Johannesburg - The potentially damning Viceroy research report into Capitec has pointed out the close ties between members of the bank’s executive board and those of Steinhoff.
The board members named in the report are also part of JSE-listed, investment holding company PSG, and while Viceroy said they did not have an opinion on PSG’s business model, the links between the companies have led to PSG’s shares dropping12.59% to R223.77 by 14:24 on the JSE.
In the 33-page report released on Tuesday, Viceroy claimed that, based on "its research and due diligence", it believed Capitec was “a loan shark with massively understated defaults masquerading as a community microfinance provider”.
Viceroy is the same group that exposed accounting irregularities at Steinhoff.
In their latest report Viceroy said that Capitec’s board was largely made up of several executives from both PSG and Steinhoff. PSG they said is Capitec’s largest shareholder and Steinhoff was, until recently, PSG’s largest shareholder. PSG is a JSE-listed, investment holding company with investments in, among others, Capitec, Curro Holdings and Zeder.
“While this is not overly suspicious, we are cautious of incestuous management between these firms given Steinhoff’s poor corporate governance,” Viceroy claims in the report.
They named the board members who are part of the businesses:
- Markus Jooste, Steinhoff’s former CEO, who served on the boards of both PSG and Capitec.
- Steinhoff's former chair Christo Wiese who also served on the board of PSG.
- Jannie Mouton, PSG’s founder and chairperson who also served on the board of Steinhoff. His son Piet Mouton, who is now the CEO of PSG, also served on the board of Capitec.
- Ben la Grange, the former Steinhoff CFO, served on the board of PSG. He resigned from Steinhoff African Retail on January 25, 2018.
“While large intra-company holdings exist, Viceroy are skeptical on any significant independence within Capitec management,” the report said.
The report said they did not have an opinion on PSG’s business model.
“In fact, the unwillingness of PSG to raise fresh equity as an investment group is a breath of fresh air,” the report said.
Jannie Mouton is an inspirational South African businessman who was fired from his job a few months short of his 50th birthday in 1995. Instead of giving up he formed a new company resulting in the birth of the multi-billion-rand PSG Group. Following the example of Warren Buffet he formed the Jannie Mouton Foundation and allocated 40% of his shareholding in PSG into the charitable trust.
Mouton has been questioned about his close ties to Jooste in the past.
Their friendship dates back well over 20 years and it is well known that Jooste invested in PSG. Mouton retired from the Steinhoff board in May 2016.
In an interview with Alec Hogg in 2015, Mouton said that they almost lost PSG a few years after it was founded, when ABSA launched a hostile takeover, but Jooste helped them out.
“Markus Jooste stepped in to help us fend it off. He and his Steinhoff Group remain close friends and loyal supporters [with] 17% of the PSH shares. Directors own 33% and friends and family another 12.5% so between us we have 62.5%, that means it is impossible for any hostile party to acquire the company,” Mouton said.
After Jooste resigned from Steinhoff last year Mouton told Bruce Whitfield on Radio 702 that he had not spoken to Jooste in weeks.
Whitfield asked why he had sold his stake in Steinhoff in 2016 and Mouton said he wanted to put the money into his Foundation.
Even though Mouton said what had happened to Steinhoff was a shock to him, he kept repeating that his colleagues had told him not to publicly speculate about what had happened and it appeared he wanted to distance himself from it all.
Something Viceroy, it appears, has not allowed him to do.
PSG did not yet reply to GFin24's repeated requests for comment.
Do you have information for one of our investigative journalists? Send an email to firstname.lastname@example.org.
* SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.