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Picture: FINANCIAL MAIL
Picture: FINANCIAL MAIL

The R100bn-plus Steinhoff accounting scandal stands out as a monument to managerial malfeasance. As the details of an investigation report by PwC continue to seep into the public consciousness, it’s becoming evident that the board cannot simply wash its hands of the mess.

In fact, it is hard to shake the feeling that the members weren’t just passive bystanders in SA’s biggest corporate scandal, which sent shock waves across the world, exposed National Prosecuting Authority weaknesses in prosecuting financial crimes and tainted the image of rectitude that Germany’s financial markets have long enjoyed. 

The investigation report rightly shines an unforgiving spotlight on Markus Jooste, who killed himself last year as the German authorities, eager to restore public trust in its capitalism, closed in. But let’s face it — Jooste didn’t pull off this decades-long deception with the help of a few individuals. The scale and sophistication required more than a small circle of insiders. The board’s supposed ignorance of the rampant financial trickery happening under their noses would be laughable if weren’t so tragic.   

Granted, in some cases the board was deliberately kept in the dark. In a section of the 7,000 page report about contributions, or fictitious money from companies already under the control of Steinhoff, Philip Dieperink, former CFO of the Steinhoff UK subsidiary, admitted in an email uncovered by investigators to hiding information from the board, asking a subordinate to “hide the contribution figure”. 

Former group COO Danie van der Merwe also left contributions out of documents prepared for the main audit committee and the board, despite Deloitte flagging them as key risk areas. The so-called contributions were a lifeline to struggling companies, especially the UK segment where Steinhoff ran Poundland, Harveys and Sleepmasters. 

Still, the PwC findings highlight a disturbing pattern of negligence. The board consistently bypassed formal due diligence processes — a non-negotiable step for any self-respecting steward of shareholder capital to minimise risk. The R63bn purchase of Pepkor in 2014, and the $3.8bn takeover of Mattress Firm two years later, are just two examples where Steinhoff overpaid, ignoring independent assessments and market norms. That acquisition frenzy was one of the key tools Steinhoff used to create an illusion of rapid growth by recognising inflated goodwill and other intangibles to mask its underlying financial issues.

Consider the absurdity of the late journals: 65 in 2013 ballooned to 404 by 2017. Are we really to believe that the board never noticed this dramatic increase? Their collective blind eye was less a case of oversight than a glaring act of complicity. It’s the kind of creative accounting that requires more than a nod and wink — it requires the tacit approval of the higher-ups who should have been safeguarding the company’s financial integrity.

The PwC report underscores the board’s complicity in these disastrous decisions, which obscured the true state of Steinhoff’s balance sheet, misleading investors and regulators about the company’s actual financial stability. 

The PwC report casts a long shadow over the board members who failed in their fiduciary duties. The investigation into Steinhoff’s collapse must be expanded. The focus should include not only those who engaged directly in the fraud but also those whose wilful blindness allowed it to happen.

The board’s shocking disregard for due diligence created an environment ripe for Jooste-led schemes to flourish. Whether through negligence or wilful blindness, the hands of the board members at the time are far from clean.

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