An investor in the financially unstable Ecsponent, who had previously attempted to obtain provisional liquidation of the once JSE-listed entity but was unsuccessful, remains resolute. Her pursuit to reveal the fate of the R2.3 billion invested in preference shares with 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 located in Bloemfontein. In it, she expresses her desire to request a judicial review of the case based on “significant failures of justice” involving Judge G Ally’s entire judgment and orders.
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This comes after Judge Ally dismissed her application for provisional liquidation of Afristrat on 20 February 2024, followed by the Supreme Court of Appeal’s refusal to entertain her appeal petition on 11 November 2024, after her request for leave to appeal was rejected on 26 May.
Read:
On Tuesday, Dreyer noted that she is still waiting for a response to her letter and emphasized her significant financial hardships, which hinder her ability to secure legal representation.
Liquidation applications
Ecsponent, now known as Afristrat Investment Holdings, had its JSE listing revoked on 1 July 2024 after trades in the company’s shares were suspended on 5 August 2022 due to its failure to issue audited financial statements.
Despite resisting Dreyer’s attempts, Afristrat’s board opted for voluntary liquidation on 1 March 2024 because of its commercial insolvency.
Afristrat has been unable to progress with its liquidation process since 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 letter to the Chief Justice, Dreyer asserts that an injustice has taken place, highlighting that her application sought “urgent liquidation” of Afristrat, rather than an inquiry into the lost investments.
She contends that Judge Ally erred by determining that the criteria for her leave to appeal application had changed, requiring her to prove that another court “would” reach a different conclusion, disregarding that there may be compelling reasons for her 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 behind the denial of her appeal attempts.
“The failure of Judge Ally to present any legal justification for his ruling, nor can the judges who dismissed the appeal petition provide valid reasoning for their decisions, reflects poorly on how ordinary citizens are treated in South Africa,” she remarked.
Background
Dreyer’s court actions result from her acquisition 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 from investors into the MyBucks Group, which is listed on the Luxembourg Stock Exchange and is involved in microlending across several Southern African countries.
According to Afristrat CEO George Manyere, nearly 90% of Ecsponent or Afristrat’s investment capital was directed towards MyBucks, either as equity or loans, all of which were 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.
In her letter, Dreyer indicated that Afristrat had presented itself as solvent in its financial statements, leading her to submit an application under Section 81 (1) (e) (i) and (ii) of the Companies Act, claiming that “assets were being misapplied or wasted.”
She argued that the court that evaluated her liquidation plea correctly ruled that Section 81(1) was applicable since Afristrat had publicly positioned itself as solvent.
Read:
Afristrat acknowledges it cannot continue as a going concern
Grim outlook for Afristrat’s future
Dreyer asserted that the main issue for her appeal concerns the mistake made by Judge Ally in accepting Afristrat’s argument that the assessment of investments should take place “at inception” and not during the investment period when judging potentially misapplied or wasted assets.
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She stressed that she held no voting rights, had no influence over the company, and could not withdraw her capital.
“The applicant [Dreyer] hereby seeks a fair legal explanation regarding the grounds on which the petition [to appeal] was denied,” she stated.
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 pointed out that Afristrat continued to invest in MyBucks even after a PricewaterhouseCoopers (PWC) report on 19 October 2019 revealed that MyBucks had breached debt covenant agreements, casting significant doubts on its viability as a going concern. Afristrat later assigned R450 million and R1.671 billion in goodwill to this investment.
“It is common knowledge that all these funds were lost,” she remarked.
Read: Huh? JSE-suspended Afristrat issues puzzling update
Dreyer also raised questions about how the court concluded that Afristrat had not misapplied assets when, during the company’s “default in honoring their obligations to investors,” it managed to loan over R626 million to ECS Financial Holdings, a newly created shelf company with no assets or staff, in addition to another loan exceeding R400 million over a year—all of which was lost.
She provided another example of wasted or misallocated 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 funds in question were also lost, she noted.
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 merely R1.
She identified the subsidiaries sold in this manner:
- Ecsponent Business Credit, which generated an income of R46 071 000 and recorded 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 posted 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 merely stated that he was unconvinced that another court would deliver a different outcome.
“Therefore, the applicant [Dreyer] finds it challenging to provide further arguments regarding the ruling due to the absence of reasons 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 added.
Read: Afristrat braces for potential liquidation
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