Ecsponent Investor Initiates Legal Proceedings for R2.3 Billion in Missing Assets

The investor involved with the financially distressed Ecsponent, who had previously tried to initiate a provisional liquidation of the formerly JSE-listed company without success, remains resolute. Her pursuit to ascertain the status of the R2.3 billion invested in preference shares with the firm is still in progress.

Jienie-Michelle Dreyer has formally submitted a petition for appeal directed to the Chief Justice of the Supreme Court of Appeal in Bloemfontein, expressing her intention to request a judicial review of the case due to “significant failures of justice” in addition to all of Judge G Ally’s decisions and rulings.

This action follows Judge Ally’s denial on 20 February 2024 of her request for the provisional liquidation of Afristrat, and the Supreme Court of Appeal’s decision to reject her appeal petition on 11 November 2024, having previously declined her request for permission to appeal his ruling on 26 May.

Read:

On Tuesday, Dreyer remarked that she is still awaiting a reply to her correspondence and emphasized her significant financial hardships that hinder her ability to secure legal representation.

Liquidation Applications

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

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

The liquidation process was obstructed by Dreyer’s active application for provisional liquidation, which took priority.

Read:

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

In her letter to the Chief Justice, Dreyer asserts that an injustice has transpired, arguing that her application was for “urgent liquidation” of Afristrat rather than just an assessment of her investment losses.

She contends that Judge Ally mistakenly concluded that the standards for her leave to appeal application had changed, insisting that she demonstrate another court “would” arrive at a different determination, disregarding the potential for significant reasons to justify an appeal.

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

Dreyer believes the entire situation warrants a new evaluation, criticizing the lack of justification for the rejection of her appeals.

“The failure of Judge Ally to provide any legal basis for his decision, along with the judges who dismissed the appeal petition not offering valid justifications, reflects poorly on the treatment of everyday citizens in South Africa,” she asserted.

Background

Dreyer’s legal actions stem from her acquisition 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 capital to the MyBucks Group, a company listed on the Luxembourg Stock Exchange that engaged in microlending across various countries in Southern Africa.

According to Afristrat’s CEO, George Manyere, nearly 90% of Ecsponent or Afristrat’s investment funds were directed to MyBucks, either as 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 currently in the winding-up process.

Dreyer noted in her correspondence that Afristrat had represented itself as solvent based on its financial disclosures, prompting her to file 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 considering her liquidation application rightly determined that Section 81(1) was applicable due to Afristrat’s public declaration of solvency.

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

Dreyer emphasized that the crux of her appeal centers around the mistake made by Judge Ally in accepting Afristrat’s claim that the evaluation of investments should occur “at inception” rather than during the operational phase of the investments when assessing potentially misallocated or squandered assets.

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

“The applicant [Dreyer] seeks a clear legal explanation for the grounds on which the petition [to appeal] was denied,” she stated.

Lost Investments

Dreyer further indicated that Afristrat had acknowledged ongoing investment losses reflected in MyBucks’ audited financial statements, which showed:

• 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 continued to invest in MyBucks even after the release of a PricewaterhouseCoopers (PWC) report on 19 October 2019, which indicated that MyBucks had violated debt covenant agreements, raising serious doubts about its sustainability as a going concern. Afristrat subsequently allocated R450 million and R1.671 billion in goodwill to this investment.

“It is universally accepted that all these funds were lost,” she asserted.

Read: Huh? JSE-suspended Afristrat issues puzzling update

Dreyer also questioned how the court could claim that Afristrat had not mismanaged assets when, during its failure to meet financial obligations to investors, it granted ECS Financial Holdings, a newly established shelf company with no assets or employees, an unsecured loan exceeding R626 million, alongside an additional loan of over R400 million in a single year—all of which remained unrecovered.

She noted another example of wasted or misallocated assets by Afristrat, which included 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 deemed lost as well, she noted.

Sale of Subsidiaries

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

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

Dreyer mentioned that Judge Ally did not address any of these points in his ruling concerning her provisional liquidation application, merely expressing doubt that another court would reach a different outcome.

“Consequently, the applicant [Dreyer] struggles to present further arguments regarding the ruling due to the lack of rationale provided by the Honorable Judge, aside from his conclusion.

“It is respectfully suggested that the Honorable Judge should have provided reasons, as fairness requires.”

“Ultimately, allowing an appeal hearing serves 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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