End of Steinhoff will dent budget, warns finance ministry
Deputy Finance Minister Sfiso Buthelezi says the collapse of Steinhoff would diminish revenue collection, destroy jobs and hamper service delivery
SA’s tax revenue will be negatively affected if Steinhoff does not survive the corruption scandal in which it has been implicated, says Deputy Finance Minister Sfiso Buthelezi.
He was speaking to reporters in Johannesburg on Friday following a meeting between the ministry and stakeholders, which resulted in a probe being launched into the retailer’s activities. Stakeholders included the CEO Initiative, the Manufacturing Circle, the Government Employees Pension Fund, the JSE, the Public Investment Corporation (PIC), the South African Revenue Service (SARS), the Financial Services Board (FSB) and the Independent Regulatory Board for Auditors (Irba).
The international retailer, which has a dual listing on the JSE and in Frankfurt, has been hit by allegations of fraud and corruption, which led to it losing billions of dollars of its total market value.
Buthelezi said if the company collapsed, it would not only affect direct shareholders and pension funds, but also reduce tax revenue collection.
A collapse would result in thousands of workers at its numerous South African businesses losing their jobs in a country already suffering from high unemployment and inequality levels.
The company employs about 130,000 workers globally.
"It could really impact the budget we are expecting to hear in February, impacting on the government’s ability to deliver services to its citizens," the deputy minister said.
On Friday, Finance Minister Malusi Gigaba announced a collaborative investigation into the retailer conducted by the FSB, SARS and Irba.
The FSB is said to be tasked with analysing the company’s share trading practices, while Irba would be probing accounting procedures at the company dating back to 2014. Irba confirmed it had initiated an investigation into Deloitte SA following the share price collapse of Steinhoff International and allegations of accounting irregularities.
JSE CEO Nicky Newton-King said that while the institution did not take law-breaking lightly, suspending a company’s trade would harm shareholders more. She said suspension was a last resort for the JSE, only in the most extreme cases.
Irba CEO Bernard Agulhas said any auditors found guilty of misconduct would have their licences suspended. "We confirmed that we will apply sanctions to auditors," Agulhas said. Guilty auditors would be named and shamed.
Earlier last week, the PIC, which is the second-largest investor in Steinhoff, said it would be pushing for a seat on the committee investigating accounting irregularities in the multinational retail group.
Gigaba said the outcome of the collaborative investigation would determine what action, if any, would be taken against Steinhoff. "We will take action without fear or favour," he said.