Ann Crotty Writer-at-large
Theo Botha. Picture: Waldo Swiegers
Theo Botha. Picture: Waldo Swiegers

Steinhoff Africa Retail’s (Star’s) annual general meeting was remarkable for a variety of reasons. Not only was it the first, with Star having listed in September 2017, but it is not often that a 77%-held subsidiary goes to such public lengths to distance itself from its parent. In addition, there was not only the physical presence of institutional shareholders but also their active involvement.

It was always going to be an interesting affair but the vigour with which the board told shareholders attending Star’s maiden AGM of its determination to distance itself from Steinhoff International was unprecedented.

Given that Steinhoff owns 77% of Star, its efforts to claim independence were not entirely persuasive. The reality is that Star can only be independent if Steinhoff allows it. That Star is even listed was a contrivance orchestrated to suit Steinhoff’s purposes.

Shareholder activist Theo Botha says as things stand Star should not have a separate listing. He points out there is not enough liquidity in the share.

Lancaster 101, a vehicle controlled by Star chairman Jayendra Naidoo, owns 9% of Star, which leaves just 14% of the shares in minority hands.

Remarkably, despite his substantial interest, Naidoo is an independent nonexecutive chairman. A significant chunk of minority shareholders voted against his reappointment but with 85.58% of the shares in the bag there was little chance of any change.

When challenged about his "independent" tag, Naidoo said that was the view the board took at the time of the listing. "We’ve asked legal advisers to review the status," he said.

News that Allen Swiegers, chairman of the audit and risk committee, had unexpectedly resigned from the board shortly before the AGM rattled some nerves, possibly because of his links with Atterbury Property Fund. Swiegers, who is chairman of Atterbury, which has a joint venture with Steinhoff, was with Deloittes for 33 years until he retired in 2016. He was appointed to the Star board in August 2017.

That Deloitte is both Star’s and Steinhoff’s auditor was sufficient reason to question why Swieger was ever appointed chairman of the audit committee. At the AGM Mehluli Ncube, representing the Eskom pension fund, wanted the auditors to tell shareholders what measures had been taken to ensure what had happened at Steinhoff had not spilled over. Naidoo refused permission to allow Ncube to direct his questions to the auditors. "I’m not aware auditors are entitled to speak at this meeting, I will take it on advisement," he said.

Ncube said he wanted to know what resources the auditors had to detect the sort of fraud that had occurred at Steinhoff and was said to be difficult to detect. "The auditors are at the centre of all these issues and we tend to give them the green light," he said.

After the meeting Ncube said he was puzzled by Naidoo’s response. "In the financial statements the auditors raised three audit matters they described as key without giving a satisfactory explanation. I thought the board would go all out to comfort us on these issues," said Ncube.

He also raised concerns about the price Star paid for Tekkie Town, which was almost double what the company had been valued at a few years earlier.

"There was no growth in the business. We need to look at that valuation."

Star CEO Leon Lourens said at the meeting that the value placed on Tekkie Town was "reasonable" based on the company’s performance.

Shareholders were reminded of just how strong the ties are between Star and its parent when Steve Muller, chairman of the remuneration committee, explained that the 2018 income statement will take a R90m hit to bail out senior Star executives who were awarded Steinhoff share options in 2016. The share options are totally valueless.

"It was crucial to keep these people and ensure they were motivated so we have bailed them out and have paid the first tranche a year early," said Muller, adding that the money would be recouped from provisions in 2019.