DailySun
An investor in the financially distressed Ecsponent, who previously sought to provisionally liquidate the once JSE-listed entity without success, remains resolute. Her pursuit to determine the fate of the R2.3 billion invested in preference shares in the company is ongoing.
Jienie-Michelle Dreyer has submitted a letter of dispute concerning a petition to appeal to the Chief Justice of the Supreme Court of Appeal in Bloemfontein, expressing her intention to request a court review of the case based on “significant failures of justice” alongside the entirety of Judge G Ally’s ruling and orders.
ADVERTISEMENT
CONTINUE READING BELOW
This comes after Judge Ally dismissed her application for provisional liquidation of Afristrat on 20 February 2024, and denied her request for leave to appeal his decision on 26 May, with the Supreme Court of Appeal electing not to consider her appeal petition on 11 November 2024.
Read:
On Tuesday, Dreyer mentioned that she is still awaiting feedback on her letter and underscored her significant financial struggles, which hinder her ability to secure legal representation.
Liquidation applications
Ecsponent, currently referred to as Afristrat Investment Holdings, had its JSE listing revoked on 1 July 2024 following the suspension of trading in its shares on 5 August 2022 due to a failure to release its audited financial statements.
Despite opposing Dreyer’s efforts, Afristrat’s board opted for voluntary liquidation due to its financial insolvency on 1 March 2024.
The liquidation process was stalled as Dreyer’s application for provisional liquidation took precedence.
Read:
Afristrat to liquidate due to being ‘commercially insolvent’
Afristrat currently halts intended voluntary liquidation application
In her correspondence to the Chief Justice, Dreyer asserts that an injustice has taken place and emphasizes that her application was aimed at “urgent liquidation” of Afristrat and not a probe into lost investments.
She claims that Judge Ally made a mistake by determining that the criteria in her leave to appeal application had shifted, requiring her to demonstrate that another court “would” arrive at a different conclusion, overlooking that there may be compelling reasons for an appeal to be considered.
Read: Did the judge err in rejecting the Ecsponent liquidation application?
Dreyer believes the entire situation deserves a fresh review and criticizes the lack of reasoning provided for rejecting her appeal attempts.
“The failure of Judge Ally to document any legal justification for his decision, nor can the judges who dismissed the appeal petition offer credible reasons for their decisions, reflects poorly on how ordinary citizens are treated in South Africa,” she remarked.
Background
Dreyer’s legal actions stemmed from her acquisition of R6.5 million worth of preference shares in Afristrat via an independent broker on 13 September 2015 and 1 June 2016.
In September 2019, Afristrat invested more than R2 billion of investor funds into the MyBucks Group, which is listed on the Luxembourg Stock Exchange and involved in microlending throughout several Southern African countries.
As stated by Afristrat CEO George Manyere, nearly 90% of either Ecsponent or Afristrat’s investment funds were directed towards MyBucks, whether as equity or loans, all of which were forfeited during MyBucks’ downfall.
Read:
Afristrat has ‘lost’ R1.5bn investment in MyBucks [Aug 2022]
Afristrat reveals R1.2bn exposure to the now liquidated MyBucks Group [Jan 2023]
The MyBucks Group has since been liquidated and is presently undergoing winding-up procedures.
Dreyer indicated in her letter that Afristrat had misrepresented its solvency through its financial statements, prompting her application under Section 81 (1) (e) (i) and (ii) of the Companies Act, alleging that “assets were being misapplied or wasted”.
She contended that the court that evaluated her liquidation application rightly determined that Section 81(1) was applicable since Afristrat had publicly claimed to be solvent.
Read:
Afristrat acknowledges it cannot continue as a going concern
Grim outlook for Afristrat’s future
Dreyer stated that the central issue for her appeal lies in the error made by Judge Ally in accepting Afristrat’s position that the assessment of investments should occur “at inception” rather than during the investment’s life when assessing potentially misapplied or wasted assets.
ADVERTISEMENT:
CONTINUE READING BELOW
She stressed that she had no voting rights, no influence over the company, and was unable to reclaim her capital.
“The applicant [Dreyer] hereby seeks a fair legal explanation regarding the grounds on which the petition [to appeal] was denied,” she expressed.
Lost investments
Dreyer further noted that Afristrat acknowledged ongoing investment losses as reflected in MyBucks’ audited financial statements, which included:
- 2016: R11.9 million loss
- 2017: R221.2 million loss
- 2018: R163.4 million loss
- June 2019: R79.5 million loss.
Nevertheless, Dreyer claimed that Afristrat continued investing in MyBucks even after a PricewaterhouseCoopers (PWC) report on 19 October 2019 indicated that MyBucks breached debt covenants, significantly casting doubt on its viability as a going concern. Afristrat subsequently attributed R450 million and R1.671 billion in goodwill to this investment.
“It is common knowledge that all these funds were lost,” she declared.
Read: Huh? JSE-suspended Afristrat issues puzzling update
Dreyer also questioned how the court concluded that Afristrat did not misapply assets while, during the company’s “failure to honor its obligations to investors,” it was able to provide ECS Financial Holdings, a newly established shelf company with no assets or personnel, an unsecured loan exceeding R626 million, along with another loan over R400 million in the course of a year—all of which were lost.
Additionally, she cited another example of wasted or misapplied assets by Afristrat, mentioning a R100 million investment in VSS Financial Services (Pty) Ltd, even though the company reported an audited net loss of R17 million prior to this investment.
All of the funds in question were similarly lost, she noted.
Sale of subsidiaries
Dreyer emphasized that several wholly-owned or majority-owned subsidiaries, which held substantial value for Afristrat, were sold to George Manyere, a current director, for merely R1.
She detailed the subsidiaries sold in this manner:
- Ecsponent Business Credit, which generated an income of R46 071 000 and had liabilities of R10 538 000 for the year ending March 2020;
- Companies in Eswatini, which reported an income of R347 523 000 and liabilities of R325 578 000 for the year ending March 2020;
- Ecsponent Swaziland (Ecsponent Limited), previously known as Escalator Capital Limited, which reported a profit of R842 843 for the year ending March 2020.
Dreyer pointed out that Judge Ally did not address any of these points in his ruling regarding her provisional liquidation application and simply stated that he was not convinced that another court would reach a different decision.
“Therefore, the applicant [Dreyer] finds it challenging to present further arguments regarding the ruling due to the absence of justifications provided by the Learned Judge, apart from his conclusion.
“It is respectfully suggested that the Learned Judge should have provided reasons, as fairness demands.”
“Ultimately, allowing an appeal hearing is in the interests of justice, as outlined in Section 17(1)(a)(i) and (ii) of the Superior Courts Act 10 of 2013,” she concluded.
Read: Afristrat braces for potential liquidation
Stay updated with Moneyweb’s detailed financial and business news through WhatsApp here.
