Ecsponent Investor Seeks Legal Recourse for R2.3 Billion in Missing Funds

The investor in financially troubled Ecsponent, who previously tried to provisionally liquidate the once JSE-listed company without success, remains determined. Her quest to uncover the fate of the R2.3 billion invested in preference shares in the firm continues.

Jienie-Michelle Dreyer has sent a letter of dispute regarding a petition to appeal to the Chief Justice of the Supreme Court of Appeal in Bloemfontein, indicating her intent to request a court review of the case based on “significant failures of justice” and the entirety of Judge G Ally’s judgment and orders.

This follows Judge Ally’s dismissal on 20 February 2024 of her application for provisional liquidation of Afristrat, and on 26 May, the rejection of her request for leave to appeal his ruling, with the Supreme Court of Appeal deciding not to entertain her appeal petition on 11 November 2024.

Read:

Dreyer mentioned on Tuesday that she is still awaiting a response to her letter and highlighted her severe financial difficulties which prevent her from acquiring legal representation.

Liquidation applications

Ecsponent, now known as Afristrat Investment Holdings, had its JSE listing revoked on 1 July 2024 after trading in the company’s shares was suspended on 5 August 2022 for failing to release its audited financial statements.

Despite opposing Dreyer’s efforts, Afristrat’s board opted for voluntary liquidation on 1 March 2024 due to its commercial insolvency.

Afristrat could not move ahead with its liquidation process since Dreyer’s provision application took precedence.

Read:

Afristrat to liquidate due to being ‘commercially insolvent’
Afristrat currently halts intended voluntary liquidation application

In her letter to the Chief Justice, Dreyer claims that an injustice has occurred and emphasizes that her application sought “urgent liquidation” of Afristrat rather than an inquiry into the lost investments.

She asserted that Judge Ally made an error in determining that the criteria in her leave to appeal application had changed to where she must prove that another court “would” reach a different conclusion, neglecting the possibility that compelling reasons may exist for an appeal to be considered.

Read: Did the judge err in rejecting the Ecsponent liquidation application?

Dreyer believes the entire affair warrants a fresh examination and criticizes the absence of reasoning provided for denying her appeal attempts.

“The inability of Judge Ally to document any legal rationale for his decision, nor can the judges who rejected the appeal petition offer valid reasons for their choices, reflects poorly on the consideration given to ordinary citizens in South Africa,” she stated.

Background

Dreyer’s court applications stemmed from her purchase of R6.5 million worth of preference shares in Afristrat through an independent broker on 13 September 2015 and 1 June 2016.

In September 2019, Afristrat invested over R2 billion of investor money in the MyBucks Group, listed on the Luxembourg Stock Exchange and involved in microlending across several Southern African nations.

According to Afristrat CEO George Manyere, nearly 90% of Ecsponent or Afristrat’s investment funds were allocated to MyBucks, either as equity or loans, which were all lost during MyBucks’ collapse.

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 been liquidated and is currently undergoing winding-up procedures.

Dreyer indicated in her letter that Afristrat had presented itself as solvent 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 claimed that the court that considered her liquidation request correctly ruled that Section 81(1) was applicable since Afristrat had publicly represented itself as solvent.

Read:
Afristrat acknowledges it cannot continue as a going concern
Grim outlook for Afristrat’s future

Dreyer stated that the core issue for her appeal is the error made by Judge Ally in accepting Afristrat’s argument that the assessment of investments should occur “at inception” and not during the investment’s currency when evaluating potentially misapplied or wasted assets.

She emphasized that she possessed no voting rights, no influence over the company, and was unable to withdraw 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 reported 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.

Nonetheless, Dreyer asserted that Afristrat continued to invest in MyBucks even after the release of a PricewaterhouseCoopers (PWC) report on 19 October 2019, stating that MyBucks breached debt covenant agreements, significantly questioning its ability to survive 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 stated.

Read: Huh? JSE-suspended Afristrat issues puzzling update

Dreyer also questioned how the court concluded that Afristrat did not misapply assets when, during the company’s “default in honoring their obligations to investors,” it managed to grant ECS Financial Holdings, a newly formed shelf company with no assets or staff, an unsecured loan exceeding R626 million, in addition to another loan exceeding R400 million over a year—all of which was lost.

She cited another example of wasted or misapplied assets by Afristrat, which included a R100 million investment in VSS Financial Services (Pty) Ltd, despite the company recording an audited net loss of R17 million prior to this investment.

All of the funds in question were also lost, she remarked.

Sale of subsidiaries

Dreyer also highlighted that several wholly-owned or majority-owned subsidiaries, which held significant value for Afristrat, were sold to George Manyere, a current director, for merely R1.

She specified 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), formerly known as Escalator Capital Limited, which reflected a profit of R842 843 for the year ending March 2020.

Dreyer pointed out that Judge Ally did not address any of these arguments in his ruling regarding her provisional liquidation application and merely stated that he was unconvinced that another court would render a different verdict.

“Therefore, the applicant [Dreyer] finds it challenging to provide additional arguments about the ruling due to the absence of reasons offered by the Learned Judge, apart from his conclusion.

“It is respectfully suggested that the Learned Judge should have supplied reasons, as fairness dictates.”

“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 added.

Read: Afristrat braces for potential liquidation

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