The Public Investment Corporation (PIC) has confirmed that it received a compliance notice from the Companies and Intellectual Property Commission (CIPC) ordering it to recover the capital investment of R4.3-billion made to Ayo Technology Solutions.
Acting company secretary Wilna Louw told the PIC commission on Tuesday that the notice was received on February 21. It states that the PIC is required to recover the capital investment made to Ayo within 15 days from the date of the notice.
This means that the PIC needs to have recouped the costs by March 13.
This should be followed up by written confirmation from the PIC to the CIPC stating that it has recovered the fund invested in Ayo. Furthermore, any interest accrued on the principal amount should be recovered within six months, Louw told the commission.
“The PIC is looking into the matter and has already appointed Gwina Attorneys and Senior Counsel to assist with a response to the CIPC,” said Louw.
The Ayo transaction was found by the PIC’s internal audit department to have blatantly flouted the state asset manager’s governance and approval processes.
Various employees were implicated in the the process with the key figure being former chief executive Dan Matjila who signed a subscription agreement, essentially sealing the R4.3-billion transaction, without the requisite approval committee meeting taking place and due diligence being completed.
Matjila signed the subscription agreement despite concerns raised by staff working on the transaction that the R43 per share for a 29% stake in Ayo was overpriced.
The company’s shares were trading at R17.70 on Tuesday
According to the CIPC’s compliance notice, by making the investment, “the directors of the PIC did not act in good faith and for a proper purpose, in the best interest of the company and with a degree of care, skill and diligence”. This is in contravention of Section 76 of the Companies Act that deals with the standards for directors’ conduct.
In a Sens announcement sent out at around 2pm on Tuesday Ayo reiterated that there are no grounds for the PIC to recoup its investment in the company.
Ayo said it had still not received the notice. It also questioned why the CIPC had not consulted it before issuing the notice or sending it a copy before the notice was leaked to the media saying it was “regrettable, if not irresponsible”.
Ayo also took umbrage with the CIPC’s argument that the R4.3-billion investment was disproportionate with its own information about the value of the company. According to the CPIC, between 2003 and 2017 before Ayo listed on the Johannesburg Stock Exchange with the cash injection from the PIC, the highest turnover Ayo had ever made was R12-million.
Ayo said this was incorrect and questioned why the CIPC would undertake a valuation of Ayo to determine if the investment by the PIC was sound or not.
“For the record, AYO stands by its valuation, is implementing its strategy in line with its pre-listing statement and questions the jurisdiction [and] competence of [the] CIPC to make determinations on valuations.
“Ayo re-asserts that the investment the PIC made into the holding group during the listing, remains sound. AYO has made significant strides forward with an established and solid base, and a number of sound acquisitions and investments,” said the company.
Ayo said it was willing to engage with the CIPC on its decision.