Dangerous amnesia: Whatever happened to Steinhoff?
South Africa remains a country in which some people are more equal than others. A dad can be arrested for flouting lockdown regulations even when he explains that he was in search of milk for his baby. By contrast, a politician can be treated with kid gloves, unless there is massive public outrage when they flout lockdown regulations.
But this Animal Farm behaviour isn’t just true of people. It is also true of corporates. Some corporates, like businesses who benefited fraudulently from PPE tenders, are feeling the continuous and continued pressure to have them held legally accountable for stealing from the public purse.
By contrast, many other corporates are either under the radar completely or they get attention for a short while before we slip into dangerous amnesia. When we choose to forget, we lower the bar for accountability because scoundrels can get away with corporate murder, secure in the knowledge that they simply need to wait for the news cycle to move on.
This is why it is important to return to the horror story of Steinhoff and ask ourselves: whatever happened to Steinhoff? Has there been accountability for the ethical and legal sins of Markus Jooste and his buddies? The answer, if we care to return to this story that has wrongly disappeared from public memory, is a scandalous “No, they have yet to be held properly accountable for the country’s biggest corporate crash.”
So what happened and where are we now? Well, in early December 2017, the Steinhoff group was valued at R193 billion. That changed literally overnight. More than R117 billion of that value was decimated overnight. The reason for this spectacular fall from corporate grace was the revelation of massive accounting irregularities over many years. In simple language –fraud.
First, a number of Steinhoff Group executives and senior management had structured various transactions in such a way, the PwC report concluded, that the result was that the profit and asset value of the company was substantially inflated.
Second, they even entered into fictitious as well as irregular transactions with parties they claimed to be independent of the Steinhoff Group. This turned out to be false. The forensic report found that, in fact, these “independents” were closely related to the Steinhoff Group and its executives.
You do not need to be trained in ethics to see how unethical this kind of false reporting and deceptive behaviour, driven by greed, is. It is unethical because it sends falsehoods into the financial markets, intentionally, in order to maximise value for the company by luring more business deals under false pretences.
Thirdly, there is no chance of Steinhoff being able to claim that any errors were unintentional. One of the most damning conclusions reached by this forensic team is that exceptionally complex and deliberate work went into this multi-year scandal. PwC concluded that the many phony transactions it had identified as being irregular were all the result of enormously complex criminality that even involved, over many years, the creation of documents, including legal documents and professional opinion.
The problem with lying too often and choosing lies that are complex is that you will, eventually, trip up. And so it was not surprising that the forensic report also found that in many instances, these supporting documents and paper trails were created after the fact and backdated, a sure sign of wrongdoing having gotten out of control.
It is worth returning to the minutiae and opening up a series of questions for public discussion. One puzzle, for example, is why regulatory oversight was ineffective.
So where to from here? We need, with urgency, to understand how Steinhoff was able to deceive so many for so long? It listed, to take one example, in Frankfurt in 2015. But this kind of move involves approval by the South African Reserve Bank in terms of laws governing permission for exchange controls.
We now know that by 2015 already this company had massively inflated its profits and asset value. Can anyone recall SARB, as yet, explaining to the public how and why it was hoodwinked? Surely it has mechanisms in place that are robust enough, one would hope, to assess the veracity of claims that are made by corporates applying for this kind of permission? If not, then the SARB is dangerously incompetent.
If, on the other hand, it does have mechanisms to detect balderdash, then we need a story to be told of why the oversight mechanism failed?
SARB itself, in other words, is not as yet blameless in part of the story of Steinhoff going global and moving into Europe. SARB needs to level with the South African public.
Another obvious question ripe for public discussion and debate is the question of what remedial action SARB has taken or should and will. Assume, for sake of argument, that Steinhoff was so gifted at criminality that it was rare and understandable for SARB to be deceived by Steinhoff. Even in that scenario, SARB has urgent questions to answer about where to from here.
Surely it can review, for example, the permission granted to Steinhoff to move chunks of business offshore? This matters if you care about the South African economy. Moving assets to Europe while leaving your liabilities here in South Africa is not in our economic interest. So what has SARB done, knowing now what it did not know in 2015, to reverse this economic injustice?
If we do not force ourselves to dive into these ethical, regulatory and economic justice questions, then we have little chance of avoiding future scandals of this kind. A good starting point is for bodies like SARB, and the justice system, to do its work properly and ensure that corporate scoundrels are not only shamed by the public reputationally but also that tough and demonstrable legal sanctions are meted out to recover some of the loot. It is time to act against Steinhoff. Until then, the story of Steinhoff’s crash will always have a missing chapter that is in the public interest to effect and write.
* Tshepo Matseba APR*, is the MD of Reputation 1st and a seasoned Marketing and Communication Director. He is the former President of the Public Relations Institute of Southern Africa (PRISA).
** The views expressed here are not necessarily those of Independent Media.
The Sunday Independent