Ayo in talks to settle R500m contract to supply matriculants with tablets

Loss-making technology group Ayo is in negotiations with the Eastern Cape education department in an attempt to reach an out-of-court settlement over a controversial deal to supply matric pupils in the province with computer tablets.

The provincial department of education and Ayo’s subsidiary, Sizwe Africa IT Group, in 2019 entered into a deal worth more than R500m to supply 55,000 tablets to matric students.

The contract was a three-year lease agreement with a price tag of R538m, equalling nearly R240 per student per month.

The deal, which courted public controversy, was interdicted by the State Information Technology Agency (Sita), which is charged with procuring IT services for government. Sita argued it was not involved in the procurement process.

Ayo and the department appealed against the high court judgment that interdicted the deal with the matter not yet finalised. However, Ayo on Tuesday said it had received legal opinion that Sizwe Africa must provide for a potential loss, “being the profit that was made from components of the deal”.

“Therefore management has made an estimate and raised the provision for the amount. Legal experts are of the opinion that AYO must provide for a potential loss equivalent to the profit that was made from schedule 9 and schedule 10 of this tender,” the group said.

“Sizwe requested a just and equitable settlement of the case from the court, which will not include any profit-making from this deal. Management has estimated that a profit of R16.7m which was made from schedule 9 and schedule 10 is at risk of not being included in the settlement amount. The parties are in negotiation to reach settlement.”

The Cape Town-based group, which on Tuesday reported a loss before tax of R258m in the year to end-March, did not go into further details.

Sita spokesperson Tlali Tlali said negotiations between the parties did not take away the option by the law enforcement agencies to investigate any aspect of the project.

“Sita does not have any relationship with Ayo in respect of the Eastern Cape matriculants’ tablet project. The agreement is between Eastern Cape department of education and Sizwe Africa IT Group. Sita is currently negotiating with the department on how the matter can be resolved amongst the organs of the state,” Tlali said.

News of the imminent settlement between Ayo and the department comes just months after the group and the Public Investment Corporation (PIC) settled their long-running legal dispute.

The PIC initially wanted to recoup R4.3bn it invested in the group in 2017. At the time, the PIC alleged the funds in Ayo were used, at least in material part, to settle the outstanding liabilities of certain of Ayo’s related companies. The parties later agreed to settle the matter out of court. Under the terms of the deal, Ayo is buying back 17.2-million shares from the PIC for R619m.

Another condition is that the Government Employees Pension Fund (GEPF) will, for every 10% of the shares it holds in Ayo, be entitled to nominate one director to the board and will have to approve of the appointment of the chair.

Business Day reported in April that attorneys told the PIC that several obstacles hampered the chances of success in a lawsuit it brought against Ayo, which is indirectly controlled by Independent Media owner Iqbal Survé.

Ayo said the R258m loss for the period under review was partly due to costs associated with the retrenchment process it undertook. The group reported a loss of R80m in the comparative period. It said the closure of its accounts by banks was hampering its competitiveness and constraining its ability to complete acquisitions. 

The group said its underlying investments were resilient and well positioned for future growth.

“Following the PIC settlement, AYO is optimistic about future prospects and looking forward to creating shareholder value. As an ICT investment holding group, AYO’s focus for the next 18 months is to strengthen the underlying subsidiaries, contain costs and overcome banking challenges. AYO, with a strong balance sheet is seeking to make strategic acquisitions,” it said.

Ayo lost two directors, Wallace Mgoqi and Dennis George, who died during the year under review.

khumalok@businesslive.co.za