EDITORIAL: Staude’s silence in light of unfolding Tongaat disaster is telling
Destruction of shareholder value at the company has been spectacular even by the inglorious recent record of the corporate sector since the 2017 exposure of Steinhoff fraud
Even by the inglorious recent record of the South African corporate sector since the exposure of enormous fraud at Steinhoff in 2017, the destruction of shareholder value at Tongaat Hulett has been spectacular.
Opportune Investments CEO Chris Logan, a constant critic of the company’s strategic direction, noted last week that the company, which was worth about R24bn in September 2014, had once been a blue chip. If there’s any investor or pension fund that kept their shareholding from those days, they have now lost about 88%. Its latest share slide has left it valued at just more than R2bn.
Unfortunately, since the collapse of the Steinhoff share price, which left investors poorer by about R200bn, these stories are becoming more frequent. After Steinhoff, there were the allegations of wrongdoing related to the Resilient group of property companies that caused a share-price slide wiping off about R120bn in value at one point.
While the Financial Sector Conduct Authority (FSCA) cleared the directors of Resilient, Fortress, Nepi Rockcastle and Lighthouse Capital of insider trading, those who have suffered losses, having invested individually or through their pension funds, are yet to be offered anything resembling a satisfactory ending, with probes into potential market manipulation and misleading reporting still ongoing.
To the list of infamy include pharmaceutical group Ascendis Health, whose shares have slumped about 85% since reaching a high of close to R30, translating to a value loss of more than R10bn. Ordinary shareholders have also been disadvantaged after directors, who had taken speculative positions on the stock, had to sell so that they could meet obligations to lenders.
Similar bets accelerated share declines at MTN and EOH, the latter also the victim of alleged governance failures that caused it to lose a reselling agreement with Microsoft.
As for Tongaat, it seems a long time ago, but it was less than a year ago that an Investec analyst bemoaned the company’s dismal performance under former CEO Peter Staude, who was paid R10m in the year to March 2018, and called on him to step aside.
Investec, which had other commercial relationships with Tongaat, didn’t cover itself in glory, apologising to the long-serving CEO and noting that it had enjoyed a fruitful relationship with him.
Since Staude’s departure, information flowing out of the company has shown things to be worse than even Investec analyst Anthony Geard imagined.
In February, Tongaat warned that it would post a full-year loss and, more alarmingly, said it was planning to hold discussions with lenders about its long-term future. Even that didn’t turn out to be the worst of the news. After the appointment of Gavin Hudson as CEO, after Staude had agreed to leave early, it conducted a wide-ranging strategic and financial review.
In disclosures that have attracted comparison with Steinhoff, the sugar producer said it had identified “certain practices” that could lead to a restatement of earlier financial information. Last week, it confirmed that it’s likely to review its financial information.
Auditing firm PwC has been hired to conduct a review of the business. Property sales, which in the latter years of Staude’s reign were used to prop up performance as its traditional sugar business struggled, were initially considered the most controversial aspect.
Back in February, the company gave a hint that something was not quite right with these transactions, revealing in its trading statement that while some of the sales had been conducted on credit, they had been fully accounted for as income.
One odd thing about this sorry episode is the stony silence of the former CEO, even as his legacy is being dismantled and discredited. One would have thought Staude, having led the company for 16 years, would be out there talking to whoever would listen in an attempt to explain himself and events under his watch.
But then in a culture in which well- or mostly over-remunerated CEOs are almost never held to account for the disasters they oversee, can one blame him for disappearing into the sunset and enjoying his pension?