Dear Stakeholder,

I am delighted to present my next address to you for the 2021 reporting period, this time in my capacity of chair of the investment committee. It includes a concise summary of the committee’s membership, mandate, workings, activities and outcomes for the year.

With investments being AYO’s core business, informing and refining the Group’s investment strategy and philosophy, setting criteria and targets for investments, evaluating proposals for business acquisitions and disposals and overseeing the meticulous administration of legal, financial and due diligence processes is of paramount importance. These very activities are the ambit of investment committee. Thus, the committee, comprising of five directors (four of whom are nonexecutive), far exceeds the King IV™ Code minimum membership requirements. Given the calibre of directors on the committee, their stellar reputation and optimal combination of expertise, covering the fields of M&A, strategy, technology, finance and risk, amongst others, I am well assured that the team is capable of maximising capitals’ utilisation and stakeholders’ value creation outcomes.

During the financial year the committee met formally three times, enjoying full attendance on each occasion, hosting the investments group executive and the rest of the executive team by invitation. This larger audience fostered perfect conditions for active discussions, robust debate and ultimately, quality decision making, which could then seamlessly be filtered down to operational level. Therefore, I am confident in the fact that the investment committee has satisfactory fulfilled its responsibilities in accordance with its terms of reference for the reporting period.

With AYO transitioning from an operating business into an investment holding company over the last two years, it was important to formalise the acquisition process, which was one of the top deliverables for the committee during the year. We adopted stringent investment criteria and protocols, agreed on acceptable valuation methods and identified specific approval and authorisation checkpoints, which we believe will further strengthen our already conscientious and transparent investment decision process. Additionally, we revised, updated and formalised AYO’s investment policy.

The key objectives of the investment committee are three-fold: to preserve and grow investments’ value; extract dividend returns and mitigate risk.

Given the operational demands on AYO capitals (both human and financial) during the financial year, particularly with regards to brand image restoration and litigation concerns, the committee felt that our resources would be best utilised addressing these pressing current challenges in the short term. Thus, a temporary moratorium was placed on future investments, to allow us to mitigate operational risks, stabilise the business and preserve shareholder value. As a result, although the acquisition pipeline remains rich, the Kathea Communications purchase was the only investment transaction completed during the financial year. Several other deals were put on hold, despite negotiations having progressed satisfactory and regulatory approvals being granted in a number of cases.

The committee reviewed the performance of existing investments. While we identified several instances where investment value has been impaired in the financial year, particularly where the pandemic has affected cash flows and forecasts, we are well pleased with the gains realised in some strategically important assets, including Bambelela and the Tamlalor joint venture. Portfolio review and continuous assessment is an important function for the committee and we will continue to monitor it on biannual basis.

Acquisitive growth remains a critical part of AYO’s long term strategy. Thus, in the forthcoming financial period, we will re-evaluate the Group’s operational demands and recommend to the Board lifting the M&A moratorium, as soon as sufficient resource capacity is available.

Dr Wallace Mgoqi
Chair of investment committee
17 December 2021