South Africa

BILLIONS WASTED

Terms of the PIC/AYO deal revealed – it is a bloodbath for state pensioners

Terms of the PIC/AYO deal revealed – it is a bloodbath for state pensioners
Iqbal Survé. (Photo: Gallo Images / Wessel Oosthuizen) | Former Public Investment Corporation (PIC) CEO Dan Matjila. (Photo: Gallo Images / Phill Magakoe)

Technology company AYO and the Public Investment Corporation (PIC) have settled their legal dispute through mediation in a deal in which the PIC will get paid around R600-million of its original R4.3-billion investment for 5% of the company’s shares, thus formalising the massive loss suffered by SA’s state pensioners during the five-year ordeal.

Since the PIC invested R4.3-billion in 2017, AYO Technology, ultimately controlled by businessman Iqbal Survé, has been paying huge dividends, even though it’s technically in a loss-making position, resulting in the gradual reduction of the PIC’s original investment.

The mediation deal effectively leaves those payments in place, but it draws a line under the dispute, ending the litigation and allowing the PIC to get back a small portion of what it originally invested – while not placing AYO in immediate jeopardy of bankruptcy but leaving the PIC with around R600-million of its original investment, R4.3-billion. 

The PIC bought 29% of AYO’s shares in its initial public offering in December 2017 on behalf of the Government Employees Pension Fund (GEPF) in a process it has now itself claimed in court was irregular. AYO’s share price has since fallen by around 85% over the past five years from R43 to R4.70 a share. The settlement agreement sees AYO paying the PIC R20 a share.

Along with the immediate 5% share buyback by AYO, the GEPF will have the option of selling another 5% of the shares back to AYO in three years’ time subject to the solvency of AYO, and at a pre-determined price of at least R20 a share. The settlement means that the PIC and the GEPF by extension, will have locked in losses of at least R2.5-billion in this controversial investment. In the meantime, the GEPF will remain a 25.1% shareholder of AYO and have one board seat for every 10% of the company it owns. The GEPF representative will also chair the board. 

This arrangement seems likely to bring a halt to the gradual bleeding of the company in favour of its holding companies. AYO is 49.4% owned by Africa Equity Empowerment Investments, which is majority-owned by Sekunjalo Investments. Sekunjalo Investments was founded and is chaired by Survé. Sekunjalo also owns a small direct stake in AYO, making it effectively the controlling shareholder of AYO. 

Although the further bleeding of AYO’s cash resources now seems likely, the deal will not reverse the approximately R3-billion paid in dividends to the holding companies over the past five years. But it does give AYO the opportunity to trade its way out of its current crisis. 

Justifying the PIC’s agreement to the mediation, the corporation’s lawyers noted that commercially, the PIC had to balance the probability of the success of the litigation, the quantum it was likely to recover and the potential growth of the business under different management and board. 

They pointed out that the last reported numbers in AYO showed a net asset value of around R3-billion and a cash balance of around R1.2-billion. The PIC had therefore secured about half the cash available in the business for 4.99% of the shares and secured a put option on another 5% of the shares. 

In a brief statement issued on Friday night, the PIC merely confirmed that a settlement had been reached: 

“The parties have sought to resolve the long-running litigation in a manner that best protects the interests of their stakeholders, in the circumstances, and with a view to giving the business of AYO a chance to create growth and value into the future,” the statement reads. 

Repeated attempts (five calls, one SMS and one WhatsApp message) to contact David Masondo, chairman of the PIC on Saturday morning were unsuccessful, and he finally replied with, “Sorry, I can’t talk right now”.

Changes in the governance structure, including the protection of minority shareholder rights, would ensure that the PIC has significant influence over potential value creation for the business over the next three to five years. What the note does not explain is how AYO, which has recorded frequent losses over the past five years, intends to turn around its financial position. BM/DM

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Comments - Please in order to comment.

  • Jon Quirk says:

    Does it follow, from this clearly illegal transaction that both Iqbal Survé and Dan Matjila will now face criminal charges?

    Surely in any sane country, where the laws of the land pertain and hold sway, this must be the case? A very small crumb of comfort for the pensioners who have suffered a R2.5 billion loss at the very least.

  • Johan Buys says:

    “ the deal will reverse the approximately R3-billion paid in dividends to the holding companies over the past five years”

    Does that mean dividends paid in the past are repaid to the company?

    • Easy Does It says:

      What about the interest lost over that period?

    • jcdville stormers says:

      Iqbal “Suurvy”

    • Leon Schipper says:

      It says, “The deal will NOT reverse the R3b dividends”…

      • Johan Buys says:

        Leon, the article was corrected. It would be a first if past dividends were clawed back.

        The directors anyway have a problem : the company would not have passed the solvency and liquidity tests that directors MUST apply before paying dividends. Net effect : personal unlimited joint and several liability for company’s liabilities. This deal now probably extinguishes the bulk of that liability…

  • Jane Crankshaw says:

    Yep Pensioners and Taxpayers are easy meat for the RET bunch. Why work hard when you can just steal it from those that do or have worked hard all their lives!
    Racist BEE policies steal jobs from those that can do them and hand those jobs to those that can’t. It’s a weird state of affairs… explains why South Africa is a failed State! Didn’t take all that long either. Took 336 years to build this country and only 30 years to destroy it. Not bad going…we’ll done ANC

  • Garth Kruger says:

    Surve made a fool of them all. Like the Guptas did too.

    Where is Matjila? What was his incentive to sign off on the original deal?

  • Paul Trewhela says:

    See online my article from Politicsweb in 2014, “China-ANC alliance: A threat to media freedom in South Africa”, about Surve’s takeover of the Argus corporation, with massive input from China and the PIC.

  • Margaret Jensen says:

    Iqbal Surve is bad news

  • Peter Cheshire says:

    “It’s a bloodbath for state pensioners” I believe to be totally misleading, state pensioners are surely on a “defined benefit” scheme, no matter how the money is wasted, any shortfall will have to be made up in the end by the taxpayers!

    • Geoff Krige says:

      Not so. State pensioners only start their pension years on a defined benefit. From year 2 onwards increases depend on adequate performance of the underlying assets. No increases are defined or guaranteed – as with most pension schemes. This is most definitely a bloodbath for State pensioners.

      • Peter Cheshire says:

        According to google -:
        The Government Employees’ Pension Fund (GEPF) is a defined benefit fund with over 1,2 million active members and more than 400 000 pensioners and …

        The once-off gratuity and the amount of the annual annuity income is calculated according to the following formula: Gratuity = 6.72% x final salary x years of pensionable service. Annual annuity = (1/55 x final salary x years of pensionable service) + R360.04 Oct 2022

        • Pam Hicks says:

          Over the past 10 years the increase, relative to inflation, has never fallen below 100%, i.e. at the very least pensions have kept pace with inflation. This year it’s dropped to 75% of inflation. So pensioners are for the first time sliding backwards. Coincidence? I think not.

    • Willem Boshoff says:

      As per Geoff the pensioners will pay in getting reduced future increases. The state/taxpayers have no obligation to the GEPF. The GEPF members should start a class action against their board and management at the time – they got fleeced and a lot of criminal palms got greased. Another RET disgrace.

  • David Forbes says:

    A shocking settlement. And no-one goes to jail. WTF??

  • Francois Smith says:

    Dan Matjila must be sued in civil court.
    Fortunately as civil service’s coloring book project is well advanced, this means that inter alia striking Nehawu nurses’ pension also will be less than expected.

  • Theart Korsten says:

    But it seems no one is accountable to anyone if you fleece a NGO out of money. As our VP said, “That’s majority rule. We are the majority. We make the rules.” So when the ANC and their institutions fail, they are not accountable. So why are they in power again? Oh yes. To enrich themselves, their family and loyalists to the party. Insane!

  • Deon Botha-Richards says:

    Ah. A successful exercise in wealth redistribution. From pensioners to wealthy businessmen.

  • D'Esprit Dan says:

    The newsletter that has this story as its lead is brilliant – juxtaposes the quote below from Bob Marley above the picture at the top of this article. Entirely coincidental, I’m sure! Does say a lot, though…

    “The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.”

  • Dennis Bailey says:

    So if pensioners arn’t benefitting who is? Isn’t this a rip-off dressed up as a deal? Is anyone going to prison for the original 4.3 billion rip-off? There are so many unanswered questions in this article I’m amazed it passed editorial scrutiny. DM, please don’t do a news24 on us.

  • Roger Symes says:

    I am a state pensioner; this frightens the life out of me – where to now?
    Surely the PIC should have consulted with the members of the state pensioners’ fund before making such an outlandish investment in AYO?
    I see that I am scheduled for an increase of 5,5% in my pension w.e.f. 01.202023, but what of the future?

  • Kevin Immelman says:

    Scurvy Surve!
    Just by his rantings can it be denoted that ‘he doth protest too much’.
    As an absolute amateur, I have been able to see through this man.
    Between him and Dan Matjila they have cost thousands of pensioners hundred of thousands of rand each with their dodgy deal. And still they walk the streets………

  • Kevin Immelman says:

    The Argus Group was a once respected group of newspapers who were known for independence and integrity. Since this ‘piece of work’ took over the group, it has deteriorated to a point where they report on stuff that even the average man struggles to believe or comprehend. The quality of journalism is worse than the tabloid press in the UK. At least there you get to see the odd boob or 2. The only tit you get to see with IOL is occasional glimpses of the owner.

  • Libby De Villiers says:

    The only state pensioners that will not lose out are the ministers and other “government officials” – they will make sure of that – always the most vulnerable that suffer. Another disgusting catastrophe created by the ANC. How utterly shameful.

  • GERT CORNELIUS Cloete says:

    Paying out dividends without posting a profit points to something very sinister indeed. These guys clearly ignore company law and IFRS. However, it is to be expected. Now they rob the very people that worked for them for many years and contributed to a fund that should have protected them at a vulnerable time in their lives. One can only wonder how long GEMS will also be able to operate

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