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The international Steinhoff group and its related entities lost about R300bn in market value over the past nine months.
And this cannot be recovered. The value of the related entities – such as Shoprite, which had close ties with the Steinhoff group – will recover.
But the majority of the amount, the value of the Steinhoff group itself, is lost.
Incidentally, the minister of public enterprises, Pravin Gordhan, recently said he estimates that the damage caused by state capture cost South Africa at least R100bn.
The Steinhoff group lost triple that amount.
In the second week of December 2017, the group’s CEO, Markus Jooste, went missing. Jooste tendered his resignation on 4 December.
His resignation was accepted the following day, and Jooste was completely out of the public eye until 5 September this year – the day he arrived at Parliament with a team of lawyers to give evidence before a special standing committee, which was established earlier this year to investigate the Steinhoff case.
The main reason for establishing this committee, according to parliamentarians, was the fact that many civil servants had their pensions invested in Steinhoff via the state pension fund.
Parliament’s meeting with Jooste, in room V454 on the fourth floor of the old national meetings building, was the fourth sitting of this committee.
His evidence consisted of a short summary of how he witnessed the unfolding of events at Steinhoff.
He blamed the collapse on mainly two facts: first was the role of a strategic partner – an Austrian businessman, Dr Andreas Seifert.
Jooste alleges that this partner was the biggest contributor to the Steinhoff tragedy. It is probably coincidental that he put the blame on the single person who would in all likelihood never appear in South Africa and would therefore never be questioned.
The second matter was the fact that the group had not released its 2017 annual financial statements in time.
Seifert’s role is largely known, but he has never before been accused of having played a major role in the group’s demise, neither by the former chairman, Christo Wiese, nor by its former financial head, Ben la Grange.
On the contrary, at the end of August, when La Grange gave evidence before Parliament, he rather blamed Jooste and said there was a limit on the information Jooste shared with him.
“There were certain relationships between him (Jooste) and third parties, the details of which were not made known to the company or to me. Had I known that he (Jooste) controlled the third party through the relationship, I would have treated the transactions differently,” La Grange said.
Jooste also said to the committee that he, personally, had lost about R3bn with Steinhoff’s collapse. He furthermore said – under oath – that he had never sold any Steinhoff shares (before the collapse) and had never taken a short position on Steinhoff.
But was Jooste telling the whole truth?
The records are self-evident.
According to Steinhoff’s share register, Jooste owned 68?947?287 shares on 30 September 2016.
They were admittedly not in his personal name, but through his race-horse business, Mayfair Speculators. Mayfair Speculators, in turn, was part of a holding company, Mayfair Holdings. Mayfair Speculators and Mayfair Holdings both had two directors each: Jooste and his son-in-law, Stefan Potgieter.
Mayfair Holdings, in turn, is owned by Jooste’s personal family trust, Silver Oak Trust.
All Jooste’s shares were therefore held in an entity through which his personal business was managed. The value of these shares was about R3bn – before the Steinhoff bomb exploded.
At that stage, Mayfair Speculators had loans to the value of more than R1bn at three separate financial institutions: Investec (about R250m), Absa (about R226m) and Sanlam Capital Markets (about R800m).
Shortly after Steinhoff’s share price imploded, these creditors suddenly discovered that Jooste had tricked them.
All that was left of Mayfair Speculators by 5 December 2017 was a few small assets and millions of Steinhoff shares, which were worth virtually nothing.
But what happened to all the assets that had accumulated in Mayfair Speculators over the years?
When the mentioned institutions made loans to Mayfair Speculators, there were many assets on its books. Among others, it included a share portfolio consisting of Steinhoff shares, shares in a number of smaller companies such as a plastics manufacturer, an interest in a number of race horses, and a 49% interest in the Klawervlei stud farm.
But in August 2017, three months before Steinhoff’s share price collapsed, Jooste and Potgieter declared an enormous dividend in specie in Mayfair Speculators to Mayfair Holdings, the holding company.
In this case, houses, other property developments, interests in other businesses and about R200m in cash were issued as dividends to Mayfair Holdings, of which Jooste and Potgieter were the only directors.
The total value of the assets issued was R1.5bn.
According to minutes of Mayfair Holdings’ meeting in August, which were seen by this writer, these were issued as an “attempt at restructuring”. These minutes were signed by Jooste and Potgieter.
After Jooste and Potgieter stripped Mayfair Speculators of most of its assets, mainly Steinhoff shares remained in the company and by 5 December 2017 these shares were virtually worthless.
After the massive asset stripping in August, Mayfair Speculators went on a begging spree to banks at the end of November to borrow even more money.
At the end of November, Potgieter asked Investec to increase Mayfair Speculators’ credit facility just days before his father-in-law resigned.
Investec granted an amount of R93.4m and paid it over to Mayfair Speculators at the end of November 2017.
The security for the additional debt was still the Steinhoff shares.
Absa, Investec and Sanlam subsequently made an application to the High Court in Cape Town in December 2017 to have Mayfair Speculators liquidated.
In court documents, Absa accused Jooste and Potgieter of fraud, but did not institute criminal proceedings.
“Both Potgieter and Jooste must have been aware of the fact that the implosion of the Steinhoff share price was inevitable,” Absa stated in its court papers.
In an affidatvit, Investec’s senior legal representative, Avrom Krengel, also said that Jooste and Potgieter must have been aware of the inevitable collapse of the Steinhoff share price when they made further loans at Investec.
“They deliberately kept the information from the bank.”
On 25 April the court was asked to withdraw the liquidation application after the parties settled out of court.
Absa says in a lawyer’s letter submitted to court that the creditors and Mayfair companies had reached an agreement which involved, among other things, the orderly sale of the assets of Holdings and Speculators to ensure maximum value for creditors.
The agreement furthermore stipulates that the debt should be paid in full by December 2018.
These issues will hopefully form part of the continuing investigations being undertaken.
PwC’s in-depth forensic investigation, specifically to resolve matters, will at best only be completed at the end of the year.
The Hawks and other investigators in Germany and the Netherlands are apparently still finding their way in the dark, waiting for the PwC investigation to be completed.
Meanwhile, it’s a remarkable achievement that the larger Steinhoff group remains operational with more than 12 000 shops globally, despite the enormous destruction of value and lack of financing caused by the crisis.
The Steinhoff share price is currently trading at about R2.40/share compared with R64.40/share a year ago.
James-Brent Styan is the author of Steinhoff en die Stellenbosse boys (LAPA publishers), which appeared earlier this year.
This article originally appeared in the 27 September edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.
