PIC v AYO: What we know after the first week in the epic court battle

AYO logo. Photographer: Armand Hough. African News Agency (ANA)

AYO logo. Photographer: Armand Hough. African News Agency (ANA)

Published Mar 18, 2023

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The Public Investment Corporation (PIC) has gone to court to recover a R4.3 billion investment ploughed into a black-owned AYO Technology Solutions (AYO).

On Thursday, the proceedings entered its sixth day, during which AYO's senior counsel, Nazeer Cassim, locked horns with PIC expert witness, Professor Harvey Wainer.

Wainer’s testimony on the stand came after Lebogang Molebatsi, the general manager of listed investments at the PIC and Bertrandt Delport, the managing director of British Telecom SA (BTSA), also testified this week.

Here is what we know so far.

1) How we got here:

The Public Investment Corporation (PIC) invested R4.3 billion in AYO Technology Solutions prior to its listing on the JSE in December 2017.

The PIC is a state-owned asset manager that invests mainly on behalf of the Government Employee Pension Fund (GEPF).

The PIC is currently in a court case with AYO to recover the investment.

2 Molebatsi’s testimony:

Molebatsi testified that he was one of the senior employees of the PIC who advised the Government Employees Pension Fund (GEPF) that "AYO was an attractive, catalytic investment.“

Molebatsi said he had enough comfort in the transaction independently of then-PIC chief executive Dr Dan Matjila’s views on the investment.

3 Delport’s testimony:

Delport was questioned about the "key strategic relationship with BT" and "alliance agreement" (the BT transaction), which included a 30% effective shareholding in BTSA held by African Equity Empowerment Investment Ltd (AEEI) that AYO would subscribe for upon AYO listing.

As per the pre-listing document and the BT Alliance, 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 will provide such services to BT and its clients in South Africa and to companies within the AYO Technology Group".

Karrisha Pillay, AYO senior counsel, questioned Delport about the pre-listing statement (PLS) being the sole final and binding offer by AYO to the PIC, and any representations made prior to the publication of the final PLS constituted part of the preliminary negotiations - which Delport agreed to.

Pillay asked Delport if there was anything he considered misleading in his understanding of the PLS, to which he replied, "No", but he repeated his concern that the PLS was built on discussions between AYO and BTSA on Project Zebra, which made it sound like a foregone conclusion.

Delport agreed that there was a strategic relationship with benefits to all parties if it materialised.

4 Wainer’s testimony:

Wainer, a financial expert with a focus on valuations, appeared for the second day in a row as an expert witness for the PIC.

Wainer's approach and mandate to the share subscription agreement and the numbers involved were questioned by AYO's senior counsel, Nazeer Cassim, during cross-examination.

Wainer criticised AYO's numbers presented in its pre-listing statement as "unrealistic and fanciful," while André Pieterse, the expert on AYO’s side, deemed the same data as "realistic, credible and probable."

Cassim forced Wainer to concede that only certain matters of principle were discussed at the meeting outside the court between him and Pieterse.

Wainer's mandate was to consider revenue growth as stated in the PLS and the effect on the value of AYO and whether it was realistic and proper.

The PIC followed an extensive analysis process, which included examining AYO's business model and strategy before deciding to invest, according to PIC listed equities general manager Lebogang Molebatsi's evidence.

Wainer agreed with Molebatsi's process but emphasised that it must be seen in context.

The case was adjourned until next week, and Wainer did not provide an opinion on whether AYO was a good or bad investment for the PIC.

IOL