Once Steinhoff was the darling of the Johannesburg Securities Exchange (JSE), a local supergroup that attracted investors in droves, its share price taking off and illustrating the deal-making prowess of its racehorse-loving CEO Markus Jooste.
The demise of this South African private-sector success story has dented the reputation of the sector and brought into sharp relief the soft-soap approach to white-collar criminals that has been a feature of the business landscape for decades. Inevitably, investors have been shortchanged. Shares that once traded at R77 sank as low as 7c. This week the furniture conglomerate limped off the JSE and Germany's Frankfurt Stock Exchange. Its exit has left investors with little to show for the faith they put in the high-flying company. But its creditors and a host of advisers have scored handsomely, even after the company crashed in late 2017.
Steinhoff will become a delisted group under the control of its creditors, bringing to an end a saga that began when auditors refused to sign off its books amid indications of a multibillion-rand fraud in late 2017. At the centre of the drama was society high-flyer Jooste, who lavished money on his horses after having splashed out on several high-profile acquisitions that would add to the group’s already staggering debt. In its heyday it boasted 40 brands in 30 companies.
Though Jooste has been convicted for financial crimes in a German court, he remains a free man in South Africa and was pictured recently in the Sunday Times casually watching a rugby game in George in the Western Cape.
His lawyers apparently told German court authorities that he could not travel to Germany for the trial because he didn’t have his passport pending an investigation by the South African authorities. Now there is a prospect of the German court applying for his extradition to stand trial there.
The speed at which the Germans have reacted shows up the state of inertia in which our law-enforcement people find themselves, suggesting a lack of capacity to probe complex financial crimes and a reluctance to bring culprits to book.
Adding to the pain of shareholders is the news that while they have been shortchanged, the past five-and-a-half years have proven a windfall for lawyers, advisers and the people installed to run the fallen behemoth.
Auditor fees alone have come in at R2.1bn, while management fees have been in the billions. CEO Louis du Preez was paid R266m in the past five financial years, excluding 2023. Admittedly they may have worked hard in extracting what value they could for shareholders, but the outcome is nonetheless a big let-down and invites unflattering comparison with the investors' meagre returns.
Not enjoying the luxury of lawyers and advisers since they took what seemed to be a wise decision to invest in the group, investors have lost 99% of their hard-earned cash. Commenting on the demise of Steinhoff and the loss suffered by shareholders, market veteran David Shapiro said: “It’s an absolute disgrace. Anyone could have seen this company was never going to survive and it would have been better for shareholders if it had been dissolved in 2017.’’
The saga leaves shareholders smarting at their loss while wondering why the bosses in the inner circle appear to have emerged unscathed and significantly richer.
For the JSE and the small investor it is similarly a disaster. The bourse has suffered a flurry of delistings in recent times, while trading volumes have suffered. The exchange is meant to offer investors a chance to grow their capital in a carefully managed environment, their funds protected by a host of listing rules and requirements.
The JSE is left to ponder how even with what companies complain is too much red tape, wholesale fraud was committed under its nose. We await action from the authorities on Jooste, which will be welcomed by those whose trust in the Stellenbosch whizz kid appears to have been misplaced. They won't get their money back but at least they would be able to savour the satisfaction of seeing justice done.
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