CAPE TOWN – The unfolding Steinhoff International accounting scandal has taken a toll on confidence in the country, wiped out billions of investors’ rand and hit the pockets of millions of civil servants who were invested in the retailer through government pension funds - and South Africans now want heads to roll and answers to the tale of woe.
Trade union Cosatu yesterday called for “Steinhoff looters to be prosecuted for stealing and mismanaging workers’ retirement savings” in the wake of the release of the Government Employee Pension Fund (GEPF) 2018 annual report in Parliament this week.
At end-March last year, the GEPF through Public Investment Corporation (PIC) owned about R28billion in Steinhoff International, which accounts for about 10 percent of the shares of the company and 1 percent of the total assets of the GEPF.
The GEPF’s R4.3bn investment in Steinhoff’s empowerment shareholder, Lancaster, which is partially owned by Pepkor Holdings chairperson Jayendra Naidoo, was rendered worthless after the 2017 accounting scandal wiped off about R200bn of the furniture retailer’s value.
“The pensions of South African government workers took a hit thanks to Steinhoff’s accounting fraud. This means workers have lost a portion of their retirement savings while these criminals are not being held accountable.
“What is more disturbing is the indifference of law enforcement agencies that are not willing to hold the Steinhoff criminals accountable,” Cosatu said.
James Brent Styan, the author of Steinhoff: Inside SA’s Biggest Corporate Crash, provides an insight into the value destruction.
Styan said the PIC had seen about R22bn in value destroyed by the spectacular crash of the Steinhoff share price since December 5 last year.
He said when the crisis hit Steinhoff, the GEPF owned 428 million shares in Steinhoff, which were worth R24.1bn on November 30 last year.
At the depth of the Steinhoff crisis in December last year, it still owned 415 million shares worth about R23bn, which then rapidly depreciated to R2.5bn.
The Steinhoff group in September last year threw all its best assets into a new business subsidiary called Steinhoff African Retail (STAR) and listed it separately on the JSE.
In August this year, STAR changed its name to Pepkor in an ongoing effort to distance itself from the Steinhoff name.
Pepkor yesterday had a market capitalisation of R74bn, while its holding company - Steinhoff - has a current market capitalisation of R7.7bn.
At the heart of Steinhoff’s woes was its complex corporate structure, which seemingly allowed Steinhoff’s then chief executive, Markus Jooste, to have free rein at the group.
The group has a two-tier board structure made up of a management board (comprising four top executives) and a supervisory board (comprising nine non-executive directors). This structure is favoured in Western Europe.
The management board doesn’t always keep the supervisory board in the loop on what the company is doing.
While there have been several changes in the management and the board to sort out the corporate mess, the wheels of justice are moving slowly with the blame game being played.
In Parliamentary hearings earlier this year, Steinhoff International Holdings’ ex-chief financial officer Ben la Grange blamed departed leader Markus Jooste and auditors, including Deloitte, for the retailer’s accounting scandal, saying that he became aware of wrongdoing only days before the crisis erupted.
South Africa heard Jooste tell Parliament without batting an eyelid that the collapse of Steinhoff could not be blamed on him.
Some have pointed fingers at South African billionaire Christo Wiese, Steinhoff’s previous chairperson, who in the wake of the scandal said he was suing the retailer for R59bn to recover some of the investments he made before the share price crashed amid the accounting scandal.
Wiese has bemoaned his loss of millions, which saw him tossed off the Forbes’ list of dollar billionaires this year.
The Steinhoff fraud dates back to 2014 and is taking time to unravel. Lawsuits are mounting up against the firm, while regulators are conducting investigations in Germany and the Netherlands.
PricewaterhouseCoopers, which is conducting a forensic investigation into the fraud, has conceded that due to the complexity of the probe it has no timeline to give the public.
The report on Steinhoff was due this month, with the audit firm studying more than 320 000 documents to determine who did what.
The corporate fraud comes at a time when South Africans are battling with the fallout of corruption stemming from state capture, which has struck a direct blow to the economy and hit South Africans in the pocket.
The double whammy of corruption in both the private and public arenas needs to be visibly addressed.
While President Cyril Ramaphosa makes great strides in cleaning up the government’s house, so too should the corporate landscape be held accountable, both in the pocket and by the criminal system.
It is time for the chickens to come home to roost.
BUSINESS REPORT ONLINE