Carol Paton Writer at Large
Iqbal Survé. Picture: GALLO
Iqbal Survé. Picture: GALLO

The Public Investment Corporation (PIC) says it has asked a court to set aside the compliance notice it received from the Companies and Intellectual Property Commission (CIPC) ordering it to recover the R4.3bn it invested in Ayo Technologies.

It also says, however, that it is taking steps to recover the investment from Ayo — a process that was already under way before the compliance notice was received and agrees completely with the CIPC that its losses must be recovered.

The investment in Ayo, which was made in December 2017, is under scrutiny by the Mpati Commission of Inquiry into the PIC. At the time, it was considered suspicious because of the extraordinarily high valuation placed on the Ayo shares. It bought a 29% stake in the company at R43 a share, implying a valuation of R14.8bn. But a few months before financial statements showed that Ayo had total assets of R292m and a book value of R67m. Since then the share has traded far below the original valuation.

This valuation, which was so out of proportion to the company’s turnover, is also what the caught the attention of the CIPC.

The CIPC, which administers the Companies Act, served the PIC with a compliance notice instructing its directors to recover the investment on the grounds that they had contravened the Companies Act, by knowingly causing harm to their company.

It also subsequently emerged that in making the investment the PIC had waived the due diligence process. Iqbal Surve, owner of Independent News papers, in which the PIC is also invested, holds a large indirect stake in Ayo

The PIC issued a press statement on Sunday in response to what it said were “misleading articles” published in various titles of Independent Media. 

In the articles Ayo states that it has launched its own court action to have the compliance notice set aside. The articles however quote extensively from the PIC’s court papers. This, the PIC said, gives readers the impression that Ayo and the PIC are collaborating to have the notice set aside.

“The titles and contents of the articles are couched in a manner that suggests that the PIC is collaborating with Ayo Technology in opposing the Compliance Notice issued by the Companies and Intellectual Property Commission against the PIC directors, directing them to recover funds invested in Ayo,” it statement says.

But the PIC says it went to court to have the notice set aside as it unable to comply with the stipulated time frame of 14 days, and not because it does not want to recover the money invested in Ayo. 

“The PIC and CIPC agree that the deadline set by CIPC in its compliance notice, which ends on  March 14 2019, does not give the PIC sufficient time within which to undertake the necessary legal steps to implement the recovery of any losses it may have suffered in relation to the Ayo transaction.

"The PIC’s view is that the law does not allow the CIPC to amend its own notice to provide for a more realistic deadline. Once issued by the CIPC, the compliance notice may only be set aside, suspended or amended by the tribunal or a court of law,” it says.

As it was already engaged in a process to recover the money, the PIC approached the court to ensure that it is not in breach of the Companies Act.

“In addition to avoiding a breach of the March 14 deadline by the PIC, setting aside or suspending the compliance notice will also allow CIPC an opportunity to collate accurate facts about the process followed by PIC in relation to the Ayo transaction, having regard to the fact that the Ayo transaction is the subject of ongoing investigation by the PIC and the commission of inquiry into the PIC,” it states.