Ecsponent Investor Pursues Legal Action for R2.3 Billion in Missing Assets

The investor in the financially distressed Ecsponent, who previously sought a provisional liquidation of the once JSE-listed entity without success, remains resolute. Her pursuit to ascertain the status of the R2.3 billion invested in preference shares in the company continues.

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

This development follows Judge Ally’s dismissal on 20 February 2024 of her application for the provisional liquidation of Afristrat, and the Supreme Court of Appeal’s refusal to entertain her appeal petition on 11 November 2024, after rejecting her request for leave to appeal his ruling on 26 May.

Read:

On Tuesday, Dreyer mentioned that she is still waiting for a reply to her letter and emphasized her significant financial challenges that hinder her ability to secure legal representation.

Liquidation applications

Ecsponent, now operating 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 its audited financial statements.

Despite opposing Dreyer’s initiatives, Afristrat’s board chose to proceed with voluntary liquidation on 1 March 2024 due to its commercial insolvency.

The liquidation process was unable to move forward due to Dreyer’s application for provisional liquidation taking precedence.

Read:

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

In her communication to the Chief Justice, Dreyer asserts that an injustice has occurred and contends that her application aimed for “urgent liquidation” of Afristrat, not merely an inquiry into her lost investments.

She contended that Judge Ally erred in determining that the criteria for her leave to appeal application shifted, requiring her to demonstrate that another court “would” arrive at a different decision, disregarding the potential for compelling reasons that could justify an appeal.

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

Dreyer maintains that the entire situation deserves a new review, criticizing the lack of justification provided for the rejection of her appeals.

“The failure of Judge Ally to record any legal basis for his decision, along with the judges who dismissed the appeal petition not providing valid reasons, reflects poorly on the treatment of ordinary citizens within South Africa,” she stated.

Background

Dreyer’s legal actions arose 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 funds to the MyBucks Group, a company listed on the Luxembourg Stock Exchange involved in microlending across various Southern African nations.

According to Afristrat’s CEO, George Manyere, nearly 90% of Ecsponent or Afristrat’s investment funds were directed towards MyBucks, either in 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 undergoing winding-up procedures.

Dreyer noted in her letter that Afristrat had portrayed itself as solvent through its financial statements, leading to her application under Section 81 (1) (e) (i) and (ii) of the Companies Act, alleging that “assets were being misapplied or wasted.”

She argued that the court that reviewed her liquidation request accurately ruled that Section 81(1) was applicable given Afristrat’s public declaration of solvency.

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

Dreyer pointed out that the crux of her appeal is the error made by Judge Ally in accepting Afristrat’s claim that the assessment of investments should be based “at inception” rather than during the investment’s active period when evaluating potentially misapplied or wasted assets.

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

“The applicant [Dreyer] seeks a fair legal explanation regarding the grounds on which the petition [to appeal] was denied,” she expressed.

Lost investments

Dreyer additionally pointed out that Afristrat had acknowledged ongoing investment losses as reflected 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.

Despite this, Dreyer claimed that Afristrat continued to invest in MyBucks even after the distribution of a PricewaterhouseCoopers (PWC) report on 19 October 2019, which indicated that MyBucks had violated 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 acknowledged that all these funds were lost,” she stated.

Read: Huh? JSE-suspended Afristrat issues puzzling update

Dreyer also questioned how the court could conclude that Afristrat had not misapplied assets when, during the company’s “failure to meet their obligations to investors,” it managed to provide ECS Financial Holdings, a newly established shelf company without any assets or staff, an unsecured loan exceeding R626 million, in addition to another loan of over R400 million in a single year—all of which was lost.

She cited yet another instance 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 before this investment.

All of the questioned funds were also lost, she remarked.

Sale of subsidiaries

Dreyer highlighted that several wholly-owned or majority-owned subsidiaries, which held considerable 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 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 showed 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 concerning her provisional liquidation application, merely stating his lack of conviction that another court would arrive at a different conclusion.

“Consequently, the applicant [Dreyer] finds it difficult to provide further arguments regarding the ruling due to the absence of rationale presented by the Learned Judge, apart from his conclusion.

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

“Ultimately, allowing an appeal hearing aligns with 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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