Steinhoff goes to Parliament: 5 key takeaways


Cape Town - Over 40 MPs from four different committees attended a briefing on Wednesday in Parliament's old Assembly Chamber into what is behind the financial irregularities that have caused Steinhoff's share price to fall by over 80%, erasing roughly R200bn in shareholder value. 

This was the first time that Steinhoff's senior management, inducing its former chair Christo Wiese, and its new acting chair Heather Sonn, had briefed Parliament since the accounting scandal was exposed in early December.

The Government Employees' Pension Fund, which owns 392 million Steinhoff shares - about 9.1% of its total shares -  has lost about R20bn as a result of the steep share price drop. 

Here are five key takeaways from the briefing 

1. The financial irregularities remain opaque, for now

MPs repeatedly asked Steinhoff's leadership what, exactly, the "financial irregularities" were that were flagged by the group's auditors Deloitte in early December, and caused the conglomerate's 2017 financials statements to be indefinitely delayed. 

But the Stellenbosch-headquartered retail group's top brass had few answers. Sonn said Steinhoff was "deeply constrained on what it can say, legal and otherwise".

"We come to this gathering open, and if we could communicate everything today, we would communicate."

Wiese, the group's former chair, meanwhile, said that until forensic auditors PwC, and the firm's statutory auditors had finalised their reports, it was impossible to know the extent and scope of the alleged fraud at the company. 

MPs were unimpressed with the performance. The briefing's chair, Yunus Carrim, asked Steinhoff to reply in detail to written questions within ten days. 

2. Jooste has been reported to the Hawks 

Steinhoff has reported its former CEO Markus Jooste to the Hawks, on suspicion that he had committed offences under the Prevention and Combating of Corrupt Activities Act. Steinhoff executives said they would consult with lawyers to see whether they could make the reasons public, but have not yet provided an update.  

Jooste abruptly stepped down as the conglomerate's CEO in early December 2017 amid an accounting scandal. He has not spoken to the media since, and was not present at the hearing. 

Shortly after he resigned what appears to be a personal letter he wrote to colleagues came to light, which Fin24 received from two independent sources.

In the letter Jooste said he had made "some big mistakes".

"It is time for me to move on and take the consequences of my behaviour like a man. Sorry that I have disappointed all of you and I never meant to cause any of you any harm." He encouraged his colleagues to "continue to live the Steinhoff dream".

3. 'A bolt out of the blue'

Christo Wiese, the Steinhoff board's former chair, told the committee that the problems at Steinhoff came like a "bolt out of the blue" to him. He described as "absolute turmoil" the days in early December after news of the accounting scandal broke.

Wiese stepped down as the group's chair in mid-December. One of Steinhoff's biggest shareholders, he has lost up to R30bn because of the group's share price plunge.  

Asked why the Steinhoff board had not flagged financial irregularities earlier, Wiese said that detecting fraud in a company as big as Steinhoff, which is active in over 30 countries, was extremely difficult. 

"I can only say that cleverer people than this board have been duped before by people committing fraud."

4. Insider trading 

The Financial Services Board, one of six oversight bodies that also briefed the committee on Wednesday, said it was investigating two cases of possible insider trading in Steinhoff shares between August 2017 and December 2017.

Solly Keetse, head of market abuse at the FSB, said the regulator was also investigating one case of possible false, misleading or deceptive statements. 

He did not name who carried out these trades. He said the FSB was also liaising with its counterparts in Germany around the trades. Steinhoff International has since 2015 had its primary listing on the Frankfurt Stock Exchange (FSE). 

5.  Steinhoff shares will not be suspended (for now)

JSE CEO Nicky Newton-King told the committee that the local bourse would not halt trade in shares of Steinhoff International, the group’s Dutch-domiciled parent company.  

"What suspension does is it stops individual investors from exiting a company. People would not have been able to trade out of it," she said.

She noted that the FSE has told her that it would not be suspending Steinhoff over its failure to submit its audited 2017 consolidated financial statements on time.

If the JSE stopped trade in Steinhoff shares then, she said, foreign investors would still be able to buy and sell shares. 

"We do not want to prejudice SA shareholders," she said. 

The JSE has, however, said it would suspend trade in some Steinhoff subsidiaries that are only listed in the JSE, if they do not submit their financials on time. 

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