You are currently viewing our desktop site, do you want to visit our Mobile web app instead?
 Registered users can save articles to their personal articles list. Login here or sign up here

Damning Tongaat Hulett forensic report fingers ex-executives, including Peter Staude

Group plans to pursue claims against executives implicated in PwC probe.

Beleaguered sugar and property group Tongaat Hulett released the “key findings” of PwC’s forensic investigation into the group’s financials and operations today, which points to serious accounting irregularities and corporate governance failures under the group’s former CEO Peter Staude and other senior executives.

Read: Tongaat Hulett’s former CEO poorer after share price dive

Tongaat Hulett’s overhauled board, under new chairman Louis von Zeuner, says it “intends to pursue claims against certain individuals who appear to have been responsible for, or party to, the undesirable activities outlined in the PwC Report”.

Former Tongaat Hulett CEO Peter Staude.

Besides Staude, Tongaat Hulett’s former CFO Murray Munro and the group’s former managing director of its Zimbabwean operations, Sydney Mtsambiwa have also been fingered in the report.

Other senior divisional directors and managers also cited include:

  • John Chibwe, finance director of Hippo Valley Estates;
  • Michael Deighton, former managing director of Tongaat Hulett Developments (THD);
  • Steve Frampton, former Zimbabwe Sugar sale general manager;
  • Shelton Nhari, a director at Triangle Finance;
  • Les Munro, former finance executive of Tongaat Hulett SA Sugar;
  • Raphael Pfunye, sales finance executive at Zimbabwe Sugar; and,
  • Sean Slabbert, a former finance executive within Tongaat Hulett group.

Tongaat Hulett has opted not to publish the full PwC Report, saying that it is “subject to legal privilege and other confidentiality restrictions”. However, its board has decided to release a document on its website with key findings from the report “in the interest of transparency”. The document also highlights how Tongaat Hulett’s board plans to deal with the issues raised in the report.

Questionable or irregular practices highlighted in the PwC Report included:

  • Early or premature recognition of land sales within Tongaat Hulett Developments (THD), the group’s land conversion and property development division.
  • Overstating the value of the group’s carrying amount of cane roots and standing cane related assets
  • The overstatement of sugar sales in Zimbabwe
  • Overstating the carrying amount of capital work in progress
  • The incorrect capitalisation of infrastructure costs
  • Overstating projected revenue
  • The provision of cash collateral in relation to a land sale

Read: Tongaat Hulett: Developments division under scrutiny

Tongaat Hulett said that disciplinary action has been or is being taken in relation “to certain of the senior executives” referred to in the PwC Report as well as other individuals.

“From the PwC Investigation, it appears that personal financial enrichment of key senior employees was largely limited to the financial incentives paid to them during the years in which they achieved their employment targets,” Tongaat Hulett said.

Read: New chair and rash of changes for Tongaat board

The group is looking to recoup some of these bonuses. It also noted that from a criminal law perspective, its board is engaging with the South African Police and the National Prosecuting Authority.

Following Gavin Hudson’s appointment as new Tongaat Hulett CEO in February 2019, the group embarked on a comprehensive strategic and financial review aimed at turning around the company.

Gavin Hudson, CEO Tongaat Hulett. Image: Supplied

An initial review of the group’s financials by the new management team, under Hudson, raised questions around the group’s previous business, accounting and other practices. PwC was then brought in to undertake a full forensic investigation into the group’s operations in March. This led to Tongaat announcing in May that it would need to restate is 2018 financial results and delay its 2019 results.

“It soon became clear that, over and above the operational difficulties facing Tongaat Hulett, there was insufficient internal accountability, governance and financial oversight,” the group notes in its key finding document.

With the PwC Report finalised and handed to a special Tongaat Hulett board committee that includes Hudson, von Zeuner and fellow board member Linda de Beer, the group is now set to finally release its restated results for its 2018 and the delayed 2019 results in the second week of December.

“The Board Committee and Tongaat Hulett’s advisors have reviewed the content of the PwC Report to prepare for litigation by and against Tongaat Hulett Limited, to understand the impact on the financial results for the financial years ended 31 March 2018 and 2019; and, to determine whether further investigation is required and what remedial action to take,” the group noted (in the findings document on its website).

Tongaat Hulett said that PwC’s investigation identified major historical shortfalls in a number of important areas, including, governance practices, delegation of authority, decision-making, oversight, financial discipline, record keeping, systems usage and financial reporting.

The Board Committee’s assessment of PwC’s key findings is as follows:

  • certain senior executives initiated or participated in undesirable accounting practices that resulted, amongst others, in revenue being recognised in earlier reporting periods than it should have been, and in expenses being inappropriately capitalised to assets. This resulted in profits in the respective years being overstated, and in the overstatement of certain assets in THL‘s financial statements;
  • there was a culture of deference and lack of challenge at THL that resulted in employees following instructions on accounting practices, without questioning the basis for those accounting practices; and
  • there were a number of governance failures pursuant to which internal policies, guidelines and frameworks were not followed, creating an environment in which senior executives could initiate or participate in the financial reporting misstatements.
Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

AUTHOR PROFILE

COMMENTS   13

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

What a joke – and here we have most people complaining only about fraud and crooked dealings in govt. Given all the names mentioned here, there must be a very, very short list of execs that weren’t involved.

This is a publicly listed company yet the full report is not being released – “… [the] board has decided to release a document on its website with key findings from the report “in the interest of transparency”. The document also highlights how Tongaat Hulett’s board plans to deal with the issues raised in the report.”

How ARROGANT and what utter BS – transparency means releasing the FULL REPORT. All stakeholders, plus the JSE, should demand this. Keeping the public blind re the full report about dishonest behaviour and at the same time expecting that statements about current / future actions are to be believed (trusted) is effing stupid.

There is also mollifying language about disciplinary action. This is what happens when one goes AWOL for a day, or performs some other relatively minor transgression. It is not appropriate (on its own) for the severity of what is reported here. This is criminal!!!

The scale of protracted ‘serious accounting irregularities and corporate governance failures’ [aka FRAUD] mentioned here (and we don’t know what is not being made public) requires complicity and/or silence from a number of people below the top dogs and that should be a very big worry for the board and shareholders.

I’d luv to see a report that sets out the time period over which these ‘irregularities’ took place versus the bonuses and other ‘rewards’ the large group of named execs received.

I think you need to calm down.

Remember that there is a matter of scope; fraud and corruption at Steinhoff and Tongaat will effect its shareholders while SOEs and Government effects every citizen in South Africa.

If you feel that you want the information now; then if you have significant shareholding in the affected company then approach the board to have them give you access… as ultimately they will be responsible to the shareholders.

By keeping it as a private matter, they want to maximize the recovery of lost value to the shareholders. While it is in Government’s interest to air their dirty laundry since everyone in South Africa is a stakeholder…

So; the fact that there is fraud is one thing… how they go about fixing it is a completely different matter as it relates to whom each entity (Government and or Public Corporations) need to satisfy.

Having a rant and asking for the report to become public domain knowledge is in fact none of your business unless you own enough shares and or have other shareholders agree to release it.

Come now Etienne – to talk down corruption in the private sector on the basis of your justification is trite. Publicly listed companies are responsible to their stakeholders. If you interpret this to only mean ‘significant’ shareholders then it is an extremely narrow view and kicks King, et al, and the very concept of ethics and corporate governance into the sewer.

In case you need reminding (or if you didn’t know), stakeholders include – Shareholders (current and prospective), employees, suppliers, community (society), unions, govt and the like.

I trust you view this as a calm and non-ranting response.

@SPAP

The fact that you think my reasoning about the effected people on the actions of corruption and fraud is trite…

Well luckily for me; the reality agrees with my view of the world and not yours.

If you have skin in the game, you get a vote – otherwise you are opinions mean less than nothing.

Dear Etienne – The ‘skin in the game’ argument in your context is a fallacy and, unfortunately the vast majority of people that use it fall into the same trap. It’s like believing in Roy Rogers and Tonto, Batman and Robin, or even the tooth fairy.

@SPAP

Like I have said; you opinion mean nothing.

Etienne, fundamentally correct , but I think SPAP’s thinking is that getting the culprit’s names out there in neon lights may be the only recourse and action that is effective and in some cases, even being taken!!

It seems to me that it is open hunting season for a lot of JSE Exec’s so by just making the Country Club a not so comfortable place to be, may get them thinking about commiting to this type of behaviour! This country desperately needs examples being made,both good and bad, don’t you think!!??

Moderators are playing games yet again. Comments are being censored – and I thought the narrow mindedness displayed during the apartheid years was a thing of the past!

I’ll try posting the same comment again and let’s see if it passes muster this time.

Knowing Peter Staude I doubt they will be able to pin anything on him. You don’t find men of integrity and caliber giving their life’s work to an organization and then doing something like this. I cannot say for the others but overstated assets is a problem on most Company balance sheets in SA. Revaluations should be mandatory every 5 years by different registered Valuators.

Rigger; at one time I would say you were right. Nowadays I am not so sure. I think Staude and chums just got too greedy and forced the issue just a little too far; Steinhoff style. Have a look at the many SA company’s whose shares have plunged. A lot borrowed too much, were a little too optimistic (loose) with spending, earnings and projections but the executive walked away with millions. Off the top of my head: Steffstocks, M&R, Esor, Woollies and a few more.

Friends with friends in big SA business tell me there is a sense of quiet desperation amongst some executives closing in on retirement and seeing SA’s economy crumbling. End game times.

Once again it just shows how little value there is in an audit. What are we paying auditors for???

jnrb , and the governance/ controls of the JSE itself!! I do not see much subsequent action taken by them , a credibility loss of note!

Load All 13 Comments
End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

NEWSLETTERS WEB APP SHOP PORTFOLIO TOOL TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: