Behind the PIC’s Ayo settlement

• Veil of secrecy soon to be lifted if asset manager’s board has its way

Legal opinion provided to the Public Investment Corporation (PIC) advised it to settle its longstanding dispute with Ayo Technology Solutions, saying the prospects of recouping its R4.3bn investment in the company in 2017 were grim.

Attorneys told the PIC there were several obstacles that hampered the chances of success in a lawsuit it brought against Ayo, which is indirectly controlled by Independent Media owner Iqbal Survé.

The PIC alleged that the funds in Ayo were used, at least in material part, to settle the outstanding liabilities of certain of Ayo’s related companies.

The legal opinion lists six key considerations that the top management ought to consider before agreeing to a settlement while the civil lawsuit was already under way in the Western Cape High Court.

They include:

● The prospects of success in the litigation, including the complexity and novel nature of the claims of the PIC;

● The financial position of Ayo, including cash on hand as reflected in the latest management accounts in possession of the PIC, to satisfy the payment amounts proposed in the settlement agreement;

● The evidence that has been led to date and witnesses still to be led, including those who had been “reputationally impugned in other proceedings, and those witnesses who were reluctant or refused to give evidence”;

● Threats levelled against witnesses;

● The potential growth of Ayo under different management and board, and the prospects of greater financial returns for the clients;

● The costs of the litigation and uncertainty of recovery or enforcement of a judgment, if eventually obtained.

The PIC and Ayo surprised many observers on Friday when announcing they had abandoned litigation and reached an out-ofcourt settlement, the details of which they said would not be made public.

The settlement was made an order of court by the high court. The PIC had approached the Western Cape High Court in an attempt to set aside its investment in Ayo and to recover the R4.3bn it invested in the technology firm.

VALUATION

This investment was made via the PIC’s participation in Ayo’s initial public offering through a private placement in December 2017, which valued the firm at R14.8bn. Ayo is now valued at R1.5bn on the JSE.

Business Day understands that the secrecy surrounding the

terms and conditions of the settlement will come under the spotlight when the board of the PIC, which manages about R2.3-trillion worth of assets on behalf of government employees, meets on April 17.

Business Day understands that the veil over the deal struck between the PIC and Ayo will soon be lifted if the board has its way. While the board was kept abreast of the mediation efforts that were taking place between the parties, Business Day understands that the finer details caught the board off guard, particularly the confidentiality clause.

THIRD PARTY

The PIC board, which is chaired by deputy finance minister David Masondo came into office in 2021.

PIC spokesperson Adrian Lackay said: “The confidentiality clauses in the settlement agreement bind the contracting parties. An interested third party can approach the court to uplift the order and get access to it.”

The Public Servants Association (PSA) has already called for the details of the deal to be made public or it will seek legal recourse.

“The question that still remains is whether Ayo misrepresented itself when it secured R4.3bn in funding from the PIC,” the union said in a statement. “The value of Ayo has fallen from R43 to R4.70 a share, which has major financial implications for the [the Government Employees Pension Fund] and its members,” it added.

“The PSA calls for transparency and rejects this secretive deal between the PIC and Ayo. The current state of affairs and the manner in which the PIC, as a plaintiff, settled this matter in secrecy leaves much to be desired.”

Survé, who also chairs the Sekunjalo Group, told one of the newspapers controlled by the group that justice had prevailed.

“We were always confident of our case and their own witnesses verified our version,” said Survé. “It’s very good that the other shareholder, the PIC, and ourselves can now turn our attention to growing the business. The settlement is a very good outcome for everybody.”

SCRUTINY

Survé and former PIC CEO Dan Matjila’s relationship came under scrutiny at the Mpati Commission, which probed allegations of impropriety at the PIC. Matjila and Survé both told the commission that the PIC’s R4.3bn investment in Ayo was above board and that the stateowned fund manager followed all prescribed investment policies.

Matjila defended the PIC’s investment at the commission, saying that he still believed there was value in the company despite the losses incurred.

Survé and the Sekunjalo Group last year filed for a formal legal review of the Mpati Commission’s report.