The Steinhoff incident is possibly the biggest corporate disaster that South Africa has witnessed. Picture: Henk Kruger/African News Agency/ANA
Johannesburg - What exactly happened within embattled global furniture retailer Steinhoff International? It should have known about the brewing accounting scandal and who should be held accountable?

These are the questions that first need to be answered to get to the bottom of the debacle, says asset management firm Sygnia chief executive.Magda Wierzycka.

“There are clearly massive failures of absolutely everything within Steinhoff. We know there is accounting fraud, possible tax fraud,” she said.

There were also the auditors: “We need to know exactly what happened before we can identify all the parties that need to be held accountable.

“You don’t know what the auditors should have known until you know what happened. They have lost R14billion.

“It’s a ginormous sum to have been wiped out by fraud. It’s one thing if it happened because of general market augments, but this should not have happened.

“This is the biggest corporate disaster that South Africa has ever seen.”

While pensions were guaranteed, what would be affected was the ability to grant future pension increases “because there was R14bn (that was lost), money that would have enabled them to grant higher pension increases".

“We still don’t know how this happened. We still don’t know all the facts but what we do know is that the hole in the balance sheet is massive. We know that they have put forward fraudulent numbers, the revenues, the profits the expenses, these being the big numbers they played around with and we know they have done it over a number of years.”

Economist Ian Cruickshanks advised investors to ensure they diversified their investments to ensure that they wouldn't lose out on their money if such an incident happened again.

“The first requirement is to have your pension in a diversified fund.

“You don’t want to be in a fund that only has a few stocks.

“You want to invest it in a fund that has all sorts of investments so that any single disaster can have a limited impact on each individual member.

“If you say they have lost billions, then yes, compared to the value of the pension funds, then it is not that big.

“Don’t put your eggs in one basket and don’t try to do it yourself. Go to professional investment managers.

“They don’t always get it right as is the case here but they have a better chance than trying to cover all investment markets on your own,” he says.

That’s why the scandal is not going to hurt individual pensioners or other beneficiaries to a large extent, he believed.

“Who will be impacted by this scandal? The funds themselves will be most impacted. They will have less in reserves.

“Let’s say there is another disaster or a number of them, then maybe it would have an impact.

“At the moment, this one disaster is not enough to have that impact on the individual pensioner or investor.”

A scandal of this magnitude will shake the pension fund industry, he said.

“Should it shake up the auditing profession, yes, after all the auditors were the ones signing off the accounts until eventually they decided they wouldn’t.

“What is says? There have to be tighter controls over the auditing of pension fund assets over time.

“And we always point fingers at the government. Now hold on, the private sector is not without blame.

“What we have to make sure is that we clamp down on these sorts of events and deal very harshly with the people who broke the law and make sure that we are not seen by the rest of this world as a morally bankrupt society.”

This could affect investment.

“The foreigners look at us and say ‘I don’t like your government, I don’t like the deficits you’re running. I think that you mismanage your state-owned enterprises’ and if you are mismanaging private sector companies, as Steinhoff was doing, and then you become an investment no-go area.

“Then the country can’t have access to funds for development to grow the economy and that would be the tragedy.”

Saturday Star