Ayo and PIC settlement ‘confidential’ for now

The court battle between the Public Investment Corporation (PIC) and Ayo Technology Solutions has come to a quick end with the signing of a settlement agreement branded as “confidential” for the time being.

The PIC set out to recover the R4.3 billion it invested in Ayo in 2017 – plus interest, which would have upped the total claim to more than R7 billion.

Independent Media which, like Ayo, is part of the African Equity Empowerment Investments (AEEI) group, was the first to break the news.

It published a short statement on the IOL news site that the two parties’ legal representatives thrashed out a settlement on Thursday and got court approval on Friday morning.

“The case in which the PIC is looking to dissolve and recoup its R4.3 billion investment in Ayo has concluded after both sides came to an, as yet, confidential settlement agreement,” according to the statement.

“The settlement was reached on Thursday after talks between the advocates for both sides, which took up most of the day meaning that the court did not sit as expected.

“The advocates and accompanying attorneys were mum as they left Western Cape High Court Judge Ashley Binns-Ward’s chambers shortly after 10am [on Friday] saying only that the matter had been settled, the settlement was confidential, and a joint statement would be released.”

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The PIC issued a short press statement late Friday afternoon to confirm that a settlement had been reached, but did not disclose any details.

The full statement reads: “The Public Investment Corporation (PIC) and Ayo Technology Solutions Limited (Ayo) have reached a settlement of the proceedings instituted in the Western Cape Division of the High Court of South Africa against Ayo.

“The settlement was made an order of court by the High Court, today, 24 March 2023.

“The parties have sought to resolve the long-running litigation in a manner that best protects the interests of their stakeholders, in the circumstances, and with a view to giving the business of Ayo a chance to create growth and value into the future.”

Neither Ayo nor the PIC responded to queries about the matter.

Need for disclosure

At least some of the terms of the settlement should be made public – R4.3 billion is a huge amount of money, even forgetting that the original claim called for interest too.

It is unthinkable that the settlement was done behind closed doors, after the original investment seemed to have been draped in secrecy and done without the PIC’s usual oversight.

The details of the settlement will not remain secret for ever, and will make for interesting reading.

On the one hand, Ayo is a listed company and JSE rules and regulations require that companies disclose particulars of material events.

The settlement of a R4.3 billion claim definitely qualifies as “material” considering Ayo’s financial standing.

At the end of its last financial year, Ayo only had R1,1 billion cash in the bank and was valued at less than R1.4 billion on the JSE. According to its balance sheet at the end of August 2022, the group had an equity value of only R3.1 billion, including intangible assets and goodwill.

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Public pressure

The PIC will face public pressure to disclose the terms of the settlement, because taxpayers are ultimately exposed in making good any losses due to bad investments and whatever is stolen through corruption from state employee pension funds.

The PIC subscribed for shares in Ayo on behalf of the Government Employees Pension Fund (GEPF). This is a defined benefit fund, which means retired government employees and those who will retire in future will receive guaranteed pensions, irrespective of the performance of the fund.

Their ultimate pensions are largely based on years of service and salary scales, rather than the expertise and commitment of their pension fund manager. Government will use taxpayer money to make up any shortfall in future.

This opens the door for civil organisations or political parties to push for disclosure.

There is also a chance that GEPF trustees will actually step up and insist on disclosure and transparency.

Justified

Questions were justified when it first came to light that the PIC had invested R4.3 billion in the unknown Ayo.

At the time of Ayo’s listing in December 2017, the R4.3 billion bought the PIC an interest of just 29% in Ayo, despite the PIC’s cash making up 92% of the small computer company’s assets of R4.7 billion.

Since then Ayo has suffered losses every year, but has paid hundreds of millions of rands in dividends.