed”.

Its executives have been intimately involved in unsuccessful negotiations with Nedbank.

Judging by the last published financial statements of Survé’s JSE-listed companies only Standard Bank still provided significant banking facilities at the end of August last year. The group had R1.17-billion parked there while large chunks of the Ayo cash had been moved out of the banking system and given to asset managers, principally Ninety One Fund Managers and a “boutique” manager Numus Capital.

According to an affidavit by Survé, Standard Bank has also put all its Sekunjalo accounts under review and is no longer opening new accounts for entities in the group, possibly presaging a final wave of account closures that would see Sekunjalo painted into a fatal corner in the same way the Gupta empire was between 2016 and 2017.

The group is now attempting to use third-party payment agents but has already discovered the limitations of this approach.

Among the court papers is a letter from Discovery directed at Ayo subsidiary Puleng Technologies demonstrating how this solution may be roundly rejected — and how the bank boycott will have a devastating cascading effect.

It noted, “Discovery, being a registered financial services provider operating within highly regulated parameters, unfortunately cannot accept any of the payment options as these may potentially expose us to legal and regulatory consequences…This letter serves as our notice of early termination of all Agreements, and/or cancellation of Purchase orders as applicable.”

Why Nedbank is dumping Survé

Like Absa and FNB before it, Nedbank is arguing that the mere association with Survé “poses reputational and association risks”.

The bank cites the serious ongoing allegations against him in the media, the several ongoing court cases against his companies as well as scathing findings in the report of the Judicial Commission of Inquiry into the Public Investment Corporation, commonly known as the Mpati Commission.

The Nedbank papers however go far deeper than that.

For the first time court proceedings have exposed some of the internal workings of Survé’s empire. A multitude of suspicious or unexplained transaction queries were attached to an affidavit by Nedbank Chief Legal Counsel Zanele Mngadi – alongside Sekunjalo responses that Nedbank in some instances labeled “odd” or “unsatisfactory”.

Some involve what at first glance appears to be the use of company funds for personal affairs, while others involved politically exposed persons receiving “loans” or “donations”.

One particularly suspicious transaction was the transfer of R25-million from the African News Agency (ANA) to Survé’s personal account, which Sekunjalo initially said was to fund Survé’s divorce settlement in August 2016.

See the full correspondence here.

The court records show that  on 28 July last year Nedbank addressed a letter to the news service, which was launched in 2015 to replace the defunct South African Press Agency. From the outset ANA’s main asset was the astounding R357-million cash paid by the China Africa Development Fund for a mere 5% shareholding in the fledgling company.

“R25 Million was paid by Africa News Agency to Dr Surve’s personal account as a payment towards his divorce settlement. Why did Africa News Agency fund this settlement?” Nedbank enquired.

Survé’s sister (and Sekunjalo executive) Aziza Amod replied:

“Dr Surve was concerned that some of the requested information in the letter is private and confidential. He indicated that he would send you an email separately about this confidential information.”

The same day Survé wrote to Nedbank that his sister had gotten it wrong and that the payment into his personal account was actually “in lieu of an intercompany loan between ANA and Sekunjalo Investment Holdings.”

“For the record Aziza indicated at no stage did she mention a divorce settlement,” Survé added.

That was untrue. An email Aziza sent to Nedbank on 15 April in response to Nedbank’s initial query clearly labels the transaction, “Dr Ml Surve: settlement agreement spouse”.

“If this was truly an intercompany loan, why was it paid into Dr Surve’s personal account.Furthermore, no intercompany loan agreements were furnished to Nedbank in support of the explanation provided,” Mngadi said in her affidavit.

This was a repeated complaint — a multitude of supposed intercompany loans with no backing documents.

In June 2017 ANA gave Sekunjalo a R20-million loan, Amod told Mngadi by email.

In August 2018 ANA paid R41,3-million to Premier Fishing. The first time Nedbank queried this the response was that it was a “payment to PF for share allocation in Private Equity Fund”.

The second time it was queried the answer changed to “This payment was transferred in error to PFSA. Upon enquiry to ANA, ANA informed PFSA that the payment was meant for AEEI. PFSA on the same day transferred the funds to AEEI”.

Even on this version ANA money was seemingly being invested with another part of the Survé empire.

On Survé’s version these intercompany transfers were above board transactions in the normal course of business, driven mainly by centralised treasury and other services performed for different parts of the Sekunjalo group.

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Big and small

Some of the transactions flagged by Nedbank were not very large but politically sensitive.

Transactions from one of Sekunjalo’s accounts included two payments totaling R30 000 to former ANC spokesman Carl Niehaus. When questioned Amod replied that “Mr Niehaus has requested loans on numerous occasions for help to deal with financial distress and family matters. This was most likely a loan/donation to assist him”.

Niehaus’s longstanding money troubles are a matter of public record.

There were a number of similar small payments to other individuals which Amod vaguely referred to as loans “or” donations.

In April 2018 Survé’s 3 Laws Capital, flush with Ayo cash, made a R200 000 payment labelled as “TMJ Pettersson loan” – referencing former energy minister Tina Joemat-Pettersson whose middle name is Monica.

Joemat-Pettersson told amaBhungane it was a formal loan backed by a written agreement which she has repaid. The loan was a financial bridge during the gap in her employment as an MP between 2017 and 2019, she said.

Among other payments cited by Nedbank are five totaling R125 000 made to former ANC and COPE MP Phillip Dexter in 2013. When queried about these Sekunjalo claimed they were loans for Dexter’s post-graduate studies.

Dexter however denies this.

“There was never any loan. They hired me as a consultant and I did work for them for a short period of about six months,” he told amaBhungane.

“I confirm that I was contracted by Sekunjalo to do certain communications work for them but I did not complete the contract contract due to a difference of values that emerged as the nature of the work was detailed to me.”

Judge for yourself – or maybe not

It appears from the court papers that Survé shot himself in the foot during the negotiations with Nedbank to keep the accounts open by first trumpeting a new independent forensic appraisal of his companies — but then burying it.

He has repeatedly railed against the Mpati Commission where former executives gave damning testimony against him and Sekunjalo companies funded by the PIC. The final report by judge Lex Mpati was released in march 2020 and was scathing about the “malfeasance” of Surve’s group. Absa, FNB and Nedbank all cited this commission when closing accounts.

In the papers Survé reveals that Sekunjalo appointed retired judge Willem Heath to “provide an impartial and independent factual findings report in relation to the Mpati Commission and the Sekunjalo Group”.

In a personal letter dated 12 November Survé promised Nedbank chief executive officer Mike Brown full transparency.

“We have…informed the judge that whatever the outcome of the report, firstly we will abide by the outcome and recommendations and secondly make the report avallable to the boards of directors of the companies affected. We also intend to make the report available to all of our advisers and our bankers.”

Nedbank wrote back saying while it welcomed such a report this should “not be interpreted to mean that Nedbank would consider same prior to closing the respective bank accounts”.

The point became academic because when Heath produced an interim report Sekunjalo promptly buried it.

“The Sekunjalo Group is now in receipt of the interim report and in considering the report, have decided to invoke principle of privilege,” Survé wrote to Brown in a new letter dated 5 January.

In her answering affidavit Mngadi called this decision “odd”.

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Plan B and Plan C

Survé’s latest court application was intended to buy time for two new attacks on the banks to come to fruition.

The beleaguered media mogul is simultaneously taking his fightback campaign to the Competition Commission and the Equality Court.

At the commission his companies will argue that Nedbank and another eight banks “colluded in an attempt to force the Sekunjalo Group of companies to stop trading by not only terminating their existing banking facilities but also by denying them access to any banking facilities completely”.

In the crosshairs are Absa, FNB, Nedbank, Standard Bank, Mercantile, Sasfin, Investec, Bidvest and Access Bank.

Pending the commission’s investigation, Sekunjalo has approached the Competition Tribunal for an interdict to halt and reverse the account closures. This application is set to be heard on 7 and 8 March.

At the Equality Court Survé will argue that banks are racist for closing his companies’ accounts but not those of “white” groups like Steinhoff, Tongaat Hulett and EOH, where there have been massive accounting fraud scandals.

All those companies, however, have been placed under new management.

Nedbank invoked client confidentiality when asked about these specific companies but told amaBhungane that “with reference to public information…each of these entities has taken remedial action and if they do hold accounts with Nedbank, they would have been subject to the same Nedbank processes as any other clients”.

“Decisions to terminate banking relationships with clients are neither arbitrary nor discriminatory…Race in not a consideration in any way in these decision processes.”

The racism attack has been a mainstay of Survé’s public campaign against his detractors, a campaign largely executed through the newspapers owned by his Independent Media.

In a statement carried by Independent Online on Wednesday Survé said, “Sekunjalo is being targeted in a proxy battle for control of the media. Banks are being used to close Sekunjalo Group accounts to destabilise the Group, with what we believe to be the aim as being the complete destruction of Independent Media.”

Judge Matthew Francis ruled that the Equality Court and the Competition Tribunal had exclusive jurisdiction on the matters referred to them by the Survé applicants, to the exclusion of the High Court.

However, he did not dismiss out of hand Survé’s claims of victimization.

Sekunjalo had requested that the banks accede to moving the tribunal hearing forward to before this week’s account closures but the banks had refused.

The judge viewed this as a “cynical” move.

“Nedbank, somewhat ironically, appears to have engaged precisely in the type of behaviour complained of by the applicants – the collective power of the banks appears to have been employed to stall the appropriate forum from timeously considering an application that is obviously of great importance to all the parties concerned.”

The 43 different Survé entities will see their Nedbank accounts closed on different dates: seven this week, two more next week, twenty-four on 15 March and ten on 9 May.

In its letters to the Sekunjalo companies Nedbank explained that “any funds held in credit in the accounts would be transferred to a Nedbank suspense account, where no interest will be earned and will be held there until such time that (the applicant) provides (Nedbank) with specific instructions to transfer or withdraw the funds”

With the Nedbank accounts being closed and other banks seemingly poised to follow suit, Survé’s empire is racing against time.

Read more stories on Iqbal Survé and Ayo

PIC looks on while ‘Survé Inc’ burns through state pensioners’ billions

Iqbal Survé takes another bite at the PIC apple

Sasol dumps Survé

Survé’s share ‘manipulation’: the smoking gun(s)

This story was updated since it was first published to clarify that Ayo Technology Solutions does not have a Nedbank account but that Nedbank only gave notice of termination to Ayo’s subsidiaries and Ayo’s parent company who did in fact bank with Nedbank. We apologise if it was implied that Ayo as apposed to parts of the Ayo group received a notice from Nedbank.

The post Strike three: Is Iqbal Survé finally unbankable appeared first on AmaBhungane Centre for Investigative Journalism.

The allegedly massively overpriced investment was pushed through by a friend of Survé, the PIC’s then-chief executive Dan Matjila. The state-owned investment manager is now in court trying to recoup the money.

In the meantime it appears that Ayo is subsidising the payroll of the beleaguered Independent Media as well as some employees of its own parent company, Survé’s African Equity Empowerment Investments (AEEI).

Read
*Sactwu drags Survé to court for Indy millions
*Absa does a Gupta on Iqbal Survé
*PIC looks on while ‘Survé Inc’ burns through state pensioners’ billions

AEEI’s travel agency Tripos and events company, espAfrika, also apparently have employees on the Ayo payroll.

An internal list of Ayo “shared services” employees dated 17 September 2020 shows 85 individuals employed by the PIC-funded company in a number of “verticals”. 

Only 11 of them are however identified as actual employees of Ayo while 8 more work for AEEI which is Survé’s main JSE-listed holding company and the controlling shareholder of Ayo.

A total of 31 employees of “Indy” make the list — some of them easily identified as employees of Independent via, for instance, LinkedIn.

It appears that much of the media group’s IT and administrative staff now “work for Ayo”.

Among the more inexplicable Ayo employees is Leonard Vusi Ndzhuluka, otherwise known as Mzilikazi wa Afrika.

Wa Afrika was one of the trio of investigative journalists that broke the now-discredited “SARS rogue unit” stories at the Sunday Times. He and colleague Piet Rampedi found their way to the Independent group after leaving the Times and Rampedi is now editor of the Pretoria News.

Contacted by amaBhungane, Wa Afrika said, “I know nothing about that.” He told us we should ask Ayo.

AmaBhungane sent detailed questions for Ayo’s response for this story but received no reply.

Wa Afrika is the only editorial employee of Independent on the list although that does not necessarily mean there are not others on the Ayo payroll.

Another 12 employees under an “events” vertical are identifiable as staff of espAfrika, an events company owned by AEEI which runs the Cape Town International Jazz Festival.

Another 6 employees on the list fall under “travel” and work for Tripos, another AEEI company.

Both espAfrika and Tripos have suffered a great deal due to the Covid-19 lockdowns, AEEI had reported in its latest financial results.

Independent Media’s woes are well-known and it is no surprise that Survé would want to subsidise it using the one good asset he has: the cash sitting in Ayo. Unlike AEEI, Independent has no ownership relationship with Ayo, though both are effectively controlled by Survé.

Hundreds of million of rands of Ayo cash has already been used to benefit other Survé companies and the man himself, as amaBhungane has reported here, here, here and here.

Not so Independent

AmaBhungane has two partially overlapping lists of employees originating from within Ayo.
One, which we reported on last year, is dated February 2019 and already appeared to show a large number of Independent staff on the Ayo payroll. We have since procured the payslip of an Independent employee which already in December 2018 suddenly started reflecting Ayo instead of Independent as their employer.

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A newer document dated September 2020 however actually seems to show how Independent employees formally became Ayo employees en masse. 

It was attached to an email sent on 4 November last year by Ayo group learning and development manager Lucien Jacobs to Hanson Francis, a member of Independent Media’s IT team, and Ebrahim Baba from Ayo’s IT department:

“Hi Hanson & Ebi. The attached list of staff must all have corp services email. They must be responding from this e-mail. All other emails to be diverted to here.”

This instruction meant that the individuals on the list would all get new addresses ending with “@corporateservices” from which they send emails even though outsiders would still send mails to their old addresses at for instance “@inl.co.za” for an employee of Independent.

A total of 34 Individuals appear on both the 2019 and 2020 lists, almost all employees of Independent. On the older list they have “employee codes” that reflect their employment at Independent, largely in the HR and IT departments. On the new list all these employees have codes clearly identifying them as employees of Ayo.

These codes are identifiers that for instance appear on payslips. The Independent format starts with “OM” or “MO” while the Ayo format is simply “AYO”. One IT specialist who appears on both lists for instance saw their employee code change from M033869 to AYO33869 somewhere between February 2019 and September 2020.

These workers did not change jobs and continued to do exactly what they had done previously.

Shared services

When amaBhungane approached Ayo about the older list last year the company responded with a threat of legal action. If later tempered its position in a second response:

“It should be noted that the Sekunjalo Group companies deploy a centralised payroll processing system… AYO also wishes to make it categorically clear that there are no undeclared related party associations within its group.”

There may very well be a centralised payroll system for parts of Survé’s Sekunjalo group. His main JSE-listed vehicle AEEI controls Ayo as well as his other listed company Premier Fishing and Brands. It is however evident that whatever central system might exist sits in Ayo, not at the level of Sekunjalo.

The change in the stated employer of Independent HR and IT staff between 2019 and 2020 also seems to undermine Ayo’s PR’s explanation. Independent sits outside the AEEI group.

In addition, the odd inclusion of an editorial employee like Wa Afrika also belies the idea that it is purely a case of centralising administration.

At best the apparent change of employer means that the fragile Independent Media fired (and Ayo hired) its staff and must now pay another Survé company market-related prices for services it used to have in-house.

More likely it means that Ayo “hired” Independent staff in order to pay their salaries with the dwindling cash pile at Ayo which is once again being used to prop up and subsidise other companies in the Sekunjalo group despite there being no basis for it to do so.

According to one affected employee speaking under condition of anonymity it really was that straightforward. Staff were informed in 2018 that they were being moved to a company called African Technology and Media Holdings and in 2019 formally moved to Ayo after signing new contracts.

“Absolutely nothing changed other than the name on our payslip,” the employee said.

A rand here, a rand there

There are other potentially simple mechanisms for subsidising Independent that can be gleaned from Ayo’s financial statements although these statements have been inconsistent in how they treat related party transactions from year to year.

On the one hand there is straightforward overt support. In the 2019 financial year Ayo bought R15-million in advertising space and another R14-million in “hardware and managed services” from Independent.

In the same year Ayo made a prepayment to Independent for advertising but then immediately impaired the expenditure because of “the uncertainty of the going concern and business operations of a related party who was prepaid to provide a service”. This suggests the payment was made in exchange for nothing.

There have however ostensibly been transactions both ways.

Ayo charged Independent R3.1-million in both the 2019 and 2020 financial years (which end on 30 August) for “corporate services”. This makes it appear that Ayo is receiving money from Independent. However, at the same time as this “income”, Ayo impaired R7.5-million it was owed by Independent.

The corporate services fee Ayo charged Independent escalated enormously to R8.7-million in just the half-year to February 2021. It remains to be seen how much Independent actually pays.

None of this would be particularly out of character. AmaBhungane has previously reported how Ayo has seemingly been used to fund companies that used to be units of Independent, rebranding them as investments in cutting edge new start-ups.

*Read more stories by amaB investigator Dewald van Rensburg.

The post Independent “outsources” staff to tap Public Investment Corporation billions appeared first on AmaBhungane Centre for Investigative Journalism.

AmaBhungane has established that on 27 August last year Absa sent letters to every client directly or indirectly controlled by Survé’s Sekunjalo Investment Holdings, giving 60 days’ notice of termination of services.

In subsequent court proceedings late last year, Absa general counsel Marthinus Janse van Rensburg insisted that “[Absa’s] continued association with customers in the Sekunjalo Group posed intolerable reputational, commercial, and legal risks.”

The companies cut off from their banking facilities include Survé’s main JSE-listed vehicle African Equity Empowerment Investments (AEEI), its separately listed subsidiaries Ayo Technology Solutions and Premier Fishing & Brands, and all subsidiaries of the three companies. Sekunjalo-controlled Independent Media appears unaffected as it banks elsewhere.

The Sekunjalo empire has been almost completely silent about the development despite the obligation on JSE-listed companies to publicly report all “price sensitive” information.

The only public announcement to date was made not on a JSE platform, but in passing when Ayo executives made a presentation to Parliament’s standing committee on finance on 17 March to bemoan the way the company has, they say, been undermined by an orchestrated media campaign and the pending court case brought by the Public Investment Corporation (PIC).

The PIC wants to reclaim R4.3-billion its previous chief executive Dan Matjila irregularly invested in Ayo in December 2017.

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Survé sat in on the session in Parliament despite having no formal role at Ayo except as the indirect controlling shareholder.

During the presentation, Ayo chair Wallace Mgoqi revealed that, apart from losing business opportunities and having its share price collapse, Ayo had “lost banking facilities”.

“Which business in the world can operate without banking facilities, honorable chairperson and honorable members,” Mgoqi asked the committee.

To court

AmaBhungane began making inquiries after this revelation.

Questions were directed to Ayo via the Sekunjalo group’s public relations firm but the company “declined to comment”, save to state that “any businesses critical developments have been alerted to the market via the appropriate channels as required of it by the various regulations”.

Further questions put to Ayo, AEEI and Premier Fishing were met with silence.

AmaBhungane has established that the most low-key part of the Sekunjalo empire, Premier Fishing, approached the Western Cape high court last year, attempting to interdict Absa.

Court papers show that, after unproductive negotiations to cancel the bank’s service termination, or at least extend the notice period, Premier went to court on 21 October, claiming Absa’s decision was discriminatory and unconstitutional.

Absa filed an answering affidavit on 5 November and Premier withdrew its case four days later.

Absa’s answering affidavit, deposed to by Janse van Rensburg, cited three main bases for the bank kicking Sekunjalo to the curb.

Casting the net

Absa’s actions affect 24 companies, most of them small subsidiaries of AEEI or Ayo. One of the more noteworthy ones is Loot Online, Survé’s online retail company.

The other major asset in the Sekunjalo Investment Holdings stable, Independent Media, is unaffected by Absa’s actions. Sekunjalo controls Independent through Sekunjalo Independent Media and this company banks with Standard Bank, according to its most recent set of publicly available financial statements.

The PIC is seeking the liquidation of this company in a separate court action. Sekunjalo Independent Media was renamed in December to Independent Consortium, removing ‘Sekunjalo’ from the name. Sekunjalo Investment Holdings itself was also not banked by Absa.

First, there had been a deluge of negative media reportage including many investigative exposés, especially about the controversial Ayo.

“Towards the end of 2018, Absa started investigating the Absa customers implicated in the adverse media reports,” he said.

Janse van Rensburg also cited evidence before and the findings of the Mpati commission of inquiry into allegations of impropriety at the PIC. These were particularly scathing about Survé and his relationship with Dan Matjila, the former chief executive of the PIC.

Janse van Rensburg also referred to the way other notable service providers had dropped Sekunjalo companies. These included the Sekunjalo group’s JSE sponsors PSG Capital, their lawyers Webber Wentzel and their auditors BDO.

The bank’s case was however that it had a straightforward contractual right to unilaterally cancel a banking relationship without the need to back up the decision with these kinds of justifications.

“The Sekunjalo Group and Dr Survé have for at least the past two years been the subject of serious allegations of disreputable and unlawful conduct that featured extensively in the public domain,” said Janse van Rensburg.

“It is crucial to note that Absa takes no position on the truth of the allegations against the Sekunjalo Group. It need not do so.

“Whether the applicants and/or their parent companies deserve a bad reputation is not something for Absa to ponder or decide. Absa must decide what effect this will have on its own reputation.”

Keeping it on the down-low

Despite the potential for ruinous damage, none of Sekunjalo’s three JSE-listed companies, AEEI, Ayo and Premier, made any announcements on the stock exchange’s news service.

The JSE rules are not explicit about this, but there is a good case to be made that Premier, Ayo and AEEI have all breached JSE regulations by not advising the market that they have lost their bank facilities – notwithstanding Ayo’s claim that all “business critical developments” had been disclosed.

The JSE said in response to an amaBhungane query: “There is a general obligation of disclosure placed on an issuer to announce price sensitive information … defined as unpublished information that is specific or precise, which if it were made public, would have a material effect on the price of the issuer’s shares.

“Directors of issuers are currently required to determine what will constitute price sensitive information with reference to the Listings Requirements … Bankers are considered to be important service providers and essential for doing business.”

The silence from the three listed entities is especially problematic considering claims made by Premier’s chief executive Rushaan Isaacs in her sworn affidavit.

Evidence Docket

See copies of two key documents:

Absa letter to Premier terminating services

Court papers filed by Rushaan Isaccs of Premier Fishing against Absa

ABSA answering affidavit in Premier case

Challenging Absa’s decision, she warned, “The businesses will certainly become unbanked for a period. Premier Fishing and Brands will be de-listed. Premier Fishing will lose all its fishing licenses and catching quotas. The Group’s 900 employees will be a risk of losing their jobs. The businesses will close.”

It is hard to imagine a better instance of precise price sensitive information which has nonetheless not been declared to the market.

In his answering affidavit, Absa’s Janse van Rensburg picked up this point.

“The applicants say that Premier will become de-listed. Yet they fail to provide the Stock Exchange News Service (SENS) announcement warning investors of their potential imminent removal from the Johannesburg Stock Exchange (JSE). Surely, if the applicants honestly

and in good faith harboured the view that Premier’s de-listing was contingent on the outcome of this court case, they would have warned stakeholders, the bourse, and investors about this fact. Yet the applicants provide no evidence that they have done so.”

Where to stash the cash?

The most dramatic impact of Absa’s action against the Sekunjalo group is that it forces it to find a new home for the enormous cash pile sitting in Ayo after the PIC investment – money the state-owned asset manager still hopes to recover. At last count Ayo had R3.2-billion left which makes up practically the entire cash reserves of the larger group of Sekunjalo companies.

The revelation that Absa has dumped Sekunjalo companies may help to explain a peculiar set of developments evident from Ayo’s most recent financial statements, for the financial year ending 31 August 2020.

In a disclosure related to which banks host the company’s cash deposits, Ayo still noted that “Absa Bank provides the majority of banking services used by the Group”.

At the same time it was however very evident that Ayo was rapidly moving cash out of Absa and had been doing so since 2019.

At 31 August 2018 all of Ayo’s cash, then over R4-billion, was deposited at Absa. At 31 August 2019 Ayo had R2.735-billion at the bank after, among other things, moving half a billion rand to the Bank of China (BoC). A year later the money kept at Absa had shrunk to R1.339-billion. The accounts holding whatever is left of this money will now be closed.

There is at least one reason AEEI may have started moving cash out of Absa long before having its facilities terminated.

According to Absa’s court papers the bank had already written to AEEI on 26 July 2019 stating that “we will not consider any expansion under our current facilities with the Bank, or open new accounts in the Group”. This followed testimony about Ayo at the Mpati commission.

Since then, the Ayo money kept getting moved to the Bank of China, the same disclosure shows. At 31 August 2019 Ayo had R501-million deposited at the BoC. A year later this was R1.355-billion.

It seems however that Ayo has found a reason to abandon the BoC as well. In its financial report covering the year to 31 August Ayo revealed that it had, after August, moved R740-million out of BoC and split it between two asset managers. Numus Capital, a “niche stock broking and asset management firm” received R540-million to invest in shares on the JSE while Ninety One Fund Managers got R200-million to “invest in the money market”.

Ayo had earlier told amaBhungane that the cash movements reflected sound money management when interest rates fell to record lows last year. It did not mention that it was forced to move money out of Absa.

AmaBhungane questions to which the Sekunjalo companies did not respond included which other banks had closed or threatened to close its banking facilities.

The BoC did not respond to a request for comment.

Read more stories on Iqbal Survé and Ayo

PIC looks on while ‘Survé Inc’ burns through state pensioners’ billions

Iqbal Survé takes another bite at the PIC apple

Sasol dumps Survé

Survé’s share ‘manipulation’: the smoking gun(s)

The post Absa does a Gupta on Iqbal Survé appeared first on AmaBhungane Centre for Investigative Journalism.

A close reading, however, reveals new aspects of Survé’s empire and how it is keeping afloat. The R4.3-billion in pension fund money which the Public Investment Corporation (PIC) controversially invested in Ayo three years ago is being steadily dispersed across his existing businesses and to shareholders – before the PIC can close in on him.

AmaBhungane has in the past revealed the wave of transactions where Ayo, which is listed on the JSE, has used some of this PIC money to do deals that directly and indirectly benefit Survé’s family holding company Sekunjalo Investment Holdings and his associates at the expense of the PIC and other shareholders.

Also read:

Iqbal and friends
How Survé ‘robs Peter to pay Paul’
Iqbal Survé takes another bite at the PIC apple

Sekunjalo has indirect control of Ayo via its majority stake in Ayo’s biggest shareholder, African Equity Empowerment Investments (AEEI).

The new financials released on 23 December show how the pattern of self-dealing has intensified despite the PIC launching a court application in May 2019 to reclaim its money.

The PIC alleges the R4.3-billion investment was made based on Ayo making misleading claims about its prospects and on irregular interventions by former PIC boss Dan Matjila.

Ayo denies this and is opposing the claim, which is yet to be heard.

In its latest financial report Ayo has quietly revealed new channels through which it is using the vast cash pile to fund the rest of Survé Inc. The report also validates previous amaBhungane reporting.

Ayo objects to the description of this cash as “the PIC’s money”, arguing  the company “has many successful cash generating businesses” – but its own financial statements show it is cash flush because of the PIC investment.

• Read Ayo’s detailed response.

4Plus: An Ayo subsidy for Survé Inc

AmaBhungane previously revealed how an Ayo investment in an ostensibly independent company grandly named 4Plus Technology Venture Fund Africa appeared to be a conduit to fund an entity carved from other Survé’s interests .

It was a particularly egregious waste of the PIC funds. At first Ayo bought 9.3% of 4Plus for R75-million. External valuation immediately impaired this investment down to R5.6-million.

According to the new financial report, Ayo was however undeterred and poured more money into 4Plus, ultimately spending R183.2-million for 22%. This was impaired down to R31.8-million in the recent financial results.

In addition to this direct financing, Ayo bought preference shares in 4Plus worth R30-million – effectively a loan that is only repayable in 2027 and can be repaid in shares if Ayo prefers.

In its financial reports Ayo hypes 4Plus as having interests in “digital media, artificial intelligence, software development and telecommunications”.

In reality, the latest financial report shows, 4Plus is a portal to Survé Inc. It holds equity stakes in subsidiaries of majority Survé-owned Sagarmatha Technologies: online shopping website Loot, online news site IOL and Africa Community Media.

4Plus also includes an investment in something called Volt Business Solutions.

AmaBhungane previously showed how Volt was in fact the renamed Independent Digital Lab, a Survé company that had been spun off from Sagarmatha in a convoluted deal involving Survé’s personal assistant.

On paper 4Plus is controlled by a company called Womens Technology Investments which is led by Zoliswa Kota-Fredericks, a former deputy minister of human settlements and also former director of AEEI. When amaBhungane previously approached her for comment she referred us to Ayo’s spokesperson.

The actual mechanics of what 4Plus is doing are a little more complicated than simply giving money to Survé companies. The stated objective is to create an e-commerce business using all these bits and pieces from his empire.

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The financial statements explain:

“Volt will be utilised to drive internet traffic towards the e-commerce platform. IOL and ACM will provide the content and link advertisers to the e-commerce platform. Last Mile Logistics Africa will be utilised to effect delivery of goods purchased on the platform.”

Last Mile is a company that was acquired by 4Plus for a “nominal amount” but according to company records was set up by Lizaan Nel, the company secretary of most Survé companies.

The last time a comprehensive glance under the hood of Survé’s unlisted companies was possible was the thwarted listing of Sagarmatha in 2018. A pre-listing statement was released with comprehensive information about some of Survé’s companies.

According to this document Loot was 83.3% owned by Survé’s Sagarmatha. IOL was 100% owned. Independent Digital Lab, which became Volt, was also 100% owned by Sagarmatha. There is consequently every indication Ayo money was used, via 4Plus, to buy these assets from Survé.

Apart from the millions invested directly in 4Plus, Ayo is also funding 4Plus’s component parts which, recall, are all pre-existing Survé companies.

• Last Mile got a loan of R25.4-million in the financial year and that loan got impaired to zero almost immediately “due to doubt over the recoverability of the loan as a result of the entity’s poor performance”.
• Volt got a loan of R11.5-million in the previous financial year which has now been impaired to zero.
• Loot B2B, part of Loot, effectively got a R15-million loan by issuing preference shares to Ayo which were impaired to zero.

This means that altogether R265.1-million of the PIC cash pile had been invested or loaned to 4Plus and its component parts by Ayo’s financial year-end on 31 August last year. By now it could conceivably be much more.

In response to questions about its investments in 4Plus, Ayo told amaBhungane, “The Group has prioritised several key industries, including e-commerce, remote working/learning, telehealth and green energy, amongst others, which we believe will grow exponentially in the next 5-10 years on the African continent… The investment in 4Plus is one such investment.”

The company said Ayo was not in a position to comment “on who 4Plus is purchasing business entities from”.

Regarding impairments to the value of its investments, Ayo said: “Impairment is a judgement call and is not a write-off. Early stage eCommerce ventures are typically impaired by auditors. We still see tremendous value in our investments and these may be shown as fair value gains in the future.”

What’s going on at Independent?

In a double insult to the PIC it appears that Ayo money is also being used to extract assets and income from Independent Media, which is controlled by Survé and in which the PIC is heavily invested. This precedes Survé possibly losing control of the media group.

In separate court proceedings from the Ayo case the PIC is trying to liquidate Sekunjalo Independent Media (SIM), the company through which Survé controls Independent and its countrywide stable of newspapers and magazines. The debt the PIC is looking to recover from SIM is R609-million, according to summons issued in November 2019.

In this context 4Plus’s activities are doubly worrisome.

For example, one of 4Plus’s assets is an unquantified share in Africa Community Media (ACM). The last time any information about ACM was in the public domain it was a 100% subsidiary of Independent Media. In other words Ayo appears to have funded 4Plus to extract an asset, rumoured to be one of the very few profitable parts of the flailing newspaper business, from Independent.

This means that Ayo is potentially helping dissipate Independent assets before Survé loses control of the media group.

The company told amaBhungane: “Ayo is not the controlling shareholder of 4Plus. Similarly, ACM is not a subsidiary of Ayo and Ayo has no direct interest in the business whatsoever. We cannot comment on any transactions happening between the two parties, although [we] can see the strategic fit of ACM within the 4Plus portfolio.”

“Keeping an eye”

Despite trying to claw back what remains of its investment in Ayo since May 2019, the PIC has still not obtained a preservation order to stop the apparent flagrant abuse of the funds.

The current chief executive of the PIC, Abel Sithole, recently assured MPs that the PIC is at least “keeping an eye”.

During a presentation to the standing committee on finance in December Sithole claimed that a preservation order was in the works.

“While we are working on processes to recover, to the extent that we are able to recover the R4.3-billion that was invested in Ayo, we have to make sure that at least when – if – we succeed for the court to grant us access to that then the money is there.”

“We have instituted an action to preserve but the requirement in law to force that kind of preservation is quite onerous. It still has to be sanctioned by a court. To date we have not been granted that. We are still pursuing and keeping an eye on how those assets in Ayo are being treated.”

The PIC did not respond to an amaBhungane query about when it first sought the preservation order.

Ayo in turn said:

“There is no preservation order and never has been. Ayo is NOT trying to dissipate funds. Quite the contrary. More than three years after the initial investment, Ayo still holds R3.2 billion in cash after making certain investments.  As any investment fund manager will tell you, investing funds is far more beneficial to their owner (be it person or a company) than holding on to cash at hand (other than what is necessary for funding operating expenses), as inflation erodes the value of the capital.”

The impetus to recover the money increased last year with the release of the report of the Mpati commission of inquiry into allegations of impropriety at the PIC. The Ayo investment and other deals with Survé were singled out for particularly scathing criticism and the PIC advised to not only recover the money but possibly pursue criminal charges.

“The Ayo transaction demonstrates the malfeasance of the Sekunjalo Group, the impropriety of the process and practice of the PIC as well as the gross negligence of both the CEO and CFO [of the PIC],” Mpati wrote.

In December 2017 the PIC circumvented its own evaluation protocols and hurriedly invested in Ayo at the behest of its then-chief executive, Dan Matjila, who was friendly with Survé.

The investment was done at what appears to be a vastly inflated price and without standard conditions that would have protected the PIC from massive losses it subsequently suffered, specifically a downside protection agreement.

Despite this, Finance Minister Tito Mboweni intimated that Survé and Matjila should be given another chance to state their case. At the same committee meeting in December where Sithole addressed the Ayo issue, Mboweni struck a conciliatory note.

“I think that maybe this committee should invite the chairperson of Sekunjalo and Ayo, also the previous CEO of the PIC to have a conversation on how those arrangements were made and so on. I think it would be very wrong for us to tarnish the image of the whole Ayo organisation or the whole Sekunjalo organization based on this.”

A magical money tap

Ayo’s main source of income is simply interest earned on the remainder of the PIC money in the bank.

With the powers that be cutting interest rates to historic lows last year, this effortless money tap had been tightened slightly. Ayo only earned R242-million interest in the financial year ending 31 August as opposed to R323-million the previous year.

That did not stop it from declaring a dividend of R223.7-million which brings the total payout to shareholders to roughly R612-million since the PIC invested.

To put that into perspective the interest that Ayo earned just by sitting on the PIC cash was a cumulative R928-million by the end of August 2020. It paid out 66% of that as dividends without achieving any operational profit whatsoever.

These dividends mostly flow to Ayo’s biggest shareholder, AEEI, which is majority owned by Survé via Sekunjalo.

Ayo did acquire a number of real businesses, the largest of which is Sizwe Africa IT. In that deal it paid R165-million for 55% of the IT company.

Sizwe is Ayo’s biggest source of actual operational income but is fighting the State Information Technology Agency in court after it won a tender to supply tablets to matric pupils in the Eastern Cape at allegedly inflated prices. The tender has been interdicted but Sizwe as well as the Eastern Cape department of education are fighting back, Ayo said in its financial report.

Ayo’s prospects of making money by actually doing something are however dim this year.

AmaBhungane previously revealed that Ayo’s single largest customer, Sasol, was prematurely pulling the plug on a seven-year contract for IT services. In the recent results Ayo revealed that this contract had been responsible for revenue of R418-million and net income of R73-million. Even that revenue stream will now evaporate.

It’s a good thing there is still plenty of the PIC’s money left to play with.

Read more financial investigations by Dewald van Rensburg

Iqbal Survé takes another bite at the PIC apple

Sasol dumps Survé

The post PIC looks on while ‘Survé Inc’ burns through state pensioners’ billions appeared first on AmaBhungane Centre for Investigative Journalism.

Often the ultimate beneficiary is Survé’s family holding company, Sekunjalo Investment Holdings, which owns 62% of his main listed entity, African Equity Empowerment Investments (AEEI). AEEI in turn owns 49% of Ayo but effectively controls it.

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PIC money has funded acquisitions from related parties, loans for related parties and fees paid to related parties tied to Sekunjalo or AEEI.

That is on top of generous dividends paid largely to the benefit of AEEI, using the PIC cash even while Ayo’s actual operations lose money.

This has continued even after the PIC went to court in May 2019 to try to reverse the investment.

A new deal in the pipeline will see this pattern of self-dealing take a particularly flagrant turn where Survé effectively buys something from himself with Ayo money.

The trick involves a company called SGT Solutions which is 60%-owned by AEEI and 40% by Ayo – but which Ayo legally controls thanks to a shareholder agreement.

AEEI’s majority shareholding in this company was itself apparently funded by Ayo last year in a particularly convoluted transaction where Ayo paid an initial R60-million and then another contingent sum of R33.5-million but AEEI ended up owning most of the company.

The latest deal sees SGT paying R48-million for shares in something called Bowwood Mainstreet 180.

The problem is that Bowwood is itself already 60% owned by AEEI. That means a company 60%-owned by AEEI (SGT) is buying shares in another company 60%-owned by AEEI (Bowwood).

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More importantly, SGT is 40%-owned (and funded with inter-group loans of at least R33-million) by Ayo while Bowwood is 40%-owned by Sekunjalo, Survé’s family holding company.

The net effect of this transaction is that R48-million cash provided by Ayo leaves SGT to the benefit of AEEI (R28,8-million) and Survé (R19,2-million).

While AEEI and Sekunjalo’s respective direct shareholdings in Bowwood get diluted, the new shareholder SGT is controlled by AEEI and by extention Sekunjalo as well so that no actual change in control takes place.

If you look at Survé’s Sekunjalo group of companies as a whole, you just see money moving from Ayo towards the exit.

In its original announcement of the transaction on the JSE’s news service on 1 June, AEEI made no bones about the transaction only serving one purpose – to let it “realise cash and utilise the proceeds from the Transaction to reduce its [AEEI’s] current external debt levels”.

The transaction is however also a continuation of a number of other Ayo-related deals. Bowwood is just a shelf company housing 25% of SAAB Grintek Defence.

AEEI has already used Ayo cash to buy a subsidiary of SAAB, Global Command and Control Technologies.

As with SGT this deal saw Ayo cough up the purchase price but AEEI end up with 74% of the shares.

Ayo has subsequently, according to interim financial results published in May this year, given Global Command loans of over R100-million.

There may however be a hiccup with the new SGT deal.

It seems someone at AEEI had misunderstood the JSE’s rules around tangled related-party deals like this one. Either that or they thought the bourse would not notice.

In the original June announcement mentioned above, AEEI told shareholders the transaction was not subject to the approval of AEEI shareholders.

On 11 August AEEI published an update: “Shareholders are … advised that the Transaction has subsequently being classified as a … related party transaction requiring approval from Shareholders prior to the implementation.”

AEEI said it was preparing a circular for shareholders and would be engaging with the JSE in respect of the timing of its issue.

If AEEI powers ahead and puts the transaction to a vote, the related party in the deal, Sekunjalo, will not be able to vote.

That takes Survé’s 62% out of the equation, leaving a body of shareholders owning 38%.

It remains to be seen if this latest Ayo exploit succeeds.

The PIC has a pending application in the Western Cape high court to claw back the money it invested in Ayo.

According to a summons lodged on 29 May last year, the state pension fund manager was persuaded to invest the R4.3-billion in Ayo based on misrepresentations of its prospects. Ayo is defending the matter.

The PIC cited the court case when declining to comment for this story.

“The Public Investment Corporation (PIC) has embarked on a court process, which seeks to recoup its investment in Ayo Technology Solutions (Ayo). Given that this process is underway, the PIC reserves its comments on Ayo’s affairs at this time,” it said by email in response to questions.

It is understood that the PIC had also considered making an urgent application for an anti-dissipation order to freeze Ayo’s assets, but felt it lacked the necessary evidence which was at the time largely confined to journalistic investigations like those of amaBhungane.

While the legal process grinds on, Ayo continues to use the PIC money for acquisitions that often benefit related parties as well as the payment of dividends.

According to Ayo’s financial results for the six months to the end of February this year, interest earned on the PIC cash amounting to R108.76-million was still the source of virtually all Ayo’s profit.

The cash is however dwindling. By 29 February this year only R3.3-billion of the initial R4.3-billion remained.

A dividend of 35 cents per share got declared nonetheless, depleting the coffers by another R120.44-million.

The results reveal some more apparent liberties taken with the PIC funds.

AmaBhungane previously reported how Ayo invested R75-million in a company tied to Survé’s personal assistant, Tricia Apollis. That investment was revalued by external auditors and impaired down to R5-million in Ayo’s subsequent accounts.

But the latest results show the crash in value did not stop Ayo from investing another R113-million in the Apollis company. This revelation is made in unaudited interim results making it possible that another severe impairment may occur when auditors have a look.

In the same story, amaBhungane reported evidence that Ayo was being used to pay off Survé’s private property investments, specifically a set of expensive apartments in the exclusive Silo development in Cape Town’s V&A Waterfront district.

This has evidently continued with Ayo paying R1.4-million “rental” to Prodirect Investments 112, the company that owns Survé’s apartments.

Ayo and AEEI declined to respond to questions.

“Both companies have declined to give detailed responses as the information is contained in the SENS announcements and both stand by the fact that all compliance has been dealt with in terms of the requirements for listed companies,” spokesperson Kaz Henderson said by email.

Survé did not respond to questions.

The PIC’s original investment in Ayo was subject to scathing criticism in the report of the Mpati commission of inquiry into allegations of impropriety at the PIC.

There was a litany of adverse findings against Survê and his companies, with the report stating, “The Ayo transaction demonstrates the malfeasance of the Sekunjalo Group, the impropriety of the process and practice of the PIC as well as the gross negligence of both the CEO and CFO [of the PIC].”

The report reserved its most severe recommendation against any implicated company for Sekunjalo, calling for further forensic reviews, the recovery of the Ayo money and legal steps regarding potential criminal conduct by Sekunjalo.

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Survé’s was found to have engaged in “outright manipulation” of Ayo’s value before the PIC invested as well as faking market demand for the shares.

The multi-billion-rand deal was rammed through by former PIC chief executive Dan Matjila, with whom Survé was friendly, riding roughshod over the formal processes meant to govern PIC investments.

Among the things that fell by the wayside was a downside protection agreement that the PIC wanted to shield it from a collapse in the Ayo share price. The investment is now nearly worthless after Ayo’s share price in fact did collapse from R43 when the PIC invested to R5.75 currently.

The Financial Sector Conduct Authority is also investigating a case of share price manipulation against AEEI, Ayo and sister company Premier Fishing.

Also read

Survé’s share ‘manipulation’: the smoking gun(s)
PIC: How years of digging paid off
Sasol dumps Survé
How Survé ‘robs Peter to pay Paul’

The post Iqbal Survé takes another bite at the PIC apple appeared first on AmaBhungane Centre for Investigative Journalism.

The Survé family’s Sekunjalo Investment Holdings has extracted yet more from the R4.3-billion that the Public Investment Corporation (PIC) fell over itself to invest in Ayo Technology Solutions in December 2017.

AmaBhungane has previously revealed a slew of transactions that Ayo embarked on to benefit its parent company, African Equity Empowerment Investments (AEEI). AEEI is 60% owned by the Survé family via Sekunjalo.

New information suggests this pattern of indirect benefit has been repeated in different ways.

Listen to amaBhungane reporter Dewald van Rensburg discusses the story with Kieno Kammies.

Independent benefit?

For one thing, evidence suggests the PIC funding has been rerouted to subsidise Sekunjalo’s greatest liability, the Independent Media group, which owns Independent Newspapers.

The PIC has launched a court application to liquidate Sekunjalo Independent Media, which controls Independent Media. The PIC, which funded the Independent deal, is owed R609-million according to its court application.

The PIC has launched separate proceedings to recover the R4.3-billion it invested in Ayo.   

Ayo appears to have started using some of the PIC cash to cover some of Independent’s expenses, effectively spending down part of the PIC cash-pile to help keep the newspaper group afloat.

Ayo and Independent are unrelated businesses (but for Survé being a common indirect shareholder) and there is no obvious justification for Ayo to bail out Independent.

A copy of what appears to be Ayo’s February 2019 payroll shows that at least 41 employees of Independent were being paid through Ayo at that point.

It appears from the payroll that Ayo had taken over virtually the entire corporate affairs and IT offices of Independent – and that more Independent staff were paid by Ayo than there were actual Ayo staff.

Only 20 employees on the payroll were unambiguously just working for Ayo. This includes the chief executive, Howard Plaatjes, and corporate affairs director Vanessa Govender, both of them incidentally previous executives of Independent.

There have long been rumours in media circles that Independent staff were no longer being paid by Independent. This payroll file appears to confirm that.

In a response to questions about the payroll, Ayo threatened legal action, saying it was “deeply concerned” amaBhungane had “procured” a copy.

“This is private, confidential information, is not for public consumption…  This has the hallmarks of corporate malfeasance. AYO consequently reserves its full rights in this matter, including the right to lay civil and criminal charges – against you, amaBhungane and the source.”

Later a spokesperson for the company said, “It should be noted that the Sekunjalo Group companies deploy a centralised payroll processing system… AYO also wishes to make it categorically clear that there are no undeclared related party associations within its group.”

That may be debatable, but those related party transactions Ayo did disclose in its latest audited financial statements are concerning enough.

The financials, released at the end of January, demonstrate how yet more Ayo money is going to the wider Sekunjalo group.

4Plus – bad for Ayo, but good for Survé?

In a previous “reviewed” (unaudited) set of financial statements released on 20 December, Ayo waxed lyrical about a new R75-million investment in a company called 4Plus Technology Venture Fund Africa.

But in the audited financials released on 31 January, it is now revealed that this investment was immediately impaired down to R5-million “based on an expert’s valuation”.

So Ayo’s stake in 4Plus is worth less than 7% of the R75-million it paid, according to the auditors.

The financials state that the R75-million bought Ayo 10% of 4Plus – and that Ayo was buying another 5%, though the price is not disclosed. Share registers procured by amaBhungane bear this additional share acquisition out.

Click on the Evidence docket to see Ayo’s 2019 and 2020 financial statements.

It looks like throwing good money after bad, but it might in reality be throwing money at Survé and Independent.

4Plus, according to the audited financial statements, “has interests in digital media, artificial intelligence, software development and telecommunications”.

According to the earlier “reviewed” results, 4 Plus’s big asset is something called VoltAfrica and that is where it gets interesting.

ReVolt

VoltAfrica seems to be a piece of Independent that has been spun off and set up as an external service provider doing work with Independent.

VoltAfrica has listed itself on the jobseeker website Talent360.co.za with the following self-description: “We are the exclusive digital services provider for Independent Media’s icon brands, which includes digital platforms such as IOL, national online newspaper titles such as The Star, Saturday Star, Pretoria News, Sunday Independent, Cape Times, Cape Argus, Daily News, Natal Mercury, Sunday Tribune and other regional titles.”

It provides digital marketing products, using Independent titles as a platform.

There is more.

VoltAfrica was until very recently a Sekunjalo company. It was called Independent Digital Lab and owned by Sagarmatha Technologies, which belongs to Survé’s Sekunjalo.

Until April last year VoltAfrica even had Survé and Ayo’s Plaatjes among its directors.

Then Independent Digital Lab/VoltAfrica got bought by, or transferred to, a company called Apollis Millennial Investments.

Whatever purchase price there was would have been for the benefit of Sagarmatha, which is to say Sekunjalo, which is in turn to say Survé.

Apollis was subsequently renamed 4Plus and Digital Lab was renamed VoltAfrica.

So Sagarmatha (controlled by Survé) transferred a subsidiary to 4Plus and then Ayo (indirectly controlled by Survé) paid 4Plus R75-million.

VoltAfrica also got a direct loan of R11.5-million from Ayo, according to the company’s financial statements.

One of VoltAfrica’s three active directors is Kubeshnee Subrayan, who was on the Ayo payroll in early 2019. Samantha Naidu, who lists herself on LinkedIn as the chief executive of VoltAfrica, was previously the head of direct advertising for Independent.

Tricia and Heidee

Ayo does not give any hint in its financial statements and limited responses to questions that the investment in 4Plus required any related party disclosure.

When we asked Ayo chief executive Plaatjes about the ownership of 4Plus, he insisted, “There is no related party relationship as this is an independent consortium.”

But 4Plus was originally known as Apollis Millennial investments because two of its founding directors were sisters Tricia and Heidee Apollis and Heidee is given by the company’s share register as the original sole owner.

Tricia Apollis is a former Independent journalist and was a personal assistant to Survé who has accompanied him around the world when he travelled to BRICS summits and the World Economic Forum. She is evidently very close to him.

She gives her residential address as a unit in the extremely expensive Silo development in Cape Town’s V&A Waterfront.

This is one of four units in that complex owned by Pro Direct Investments 112 – a private company with Survé and his two sisters as directors. The apartment was worth about R24.5-million when Survé bought it in 2018.

So the company getting money from Ayo was co-founded by Survé’s personal assistant who is living in his apartment.

AmaBhungane originally approached the other Apollis, Heidee, to procure the 4Plus share register, after which she sent a WhatsApp message saying, “Please don’t phone or send me emails again!”

Before breaking off communication, she did however provide her address – the same Silo apartment where her sister lives and which belongs to the Survé company.

Mystery shareholders

One mystery remains. If Ayo now owns 15% of 4Plus and its subsidiary Volt, who owns the rest?

Ayo says it is not the Apollis sisters, but rather a consortium of formidable female businesswomen in the technology field completely independent from Ayo.

Plaatjes said that Zoliswa Kota-Fredericks, a former deputy minister of human settlements, is a “key shareholder” and chair of 4Plus. This shareholding is via a company called Womens Technology Investments, which the 4Plus share register bears out. This company again has Tricia Apollis as a director.

Kota-Fredericks initially told amaBhungane she “reserves her right to comment”. She referred amaBhungane to Ayo’s spokesperson, Kaz Henderson, which is strange if her consortium is independent of the company.

Company records show that, on the same day she became a director of Womans Technology Investments, Kota-Fredericks also became sole director of five other companies linked to Survé.

Up to Kota-Fredericks’ appearance as a director on 1 March 2019 all the companies had the same two directors.

One is Lizaan Nel, the company secretary of Survé’s niche asset manager 3 Laws Capital.

Both Tricia and Heidee Apollis blocked amaBungane’s phone numbers and did not respond to emails.

And yet more related partying

Another new investment by Ayo is in a company still going by its registration number, K2018010234, rather than a real name.

This one was also set up by the two company secretaries working for Survé.

Ayo spent R15-million to partner with the existing Sekunjalo online shopping company Loot.co.za to establish a supposedly new e-commerce business under K2018010234.

The auditors also immediately impaired this investment by R12.2-million.

The company’s sole director is Valentine Dzvova, the group financial manager at Independent.

Another item in the Ayo reviewed results is a small related party note that the company has paid rent to two different entities.

One was Sekunjalo Properties (co-directors: Survé and his sister).

The other was Prodirect Investments 112, the Survé company that owns the luxury Silo apartments. The rent of R1.73-million would cover a large proportion of the payments on the bonds of R22.65 million registered over some of these units.

This is where one or both of the Apollis sisters live. AmaBhungane’s questions about Ayo apparently paying off Survé’s personal debt, like most questions, went unanswered.

Dividends or dissipation?

If the PIC succeeds in its court bid to claw back the R4.3-billion invested in Ayo, it is not clear how much will be left to attach.

After already having paid out dividends of R221-million, Ayo has announced a further R55-million will be paid out.

AEEI, Ayo’s parent company, released its own financial statements on the same day as Ayo and it appears that the Ayo dividend is simply being passed on to AEEI shareholders, of which Survé’s Sekunjalo is the major one with a 60% stake in the company.

AEEI, which owns 49% of Ayo, is getting a R22.5-million dividend from Ayo and has in turn declared a dividend of R29.5-million, 60% of which goes to the Survés.

The centrepiece of Ayo’s finances however remains the R3.6-billion that was left of the R4.3-billion it was given by the PIC in August last year. The company had profit after tax of R181.8-million, but got interest on its bank balance of R295-million.

Its profits on which the dividends are based fundamentally come from the PIC money.

These cash distributions and Ayo acquisitions are continuing despite all the company’s cash being under threat of claw-back by the PIC and of its major customer, Sasol, recently having cancelled its contract.

Also read

Analysis: How ex-PIC boss swallowed Iqbal Survé’s Indy lemon

Another blow for Survé as auditors quit

Survé’s share ‘manipulation’: the smoking gun(s)

Dr Dan and Dr Survé mistreat the PIC

*This article was changed after publication to reflect that Sagarmatha’s company secretary had already resigned at the end of January 2019.

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The post How Survé ‘robs Peter to pay Paul’ appeared first on AmaBhungane Centre for Investigative Journalism.

It coyly noted that an unnamed “significant customer” had “purported” to cancel its deal with Ayo, giving the embattled company a six-month notice period, set to run out at the end of March 2020.

The significant customer is Sasol and the deal is a seven-year contract worth R2.3-billion that has been providing a huge chunk of Ayo’s income.

• Read some of our earlier stories here, here and here.

Ayo is already defending a high court bid by the Public Investment Corporation (PIC) to claw back the R4.3-billion invested in Ayo’s controversial “private placement”, which the public pension fund manager now alleges took place under false pretences.

Clinching the Sasol deal was ostensibly the whole reason that the listing of Ayo had to be rushed through in December 2017 – causing the PIC to flagrantly upend its usual due process to invest R4.3-billion for overvalued shares, now worth only R131-million at Monday’s share price.

The PIC claims the investment was irregularly approved by among others its former CEO Dan Matjila.

Sasol’s identity as the  “significant customer” is thinly disguised in Ayo’s financials, which have yet to be fully audited,.

They mention that Ayo and the customer “concluded an ICT Master Service Agreement in May 2018 whereby Ayo would render to the significant customer a host of ICT services effective from 1 July 2018”.

Those dates correspond exactly to the jubilant announcement of the Sasol deal in the Independent News and Media newspapers controlled by Survé. The papers also called it a “master services agreement”.

An insider with extensive knowledge of Ayo’s workings confirmed that “it’s definitely Sasol”.

In sworn testimony before the Mpati Commission of Inquiry into the affairs of the PIC, Survé himself said that Sasol was the reason for Ayo embarking on an “accelerated listing”.

Former Ayo chief executive Kevin Hardy similarly testified at the commission that

“Sasol was instrumental in the process and to the value of Ayo.”

Hardy told the commission the contract went live with Sasol in July of 2018, again matching the date given for Ayo’s “significant customer” that is now trying to get out of its contract.

Ayo’s financials state that Ayo “disputes this significant customer’s right to cancel the agreement” and that it has invoked the arbitrations provisions under the agreement.

Sasol declined to comment. “Please will you contact Ayo in respect of their disclosures,” spokesperson Matebello Motloung said in response to amaBhungane’s questions.

Ayo, by way of spokesperson Kaz Henderson, said that it “is currently not able to reveal who the client is or comment as the matter is following due process”.

Losing Sasol would be a major blow.

When Ayo listed, it had two major plans on the horizon. It was going to spend R1-billion of the PIC’s money buying a 30% share in British Telecoms South Africa (BTSA) from its own parent company, the Survé-controlled African Equity Empowerment Investments (AEEI).

Survé family investment company Sekunjalo Investment Holdings owns 60% of AEEI.

After acquiring the BTSA stake, Ayo was going to conclude a parallel “alliance agreement” with BTSA whereby Ayo would bid for the Sasol work using BTSA as its subcontractor. Sasol was already a BTSA client, but the new arrangement still had to go through a bidding process with six other companies in the running.

The alliance agreement went ahead, but BTSA baulked at the sale of its shares to Ayo after the first negative reports about the PIC investment started appearing in media. It is the Sasol work being done in terms of this alliance agreement that Ayo now stands to lose.

• Previous reporting on the PIC, AEEI and BTSA.

In the interim financials, Ayo disclosed that a significant portion of its increased earnings flowed from “the contract with a multinational company [commencing] in July 2018”.

“Revenue of R430-million was generated in relation to this contract, of which the gross margin amounted to R121-million.”

At the Mpati commission, Hardy said that there was panic about getting the Sasol job clinched.

“The business was heading towards its first reporting period at the end of March 2018 and there were concerns that we had not closed the Sasol deal yet and that we needed to announce something positive to the market to justify the investment the PIC had made,” he said.

“Unfortunately due to all the media noise, Sasol were also getting nervous about the contract to the extent that we were sent a note by Sasol putting the contract on hold until further notice… [N]umerous emails were written and commitments made to Sasol. Sasol would not allow Ayo to announce the deal until all their concerns had been addressed.”

Losing its most prominent customer is just the latest in a series of set-backs for the company.

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Ayo has also lost its auditor, BDO, which decided to abandon ship at a number of Sekunjalo companies late last year. The Financial Services Conduct Authority has also raided the major Sekunjalo companies’ offices, including Ayo, in relation to apparent share price manipulation.

Worst of all, the PIC is suing to get its entire R4.3-billion back, with interest, while Ayo has only R3.68-billion cash left after making a number of acquisitions, paying out R221-million in dividends as well as making a number of loans to related companies.

Another R55-million in dividends was declared in the new financial report while Ayo also announced some new acquisitions made after the end of the period covered by the financials.

AEEI released its own financial statements on the same day as Ayo and it appears that the Ayo dividend is simply being passed on to AEEI shareholders. AEEI, which owns 49% of Ayo, declared a dividend of R29.5 million, 60% of which goes to the Survé family, via Sekunjalo.

*Additional reporting by Sam Sole

The post Sasol dumps Survé appeared first on AmaBhungane Centre for Investigative Journalism.

Details of the trades have been laid bare in a Financial Sector Conduct Authority (FSCA) affidavit used to obtain a search warrant targeting Survé premises in October. His companies are now challenging the warrant in the Western Cape High Court

Survé’s domination of the market for Ayo shares was especially true during three months the share price was subject to a deeply flawed downside agreement that required minimum effort to squirm out of.

Being the only person interested in your own company – he is indirectly Ayo’s biggest shareholder by far – is however not a crime and Survé’s overwhelming role in the market for Ayo shares has been reported before. He has denied market manipulation, saying that he simply sees Ayo as an “attractive long-term investment”.

More important is the way in which Survé traded the shares, which can be an offence under section 80 of the Financial Markets Act carrying a fine of up to R50-million and imprisonment of up to ten years.

The Johannesburg Stock Exchanged referred suspicious Ayo trading to the FSCA leading to the October raids. The FSCA has only successfully prosecuted or settled eight market manipulation cases in the past decade and none of those related to the owner of the company in question.

The FSCA is particularly interested in Survé’s trading during the operation of the downside protection agreement between his company Arican Equity Empowerment Investments (AEEI), which sold Ayo shares to the PIC and the PIC.

The agreement required that the Ayo share price stay at above R22 from 19 October 2018 to 19 January 2019, failing which AEEI would have to pay part of the difference to the PIC.

AmaBhungane has previously reported how Ayo’s share price was mysteriously maintained at just above R22 for that period and started its descent to the current level of R5.45 straight afterwards.

In a lengthy and technical affidavit motivating for the search and seizure warrant, FSCA investigator Alfred Shimati noted that there was a “notable increase” in Survé’s trading in Ayo shares during this period.

“It is reasonable to suspect that this potential liability … may serve as a motive to manipulate the Ayo share price,” he said.

Before raiding the offices of three of Survé’s companies last month, the FSCA conducted an exacting study of what on the face of it was clear-cut manipulation of Ayo’s share price.

“Prohibited practices” under the Financial Markets Act (FMA) include at least three things the FSCA accuse Survé of doing.

Shimati’s affidavit spelled out the evidence using a sample of trading days.

On 25 May last year for instance, there was a yawning gulf between the prices at which sellers were offering Ayo shares and which potential buyers (other than Survé) were willing to pay. In practice this amounts to there being zero real demand for the shares.

In the morning the best bids were at R8.92 while the largest quantity of shares was bid for at only R1.03. People were only willing to sell them at R30. This was after Ayo shares had already tanked from R45 when the PIC invested in December 2017.

Just then, Survé put in a bid to buy 1 000 Ayo shares at R29.90. Less than a minute later Survé put in another bid to buy 1 000 shares at R29.90 – much more than the other bids on offer.

Survé kept this up throughout the day, sometimes putting in bids for Ayo shares three times higher than any other bids on the market. Thanks to Survé’s purchases, and his purchases alone, the Ayo share price had shot up to R43 in the course of the day. He put in a last bid of R40, which would have been the closing price, but he was too late and it was rejected by the JSE’s trading system.

Watch: Dewald van Rensburg takes us through his ‘Iqbal and friends’ investigation.

“If Sekunjalo did not trade, it is highly probable that the Ayo share would have closed at R26.99,” Shimati said in his affidavit. Creating this kind of false impression of demand contravenes section 80(3)(b) of the FMA.

This pattern was repeated on the other days canvassed in the affidavit. On 29 May 2018 Survé also tried to buy a tiny amount of extra Ayo shares at R44.28 just as the market closed at R40 (also thanks to him).

“The significantly higher bid entered by Survé at or near the close of market and the higher price he paid for a small volume of shares give rise to the reasonable suspicion that … the primary purpose of which was to change the closing price of the Ayo share,” said Shimati.

Survé’s trades that day “make no commercial sense”, Shimati added.

30 November, in the middle of the downside protection agreement, is particularly suspicious. Only Sekunjalo bought any shares that day. Dangerously for Survé, the share price was hovering at R22.25 – cents above the level it had to stay at.

Sekunjalo then spent the entire day buying tiny tranches of 100 shares at successively higher prices to get Ayo up to R23. It did the same thing for a number of preceding days.

Back at Survé Inc

These case studies secured Shimati a warrant to raid Survé’s Sekunjalo and 3 Laws Capital as well as AEEI, the listed investment vehicle he controls and is run by his brother-in-law, Khalid Abdullah. The raids on 9 October were not without incident. Among other things Survé conveniently “lost” his cellphone when investigators needed it.

In a report following the raid, Shimati recorded that Survé had “temporarily disturbed” the search when he arrived on the scene.

“He [Survé] made allegations inter alia that the investigation of his Company was a political plot aimed at intimidating him and bringing his Company’s name into disrepute as well as to bring reputational harm to him personally. He submitted that had the documents been requested from him by the FSCA, he would have willingly produced them.”

The “missing” cellphone incident came with Survé accusing investigators of already taking it. “When he was requested to provide his cell phone, he responded that he did not know where his cell phone was. He stated that he arrived with the cell phone at the premises and that it may have been taken by someone from the investigating team.”

“Dr Surve again expressed that he did not have his cell phone with him and was unaware where it may have vanished to… When attempts were made by one of Sekunjalo’s Attorneys to call his cell phone, it went straight to voicemail.”

There were also clumsy attempts to stop the raid. The company the FSCA uses to clone hard drives, Exactech, wrote up “investigation diaries” throughout the day to register noteworthy events. Two of these, relating to the copying of hard drives, say that a “company representative” came and physically pulled the machine’s plug out of the wall “even though we advised them … it might destroy the hard drives”.

Survé has applied to the Western Cape High Court to have the warrant for the raid scrapped and all seized records returned; alternatively that some of it be returned on the grounds that the FSCA seized more than it was entitled to. A separate case was filed by AEEI, through which Survé controls Ayo.

Survé argues the raid was an unconstitutional infringement of his privacy as there were less invasive means of getting the information – like asking him for it.

He also claims that judge Patrick Gamble, who gave the FSCA the warrant, was not given the full facts.

What was allegedly withheld is that Survé had earlier lodged his own complaint to the FSCA claiming that conspirators were intentionally driving down the share prices of not only Ayo, but also AEEI and his other listed company, Premier Fishing and Brands.

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Survé had previously met with the FSCA and been very willing to discuss his own allegations. Even though this is completely unrelated to the JSE complaint that led to the raid, Survé says this demonstrates he would also have cooperated when the tables were turned.

In his affidavit, Survé again alleged a conspiracy against him.

“There may be asset managers and/or hedge funds working with the media to short the shares of the JSE-listed companies, i.e. by employing a strategy aimed at creating the impression that the shares were losing value in order to try to get unsophisticated shareholders to sell their shares in order to further lower the share price,” he said.

Although the FSCA investigation only covers the period up to the end of February this year, JSE market data shows that both Sekunjalo and 3 Laws have kept on buying Ayo shares through the year. They still dominate the market.

Survé has previously defended his dominance in the market for Ayo shares.

“The Sekunjalo Group is an investor in many companies on the JSE and sees Ayo as an attractive long term investment. Sekunjalo generally invests in companies and takes a 5 to 10 year view like Warren Buffet, Berkshire Hathaway,” he said by Whatsapp as far back as September last year.

• Read Dr Dan and Dr Survé mistreat the PIC

The post Survé’s share ‘manipulation’: the smoking gun(s) appeared first on AmaBhungane Centre for Investigative Journalism.

The minutes noted that if the liquidation application was successful, “the PIC would have an ability to Investigate the actions of the Directors [of Sekunjalo Independent Media]”.

Those directors include Survé, who is cited as the second respondent in the application.

Survé’s family investment company, Sekunjalo Investment Holdings (SIH) dominates SIM, despite the inclusion of some smaller union and community shareholders.

SIM in turn owns 55% of Independent News Media South Africa (INMSA), the publisher of 20 newspapers.

The PIC itself owns 25% of INMSA while Interacom Holdings owns the balance of 20%.

Interacom consists of a previous Survé backer, the China Africa Development Fund, and Chinese state-owned China International Television Corporation.

It is SIM, not Independent, that stands to be liquidated although the potential effect on the newspaper group is unclear.

Technically, SIM’s share could be sold to a new investor by a liquidator.

In September the PIC demanded repayment of R609 203 987 from SIM, but to no avail.

This money from SIM was due more than a year ago in terms of a 2013 loan agreement which called for an initial advance R579 683 083 to be repaid within five years.

SIM has repaid R325 750 000, but interest larger than that has also accrued, leaving an outstanding balance of R609 203 987 as of 30 June 2019.

In his affidavit accompanying the liquidation application PIC acting CEO Vuyani Hako made a straightforward case.

“The Applicant is in possession of some of the First Respondents financial statement which show that the First Respondents debts are larger than their assets resulting in the First Respondents inability to honour its debts in terms of the loan agreement.”

“The Respondent continues to trade notwithstanding the fact that they remain indebted to the Applicant for payment of the outstanding loan amount. In the circumstances, I respectfully submit that the only conclusion to be drawn from the Respondents failure to pay the Applicant is the fact that the Respondent is commercially, if not factually insolvent and unable to pay its debts when they become due.”

Newspapers in the Independent stable have attacked the liquidation application as part of a political conspiracy to stop transformation in the media.

While SIM is yet to respond in court, it hinted at its legal strategy in an article published on its news website, IOL.

Takudzwa Hove, one of SIM’s four directors, was quoted as saying that SIM in fact does not owe the PIC anything at all. His argument is that the PIC has already swopped the debt for shares in Sagarmatha Technologies, the company Sekunjalo tried and failed to list on the JSE last year with handsome PIC backing.

Survé’s friend Dan Matjila was at the time still chief executive of the PIC.

Whether or not Hove’s argument makes it into court papers, it seems incongruous because the set of transactions that were meant to take place between Sagarmatha and SIM were conditional on the listing, which never happened.

Matjila’s testimony at the Mpati Commission confirmed this.

“One of the suspensive conditions of the agreement was the successful listing of Sagarmatha which ultimately never happened and therefore the agreement never became operational and lapsed,” said Matjila.

So, how bad is SIM’s position?

The R609 203 987 owed to the PIC is not even close to the full extent of SIM’s debt. The PIC also holds convertible preference shares which were worth R433 million at the end of 2016. The PIC also gave a shareholder’s loan of R183-million directly to Independent which is due next year. In Matjila’s statement to the Mpati commission, he somehow got the values of these debts completely wrong.

According to him SIM only owed R234-million on the 2013 loan – but this excluded accrued interest. He claimed the preference shares were worth R285-million when in fact they are worth R433-million.

We know this due to the failed listing of Sagarmatha, which provided the only recent window into the financial affairs of SIM.

Like Survé’s controversial Ayo Technology Solutions, Sagarmatha would have received billions from the PIC (under Matjila).

The PIC’s contribution would have been R7.5-billion if the Sagarmatha listing proceeded in the same fashion as the Ayo listing a few months earlier where only the PIC actually got allocated shares. After listing, the plan was to have Sagarmatha buy Independent and pay off its debts using PIC money.

The rest of Sagarmatha was a hotchpotch of smaller companies dominated by the remains of R350-million Survé got from the China Africa Development Fund (CADF) to prop up African News Agency (ANA) in 2015.

Earlier this year ANA fired all its employees citing financial difficulties, but then mysteriously offered to rehire all of them less than a month later. The CADF has remained a staunch Survé backer through Interacom, the 20% shareholder in Independent.

Interacom has displaced the PIC as SIM’s major funder by lending it nearly R1-billion.

According to the pre-listing statement published by Sagarmatha, SIM owed Interacom R909-million at the end of 2016.

The urgency of getting that listing done is obvious if you look at the repayment terms attached to both the PIC and Interacom loans. Both required repayments in 2018.

The massive Interacom loan has nonetheless kept SIM afloat despite accumulated losses of R617-million (as of 31 December 2016). SIM’s total debt, consisting of the Interacom and PIC loans, came to R2.4-billion at that point.

The only thing keeping SIM solvent was the value is ascribed to the various publication brands it owns. It valued these at R866-million in 2016.

SIM and Independent, like all media, have been under immense financial strain for years due to the rise of free digital content and shrinking advertising.

The PIC’s loan agreement with SIM was seemingly blind to this trend in the industry. The 2013 loan agreement attached to this week’s application includes financial projections up to 2018 which now seem laughable.

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Back then revenue in 2016 was projected to reach R3-billion. In reality it came in at R1.8-billion. The estimated profit in 2016 was R185.5-million after tax. It turned out to be a loss of R530.7-million.

Read our previous reporting on the PIC and Iqbal Survé:

• Another blow for Survé as auditors quit
• Analysis: Ayo’s last stand
• Analysis: Tosaco, the deal that could sink Matjila
• Watch: AmaBhungane’s Dewald van Rensburg takes us through his Iqbal and friends investigation

The post PIC wants to “investigate” Sekunjalo directors after liquidation appeared first on AmaBhungane Centre for Investigative Journalism.

Iqbal Survé is in trouble.

Listen: Sam Sole speaks to Bruce Whitfield about the PIC inquiry.

The commission of inquiry into affairs at the Public Investment Corporation (PIC) has driven a spike through the heart of the PIC’s controversial R4.3-billion investment into Ayo Technology Solutions, the IT group in which Survé holds a large indirect stake.

The PIC’s head of internal audit, Lufuno Nemagovhani, only gave limited evidence last week because both he and the commission’s investigators are still probing the Ayo deal.

But what he did say underlined the accuracy of amaBhungane’s previous reporting (here and here), confirming the Ayo deal involved “blatant flouting of governance and approval processes of the PIC”.

The PIC previously asserted that its portfolio management committee had met on December 20, 2017 and approved a proposal to take up 100% of a private offering of Ayo shares ahead of Ayo listing on the Johannesburg Stock Exchange.

Ayo listed the next day, December 21.

The decision to invest was controversial because the price paid by the PIC was R43 per share, whereas the value of the company by one measure (net asset value) was only 15 cents per share.

Nemagovhani’s testimony at the commission suggests that the PIC meeting was a stitch-up because the decision had already been made. He said that an “irrevocable agreement” committing the PIC to take up the entire private placement at a cost of R4.3-billion was signed on December 14, 2017 and confirmed with the listing agent – all prior to the committee meeting that was supposed to make the investment decision.

Nemagovhani did not disclose who had signed the undertaking, but amaBhungane understands it was the then PIC chief executive, Dr Dan Matjila.

At the commission Nemagovhani did disclose that Matjila had already signed documentation to approve payment for the shares on December 19, though the cash was only transmitted after the meeting of December 20.

The PIC told us: “The Public Investment Corporation (PIC)’s investment in Ayo Technologies (Pty) Ltd is a subject of investigation by the Commission of Inquiry… and a PIC internal investigation. For this reason, the PIC is cautious not to discuss details relating to this transaction and others that the Commission will be looking into.”
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Khalid Abdulla, chief executive of Ayo’s largest shareholder, African Equity Empowerment Investments (AEEI), also declined to respond to questions and referred us to a press statement from Ayo chair Wallace Mgoqi welcoming the inquiry and affirming Ayo’s commitment to “integrity and sound business practice” (See his full statement here).

Ayo did not respond to questions.

Matjila told us: “You would appreciate that by now Judge President Lex Mpathi is conducting an inquiry on this and other matters. I have committed to make the submission on the inquiry on the matters you are raising. It will be improper for me to communicate such a submission to the media, whilst I am due to appear in an appropriate forum.”
Survé did not respond to questions sent to his private secretary.

Preordained

Earlier leaks suggested the decision to invest in Ayo was so rushed that the PIC struggled to come up with the money and had to dump other shares in a thin December market to raise cash.

Nemagovhani’s evidence supports early allegations from inside the PIC that Matjila was “desperate to have the transaction done” and used his position to achieve a preordained outcome.

It is also now clear why both the PIC and Ayo refused to answer our questions in April and May 2018 about exactly when the irrevocable undertaking was given.

Suspicions of an attempted cover-up were boosted when Nemagovhani revealed that the PIC’s own internal audit division had also formally flagged the irregularities in reports to Matjila and the board audit and investment committees as early as May 2018.

But nothing was done until a more detailed investigation was ordered by the PIC board chair, Deputy Finance Minister Mondli Gungubele, in December 2018.

That intervention resulted in Nemagovhani delivering a 94-page preliminary investigation report to the board on 21 January 2019.

That same day the board suspended the executive head of listed investments, Fidelis Madavo, and assistant portfolio manager Victor Seanie.

Matjila had already exited as chief executive in November 2018, when the board effectively pushed him out.

Matjila and those at the PIC are not the ones whose conduct should be investigated.

What has emerged is that Ayo appears to have purchased some powerful supporters at the expense of the PIC.

George and Fedusa

One example is Dr Dennis George, the general secretary of Federation of Unions of South Africa (Fedusa).

George has been one of Matjila’s staunchest supporters, both publicly and behind the scenes.

As recently as last week, following the revelations at the PIC inquiry, George was on the line to The Money Show’s Bruce Whitfield, defending Matjila, criticising the PIC board and praising Ayo, where he has been a non-executive director since August 20, 2018.

George emphasised to Whitfield that he was an “independent” director, while proceeding to suggest all was well at Ayo and that people should invest in the company.

What George did not disclose was that Fedusa was one of the unions cut in to a pre-listing deal where they were gifted millions of Ayo shares at a price of R1.50 per share – while the PIC was charged R43 per share.

(Other cut-price beneficiaries included the SA Clothing and Textile Workers Union, the police and prisons union Popcru, the Black Business Council and something called the Social Entrepreneurship Foundation.)

That much was publicly disclosed in the prelisting statement.

The injection the PIC’s R4.3-billion immediately raised the net asset value per share to R12.47. (On a R1.50 investment per share, beneficiaries made an immediate gain of nearly R11 per share.)

Lucky Fedusa!

What was not disclosed was that George appears to have been cut in personally.

Share-holding records seen by amaBhungane show that a company called Difeme Holdings was part of the pre-listing BEE bonanza and got 3 million shares at R1.50. George is the sole director of Difeme and is described elsewhere as its “managing director”.

Contacted for comment, George replied: “Your scenario is incorrect or you are incorrectly briefed… Fedusa does not have shares. Difeme is a nominee company…”

We asked him: “Who is the beneficial owner of Difeme? You are listed as the sole director.”

He did not reply.

Contrary to his avowal, the records seen by amaBhungane list Fedusa as having a separate shareholding of just over eight million shares in its own name.

If George is indeed the beneficial owner of Difeme, then he picked up a cool R900 000 when Ayo declared a first dividend of 30 cents per share in November 2018.

The dividend was justified based on Ayo’s revenue increasing from R478-million to R638-million, compared with the prior year.

What Ayo’s statement did not highlight was that the major contributor to that improvement was investment revenue of R226-million from the pile of PIC cash it is sitting on.

Without that free cash, the company’s revenue would have dropped from R478-million to about R412-million.

Back to the PIC

The abuse of the PIC’s decision-making processes disclosed by its internal auditor was not just technical or bureaucratic.

In the case of Ayo it had a catastrophic impact on the rationale and value of the investment – and the PIC’s attempts to put some security in place to protect its investment. Ayo was this week trading at under R22 per share, meaning the PIC’s R43 per share investment is worth half what it was.

The real picture is probably much worse because the share hardly trades and the share price is kept artificially high. On Monday, open market offers for Ayo stood at just over R4 per share.

The only people that have been buying in significant volumes at a much higher price appear to be related parties. For instance, in December 2018, there were only three large purchase trades. The largest purchase was by a shelf company called K2011146299, which is associated with Khalid Abdulla.

Abdulla is Survé’s brother-in-law as well as the chief executive of AEEI (the largest shareholder in Ayo). Abdulla’s company purchased 145 250 shares, worth R3.4-million.

The only other significant purchases came from Sekujalo Investment Holdings, which is associated with the Survé family trust, and 3 Laws Capital, which is also an investee of Sekunjalo and where Survé is a director.

The stake held by Abdulla’s K2011146299 appears to have been used to churn the shares.

In March 2018 the 145 250 shares were held by K2011146299. In June they were flipped to another party that enjoys ties with Survé’s portfolio of companies. Then in December they moved back to K2011146299.

The significance of the artificial way the share has traded since listing gains importance in the light of the belated attempt to protect the value of the PIC’s investment in Ayo.

Internal PIC documents show that there was concern expressed whether the valuation of R43 per share was sustainable.

• Click on the evidence docket to see the Leaked Ayo Cache. 

As a result, on December 20, 2017 the PIC investment committee insisted, as a condition for investing, that an agreement should be put in place to protect the PIC in the case of the share losing value after listing.

However the intense pressure on the PIC meant that no agreement was even attempted prior to the money being paid out.

Just what a weak bargaining position this left the PIC in is demonstrated by the agreement eventually structured between the PIC and AEEI Corporate Finance in August 2018, long after the listing horse had bolted.

AmaBhungane has seen a copy of this agreement but it is not clear to us whether it actually came into force on the terms laid out or at all.

Neither the PIC nor Ayo were prepared to clarify the position.

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But the terms of the agreement underscore the weakness of the PIC’s position:

– The protection is only valid for 12 months after the listing date – meaning it expired already on December 21, 2018;

– The compensation to PIC is limited to a maximum of R1-billion – it invested R4.3-billion – and may be paid up to 50% in Ayo shares rather than cash;

– The protection is only valid for one claim within 30 days of the signature date of the agreement – and the PIC would not divulge when the agreement had actually come into force, if at all; and

– The protection for an investment at R43 per share only kicks in when the average Ayo share price falls below R30 (and for at least for 90 days).

Although the Ayo share price appears to have stayed below R30 per share since mid-September, the PIC would not disclose whether it ever invoked the penalties contained in the agreement and, if not, why not.

The post A’yo goin’ down Dr Survé? appeared first on AmaBhungane Centre for Investigative Journalism.

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.

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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 fo r 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 byWarren Thompson, Craig McKune and Susan Comrie.

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