NEWSMAKER OF THE YEAR: Markus Jooste — public enemy number 1
It was a conspiracy that dated back more than a decade, making fools of some of SA’s smartest businessmen. Steinhoff is SA’s newsmaker of 2018
In the end, it was no contest. Markus Jooste’s Shakespearean fall from grace — from the top echelons of Stellenbosch royalty during his stint as CEO of Steinhoff, to pariah in the coastal town of Hermanus — made him a shoo-in for the FM’s newsmaker of the year.
It was no small feat: in 2018 the headlines were dominated by the ousting of SA’s president, Jacob Zuma, and by US leader Donald Trump sparking a global trade war.
But it is the fallout from Jooste’s overnight "resignation with immediate effect" on December 5 2017, and Steinhoff’s simultaneous admission of "accounting irregularities", that will haunt SA for years to come. This year, there have been almost weekly revelations of how Jooste masterminded secret "related-party deals" that enriched him, as well as revelations of how Steinhoff’s own books were cooked. It has sparked widespread outrage.
In one of the last interviews he gave before quitting in 2017, Jooste famously dismissed the German investigation into him and Steinhoff’s accounting. "The authorities worldwide are looking for more tax ... you must remember, it’s a game for money," he said. It was a prophetic choice of words.
A year later, and the game is up. It’s a steep fall: for so long the gilded king of the local retail scene, Jooste embarked on a debt-fuelled acquisition spree to drive Steinhoff to the pinnacle of the global furniture industry. It became the second-largest furniture retailer in Europe, behind Ikea.
But in the two decades that followed the company’s 1998 listing on the JSE, Jooste’s greed became a cancer that brought the company to its knees, and may yet fell it entirely.
In a multiplicity of deals that have since come to light, it turns out he had taken secret stakes in entities that were benefiting from Steinhoff’s dealmaking. Finally, the risk-taking became so daring that it could no longer be explained away to the company’s auditor, Deloitte, and to nonexecutive directors.
That Steinhoff has survived until now, without entering into formal bankruptcy proceedings, is an achievement. Steinhoff’s reconfigured board, led by chair Heather Sonn and the executive team, initially led by Danie van der Merwe, have managed to convince creditors and legal claimants that keeping the company alive is the best long-term solution for all.
On December 14, Steinhoff concluded a lock-up agreement with the company’s creditors which, it hopes, will bring "a new period of financial stability for the group and enable management to focus on maximising the potential of [its] various businesses".
The trick now for Sonn’s board is to figure out what to do with its crown jewels: Steinhoff’s direct stake in Pepkor Europe (which it owns outright), and the 71% of the Pepkor group, which listed last year on the JSE as Steinhoff Africa Retail (Star).
The FM has been led to believe the sale of Pepkor Europe could fetch anything between R50bn and R60bn. One option touted in corporate finance circles would unite the two Pepkors under Pepkor Holdings. Here, the largely ungeared balance sheet of Pepkor Europe could be used to finance its acquisition by Pepkor Holdings.
Steinhoff still has other global retailers under its umbrella. These include French chain Conforama, US company Mattress Firm (which recently emerged from bankruptcy), Poundland in the UK and Freedom in Australia. It remains to be seen which ones will stay inside the group.
But the real question for those who demand accountability for the R200bn lost in market value is: what will happen to Jooste?
What it means
Someone must pay for the huge loss of value
Given the complete evisceration of the National Prosecuting Authority under Zuma, there seems little confidence that he will be held accountable for his sins in SA. Perhaps the German prosecutors will prove more adept. But even the Germans have been investigating Jooste for more than three years, and haven’t brought charges.
Many people have been waiting for PwC’s forensic report to emerge to see where blame should be placed. But though it was initially expected this month, Steinhoff now says the probe is only "expected to be complete by the end of February 2019".
Even then, there’s no guarantee the full forensic investigation will be released — an alarming about-turn on its earlier undertaking. Should it fail to do so, shareholders will certainly fight that in court.
That doesn’t mean justice will come quickly for the thousands who have suffered from the huge loss of value. As it was, 948 of SA’s 1,651 pension funds had exposure to Steinhoff, and were cruelly exposed as the share price fell from R96.94 in April 2016 to just R1.74 at the time of going to print. It would be a travesty if no-one is held to account for that.
DOWNLOAD FINANCIAL MAIL NEWSMAKER OF THE YEAR
The FM has produced its annual 'Newsmakers of the Year' for 2018, which is available as a digital-only e-edition. Download the FM app for either Android or IOS on either your iPad, phone or computer, and read about who scooped the most headlines, who just missed out, who was responsible for the scandal of the year and the deal of the year.
Plus, read about why populism is on the rise in South Africa, our exclusive investigation into how SA firms are dodging R7bn in taxes by shifting profits offshore, and the top books of the year. Also, your favourite columnists too: Justice Malala, Fred Khumalo, Ann Crotty, Sikonathi Mantshantsha and Rob Rose.
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