Almost all of the R1.5 billion investment by JSE-listed Afristrat Investment Holdings Limited in Frankfurt-listed MyBucks SA, a microlender in several southern African countries that collapsed and is now in liquidation, has been lost.
Afristrat owns a 42.39% stake in MyBucks after originally providing start-up capital loans to MyBucks but being forced to convert its loans into equity.
Afristrat was previously known as Ecsponent Limited.
Preference shareholders in Ecsponent had little option but to opt in May 2020 to a restructuring of the group that resulted in R2.3 billion in preference shareholder debt being converted into equity in Ecsponent.
MyBucks was founded by former Blue Financial Services boss Dave van Niekerk. However, Van Niekerk has not been involved with MyBucks for several years.
Afristrat CEO George Manyere told Moneyweb last week that Afristrat has launched about five forensic investigations in total into the operations of MyBucks.
Manyere said three of those investigations – two in South Africa and another in Botswana – have been completed.
Afristrat is in the final stages of getting the final forensic investigation report in Zambia and has commenced with a forensic investigation in Eswatini as well, he said.
“The operations of MyBucks were quite expansive, with [operations in] 11 or 12 African countries and three outside of Africa, specifically Australia, Poland and Spain.
“So it [the forensic investigations] was quite an expansive process and almost 90% of Ecsponent or Afristrat’s investment funds were invested in MyBucks either as equity or as loans and all that money was lost with the collapse of MyBucks, which is now in bankruptcy,” he said.
Loss and litigation
Afristrat disclosed in May 2022 that it lost in excess of R1.5 billion of equity value in MyBucks and its subsidiaries through debt, which was provided under the pretext of growing the MyBucks loan book.
However, Afristrat said this debt was substantially diverted to meet MyBucks management overheads and interest expenses from other borrowings being converted into equity in MyBucks.
This led to Afristrat’s board:
Instructing its attorneys in South Africa and Botswana to institute civil claims totalling R250 million against the responsible former executives at the company and/or MyBucks; and
Instituting an R800 million claim against MyBucks.
Afristrat added that its board is considering its options to potentially also institute civil claims against the previous management, directors and auditors of MyBucks “where considered appropriate”.
Manyere confirmed last week that the claim against MyBucks had been launched in Luxembourg with the receiver who is handling the bankruptcy process for MyBucks, while the litigation process in Botswana has already started and is “quite advanced”.
He said the litigation in South Africa has also started and a commission of inquiry, granted by a high court and chaired by a retired judge, is also currently underway.
“But I think what is critically important for us in this situation is to put in an appropriate liquid facility to fund all these processes. So we are also seized with that situation,” he said.
The liabilities of Afristrat resulted in the company announcing on 12 May that it will be unable to pay any interest or capital due and payable to holders of notes with immediate effect which, in terms of Condition 16 of the programme memorandum, will constitute an event of default.
Afristrat said it will also make an offer to current holders of preference shares to convert to ordinary shares in the company.
Manyere said last week Afristrat is considering all the various options to improve the company’s liquidity but believes it is critical to first clean up its balance sheet.
“That is why we did announce that they will be approaching our remaining creditors and lender with a proposal to convert their debt into equity.
“We believe that is critical in us successfully being able to improve that liquidity position because before that balance sheet clean-up, it will be a lot more challenging to bring in any other liquidity solution. So that process is also currently being worked on,” he said.
Manyere declined to comment on the initial reaction of Afristrat creditors to the company’s liquidity improvement proposal, stating: “We are still engaging.”
Manyere was also guarded in his comment about the prospects of Afristrat recovering anything from its R250 million civil claim against the responsible former executives at Afristrat and/or MyBucks in South Africa and Botswana or the R800 million claim against MyBucks.
“These are all processes that are being handled legally but I can’t comment on the prospects. It’s is going to be tough because obviously it’s very clear that MyBucks has totally collapsed.
“There will be maybe some recoveries here and there but I can’t speak at this point what exactly would be the probability of recovery,” he said.
Afristrat last week found itself on the wrong side of the JSE, with the bourse issuing a notice about the late submission of its provisional annual financial statements.
It warned that if Afristat fails to publish these results by 31 July, its listing on the JSE may be suspended.
Manyere confirmed last week that Afristrat will be unable to meet the JSE deadline.
“We will definitely publish I think sometime soon but definitely not by July 31,” he said.
Manyere said the reason for the delay is because the company has been “working on a plan to save the business of Afristrat because of the impact of the significant losses we suffered with MyBucks”.
“In the last couple of months, we have been focused on undertaking various forensic investigations in South Africa, Botswana, Eswatini and Zambia primarily.
“They are now nearing completion so it did impact the timeframe for the auditors to start.
“That audit has started but, also at the same time, we are working on a plan to improve our liquidity position in order for us to complete all these various workstreams.
“So yes, we will be delayed in releasing the financials but the audit process has started and we should have that completed in the third quarter [of 2022],” he said.
Afristrat announced last week that Tertius de Kock, the company’s chief financial officer and an executive director, has tendered his resignation effective from 26 July as a director although he will serve a one-month notice period.
Manyere said De Kock’s resignation was not related to the late publication of Afristat’s financial results.
De Kock’s resignation follows that of Yvonne Maitin, who resigned as an independent non- executive director effective from 7 June due to “her other work commitments”.
An analyst who did not want to be named said investors and lenders generally get co-opted into converting their investment or loans into equity on the basis of a plan by a company, but it means they give up their rights in the hope there is a turnaround, which rarely pans out.