AYO Technology Solutions’s (AYO) partnership with British Telecom South Africa (BTSA), and their different interpretations of the agreement between them in 2017, fell under the spotlight on the third day of the Public Investment Corporations’ (PIC) legal action against AYO yesterday.
The PIC, the state-owned asset manager that invests mainly the Government Employee Pension Scheme funds is attempting through the Western Cape High Court to recover about R4.3 billion it invested for a 29% stake in AYO, as part of a private placement prior to AYO listing on the JSE in December, 2017.
The PIC led the evidence about the BTSA relationship throughout most of yesterday, about the transfer of customers and shareholdings between the parties, as it sought to prove that AYO had overstated its relationship with the BTSA, thereby leading to the PIC making an uninformed investment in AYO, the PIC’s legal representative Duncan Wild told the court. Something, AYO have strongly denied and is defending.
Karrisha Pillay, SC, representing AYO, in cross-examination of BTSA’s managing director and the company’s legal head in 2017, Bertrandt Delport, wanted to know how Delport had told the court days before that AYO’s reseller gross profit margin, through the partnership with BTSA, should have been 10% to12%, when BT’s own documents said the margin should be around 25%.
Delport, the second witness in this case, admitted he did not know why the first draft of an internal document might be wrong, but he admitted the document would have passed through many hands at the company, that an error may have been made, and that AYO’s then CEO Kevin Hardy may be able to throw more light on the matter,
He said third-party companies providing normal BT services to a customer would normally get a 10% to 12% margin, but companies wanting to get their BEE rating improved using BT services might do so through AYO. But the margin in AYO would be 25%, but this margin only ever applied to one client at AYO – Sasol, Delport said.
Delport was referred by Pillay to a BTSA internal document, which stated that the company might lose its customers if it did not find a way improve its BEE status due to the changing BEE environment in the ICT sector in 2017, and which stated that Project Zebra, referring to the creation of the alliance with AYO, was the only alternative,
Delport told the court that in 2017, the company, one of a handful of ICT service providers to Sasol, were notified that Sasol wished to improve its black economic empowerment through its procurement, and that the ICT service providers were asked to provide information on how they could improve their BEE status.
He claimed also there was information in AYO’s pre-listing statement that contained information about BTSA that should not have been made public. He said BTSA became aware of this in the pre-listing statement only in mid-2018, after negative media reports, and did not know how AYO had been given that information.
At the time, AYO parent company African Equity Empowerment Investment (AEEI) held a 30% shareholding in BTSA, as its empowerment partner. Delport said BT kept strict control of the shareholdings and the number of shareholders of its global subsidiaries, because for instance, in South Africa, a change in shareholding could affect an Independent Communications Authority of SA (Icasa) broadcasting licence that BTSA held.
In terms of the alliance arrangement, however, and as per the pre-listing document, AYO would “take over and provide the BT transition services in South Africa, including the BT service desk, technical engineering capacity, maintenance and support services post the listing, and would provide such services to BT and its clients in South Africa and to companies within the AYO Technology Group”.
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