Wirecard the African Connections: Mauritius And South Africa

It is widely known that Wirecard AG is under scrutiny as a result of over R35bn missing from its accounts leading to its crash in the market.

The Bank of Mauritius announced that it is investigating alleged round-tripping connected to cross-border transactions. In a recent press release it states that the Bank and the Financial Services Commission is determined to bring to light any possible breach of regulatory requirements, including Anti-Money Laundering/Combating the Financing of Terrorism regulations.

Other news reports draw attention to a Mauritius-based private equity fund called Emerging Market Investment Fund (EMIF) that was used by Wirecard to acquire entities that were allegedly part of these round-tripping schemes that were used, together with complicated deal structures, to mask inflated valuations.

Last year it was reported that Wirecard had used the EMIF fund to pay €300m for an Indian business shortly after it changed hands for only €37m. The 2015 deal meant large profits for a Mauritian intermediary and was questioned by short-sellers who were concerned about the deal being orchestrated to inflate Wirecard’s sales and profits.  Following this acquisition Indian businesses contributed only €12.1m to Wirecard’s net profits in 2017, and €1.7m in 2018.

In South Africa Wirecard paid €23 million in 2017 (at that stage over R300m) for South African MyGate, a price that at face value seemed a premium price for an online payments processor in the South African market. MyGate had a reported 21 employees and was later re-branded to Wirecard.  It was understood that elements of other smaller payments business lines were also bundled into the deal around the time of the transaction.  Wirecard bought 100% of MyGate and stated that it was expected to generate an EBITDA of EUR 2.0 mn (R30m+) for the 2017 calendar year.