Peter Staude, CEO of Tongaat Hulett.
Peter Staude, CEO of Tongaat Hulett.

There is the oft-repeated quote of a US president, apparently frustrated by his economic advisers’ failure to provide clear or bold answers. “Give me a one-handed economist,” he is said to have demanded, complaining about how his economists would hedge their views with “on the one hand”, followed by “on the other”. 

It’s hard to imagine how frustrated he would be if he was around today and dealing with, not economists, but accountants and lawyers. What would he make of the latest scandalous headlines involving sugar producer Tongaat Hulett?

We are witnessing the demise of what was once one of the icons of SA industry, dating back to the late 19th century. Investors in the former blue chip have seen the value of their holdings plunge to just over R2bn, from about R25bn less than five years ago.

Tongaat Hulett said its balance sheet may have been overstated by as much as R4.5bn, which is equivalent to more than twice its  current market capitalisation.

If it was just a case of the “normal” mistakes in business, management misjudging the business cycle and making the wrong investments, the value destruction would still be scandalous. But with every new revelation it becomes clear that this hasn’t been the case here. Comparisons to Steinhoff look more appropriate by the day.

Of course, the statement issued by the company on Friday falls way short of this, instead talking about “past practices, which are of significant concern” and will require the restatement of financial statements for the year to March 2018. This makes Steinhoff’s revelation of “accounting irregularities” look refreshingly open and transparent in comparison.

Tongaat Hulett said its balance sheet may have been overstated by as much as R4.5bn, which is equivalent to more than twice its  current market capitalisation. 

While stating that management practices led to the release of financial statements that “did not reflect Tongaat Hulett’s underlying business performance accurately”, the company was careful not to, yet, apportion blame on previous directors, saying an ongoing review will seek to “establish any evidence of whether any of these past practices were deliberate”.

If it wasn’t deliberate, then the incompetence alone, on the part of management, auditors and the board, would be of criminal proportions, and the least the company can do is to immediately claw back the millions paid to former CEO Peter Staude, who made off with R176m in the decade to 2018.

CFO Murray Munro, has also since left the company to enjoy a comfortable retirement, having been paid almost R100m in that period.

Will they be held to account, if only for overseeing the company’s spectacular downfall? Don’t hold your breath.

While cases far from our shores — such as the failed prosecution in the UK of Tesco directors after an accounting scandal that wiped £1.5bn off its market value in one day —show the difficulty of securing convictions, the regulators have unfortunately not covered themselves in glory.

While investors, ordinary people exposed through their pensions or as purchasers of retail products from the financial sector, have suffered great harm, those responsible for the scandals at Steinhoff, the Resilient group and Tongaat Hulett are left unbothered.

It’s almost 18 months since Steinhoff’s fraud was uncovered and there is almost a universal acceptance that Markus Jooste, the former CEO, won’t be dragged to a police station anytime soon, despite all the evidence that’s in the public domain.

This rotten state of affairs can only further erode faith in our corporate sector.

How is the economy supposed to grow if we can’t trust the companies that fund managers plough our money into? And if the regulators and law enforcement agencies are so impotent that it’s literally anything goes, what motivation do corporate leaders have to behave appropriately?

South African capitalism is in a state of crisis, and if we don’t wake up from from our slumber it will soon be too late to save it. That’s if it isn’t already too late. What’s at stake is not just the possibility of a few rotten apples getting away, but the integrity and credibility of the whole system.