The investor in the financially distressed Ecsponent, who had previously attempted to file for provisional liquidation of the once JSE-listed entity unsuccessfully, continues her determined pursuit. Her ongoing investigation into the fate of the R2.3 billion invested in preference shares in the company remains vital.

Jienie-Michelle Dreyer has submitted a letter of dispute concerning a petition to appeal to the Chief Justice of the Supreme Court of Appeal in Bloemfontein. This letter expresses her intent to seek a court review based on “significant failures of justice” relating to the entirety of Judge G Ally’s judgment and orders.

This follows Judge Ally’s rejection on 20 February 2024 of her application for provisional liquidation of Afristrat, as well as the dismissal of her request for leave to appeal his decision on 26 May, with the Supreme Court of Appeal choosing not to consider her appeal petition on 11 November 2024.

Read:

Dreyer noted on Tuesday that she is still waiting for a reply to her letter and emphasized her severe financial challenges, which hinder her ability to obtain legal representation.

Liquidation applications

Ecsponent, now rebranded as Afristrat Investment Holdings, had its listing on the JSE revoked on 1 July 2024 after its shares were suspended on 5 August 2022 due to the failure to publish audited financial statements.

Despite opposing Dreyer’s attempts, the board of Afristrat opted for voluntary liquidation on 1 March 2024 because of its financial insolvency.

Afristrat was unable to proceed with its liquidation process as Dreyer’s provisional application took precedence.

Read:
Afristrat to liquidate due to being ‘commercially insolvent’
Afristrat currently halts intended voluntary liquidation application

In her correspondence to the Chief Justice, Dreyer asserts that an injustice occurred and stresses that her application requested “urgent liquidation” of Afristrat instead of an inquiry into lost investments.

She contended that Judge Ally erred by ruling that the conditions for her leave to appeal application had shifted, requiring her to demonstrate that another court “would” arrive at a different conclusion, ignoring the notion that compelling reasons could justify an appeal being considered.

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

Dreyer asserts that the entire situation warrants a renewed examination and criticizes the lack of reasoning provided for the denial of her appeal efforts.

“Judge Ally’s inability to furnish any legal justification for his decision, alongside the judges who dismissed the appeal petition failing to give credible reasons for their decisions, reflects poorly on the treatment of ordinary citizens in South Africa,” she remarked.

Background

Dreyer’s court actions are rooted in her purchase 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 of investor funds 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 funds were directed toward MyBucks, either as equity or loans, all of which were lost during the collapse of MyBucks.

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 presently undergoing winding-up procedures.

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

She asserted that the court considering her liquidation request rightly concluded that Section 81(1) was applicable, given Afristrat’s public representation of itself as solvent.

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

Dreyer asserted that the key issue for her appeal lies in Judge Ally’s mistake in accepting Afristrat’s claim that the evaluation of investments should occur “at inception” rather than during the investment’s duration when considering potentially misapplied or wasted assets.

She stressed that she had no voting rights, no influence over the company, and was unable to retrieve her capital.

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

Lost investments

Dreyer also pointed out that Afristrat acknowledged ongoing investment losses as revealed in MyBucks’ audited financial reports, 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 a PricewaterhouseCoopers (PWC) report on 19 October 2019 indicated that MyBucks had breached its debt covenants and significantly questioned its viability as a going concern. Afristrat subsequently attributed R450 million and R1.671 billion in goodwill to this investment.

“It is widely recognized that all these funds were lost,” she stated.

Read: Huh? JSE-suspended Afristrat issues puzzling update

Dreyer also questioned how the court arrived at the conclusion that Afristrat did not misapply assets when, during the firm’s “default in meeting its obligations to investors,” it extended an unsecured loan exceeding R626 million to ECS Financial Holdings, a newly formed shelf company with no assets or personnel, in addition to another loan exceeding R400 million within a year—all of which ended in loss.

She identified another instance of wasted or misapplied 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.

Dreyer noted that all the funds in question subsequently went unaccounted for.

Sale of subsidiaries

Dreyer highlighted that several wholly-owned or majority-owned subsidiaries, which held substantial value for Afristrat, were sold to George Manyere, a current director, for the nominal amount of R1.

The subsidiaries sold in this manner included:

• Ecsponent Business Credit, which generated an income of R46 071 000 and had liabilities of R10 538 000 for the year ending March 2020;
• Entities 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 Escalator Capital Limited, which revealed a profit of R842 843 for the year ending March 2020.

Dreyer pointed out that Judge Ally did not address any of these assertions in his ruling on her provisional liquidation application, merely stating that he was unconvinced that another court would decide differently.

“As a result, the applicant [Dreyer] finds it difficult to present additional arguments regarding the ruling due to the lack of reasoning provided by the Learned Judge, aside from his conclusion.

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

“Ultimately, permitting an appeal hearing aligns with 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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