Audited financial statements for Ayo Technology Solutions were released just before Christmas last year, announcing exciting new investments in cutting-edge technology ventures.

A close reading, however, reveals new aspects of Iqbal Survé’s empire and how it is keeping afloat. The R4.3-billion in pension fund money that the Public Investment Corporation (PIC) controversially invested in Ayo three years ago is being steadily dispersed across his existing businesses and to shareholders – before the PIC can close in on him.

amaBhungane has in the past revealed the wave of transactions where Ayo, which is listed on the JSE, has used some of this PIC money to do deals that directly and indirectly benefit Survé’s family holding company, Sekunjalo Investment Holdings, and his associates at the expense of the PIC and other shareholders.

Read Iqbal and friends, How Survé ‘robs Peter to pay Paul’, and Iqbal Survé takes another bite at the PIC apple.

Sekunjalo has indirect control of Ayo via its majority stake in Ayo’s biggest shareholder, African Equity Empowerment Investments (AEEI).  

The new financials released on 23 December show how the pattern of self-dealing has intensified despite the PIC launching a court application in May 2019 to reclaim its money. 

The PIC alleges the R4.3-billion investment was made based on Ayo making misleading claims about its prospects and on irregular interventions by former PIC boss Dan Matjila.

Ayo denies this and is opposing the claim, which is yet to be heard.

In its latest financial report, Ayo has quietly revealed new channels through which it is using the vast cash pile to fund the rest of Survé Inc. The report also validates previous amaBhungane reporting.

Ayo objects to the description of this cash as “the PIC’s money”, arguing  the company “has many successful cash generating businesses” – but its own financial statements show it is cash-flush because of the PIC investment.  

4Plus: An Ayo subsidy for Survé Inc 

AmaBhungane previously revealed how an Ayo investment in an ostensibly independent company grandly named 4Plus Technology Venture Fund Africa appeared to be a conduit to fund an entity carved from Survé’s other interests.

It was a particularly egregious waste of the PIC funds. At first, Ayo bought 9.3% of 4Plus for R75-million. External valuation immediately impaired this investment down to R5.6-million.

According to the new financial report, Ayo was, however, undeterred and poured more money into 4Plus, ultimately spending R183.2-million for 22%. This was impaired down to R31.8-million in the recent financial results.

In addition to this direct financing, Ayo bought preference shares in 4Plus worth R30-million – effectively a loan that is only repayable in 2027 and can be repaid in shares if Ayo prefers.

In its financial reports Ayo hypes 4Plus as having interests in “digital media, artificial intelligence, software development and telecommunications”.

In reality, the latest financial report shows, 4Plus is a portal to Survé Inc. It holds equity stakes in subsidiaries of majority Survé-owned Sagarmatha Technologies: online shopping website Loot, online news site IOL and Africa Community Media.

4Plus also includes an investment in something called Volt Business Solutions. 

AmaBhungane previously showed how Volt was in fact the renamed Independent Digital Lab, a Survé company that had been spun off from Sagarmatha in a convoluted deal involving Survé’s personal assistant.

On paper, 4Plus is controlled by a company called Womens Technology Investments which is led by Zoliswa Kota-Fredericks, a former deputy minister of human settlements and also former director of AEEI. When amaBhungane previously approached her for comment she referred us to Ayo’s spokesperson.

The actual mechanics of what 4Plus is doing are a little more complicated than simply giving money to Survé companies. The stated objective is to create an e-commerce business using all these bits and pieces from his empire.

The financial statements explain:

“Volt will be utilised to drive internet traffic towards the e-commerce platform. IOL and ACM will provide the content and link advertisers to the e-commerce platform. Last Mile Logistics Africa will be utilised to effect delivery of goods purchased on the platform.”

Last Mile is a company that was acquired by 4Plus for a “nominal amount” but according to company records was set up by Lizaan Nel, the company secretary of most Survé companies.

The last time a comprehensive glance under the hood of Survé’s unlisted companies was possible was the thwarted listing of Sagarmatha in 2018. A pre-listing statement was released with comprehensive information about some of Survé’s companies.

According to this document, Loot was 83.3% owned by Survé’s Sagarmatha. IOL was 100% owned. Independent Digital Lab, which became Volt, was also 100% owned by Sagarmatha. There is consequently every indication Ayo money was used, via 4Plus, to buy these assets from Survé.

Apart from the millions invested directly in 4Plus, Ayo is also funding 4Plus’s component parts which, recall, are all pre-existing Survé companies.

• Last Mile got a loan of R25.4-million in the financial year and that loan got impaired to zero almost immediately “due to doubt over the recoverability of the loan as a result of the entity’s poor performance”.
• Volt got a loan of R11.5-million in the previous financial year which has now been impaired to zero.
• Loot B2B, part of Loot, effectively got a R15-million loan by issuing preference shares to Ayo which were impaired to zero. 

This means that altogether R265.1-million of the PIC cash pile had been invested or loaned to 4Plus and its component parts by Ayo’s financial year-end on 31 August last year. By now it could conceivably be much more.

In response to questions about its investments in 4Plus, Ayo told amaBhungane, “The Group has prioritised several key industries, including e-commerce, remote working/learning, telehealth and green energy, amongst others, which we believe will grow exponentially in the next 5-10 years on the African continent… The investment in 4Plus is one such investment.”

The company said Ayo was not in a position to comment “on who 4Plus is purchasing business entities from”.

Regarding impairments to the value of its investments, Ayo said: “Impairment is a judgement call and is not a write-off. Early stage eCommerce ventures are typically impaired by auditors. We still see tremendous value in our investments and these may be shown as fair value gains in the future.”

What’s going on at Independent?

In a double insult to the PIC it appears that Ayo money is also being used to extract assets and income from Independent Media, which is controlled by Survé and in which the PIC is heavily invested. This precedes Survé possibly losing control of the media group.

In separate court proceedings from the Ayo case the PIC is trying to liquidate Sekunjalo Independent Media (SIM), the company through which Survé controls Independent and its countrywide stable of newspapers and magazines. The debt the PIC is looking to recover from SIM is R609-million, according to summons issued in November 2019.

In this context 4Plus’s activities are doubly worrisome. 

For example, one of 4Plus’s assets is an unquantified share in Africa Community Media (ACM). The last time any information about ACM was in the public domain it was a 100% subsidiary of Independent Media. In other words, Ayo appears to have funded 4Plus to extract an asset, rumoured to be one of the very few profitable parts of the flailing newspaper business, from Independent. 

This means that Ayo is potentially helping dissipate Independent assets before Survé loses control of the media group.

The company told amaBhungane: “Ayo is not the controlling shareholder of 4Plus. Similarly, ACM is not a subsidiary of Ayo and Ayo has no direct interest in the business whatsoever. We cannot comment on any transactions happening between the two parties, although [we] can see the strategic fit of ACM within the 4Plus portfolio.”

‘Keeping an eye’

Despite trying to claw back what remains of its investment in Ayo since May 2019, the PIC has still not obtained a preservation order to stop the apparent flagrant abuse of the funds.

The current chief executive of the PIC, Abel Sithole, recently assured MPs that the PIC is at least “keeping an eye”. 

During a presentation to the standing committee on finance in December Sithole claimed that a preservation order was in the works.

“While we are working on processes to recover, to the extent that we are able to recover the R4.3-billion that was invested in Ayo, we have to make sure that at least when – if – we succeed for the court to grant us access to that then the money is there.

“We have instituted an action to preserve, but the requirement in law to force that kind of preservation is quite onerous. It still has to be sanctioned by a court. To date we have not been granted that. We are still pursuing and keeping an eye on how those assets in Ayo are being treated.”

The PIC did not respond to an amaBhungane query about when it first sought the preservation order.

Ayo in turn said: “There is no preservation order and never has been. Ayo is NOT trying to dissipate funds. Quite the contrary. More than three years after the initial investment, Ayo still holds R3.2-billion in cash after making certain investments. As any investment fund manager will tell you, investing funds is far more beneficial to their owner (be it person or a company) than holding on to cash at hand (other than what is necessary for funding operating expenses), as inflation erodes the value of the capital.” 

The impetus to recover the money increased last year with the release of the report of the Mpati commission of inquiry into allegations of impropriety at the PIC. The Ayo investment and other deals with Survé were singled out for particularly scathing criticism and the PIC was advised to not only recover the money but possibly pursue criminal charges.

“The Ayo transaction demonstrates the malfeasance of the Sekunjalo Group, the impropriety of the process and practice of the PIC as well as the gross negligence of both the CEO and CFO [of the PIC],” Judge Lex Mpati wrote.

In December 2017 the PIC circumvented its own evaluation protocols and hurriedly invested in Ayo at the behest of its then chief executive, Dan Matjila, who was friendly with Survé. 

The investment was done at what appears to be a vastly inflated price and without standard conditions that would have protected the PIC from massive losses it subsequently suffered, specifically a downside protection agreement. 

Despite this, Finance Minister Tito Mboweni intimated that Survé and Matjila should be given another chance to state their case. At the same committee meeting in December where Sithole addressed the Ayo issue, Mboweni struck a conciliatory note.

“I think that maybe this committee should invite the chairperson of Sekunjalo and Ayo, also the previous CEO of the PIC to have a conversation on how those arrangements were made and so on. I think it would be very wrong for us to tarnish the image of the whole Ayo organisation or the whole Sekunjalo organisation based on this.”

A magical money tap

Ayo’s main source of income is simply interest earned on the remainder of the PIC money in the bank. 

With the powers-that-be cutting interest rates to historic lows last year, this effortless money tap had been tightened slightly. Ayo only earned R242-million interest in the financial year ending 31 August as opposed to R323-million the previous year. 

That did not stop it from declaring a dividend of R223.7-million, which brings the total payout to shareholders to roughly R612-million since the PIC invested. 

To put that into perspective, the interest that Ayo earned just by sitting on the PIC cash was a cumulative R928-million by the end of August 2020. It paid out 66% of that as dividends without achieving any operational profit whatsoever. 

These dividends mostly flow to Ayo’s biggest shareholder, AEEI, which is majority-owned by Survé via Sekunjalo.

Ayo did acquire a number of real businesses, the largest of which is Sizwe Africa IT. In that deal it paid R165-million for 55% of the IT company.

Sizwe is Ayo’s biggest source of actual operational income but is fighting the State Information Technology Agency in court after it won a tender to supply tablets to matric pupils in the Eastern Cape at allegedly inflated prices. The tender has been interdicted but Sizwe as well as the Eastern Cape Department of Education are fighting back, Ayo said in its financial report.

Massive ‘markups’ at heart of Eastern Cape’s R538m tablets and e-learning deal with Surve-owned Sizwe Africa IT

Ayo’s prospects of making money by actually doing something are, however, dim this year.

AmaBhungane previously revealed that Ayo’s single largest customer, Sasol, was prematurely pulling the plug on a seven-year contract for IT services. In the recent results Ayo revealed that this contract had been responsible for revenue of R418-million and net income of R73-million. Even that revenue stream will now evaporate.

It’s a good thing there is still plenty of the PIC’s money left to play with. DM