Afristrat, previously named Ecsponent Limited, reported on Friday that FirstCred has brought civil and criminal proceedings against the former management and their associates who allegedly participated in the loss of 120 million pesos (about R91.2 million) in business funds. investors, which included the 50 million pesos invested by Afristrat.
Read: JSE suspends trading in Afristrat shares
This follows a forensic investigation launched by FirstCred’s board to establish how funds raised through its 500 million peso bond program between 2017 and 2018 were used.
“Blatant embezzlement” of funds
The investigation, which was completed this month, “unveiled misuse of 120 million pesos raised from investors by the former management of Getbucks Limited Botswana between 2017 and 2019,” Afristrat said.
The purpose of the investigation was to establish whether funds raised through the Botswana Bond Scheme were used in accordance with the terms of the Bond Scheme Memorandum or were improperly disbursed to MyBucks SA and/or its related entities, and were ultimately never reimbursed to FirstCred.
Frankfurt-listed MyBucks SA, a microlender in several Southern African countries, has collapsed and is now in liquidation, resulting in the loss of almost the entire R1.5 billion investment of Afristrat in MyBucks SA.
Afristrat holds a 42.39% stake in MyBucks after initially providing seed capital loans to MyBucks but being forced to convert its loans into equity.
Read: Afristrat ‘lost’ R1.5 billion investment in MyBucks
Following the findings of the FirstCred investigation and the announced bankruptcy of MyBucks, two investors in Botswana’s bond program – ALCB Fund and AS Mintos Market Place – filed their liquidation claims for FirstCred in the High Court of Botswana in order to recover their investment. , which was part of the loss of the 120 million pesos.
Judicial management order
On August 19, the High Court of Botswana dismissed motions by ALCB Fund and AS Mintos Market Place to liquidate FirstCred and instead granted a judicial management order to give the company an opportunity to resolve its indebtedness, which resulted from mismanagement and embezzlement. by the old management.
Afristrat said on Friday its board believes the order placing FirstCred in receivership would have a further negative impact on its liquidity.
However, he added that it “will provide an opportunity to potentially recover some of its investment value and in doing so, rebuild value for all stakeholders.”
FirstCred CEO Dudu Garekwe confirmed last week that he had shared the findings of the forensic reports with regulators for investigation and retained a lawyer to take legal action against the people. involved.
“Forensic examinations show that 160 million pesos were raised between 2017 and 2019 when the company was operating as Getbucks Botswana and 120 million pesos of these funds were used grossly and improperly, which has resulted in its current position,” Garekwe said.
“The level of malfeasance was such that investor funds spent only two days in Getbucks Botswana bank accounts before being withdrawn from Botswana and spent,” she claimed.
“Funds were primarily raised from AS Mintos Market Place and a bond listed on the Botswana Stock Exchange whose investors included the ALCB fund managed by Lions Head and Ecsponent Limited. [now Afristrat Investment Holdings Limited].
“Previous management’s misdeeds which resulted in the loss of 120 million pesos made it almost impossible for FirstCred to reimburse investors who were victims of previous management’s mismanagement and poor governance practices between 2017 and 2019” , she added.
The orientation of the new management
“As new management from 2020, we have focused on engaging with creditors who have been exposed to this loss and sensitizing them to the negative impact on the ability to repay funds in a timely manner due to these high levels of diversion,” Garekwe said.
Welcoming the judgment of the High Court of Botswana, she said FirstCred believes that insolvency management provides the most optimal way for the company to repay all of its creditors, as the fundamentals of the business remain strong and can be operated through appropriate refinancing initiatives.
She said a liquidation of the company would have closed the doors for the company to fully investigate and bring those responsible to justice, while forensic management also offers prospects for dealing with investors through the conversion of their investments or other appropriate arrangements that ensure that as much value as possible is recovered.
Afristrat CEO George Manyere told Moneyweb last month that an 800 million rand claim against MyBucks had been launched in Luxembourg with the receiver handling MyBucks’ bankruptcy process.
He also said that civil claims litigation proceedings in Botswana and South Africa to recover R250 million from the ex-executives responsible for the company and/or MyBucks have already begun.
Trading in Afristrat’s shares was suspended by the JSE on August 5 due to its failure to submit its annual financial reports for the year to end March 2022 within the four-month deadline stipulated by the company’s listing requirements. JSE.
AF Afristrat results delayed
Afristrat said the same day that the company’s audited annual financial statements for the year to the end of March 2022 should not be distributed until November 30 at the latest.
Manyere told Moneyweb the reason for the delay was that the company was “working on a plan to salvage Afristrat’s business due to the impact of the significant losses we suffered with MyBucks.”
Afristrat’s investors have reacted angrily to Manyere’s claims about the company’s financial difficulties in an article published by Moneyweb, all claiming Manyere’s comments are inaccurate and alleging that Afristrat is operating a scam.
The holding company of the FirstCred group was incorporated in Botswana in 2012 as GetBucks Limited, trading as GetBucks Botswana.
A takeover by private equity firm MHMK Group Limited led to a change in leadership and management, with GetBucks Limited in Botswana rebranded as FirstCred Limited in 2020.
Manyere was the ultimate beneficial owner of MHMK Group and is also the current CEO of the company.
It operates through several brands in its operations, including GetBucks in Zimbabwe, Eswatini, Kenya and Namibia; SmartAdvance and Nifty in South Africa; and MyBucks in Malawi.
Afristrat entered into an agreement in May 2020 to acquire 100% of MHMK Financial Services Limited from MHMK Group Botswana Limited.
This transaction was finalized in March of this year.