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Capital Appreciation seeks solutions for GovChat

Staff Writer
By Staff Writer, ITWeb
Johannesburg, 01 Jun 2023

Capital Appreciation says various alternatives are being explored for citizen engagement company GovChat.

This, after Capital Appreciation placed GovChat into business rescue in December 2022, over loans it advanced to the firm.

The JSE-listed fintech group initiated the rehabilitation of GovChat over R20 million (the initial loan) and R12 379 778 plus interest (the additional loan).

In a trading statement, issued ahead of its financial results for the year-ended 31 March, the fintech group cautions shareholders about the expected credit loss provision related to the loans.

As part of its conditions of the business rescue, Capital Appreciation says it committed to providing the business rescue practitioner with a post-commencement funding facility for GovChat to the end of May.

Resultantly, the business rescue practitioner is “managing GovChat as a going concern and various alternatives for the company are being explored”.

“Capital Appreciation is in the process of finalising its annual results for the year ended 31 March 2023. In finalising the results, the board has considered its position in relation to its associate, GovChat. The group has resolved to adopt a conservative approach by raising an expected credit loss provision of R70.8 million (pre- and post-taxation) for GovChat.

“Shareholders are further advised that, while group revenue for the year ended 31 March 2023 has shown strong growth, exceeding 19%, the group has incurred and expensed substantial budgeted costs in growth and new business initiatives, while the economic benefits of such costs will only accrue in the 2024 financial year and future years.”

Notwithstanding the expected credit loss provision, Capital Appreciation indicates its loan continues to be secured by the shares in GovChat and GovChat’s intellectual property rights, including the platform’s software.

Capital Appreciation will release its results on 6 June.

Launched in 2018, GovChat is a platform that enables citizens to engage with government on service delivery matters. It can be accessed through WhatsApp, Facebook Messenger, SMS and USSD channels.

It was founded in 2016 by Eldrid Jordaan, who later exited the company before it was placed in business rescue.

Earlier this year, Jordaan and his partners in K2018 made a R50 million public offer to Capital Appreciation and other creditors to take total control of GovChat.

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