Analysis of a Company Murder

MUCH has been made of the recent Public Investment Corporation (PIC) and AYO Technology Solutions (AYO) settlement agreement that was made an Order of Court on March 24. Picture: Supplied

MUCH has been made of the recent Public Investment Corporation (PIC) and AYO Technology Solutions (AYO) settlement agreement that was made an Order of Court on March 24. Picture: Supplied

Published Apr 5, 2023


MUCH has been made of the recent Public Investment Corporation (PIC) and AYO Technology Solutions (AYO) settlement agreement that was made an Order of Court on March 24.

The beleaguered ICT group who listed on the Johannesburg Stock Exchange (JSE) in 2017, has been the subject of hundreds of articles, investigations and what the group has often claimed as harassment by the JSE, since then.

Based on media hearsay and opinion, a commission of inquiry was set up, ostensibly to deal with alleged impropriety at the PIC. As the records now show, it became the trial by media in the court of public opinion against AYO.

Relying on the subsequent Mpati Report, which is currently subject of a court case in the Western Cape High Court as a formal request by the Sekunjalo Group (under which AYO falls), to have it officially reviewed, the PIC launched legal action against AYO in 2019. The basis of this action was to recover its R4.3 billion investment along with interest.

Its declared reasons for wanting to get out of bed with AYO being that AYO had allegedly misrepresented in the pre-listing-statement (PLS), principally its relationship with British Telecommunications SA (BTSA), and that there had been fraud perpetrated when the investment was made.

Whose fraud it was is the question isn’t it, because from where I’m sitting, it was the PIC itself that could have perpetrated such through self-confessed flaws in their own internal procedures. Not AYO.

As was also patently obvious from a reading of the court transcripts, AYO had not overstated its relationship with BTSA, which became apparent from the testimony heard in court.

A cursory reading of the nearly two weeks of testimony will show even the layman, that the PIC was on a sticky wicket. Its own witnesses having not proved to be as reliable or credible as they had hoped, and whose evidence had been taken to task by AYO’s legal counsel.

On the face of it, and indeed, possibly to save face, the PIC having been cautioned by its legal counsel, decided to do the honourable thing, and come to what they have termed an amicable settlement agreement with AYO.

All is well that ends well then, except no.

Since the PIC and AYO released their statements declaring that both are going to work together to rebuild the value in AYO that has been destroyed over the past six years, South Africa’s media have gone to town. Imagining scenarios that simply do not exist, unable to move forward, or it would seem, to allow AYO and the PIC the space to build a future.

For whatever reason, there seems to be a concerted effort to continue casting aspersions on these companies to further erode value in AYO, which is quite hypocritical when one considers that it is the media who have kept the story alive and prevented the company from doing business.

In fact, we could draw the conclusion that it is the media that is damaging the government pensioners’ hopes of ever seeing their money grow. If the media were that truly invested in these pensioners, they would allow the companies to now fulfil what they both clearly want to achieve – the mandate of the original PLS.

If AYO and the PIC as partners do pull this off, and succeed in turning around this ship that has been becalmed, it will be the single biggest business success story in South Africa’s still young democracy.

But whether the media will be able to offer objective, unbiased and informed reporting is the question here. Judging by articles coming out of the Daily Maverick, it is doubtful.

Here’s why:

Media lack the business knowledge to properly interpret data: Articles written in the last two weeks analysing the PIC and AYO deal have made a fundamental flaw. They have failed to consider the state of the market in 2017 versus 2023.

In 2017, ICT companies were the darling of the world markets. In South Africa, EOH for example, was running at a PE multiple of 60, but today, its share price is R1.74, down from a high of R110.00. Overall conditions for EOH’s decline are publicly acknowledged as being influenced by the fraud and corruption and being overindebted.

The JSE has witnessed an exodus of ICT companies too since AYO’s initial entry to the bourse. Adapt IT, for instance, has now delisted and it is just one of many. There appears to be a collapse of the ICT market on the local bourse.

So, with this as context, how is it that AYO, which has zero debt, has cash reserves and a stable net asset value (NAV), and can raise debt if it wanted – despite consecutive years of losses – always be compared to these losers?

Understanding AYO’s dividends: AYO has paid out a little more than R1.2. billion in dividends since listing. Not the R3.6 billion as recently claimed by the Daily Maverick. That’s a heck of a difference and even without a calculator it would have been easy to count the right number.

The PIC has been the beneficiary of some R400 million in dividends over this time. Now add that to the settlement number of R610 million that it will receive for selling 5% of its shares, plus, the put option reported in the terms of Settlement on SENS on Monday, with the fact the PIC retains 25% in AYO, there is some considerable value there.

Compare the PIC’s exposure to AYO then against EOH, Steinhoff and Tongaat Hulett, which comes to around some R50bn of anticipated loss.

Additionally, if AYO were to recover the various loans to subsidiaries and call in its favours, it could amass some R3.6 billion, of which the PIC would also be entitled to a portion. Hardly something to be sneezed at.

That Mpati Report: At the heart of AYO’s woes is this “report”. It is what the media continuously rely on to quote and what the banks have used as the basis on which to unbank Sekunjalo, AYO and all Sekunjalo-related companies.

It all seems too coincidental to me, and apparently to the Equality Court and the Competition Tribunal too, who have both found that there could well be some discrimination at play here, because not content in gunning only for AYO, the media have reported ad nauseum on the wider Sekunjalo, creating some interesting narratives. These have culminated in the entire Group being considered a “reputational risk”.

Sekunjalo had this report reviewed by former judge and now retired advocate, Willem Heath. Heath found enough evidence to warrant Sekunjalo taking the entire report on official review to the courts, where it now awaits a date.

Chief among his findings, was that witnesses were coached and led by the evidence leaders to create a specific narrative, something the PIC’s chief financial officer at the time, Matshepo More, corroborated in her testimony, which led to her laying an official complaint.

More was suspended by the PIC during the hearing but was later reinstated post a Commission for Conciliation, Mediation and Arbitration (CCMA) hearing that found in her favour.

The Mpati Commission Report has also been the catalyst for a fair amount of questionable litigation and harassment from among others, the Companies And Intellectual Property Commission (CIPC) that launched a failed attempt to shut AYO down and get the PIC’s investment returned to it. CIPC is an agency of the Department of Trade and Industry (DTI) and functions as an organ of state as an institution outside of the public service.

Sound familiar? Didn’t the PIC, Africa’s largest asset manager, attempt to say that it functions as an organ of state but within the public service though, in its court case against AYO? Didn’t the PIC also launch what is now a failed attempt to claw back its entire investment?

What of the JSE’s own unprecedented attacks and continuous engagement with AYO that could keep it so tied up in answering its alleged complaints and questions that the company could be forgiven for not finding the time to run its business.

Adverse publicity: AYO’s predicament today should be seen in the context of the sustained and heightened campaign against it, principally arising from the above mentioned Mpati commission and report. Erroneous, misleading articles have peppered the headlines that according to AYO and the wider Sekunjalo Group, are false and incorrect.

What is of grave concern to me, is that even from a superficial viewing of the reams of articles badmouthing AYO, it can be deduced that there is a one-sided view. For me, that suggests that the media believe that the South African public at large are gullible and will swallow what they’re told. Without question.

Even before the Mpati commission, which cost taxpayers (and pensioners) millions, AYO had courted negative publicity. In fact, it was so bad, that BTSA reconsidered its options to follow through on an alliance, that according to the legal papers in the PIC vs AYO case, they had motivated.

The collapse of the AYO share price is also firmly at the feet of the media. Since the listing of AYO, this concerted media campaign has drastically affected its share price. No one is going to buy the shares if the company is continuously pummelled in the public forum. The media, drives the share price down then disingenuously refers to the low share price to talk about the loss of value for the PIC. Go figure.

And so sounded the knell of the death bells for AYO’s dreams of being the most transformed ICT conglomerate in South Africa. But just consider what would or could have happened, had the BTSA deal gone through, and AYO had been left alone to fulfil its mandate…

AYO has oft been criticised for only having its point of view carried in Independent Media (another Sekunjalo Group company), but objectively, what other media house who have already nailed their colours to the mast as being oppositional, will carry their side of the story, unless ordered to?

In conclusion, for me, the jury is still out on AYO, but having done considerable reading of late to look at all sides of the story, I reckon, that with the apparent backing of its former enemy, the PIC, the group should be given the chance to prove itself before the vultures’ feast.

Unlike other PIC investments such as Steinhoff, which is about to be liquidated, and the heavy indebtedness of the likes of Tongaat, EOH etc, AYO still has a working chance of living, if only the media could refrain from attempting to murder it at every opportunity.