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How could they have missed it?

And why is Markus Jooste the only one on the esteemed Steinhoff board to have resigned?
Picture: Supplied

The current Steinhoff saga is set to become the biggest business news story of the year. It culminated in massive value destruction for investors who thought they were invested in a very well-managed company. It also damaged the integrity of several very respected business leaders, and if social media is an indication, the integrity of corporate South Africa.

Read:

Steinhoff skeletons emerge

The extent of Steinhoff’s value destruction

What is extraordinary to me is that fraud of this magnitude (if it occurred) could take place in a company with a board comprised of vastly experienced, respected and accounting-savvy members. There are no fewer than six CAs on the board and virtually all the directors have been in executive roles at various companies.

Apart from Markus Jooste and Christo Wiese, the board is littered with exceptional leaders. Dr Johan van Zyl, Dr Theunie Lategan and Dr Steve Booysen were the CEOs of Sanlam, FirstRand Africa & Emerging Markets, and Absa respectively. Dr Len Konar is on the King Committee on Corporate Governance and chairman of the External Audit Committee of the IMF.

In fact, until this week at least, Steinhoff would have been on most fund managers’ lists for companies with the strongest boards. The quality of the board made Steinhoff a more attractive investment.

The Steinhoff board consists of:

  • Markus Jooste, BAcc, CA(SA)
  • Ben la Grange, BCom (Law), CA(SA)
  • Dr Steve Booysen, BCompt (Hons) (Accounting), MCompt, DCom (Accounting), CA(SA) (Former CEO of Absa)
  • Claas Daun (BAcc, CA)
  • Thierry Louis Joseph Guibert, MBA (FR) (Former auditor at KPMG)
  • Dr Len Konar, BCom, MAS, DCom, CA(SA), CRMA (He is also a member of the King Committee on Corporate Governance and chairman of the External Audit Committee of the IMF.)
  • Angela Kruger-Steinhoff BCom (Economic Science)
  • Dr Theunie Lategan BAcc (Hons), MCompt, DCom (Accounting), CA(SA), Advanced Diploma Banking Law (He is also a former CEO of FNB Corporate Banking and FirstRand Africa and Emerging Markets)
  • Heather Sonn BA (Political Science), MSc (International Business)
  • Bruno Steinhoff
  • Dr Johan van Zyl, BSc (Agricultural Science), BSc (Hons) (Agric) (cum laude), MSc (Agric ) (cum laude), DSc (Agric), PhD (Economics). (He is a former CEO of Sanlam)
  • Dr Christo Wiese: Chairman. BA, LLB, DCom (hc)
  • Jacob Wiese, BA (Stellenbosch), MA (Stellenbosch), International Economics & Management (Universita Commerciale Luigi Bocconi, Italy), LLB (UCT)

The question is therefore, how did alleged fraud amounting to R100 billion take place on this board’s watch? An even more pertinent question is why did the board not react proactively since the first allegations of transgressions surfaced in 2015?

Some may argue that it is interesting that only Markus Jooste resigned from the board. What about other board members, and especially the audit committee which Booysen chairs?

A board is ultimately responsible for the affairs of a company and in this case, there has to be “aggressive accountability”.

In a broader context, South Africa’s corporate governance credentials have been severely tarnished in recent months. If it comes out in the wash that fraud took place, Steinhoff will stand with a growing list of private sector and state-owned enterprise firms that have lost their moral compass. The well-known culprits are those linked to state capture such as KPMG, McKinsey, Bell Pottinger and SAP. Serious allegations against Naspers and MultiChoice suggest they could be added to the list.

The outcome of the PwC investigation is therefore critical and hopefully the resultant report will be made public, warts and all.

The private sector has always portrayed itself as a beacon of good corporate governance, but these latest developments show that there are not only corporate governance challenges in government.

Please consider contributing as little as R20 in appreciation of our quality independent financial journalism.

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COMMENTS   53

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The rot here is going to be devastating to a whole host of people who were considered upstanding. The above names represent a groomed association of Wiese followers. There will be hell to pay in Stellenbosch never mind the rest of the country and the world at large..

It did not require the governments BEE intervention to break the Stellenbosch mafia and monopoly but their own internal greed that destroyed them. I am certain that there are still a few more of those greedy chaps that will fall on their own swords.

In fact, all those companies associated with Steinhof directly or indirect have been infected with the same virus and disease and at some point, it will reach fever pitch.

Let’s watch and see what happens to PSG, Kap, Star, Naspers etc.

There is no such thing as not knowing or not being aware of this level of taking shortcuts in a company like Steinhoff. The board knew about this mischievousness and the senior management knew about this too. Finished en “klaar”.

The nature of people is to share confidential information with trusted allies, to discuss issues of the company in tearooms, the corridors, meetings, smoking areas, the gym, at the bar, behind closed doors and even with their chauffeurs (as these directors enjoy).

There is no way any competent board would not have picked up the shortcuts or not be aware of it. The directors serving on the audit committee or chairing the audit committee (Steve Booysen) have heard the concerns of subsidiary directors, subsidiary CFO’s, of senior staff and of the auditors and then massaged it away with obscured explanations or empty promises to address the concerns.

Matters of this nature do not happen in isolation, similarly as it was an orchestrated cover-up operandi with Enron, USA and Eskom, SA.

What exactly they knew, we still have to learn as it is as yet still covered-up.

Yes – surprising indeed that that this happened under their watch. Or maybe not. I suspect that many of these high profile board members have probably forgotten what is required from them to fulfil their duties. Things like actually reviewing the statements and other relevant material prior to meetings, asking tough questions and probing for areas of weakness / improvement. What is more likely is that these meetings have become a social gathering with lots of back slapping, discussions about golf and international holidays (and a nice lunch thrown into the mix).

I can still believe that the board snoozed through all of this, but the CFO and other senior finance staff must have been aware that lots of questionable or irregular transactions were taking place. Someone must have fiddled the actual numbers (the grunt work) and I cannot imagine that Jooste would have the know how to amend numbers in SAP (or whatever system they area using).

But why do people think this is surprising? Do people think the Apartheid regime were put together by honest men acting in the best interest of anyone in this country?

What is surprising is that the ANC has been so complicit in going along with their continuing corruption and theft of South-Africa’s human and capital resources.

People who think these board members could have snoozed trough this fundamentally misunderstands how billions are made and kept.

None of these execs were involved in ” putting together apartheid”. The first laws were initiated by the British en Verwoerd who expanded the system died decades ago.

Every single institutional investor in SA knew SNH was questionable. As they acquired, got bigger and became a rand hedge, the price ran and FOMO took over. Not one asset manager is surprised by this

Plenty of pale males there. Just goes to show corruption and ineptitude doesnt have a skin colour.

Indeed. It is virtually only pale males. Have a read of the names on the exec committee:

MJ Jooste
AB la Grange
DM van der Merwe
JNS du Plessis
P Erasmus
HJK Ferreira
SJ Grobler
KJ Grové
FJ Nel
M Nel
H Odendaal
P Pohlmann
D Schreiber
S Summers

It’s going to be a problem to find a jail big enough to house these egos!

….I agree Davezim. Mostly pale male.

Now, WHO ELSE is there to give the (mostly “unpale”) corrupt Government much needed ‘competition’ in stealing *lol*

The pale males were corrupt long before the ANC government existed and they were so corrupt and so good at manipulating the system that the ANC apparently didn’t see it’s way open to contesting their control of this countries economic system. This of course presumes the ANC intended to fundamentally change the economic system which i think were probably one of the first compromises the ANC had to make to get a chance of liberating themselves and the majority.

Hit the nail on the head Ryk. Beggars belief how this was not picked up by any of the insiders in the company. The collapse of Enron brought down a global big 5 accounting firm. If Steinhoff think they can get away with only losing their CEO they are sorely mistaken.

And SAICA had better think twice about how they handle the disciplinary actions into all of these CAs involved. The notion that disciplinary action and the results thereof should be kept confidential is doing significant damage to the brand. Their handling of Gupta saga and the CAs involved has been deeply disappointing.

Many of these board members are directors on multiple boards. Steinhoff’s CFO was also CFO of Star.

I simply cannot believe that it is possible to hold these multiple positions (I saw one director of a company recently with 8 board positions at different companies) – and still give all of these the attention they need.

Simply put – directors aren’t being held accountable to fulfill their duties (accross the board in corporate South Africa).

The purpose of such elite members to be on the boards of so many companies is to ensure mutual defense and coordination of the corrupt activities they are are richly rewarded ( and also in some ways necessitated by capitalism itself) for continuously committing and retroactively obscuring.

Again to be a country as wealthy as South-Africa and maintain such poverty/inqaulity takes concerted and coordinated effort by men with elite training and decades of experience.

I am ashamed of my fellow CA on that board

How did they miss this? Fat, lazy, complacent, beste maatjies, belief they are a bulletproof superior sub-race, etc. What strikes me is that most of that board is made up of professional hired help – corporate types that never started or ran a real business. Founders and real businessmen ask questions when the cashflow does not make sense : what proportion of Steinhoff was journal entries and contracts??

It is time for serious education and enforcement of director liability. I need a complex skipper certificate to operate a boat, these people can operate R100billion of other people’s money with nothing more than being a maatjie of the proxy club that ran Steinhoff as ifit was a private company.

Not to put too fine a point on it , but Ben La Grange also resigned..?

No he did not resign from Steinhof- he resigned from STAR to spend time as CFO at Steinhof (Wiese asked him to)

Benfair : old people do not know how to work the shredder and the mailserver delete purge functions

and every body is still running circles around Wiese. my question still remains: how did Wiese missed this. I hope somebody will not be afraid to confront him directly otherwise he will get away with it again.

Get away with what?

Taking moneys oversea in suitcases.

Well maybe – just maybe – he is part of it. Only time will tell. But just remember the New York Jewish community trusted Bernie to the nth degree. Couldn’t believe he did what he did. Also remember the scene in Wall Street 1 – where the “old” analyst tells the Sheen character just before his arrest – money does funny things to people!

After all it is just a question of “suspected accounting irregularities”… The reaction of shareholders is too irrational, I only hope its not Wiese himself buying all these shares that are being dumped in the panic selling….or “the board that is littered with exceptional leaders”. Someone is buying and that someone will be filthy rich at the end of the day. LUCKY BUGGER.

‘Someone is buying.’ Shorts have to buy to close their positions and bank profits.

6 points : 1) I have been highly critical of these so-called Rand hedges. I have stated ad naseum- the only true Rand hedge is an acct in foreign currency in Your name held by a foreign institution- unfortunately these drew many jeers 2) I have never followed this share- but I did note that it appeared it was chasing too many deals with borrowed money 3) the regulators in sa clearly have no concept of what they shld be doing 4) makes nkandla seem like petty cash 5) glad I gave away my CA(SA) a long time ago

On #5: I think they are too, for after all these years you still can’t count…

Robert you have been critical about all and sundry. My goodness you are a gifted individual. No doubt when you arrive in SA for your Christmas visit you will be banging on ad museum to all who re unfortunate enough to be cornered.

I think you may well find that even more miscreants for this debacle may soon be winging their way to your neck of the woods where they will find safe haven.

‘makes nkandla seem like petty cash’

I.Q. ?

Time to resuscitate the so called rogue tax unit to do a lifestyle audit on these esteemed directors including Wiese who started as a smouse in Upington.

Are there any honest business people in RSA? Just asking

Been thinking along the same lines: many a times one witness the super-wealthly travelling in exotic cars, live in palaces, and the I wonder how the super-wealthy (of this world, not only SA) amassed such wealth….

(i) What % is due to inheritance from wealthy parents/families?
(ii) What % is due to cunning/unethical/dishonest business/ tenderpreneurs / filthy stepping on other mere mortals in life to reach where you’re now?
(iii) The smallest % must be through honesty / hard work / true entrepreneurship?

In defense of the super-wealthy…we need more of them in SA to get the economy cooking. Dawie Roodt states “We don’t have an unemployment problem in SA. Instead we have too few really wealthy people in SA”

Problem is many super-wealthy pay a fraction of the tax they should (as they can afford the best global tax & legal advice) to minimise/shift liability, so broad society doesn’t benefit as much as it should from taxing the wealthy. That is a problem.

The wealthy’s economic role is necessary in the function of any country….we need them, but the wealthy NEED…..the “man-in-the-street” as consumers en-masse supporting their products & empires, in order to exist at the “top of the pile”.

“… too few really wealthy people in SA” Too many chased away as a result of BEE and AA.

Janie:

The problem is the capitalism rewards the worst individuals ( morally speaking) the best and it’s been battling the negative incentive problem since day one. Since capitalism is a system that can’t help but concentrate wealth it’s thus ( as is easily illustrated) also a system that ensures that some of the worst people end up having a tremendous proportion of the wealth.

So far only facts seem to be that 2 directors have resigned. Trust that more facts will be known soon rather than guessed at. Eg. where does the R100 billion fraud come from? Sure one can infer that there is a really big problem but facts would be nice now rather than self righteous journalistic rage.

IMHO, somethings appear to have been confirmed:

-External Audit “benefits” way over exagerated

-CA(SA) now simply pulp fiction. It has been in noticeable decline for 20+ years. Time we had a judicial commission of enquiry into SAICA and IRBA.

-Non-excecutives a waste if time and money. Just too much work to be effective in a large company

-King code type of corporate governance just a tick box excercise and essentially worthless and costly to boot. CG comes from inside an individual; it has to be built into an organisation and cannot be inspected in successfully.

-Asset managers better do some serious refunds to particularly retail investors

Hope that Steinhoff recovers from this and that at least some of the disasters are smaller than most commentators seem to hope they are.

Doesn’t do much for the value of a CA.

…now you’re insulting all the number-plates on cars in Cape Town municipal region! *lol*

This is the innocent Christo Wiese who tried to fly from Heathrow to Switzerland, carrying a suitcase with £6,000,000.00 and then got intercepted by Customs, for not declaring it. He is now going to do the “Damage Control” for Steinhoff. Probably because he did not know about these shenanigans? Or he’s good at Damage Control?

I would expect his long career would have adequately prepared him to handle every crisis that can be handled as well as some that can’t be.

Ekiva – he did not have St6m in his brief case – get to know your facts – and think before you write – start by thinking what St6m would look like – IDIOT

Might we see some Steinhoff Board Members jailed. Like British MP’s, who fiddled their expenses.

Thing is nobody actually really know for a fact what the issues are. Maybe a bit early for the lynch mob to form and randomly hang every and anybody without a shred of proof.

Journo’s and social media are worse than a mob of superstitious peasants in the middle ages hunting witches. Thank goodness we do not have jury system in SA – would not want to be tried by you lot!

I’m with you on this one, Notwarren. Maybe we should actually have some hard evidence before the mudslinging/schadenfreude starts. Most of what has been reported up to now is pure speculation as I read it. As far as journalists are concerned, some may recall Breyten Breytenbach’s version from the bad old days of apartheid : a cross between a shark and a donkey, they gather wherever there is blood (and he replaced the J with an H in the Afrikaans version of the word). As far as Wiese and the case of cash is concerned, he was never charged with an offense as far as I know. In fact as I recall he successfully sued and got his money back from the British customs.

How could they have missed WHAT ?
WHAT did they miss ?
Such pathetic reporting – how do we know anything is missing ?
Steinhoff has not put out our cautionary – what we know is there are probable accounting irregularities involving 3 companies and 4 of the management team.

To say that R100bn is missing is such rubbish and weak reporting

Robot:

If you spend 5min on Google you can find the frauds reported with proper research to back it. Reuters called Steinhoff a fraud weksmago – argue with them if you are feeling defensive. Essentially they ran unrelirted controlled entities that were used to first absorb losses off S tesults, then journal entry massive investment income to Z, and when it was nice and clean and fresh, S bought them at an inflated price. That is jail in Germany, UK, France and US

The R100b (or R120b) is not stolen in the sense of a heist, They presented certain results that at a PE of 10or 15 or whatever implied a valuation of R100, yet the results are a spreadsheet and whiteboard exercise, not actual real cash backed results. No results, no R100

Anyone here buy shares today?
I bought some this morning so hoping I don’t lose all my money!

Any advise would be great.
Should I hope to turn a profit and sell or hold on for a few months?

let’s be honest, Wiese has never been squeeky clean in his dealings so this is not that shocking. Tone from the top does not only apply to Government.

What is quite scary about the Steinhoff share value demise and that is furthering the value destruction mode, is that after three business days, there is but for one Sens announcement without any detail, nothing else forthcoming from the board of directors to their shareholders. No communication, absolute abandonment.

The directors have long since forgotten that their primarily responsibility is towards shareholders. Directors have to inform the shareholders, not only in times when good news are shared, but even more so in times when shareholders need to be informed of bad news and the detail surrounding that. The silence from the board is the most scary part. The board of EOH makes the same mistake of saying as little as possible and not reporting swiftly with their shareholders.

That absence of shared information, creates uncertainty, fear, an experience of abandonment, which fuels speculation, propaganda, unsubstantiated deductions and leads to a self-fulfilling prophecy.
This negligence by the board to communicate daily with the market in times of a crisis, is what is most criminal about their actions or actually in-actions. They are so shocked and trying to make sense of the chaos that they abandon their fiduciary duty towards shareholders. That is criminal.

Corporate Governance has lost all credibility. Where is the accountability? Who is going to pay for the billions lost by investors? Will some-one got to prison?

too many meetings and deal making!!! you look at the costs the auditors charge for their audits and the audit plan and the amount of real staff digging around PLUS the number of days – maybe it was weeks ??? or years ???…… around all offices of a group around the globe and the local offices AND THEN you get the real people like us by doing the proven management with the best qualifications in the world of any business ……called M W A – Managing by Walking Around ……. all the other pieces of papers like MBA’s etc and CA’s etc …. we put it through the office shredders.

Greed has no respect for the number of degrees and certifications you may have. Looking at the Board list and their illustrious accolades, etc. the number one rule has been ignored.The lust for power and being one of the main kingpins will always bring you down where you actually belong. Ask sleepy Bob.

End of comments.

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