South Africa’s financial market conduct regulators caused a stir at the offices of Sekunjalo Investment Holdings and its subsidiary African Equity Empowerment Investments (AEEI) on Wednesday when they arrived to conduct a search and seizure operation.

The officials were prevented from continuing with the job by Iqbal Survé, the head of Sekunjalo and chairperson of Independent Media, who accused them of being on a “fishing expedition”.

The regulators were looking for evidence to support allegations that companies and individuals close to Dr Survé may have manipulated the share price of subsidiary company Ayo, which listed in December 2017 and has been the subject of controversy since.

The operation was conducted under a legal order, granted by Justice Gamble of the Western Cape High Court earlier in the week, allowing the FSCA to conduct the search over two days under the supervision of an independent attorney.

However, Survé maintained that the search had nothing to do with Ayo and was a political tool motivated by the DA and Minister of Public Enterprises Pravin Gordhan, among others. Events became farcical when the interaction between Survé and Nomsa Banda, a manager at FSCA, and her team was recorded and published on the website IOL, owned by Independent Media.

“This is not going to work guys,” Survé was heard saying. “There are media freedom issues here, legal privilege issues and that is all it is. It’s Pravin Gordhan behind this. It’s an abuse of regulatory authorities. It’s a political case.

“You went to a judge who is a friend of the DA and Pravin Gordhan,” he told the FSCA officials.

“Tell us what you are looking for specifically. You are not going to take the laptop of my PA — there is privileged information on that laptop. This is purely a fishing expedition on your part.

“It’s to get information that we have on Pravin Gordhan, on the president, various ministers and various others. And you are trying to get that because my reporters are going to publish it, this weekend. And that is all this is about. A fishing expedition.”

The investigative wheels may move slowly in South Africa, but they do move, it appears.

In March 2019 the FSCA announced it was investigating trades in the shares of Ayo Technology Solutions and its main shareholder, AEEI, for possible market manipulation.

Ayo listed in December 2017 at a price of R43, reached a high of R45 a few days later, and from there began to drop, reaching R24 in April 2018.

What triggered the FSCA investigation was abnormal share price movements witnessed in April and May 2018.

Ayo’s share price rose to R40 on May 28, a rise of 66% in less than a month.

The spurt was shortlived and the share is now trading at R5.60.

Just to fill readers in, Ayo is a technology company that aspires to be “the leader in ICT solutions and business transformation across Africa”. Ahead of its listing, its assets were valued at less than R300-million, but miraculously it listed at a valuation of R14.3-billion.

According to reports, this was because a deal with British Telecom SA, in which AEEI had a stake and which would be transferred to Ayo, was imminent.

On the strength of its pre-listing statements, the Public Investment Corporation (PIC) invested R4.3-billion in Ayo through the subscription of shares at a valuation of R43 a share, effectively giving the state-owned asset manager a 29% stake in the technology firm.

The PIC was the only external investor to buy shares in Ayo.

Flags should have been raised when no other institutional investors were willing to invest ahead of the listing. In fact, almost everyone who has acquired a significant number of shares in Ayo since then have been linked to Survé and his family’s Sekunjalo Investments, or Ayo’s direct parent company AEEI. AEEI is in turn controlled by Sekunjalo.

This is according to an article published here and a share register provided to this journalist by the company secretary at Ayo.

The R43/share valuation has been the subject of dispute since.

In April 2019 the JSE requested that Ayo’s external auditors investigate the company’s reported financials for the six months to end February 2018 and February 2019.

This follows evidence provided to the Mpati Commission of Inquiry into the PIC — at which the Ayo deal assumed a central role — by a number of high-ranking PIC and Ayo executives.

Investigations found that senior individuals within the asset manager, including former CEO Dan Matjila, bypassed investment procedures and governance processes when they finalised the investment.

At the same time, others — notably Ayo ex-CIO Siphiwe Nodwele — alleged that Ayo boosted its financials to secure the investment from the PIC.

Nodwele said that Ayo’s valuation should have been closer to something between R700-million and R1-billion.

Ayo’s final valuation amounted to R14.7-billion at R43 a share, signed off by Grant Thornton auditors.

Nodwele and former CEO Kevin Hardy resigned in August 2018, after the Ayo board didn’t address governance concerns raised by the executives.

Further, Ayo chief investment officer Malick Salie supported these allegations when he told the commission that there were many upward revisions to the company’s valuation. This went from an arbitrary valuation of R2.3-billion to between R10-billion and R15-billion. These revisions came at Survé’s behest, he said.

Survé has always maintained that he has very little to do with Ayo. However, Salie suggested the reverse was true. Survé, he said, set the tone for the [pre-listing statement] and provided guidance on what the valuation of Ayo should be.

Abel Sithole, the principal officer of the Government Employees Pension Fund, on whose behalf the PIC invests, had no idea that savers’ money was going into such a questionable investment. He told the commission the PIC only began engaging with the GEPF on the deal after it was alerted to concerns about the company’s valuation through various media reports.

The PIC has begun legal proceedings to recoup the money, saying it was misled about the prospects of the company.

This is one reason Survé believes that Wednesday’s investigation is part of a greater plot. Sithole is now the chair of the Financial Services Board and the caretaking FSCA commissioner.

“I do solemnly believe this is also an underhanded attempt to obtain information relating to our legal case against the PIC and the GEPF,” Survé says.

The PIC had intended to invest several billion more into Survé-related company Sagarmatha Technologies before its proposed listing in 2018.

This listing was scuppered after the company failed to provide the JSE with all the required information. BM