Jooste Leaves Stones Unturned

 Jooste Leaves Stones Unturned

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By Xolani Qotoyi

Published on March 25, 2024

Markus Jooste, the former CEO of Steinhoff International, was found dead under mysterious circumstances just a day before he was scheduled to surrender to the Hawks. Jooste’s death, ruled a suicide, leaves many unanswered questions about the biggest corporate fraud scandal in South Africa’s history.

Jooste was fined R475 million by the Financial Sector Conduct Authority (FSCA) for accounting violations at Steinhoff International. The company, a global retailer with a presence in Europe, Australasia, the United States, and Africa, had over 40 local brands in more than 30 countries. Steinhoff was known for providing affordable household goods and general merchandise.

Jooste’s Legacy at Steinhoff

Jooste’s tenure as CEO marked a period of significant growth for Steinhoff International, propelling the company to become the second-largest household goods retailer in Europe. Under his leadership, Steinhoff expanded its reach into Africa and became a major player in the retail sector.

In 2014, Steinhoff acquired Pepkor Holdings for over $5.7 billion, integrating it into their portfolio. Pepkor, with its extensive retail footprint in Southern Africa, operated 5,900 stores and employed 50,000 people across nine African countries and Brazil. The acquisition included prominent South African brands such as Pep, Capfin, BUCO, and Ackermans.

However, the scandal erupted in December 2017 when auditors refused to sign off on the company’s financial statements. Jooste abruptly resigned as CEO, and the board acknowledged “accounting irregularities” that triggered a major investigation. The fallout was severe, resulting in a 98% loss in Steinhoff’s share value and a staggering R200 billion hit to shareholders, including the Government Employees Pension Fund.

The collapse of Steinhoff had dire consequences for pension funds, eroding retirement savings for many individuals. Jooste, who had joined Steinhoff in 1988 and played a key role in its international expansion, saw his empire unravel.

The Downfall

Jooste’s downfall is often linked to conflicts with business partner Andreas Seifert. Disagreements between Seifert and Steinhoff led European regulators, journalists, and law enforcement to uncover exaggerated profit and asset values, as well as undisclosed deals. Deloitte LLP requested an internal investigation before approving Steinhoff’s 2017 financial statements. Despite Seifert’s departure from the company, he continued to pursue legal challenges against Steinhoff, which included delaying rescue plans for the company’s European businesses.

Ethical Violations and Media Access

The Steinhoff saga raised serious ethical concerns. The company’s refusal to publicly disclose a 7,000-page PwC report, opting instead for a brief 11-page overview, highlighted a disregard for transparency. Media outlets like Amabhungane and Financial Mail struggled to access the full report, with Steinhoff citing confidentiality and legal privilege.

Jacques van Wyk, an activist on ethical business conduct, criticized the company’s obstructionist stance. He argued that Steinhoff’s actions undermined journalistic efforts to investigate corporate crimes and emphasized the need for robust ethical frameworks within corporate entities.

The media’s pursuit of the PwC report is rooted in the constitutional right to access information necessary for protecting or exercising rights. The Steinhoff scandal, which has severely impacted ordinary South Africans and pensioners, underscores the importance of transparency.

Current Legal Challenges

Steinhoff is currently facing investigations and legal actions from various bodies, including the Johannesburg Stock Exchange (JSE), the Financial Services Board (FSB), the Department of Trade and Industry (DTI), and the Companies and Intellectual Property Commission (CIPC). The company is also involved in class action lawsuits in Germany and the Netherlands, and its executives have appeared before South Africa’s Parliament’s oversight committee on finance and the Standing Committee on Public Accounts (Scopa).

Recommendation

To prevent such scandals, companies should invest in officers responsible for ensuring ethical behavior among employees and stakeholders. These officers should conduct regular reviews and enforce board oversight and transparency to maintain integrity and accountability.