A leaked letter written to the board of Ayo Technology Solutions by its executive team reveals a host of concerns regarding corporate governance issues at the company.
Ayo is controlled by African Empowered Equity Investments (AEEI) which owns about 49% of the shares. Iqbal Survé's Sekunjalo Investment Holdings in turn controls 61% of AEEI.
The damning letter alleges "lack of professionalism" and interference in the affairs of the company by board members and executives linked to Survé-controlled entities.
Ayo was listed on the JSE in December last year following a controversial private placement that saw the Public Investment Corporation (PIC) subscribe for the entire private offering at a price of R43 a share — a R4.3bn investment for a 29% stake.
The offer raised eyebrows as the net asset value of Ayo at the time was just 15 cents per share. Ayo shares are barely traded, but on Friday were offered at R23.65 a share.
In August, Ayo issued a Sens announcement stating its CEO Kevin Hardy and chief investment officer Siphiwe Nodwele had resigned, without giving an explanation.
The letter, dated August 7, was signed by Hardy, Nodwele and CFO Nahied Gamieldien, who has stayed on as acting CEO.
The letter lists 14 points of concern relating broadly to conflicts of interest between Ayo and AEEI and to questionable decisions that appear to be driven by those conflicts.
Hardy and Nodwele referred questions to Ayo. Neither the company nor Survé responded to requests for comment.
The letter complains of the "continued interference" of AEEI CEO Khalid Abdulla and his executives in the daily operations of Ayo, warning this "could lead to a breach of the Companies Act and the JSE listing rules".
Survé is Abdulla's brother-in-law.
The letter decries "resolutions . sent to the board for signature without any consultation with the Ayo executives" and notes concerns "around the lack of independence on the board and the significant representation in particular from INL".
INL refers to Independent News & Media SA (INMSA), of which another Survé-controlled vehicle, Sekunjalo Independent Media, owns 55%.
The Government Employees Pension Fund (GEPF), on whose behalf the PIC invests, announced this week that its R1bn loan to Independent had been fully impaired after INMSA and Sekunjalo "did not honour their payment obligations" when they became due in August. It is understood that about R400m was due.
At the heart of questions about the PIC's investment in Ayo was the suspicion it was partly aimed at allowing Survé companies to meet their obligations. The letter references two transactions that might have a bearing on those obligations.
One was a concern raised by the executives about a decision to transfer R400m of the PIC investment in Ayo at the instruction of the board to 3 Laws Capital, a company of which Survé is a director.
The letter notes: "The requirement for the R400m investment/loan imposed onto the company by AEEI into 3 Laws Capital Proprietary Limited (a related party) to be returned with interest in our bank account by the due date of 31 August . (note various attempts to gain visibility on statements of the account have failed to date which has given us much consternation)."
The other transaction involves BT Communications Services SA (BTSA), the South African arm of BT Group. AEEI owns 29.9% of BTSA and wanted to sell its stake to Ayo for almost R1bn.
In previous reports amaBhungane questioned the valuation and suggested the transaction was aimed at unduly benefiting AEEI.
Now the letter shows the three Ayo executives shared those concerns. Hardy was previously BTSA CEO.
As one concern, it lists: "The nature of the BTSA transaction and in particular the inflated valuation of R990m for a 29.9% stake. It is noted that a commitment was made by AEEI that they would withdraw from this transaction given the state of the BT relationship and our concerns as the AYO executive."
BT Group said it would not comment on "what appears to be confidential correspondence between third parties" but emphasised it was fully committed to BEE transactions that "also satisfy the highest levels of governance".
Additional reporting by Warren Thompson, Craig McKune and Susan Comrie...