Grim prospects for the future of Afristrat

Company in which investors invested R2.3bn in preference shares appears to be on its deathbed.
The JSE removed Afristrat’s listing from 1 July, paving the way for the company to publish its unaudited financial results for the 2022 to 2024 period … . Image: Moneyweb

It appears it is only a matter of time now before an epitaph can be written for Ecsponent, the financially-distressed company now renamed Afristrat Investment Holdings.

This will come as a bitter but not totally unexpected pill to swallow for investors, who invested R2.3 billion in preference shares in Afristrat.

Read:

The JSE removed Afristrat’s listing on the main board from 1 July 2024 following the suspension in trading in the company’s shares on 5 August 2022.

This paved the way for the company to publish its unaudited financial results for the 2022 to 2024 period, which reveal that Afristrat is on life support.

Afristrat invested just over R1.6 billion in MyBucks Group but the full amount has been lost due to the bankruptcy proceedings at MyBucks in Luxembourg.

Afristrat made a total comprehensive loss of:

  • R310.291 million in the year to end-March 2022;

  • R267.254 million in the year to end-March 2023; and

  • R97.181 million in the year to end-March 2024.

In addition, Afristrat’s total assets decreased by 72% to R21.65 million at end-March 2024 from R75.47 million in the prior year.

Afristrat CEO George Manyere attributed this to write-offs of all legacy investments that have now turned out to be not recoverable or have been foreclosed by secured lenders.

Manyere also confirmed that Afristrat no longer has a staff complement.

The group had total assets of R705.66 million at end-March 2021.

Total liabilities increased by 5% to R841.94 million at end-March 2024 from R798.51 million in the prior year due to interest accruals on amounts due to lenders.

Afristrat’s board took a decision on 1 March 2024 to voluntarily liquidate the company because it is commercially insolvent but was unable to proceed with it because an application by a single minority shareholder in the company to provisionally liquidate Afristrat took precedence.

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Manyere said in the company’s unaudited consolidated financial statements for the year to end-March 2024 that the liquidity position of the group remains under severe pressure and it has “no interventions to address future cash flows and liquidity requirements”.

“Hence, the group is no longer considered a going concern.”

Manyere added the condensed consolidated financial statements “have not been prepared on the going concern basis” and therefore the financial statements “contemplate discontinuity of the normal business activities and the non-realisation of assets and non-settlement of liabilities in the normal course of business”.

He said the board had not adopted the going concern basis of accounting in preparing the consolidated condensed financial statements after the directors concluded the group would not be able to continue its operations as a going concern.

The Afristrat board considered a number of specific factors in determining whether the group is a going concern, including:

  • The total comprehensive loss for the year financial period of R90.18 million compared to a R267.15 million loss in the prior year;

  • Total liabilities exceeding total assets by approximately R813 million as at 31 March 2024;

  • Whether the group has sufficient cash resources to pay its creditors and maturing liabilities as and when they fall due and meet its operating costs for the ensuing 12 months;

  • Whether there is any significant pending litigation that will threaten the going concern status of the group; and

  • Whether the group has available cash resources to deploy in developing and growing existing operations or invest in new opportunities.

Manyere said these, plus other conditions, indicate the group is unable to continue as a going concern.

He said this is largely attributable to Afristrat’s short-term liquidity position, the liquidation application, the collapse of the group’s investment in MyBucks and the then JSE listing suspension.

“The board has no practical measures to improve both solvency and liquidity,” he said.

Manyere said Afristrat’s directors also evaluated the group’s solvency position in terms of the Companies Act and concluded the group’s total assets fairly valued exceeded its total liabilities fairly valued by R813 million “and therefore is in a technically insolvent position”.

Read: Afristrat is contravening the Companies Act

“The board’s short term outlook of its solvency position remains negative, with the expectation that the fair value of the investments will not improve in the foreseeable future,” he said.

Investment portfolio

Afristrat said the group’s investment portfolio at end-March 2024 consisted of seven financial services investments plus a 6% indirect shareholding in Harava Solar Park in Zimbabwe and a 51% shareholding in Chrome Valley Mining Private Limited.

The financial services investments are:

  • 42.97% in MyBucks SA Group, which is under bankruptcy;

  • 100% in FirstCred Limited, previously a subsidiary of MyBucks Group which is under judicial management;

  • 32.8% in GetBucks Microfinance Bank Limited, previously a subsidiary of MyBucks Group;

  • 25% in Ecsponent Financial Services Zambia Limited, trading as MyBucks Zambia and previously a subsidiary of MyBucks Group;

  • 49% in GetBucks Limited Eswatini through ESW Investment Group Limited, previously a subsidiary of MyBucks Group;

  • 85% in ESW Investment Group Limited, formerly Ecsponent Eswatini Limited; and

  • 100% in MHMK Financial Services Limited.

However, most of these investments now retain little to no value for Afristrat.

Manyere said the MyBucks Group is no longer operating, it has been placed under bankruptcy and is now under the control of a court-appointed receiver, and no cash flows are accruing to Afristrat.

“The company’s entire shareholding was pledged against $10 million debt, which was raised from Scipion Active Trading Fund in 2017,” he said.

“The total amount that Afristrat invested in MyBucks was R1 629 093 163.00 and the full amount has been lost due to the bankruptcy proceedings at MyBucks in Luxembourg.”

Manyere said FirstCred has been placed under judicial management and is still operating under the control of a judicial manager, and no cash flows are accruing to the group.

He said Afristrat invested a total of $5 million in FirstCred through a listed bond and the full amount has been lost due to the judicial management process at FirstCred.

Manyere said GetBucks Zimbabwe is still operating and licensed by the Reserve Bank of Zimbabwe although it has been significantly impacted by the MyBucks Group challenges, currency reforms in Zimbabwe, and under-capitalisation in line with regulatory required levels.

He said the group’s 32.8% shareholding and the 52% owned through MyBucks Group were all pledged against debt that was raised from Ever Prosperous Worldwide Limited between 2018 and 2020.

The lender has since foreclosed on the security due to non-repayment on the loans due from the group and MyBucks Group.

Afristrat invested a total of R342 402 570.51 in GetBucks Zimbabwe but this was foreclosed by Ever Prosperous, which was owed R87 021 069.91 and $8 900 200.00 by MyBucks Group, he said.

Read:
Ecsponent Financial Services’ licence withdrawn [June 2020]
FSCA debars Ecsponent Financial Services’ key directors [June 2020]
Ecsponent’s preference shareholders fear losing everything [May 2020]

Manyere said Ecsponent Financial Services Zambia Limited trading as MyBucks Zambia is still operating, licensed and supervised by the Bank of Zambia.

However, Manyere said MyBucks Zambia’s activities have been curtailed due to the various supervisory directives that have been imposed by the Bank of Zambia and conflicts with the MyBucks Group receiver.

“Its loan book is pledged as security to debt that was raised at MyBucks Group from Ever Prosperous Worldwide Limited between 2017 and 2018.

“No cash flows are accruing to the group from MyBucks Zambia.

“The total amount that Afristrat invested in MyBucks Zambia was R25 000 000.00 and the full amount has been impaired down to R21 000 000.00,” he said.

Manyere said ESW Investment Group Limited, formerly Ecsponent Eswatini, was the issuer of the group’s equivalent preference share programme in Eswatini since 2010 when it was started and “so it is laden with debt” in excess of R400 million and has no assets, except 49% of the shares in GetBucks Eswatini.

He added that about R340 million proceeds from the equivalent preference shares issued in Eswatini were consumed in South Africa through MyBucks Group subsidiaries – GetBucks South Africa and VSS and related companies – and nothing was repaid back to Eswatini and no cash flows are accruing to the group from ESWIG.

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Your regular reminder that Brandon Topham, a lawyer and chartered accountant, received remuneration to be a non-executive director of Ecsponent.X bio states: “Still fighting for the ordinary man.”

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