Ecsponent Investor Takes Legal Action Over R2.3 Billion in Missing Assets

The investor in the financially troubled Ecsponent, who previously attempted to initiate a provisional liquidation of the previously JSE-listed firm without success, remains determined. Her quest to determine the status of the R2.3 billion invested in preference shares with the company is ongoing.

Jienie-Michelle Dreyer has officially filed a petition for appeal addressed to the Chief Justice of the Supreme Court of Appeal in Bloemfontein, conveying her intention to seek a judicial review of the case due to “significant failures of justice” along with the entirety of Judge G Ally’s rulings and judgments.

This development follows Judge Ally’s rejection on 20 February 2024 of her application for the provisional liquidation of Afristrat and the Supreme Court of Appeal’s decision to dismiss her appeal petition on 11 November 2024, having previously turned down her request for leave to appeal his ruling on 26 May.

Read:

On Tuesday, Dreyer indicated that she is still awaiting a response to her letter and highlighted her substantial financial difficulties that impede her ability to obtain legal representation.

Liquidation Applications

Ecsponent, now functioning as Afristrat Investment Holdings, had its JSE listing revoked on 1 July 2024 after its shares were suspended from trading on 5 August 2022 for failing to submit audited financial statements.

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

The liquidation process was stalled because of Dreyer’s ongoing application for provisional liquidation, which took precedence.

Read:

Afristrat to liquidate due to ‘commercially insolvent’ status
Afristrat currently pauses voluntary liquidation application

In her correspondence to the Chief Justice, Dreyer insists that an injustice has occurred, arguing that her application sought “urgent liquidation” of Afristrat rather than merely an exploration of her lost investments.

She argued that Judge Ally erred in concluding that the criteria for her leave to appeal application had shifted, demanding that she show another court “would” reach a different conclusion, ignoring the possibility of significant reasons to justify an appeal.

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

Dreyer believes the whole matter merits a fresh review, condemning the absence of justification for the rejection of her appeals.

“The failure of Judge Ally to document any legal foundation for his decision, alongside the judges who dismissed the appeal petition not providing valid reasons, highlights poor treatment of ordinary citizens in South Africa,” she stated.

Background

Dreyer’s legal actions stem from her purchase of R6.5 million in preference shares in Afristrat through an independent broker on 13 September 2015 and 1 June 2016.

In September 2019, Afristrat allocated over R2 billion of investor funds to the MyBucks Group, a company listed on the Luxembourg Stock Exchange that engaged in microlending across various Southern African countries.

According to Afristrat’s CEO, George Manyere, nearly 90% of Ecsponent or Afristrat’s investment funds were directed towards MyBucks, either in the form of equity or loans, all of which were lost following MyBucks’ collapse.

Read:
Afristrat has ‘lost’ R1.5 billion investment in MyBucks [Aug 2022]
Afristrat reveals R1.2 billion exposure to the now liquidated MyBucks Group [Jan 2023]

The MyBucks Group has been liquidated and is presently undergoing winding-up procedures.

Dreyer indicated in her correspondence that Afristrat had presented itself as solvent based on its financial disclosures, prompting her to file 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 reviewing her liquidation request rightfully determined that Section 81(1) was applicable due to Afristrat’s public assertion of solvency.

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

Dreyer emphasized that the core of her appeal revolves around the mistake made by Judge Ally in accepting Afristrat’s assertion that the assessment of investments should be evaluated “at inception” rather than during the active period of the investments in question when examining potentially misapplied or wasted assets.

She stressed that she held no voting rights, had no influence over the company, and was unable to withdraw her investment.

“The applicant [Dreyer] seeks an accurate legal explanation for the grounds on which the petition [to appeal] was denied,” she expressed.

Lost Investments

Dreyer further pointed out that Afristrat had acknowledged continuing investment losses reflected in MyBucks’ audited financial statements, which detailed:

• 2016: R11.9 million loss
• 2017: R221.2 million loss
• 2018: R163.4 million loss
• June 2019: R79.5 million loss.

Despite this, Dreyer claimed that Afristrat proceeded to invest in MyBucks even after the release of a PricewaterhouseCoopers (PWC) report on 19 October 2019, which outlined that MyBucks had breached debt covenant agreements, casting significant doubt on its viability as a going concern. Afristrat subsequently assigned R450 million and R1.671 billion in goodwill to this investment.

“It is widely recognized that all these funds were lost,” she commented.

Read: Huh? JSE-suspended Afristrat issues puzzling update

Dreyer also challenged how the court could assert that Afristrat had not misapplied assets when, during its inability to meet financial obligations towards investors, it granted ECS Financial Holdings, a newly formed shelf company with no assets or employees, an unsecured loan exceeding R626 million, along with another loan of over R400 million in a single year—all of which was unrecouped.

She noted another case of wasted or misapplied assets by Afristrat, including a R100 million investment in VSS Financial Services (Pty) Ltd, despite the company reporting an audited net loss of R17 million prior to this investment.

All of the aforementioned funds were also rendered lost, she remarked.

Sale of Subsidiaries

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

She detailed the subsidiaries sold in this manner:

• Ecsponent Business Credit, which generated an income of R46,071,000 with liabilities of R10,538,000 for the year ending March 2020;
• Companies in Eswatini, which reported an income of R347,523,000 with liabilities of R325,578,000 for the year ending March 2020;
• Ecsponent Swaziland (Ecsponent Limited), previously known as Escalator Capital Limited, which yielded a profit of R842,843 for the year ending March 2020.

Dreyer noted that Judge Ally did not address any of these arguments in his ruling regarding her provisional liquidation application, merely stating his skepticism that another court would reach a different conclusion.

“As a result, the applicant [Dreyer] finds it challenging to present further arguments concerning the ruling due to the absence of rationale provided by the Learned Judge, apart from his conclusion.

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

“Ultimately, permitting an appeal hearing serves the interests of justice, as specified 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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