Dr Wallace Mgoqi says AYO is not privy to the processes within the PIC. Photo: Courtney Africa/African News Agency (ANA)
Dr Wallace Mgoqi says AYO is not privy to the processes within the PIC. Photo: Courtney Africa/African News Agency (ANA)

AYO has no involvement in PIC's internal processes

By Sizwe Dlamini Time of article published Jun 26, 2019

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CAPE TOWN – AYO Technology Solutions (AYO) is not privy to the processes within the Public Investment Corporation (PIC), according to the tech company’s chairperson, Dr Wallace Mgoqi.

Mgoqi made this statement after reports that executives at the PIC, which has a R4.3 billion investment in AYO, were allegedly facing disciplinary action for involvement with the AYO transaction.

According to submissions made by PIC executives at the Commission of Inquiry into alleged improprieties at the asset manager, the PIC went through its own processes with regard to the AYO transaction and valuation.

The PIC’s portfolio manager of non-consumer industrials and listed equities, Sunil Varghese, said the enterprise value-to-earnings before interest, tax, depreciation and amortisation (EV/Ebitda) valuation method put AYO Technology Solutions’ actual value, as high as R47 a share at the time of the company’s initial public offering.

Varghese told the Mpati Commission that EV/Ebitda was a popular valuation multiple used in the finance industry to measure the value of a company. He said the price-to-earnings (P/E) method gave the base case value of R43 a share, which was derived from earnings a share of R2.68 a share multiplied by 16 x P/E.

Varghese also told the Mpati Commission that the PIC assistant portfolio manager, Victor Seanie was very familiar with the normalised P/E valuation methodology, and this was his preferred approach when he valued companies.

READ: AYO shares initially valued as high as R47

Seanie appeared before the PIC Commission of Inquiry in January, where he accused erstwhile chief executive, Dr Dan Matjila, and suspended chief executive and chief financial officer, Matshepo More, of disregarding processes with regard to the AYO transaction.

This allegation was vehemently denied by More who said there was ambiguity about Seanie testimony and threw the blame back at him, saying he was the one who “misrepresented what should have been an approval or condonement memo as a disbursement memo”.

“In fact, (Seanie) was the compiler of the documentation that was served before both the IC and SCOPA, all of which, indicated that the deal team – which he was a part of – supported the AYO Transaction.”

Meanwhile, during his testimony, suspended executive head of the PIC Listed Investments, Fidelis Madavo, told the Mpati Commission that he was not aware of the much-reported corruption, particularly singling out the investment into AYO.

READ: I did not witness inappropriate actions at the PIC - Fidelis Madavo

Mgoqi, who was appointed to the AYO board by the PIC, expressed disappointment at the negative and defamatory reporting by various media, saying such could not be allowed, as it hampered economic transformation efforts.

Mgoqi said: “AYO has a 20-year track record, is profitable, has a strong balance sheet and has shown consistent growth in earnings and net asset value.” AYO saw a five-fold increase in profit before tax in the financial year to end-August 2018 and growth in its underlying businesses.

He said that since listing on the JSE, AYO has met its mandate as per the pre-listing statement, invested in subsidiaries, strengthened its management team and restructured its board as requested by the PIC and focusing on tightening its governance.

“Over and above its commercial imperatives … AYO is committed to the transformation of the ICT sector,” said Mgoqi.


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