High court bid to place Afristrat in liquidation

Financially troubled investment holding company Afristrat is facing a high court bid to provisionally liquidate the company.

The application was partially heard this week. However, it was deferred for hearing at a later date to, among other things, allow Afristrat (previously known as Ecsponent Limited) to lodge papers to oppose the application.

The application was brought by preference shareholder Jienie-Michelle Dreyer, who has also launched a civil case in an attempt to recover her investment in Afristrat.

Read: Afristrat: More legal action against former execs, this time in Botswana

In an affidavit, Dreyer said she is supported in the provisional liquidation application by 57 shareholders and holders of securities of Afristrat to the value of about R100.3 million.

Dreyer said she brought the application on the basis that the directors of Afristrat have acted in a manner that has been “fraudulent or otherwise illegal, alternatively the respondent’s [Afristrat’s] assets are or have been misapplied or wasted, justifying an order to wind up” the group.

She claims Afristat has received and apparently invested “well in excess of R2.3 billion” in funds from mainly elderly pensioners and has made various representations about guarantees and surety, with 100% capital returns for shareholders and holders of securities, “none of which have materialised in the last several years”.

Read:
JSE suspends trading in Afristrat shares
Afristrat has ‘lost’ R1.5bn investment in MyBucks

Dreyer said a provisional liquidator will be best placed to make all the necessary inquiries into Afristrat’s assets and liabilities and report to the court on the best interests of the many vulnerable pensioners whose funds have been placed into Afristrat.

More time

Afristrat CEO George Manyere told Moneyweb this week the matter has been deferred because Afristrat asked for more time to file papers.

Manyere claims the application was “done unprocedurally and also the time was too short for us to respond”.

“But we are responding. This applicant [Dreyer] has been very malicious, very defamatory and trying to suppress the truth,” he said.

“We did not want to be impeded in doing the necessary work through forensic investigations of what exactly transpired. By them seeking to put the company into liquidation, is to hide the truth,” he added.

“The full response will be there with the clear facts of exactly what happened. Right now, the priority for us is to respond to this action and let the courts go through the issues and determine the future.”

Complex web

In her affidavit, Dreyer said Afristrat is a central part of an intricate and complex web of corporate structures spun throughout South Africa, southern Africa and international destinations such as Mauritius and the Cayman Islands.

She said that when she first invested in Ecsponent (since rebranded Afristrat) on 15 October 2015, she was promised a return of 9.5% per annum in the form of monthly dividends, after the withholding of taxes.

Dreyer pointed out that she was paid monthly dividends up until 20 January 2020, with Afristrat informing her via email on 28 January 2020 that the 106% capital redemption to her investment would be paid to her on or about 6 March 2020.

She said she was informed by means of a circular posted on the JSE in February 2020 that Afristrat would no longer be paying any form of dividends nor any capital redemptions and had instead converted the mandatory redeemable preference share into a combination of ordinary shares and hybrid instruments.

Read:
Ecsponent’s default puts R2bn in preference shares at risk [Feb 2020]
Ecsponent defaults on pay-out to preference shareholders [Feb 2020]
Red flags as Ecsponent faces ‘default event’ [Feb 2020]
FSCA inquiry into Ecsponent Financial Services [Apr 2020]

Some of the shareholders supporting her application have made many inquiries and sent correspondence to Afristrat but none has yielded any form of satisfactory answers on why the returns have simply not materialised, she said.

Dreyer added that Afristrat has consistently failed to give any form of explanation for its non-investment performances apart from indicating the investments it has selected have not performed as expected and it was not their fault but “due to prevailing market conditions, irregularities and mismanagement by the respondent [Afristat] and its directors”.

She claimed a recent inquiry revealed that Afristrat has moved considerable sums of money out of South Africa “ostensibly to Botswana, Zimbabwe, Mauritius and the Cayman Islands”.

Dreyer said Afristrat has, in a written offer to its shareholders and potential shareholders, clearly stated that “investor’s capital is 100% secured”.

“Having induced investors to invest based on such undertakings, the respondent [Afristrat] has singularly failed to honour any capital redemption commitments,” she said.

Shelf companies 

Dreyer said she conducted inquiries while preparing this provisional liquidation application. She ascertained that Afristat has, during its existence and trading activities, acquired either shelf companies or existing operating companies, most of which were purchased from either past or present directors.

Some of these companies have subsequently been on-sold to one of the current directors, George Manyere, for R1, she said.

Dreyer added that Afristrat subsidiaries also acquired companies that do not appear on the company’s organogram and were never mentioned in any of its Stock Exchange News Services (Sens) communications.

These include Virtual Shared Services (Pty) Ltd for R16 million, Ligagu Investments, trading as Get Bucks Swaziland, for R16 million, and Pink Orchard (Mauritius) for R185 million.

Dreyer further claimed that in the same month that Afristrat defaulted on its commitment to redeem her capital, it made a loan of R695 million to a newly established shelf company and subsidiary, ECS Financial Holdings, without any collateral as indicated by Afristrat’s 2020 balance sheet.

She claimed ECS Financial Holdings is owned by George Manyere and former Afristrat chief financial officer Tertius Johannes de Kock, who resigned on 26 July 2022.

Other claims made by Dryer include that Afristrat:

• On 3 January 2018 purchased 100 million of non-redeemable preference shares in VSS Financial Services, a subsidiary of the MyBucks group, which reported a net loss of R17 million.

• On 18 February 2019 secured a term funding facility from African Export Import Bank to the value of R700 million, which has never been recorded or reported in any of the company’s financial statements except for Sens.

• On 5 November 2019 announced the purchase of 51% of a chrome mine from the Makaha Cooperative Society for R22.5 million, with payment to be funded by its listed preference shares and contributions to commence from April 2020.

• On 13 December 2021 sent a notice to investors informing them that it had purchased the same mine from director George Manyere for R22.5 million.

• Subsidiary Basira Capital Limited has been placed in liquidation.

• Director turnover in terms of the sheer number of appointments and resignations “is akin to that of a busy bus terminal” and this simply cannot make for corporate leadership stability and good corporate governance.

• On 12 May 2022 defaulted on repayment of R512 million worth of hybrid instruments issued to investors and R162 million in terms of the term note programme.

High court Judge J Mokose issued an order stating that it is agreed the matter is urgent.

She said the matter is complex but shall, on proper ventilation, exceed 500 pages and both parties are in agreement that more than one day needs to be allocated for argument.

Read:
Ecsponent extends internal forensic investigations to over R220m [Sept 2020]
FSCA debars Ecsponent Financial Services’ key directors [June 2020]

Judge Mokose referred the matter to the Office of the Deputy Judge President for the preferential allocation of a date for hearing on an urgent basis by another court.

Manyere told Moneyweb in July this year that almost all of the R1.5 billion investment by Afristrat in Frankfurt-listed MyBucks SA, a microlender in several southern African countries that collapsed and is now in liquidation, had been lost.

Afristrat owns a 42.39% stake in MyBucks.

Manyere said at the time that Afristrat had launched about five forensic investigations into the operations of MyBucks.

Afristrat’s board had also instructed its attorneys in South Africa and Botswana to institute civil claims totalling R250 million against former executives at the company and/or MyBucks and institute an R800 million claim against MyBucks, he said.

Afristrat’s board was also considering instituting civil claims against the previous management, directors and auditors of MyBucks.

Trading in the shares of Afristrat was suspended by the JSE on 8 August 2022 because of the company’s failure to publish its provisional annual financial results within three months of the end of its financial year.