THE SOUTH African Federation of Trade Unions (SAFTU) demands that Markus Jooste, the former Chief Executive Officer of Steinhoff, be arrested and charged with negligent and reckless financial management, fraud and corruption, in connection with the scandal in December 2017 when the company’s share price collapsed in just two days, plumetting by R134 billion.
This led to the loss of R15.6-billion of workers’ money invested by the Public Investment Corporation (PIC) that manages R1.2-trillion worth of assets, overwhelmingly made up of government workers’ pensions and savings. The crash in share prices thus threatened the livelihoods of millions of workers whose pension and provident funds were invested by both the PIC and numerous other workers’ funds with big holdings of Steinhoff shares.
It also threatened the jobs of over 130,000 workers in 32 countries around the world, in Europe’s second-largest retailer. On 5 September 2018 Jooste appeared before a joint meeting of the Parliamentary committees of finance, trade and industry, public service and administration and Scopa, which was looking into allegations of fraud by those involved in the company.
Jooste’s response to MPs’ questions, much like those of other leading figures in Steinhoff, was to deny any responsibility for, or even knowledge of, the scandal, and to shift blame on to others. ‘I want to place on record,’ he said, ‘that when I left Steinhoff on 4 December 2017, I was not aware of any accounting irregularity that they refer to in the books of Steinhoff.’
MPs were rightly sceptical as to how the leader of a company could claim not to have known what was going on under his nose, which was confirmed when he admitted to the committee that he had made ‘big mistakes’, including that he ‘chose the wrong partner’, referring to Andreas Seifert, and that Steinhoff ‘grew too fast, too quickly’.
ANC MP Yunus Carrim, the chair of the parliamentary inquiry, described Jooste’s answers as ‘incredulous’. His testimony also contradicted the explanations offered by Steinhoff itself, which laid a criminal charge against Jooste for fraud in January.
Steinhoff insiders have told the media that what really happened was that on 4 December 2017 Jooste was due to arrive to provide documents to Steinhoff’s audit committee, but he never arrived. Instead, he sent a lawyer to meet Steinhoff’s former chair, Christo Wiese, and offer his resignation.
Why would a CEO who now says he knew nothing about any ‘irregularities’ take such drastic action on the day the audit committee was due to meet? His claim that there were no errors in Steinhoff’s books when he was its CEO, was demolished when the company later ‘restated’ its accounts. Before his resignation, Steinhoff claimed it had made a R711m profit for the six months to March 2017 but this figure has since been ‘restated’ as a R362m loss — a R1.07bn drop from what was originally reported!
Steinhoff has since also had to write off another R10.9bn in share prices from those previously reported number. This recalculation proves that there were massive errors in the accounts presented to shareholders under Jooste’s watch, about which he would have to have been aware. This is not just ‘negligence’ but fraud.
The most likely reason for his sudden resignation was that he had committed the ‘crime’ of being found out by the auditors Deloittes, whom he now admits he wanted to get rid of, and to get a new auditor to finalise a financial statement by the last possible day, 31 January 2018.
The hearing was attended by the Hawks (Directorate for Priority Crime Investigation – DPCI), which told parliament last week it did not have enough evidence to act against anyone. SAFTU agrees with Carrim who told the Hawks: ‘Surely there’s enough here for you to act … parliament can do so much, but ultimately it’s the regulator and the Hawks and the National Prosecuting Authority that must do their jobs.’
SAFTU has fully supported the public inquiry into ‘state capture’ which so far has been looking solely at the Gupta-related allegations. The federation has however always insisted that serious though these crimes are, they are not abnormal, but just one of the worst symptoms of a structurally corrupt capitalist system.
This view is now being vindicated by the evidence of massive corruption, fraud and money-laundering in Steinhoff, which is totally unconnected with the Guptas but whose crimes are every bit as bad. If the allegations already made in the media, and now the evidence presented in parliament, are true, Steinhoff used earnings manipulations, uncontrolled acquisitions, tax frauds, and an even older but equally abhorrent trick, now known as a Ponzi scheme, defined in Wikipedia as ‘a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading.’
The shareholders, including all those provident funds are the ‘new investors’ who were duped into buying shares, which were inevitably going to crash once the bubble burst.
In such companies, the truth is hidden behind a web of complex and fraudulent book-keeping exercises, setting up bogus companies, which transfer money to and from each other, and spinning excuses like Jooste’s talk of ‘accounting irregularities’ he knew nothing about.
It is not only companies like Steinhoff, which is now exposed as directly involved in these crimes that must now be investigated and prosecuted, but also all the regulatory bodies, stock exchanges, auditing firms and investment portfolio managers who advised the pension funds to invest workers’ money in Steinhoff. They all failed to detect and warn about activities which they must have known were at the very least suspicious.
These are not victimless crimes. As well as those whose pensions have been jeopardised, every South African will have to pay the price of living in a corrupt kleptocracy, with all the consequences in ‘negative growth’, grinding poverty for millions, unemployment six times the world average and living on the world’s most unequal society.
That is why it is so important to arrest and charge Jooste and any other Steinhoff executives against whom there is evidence, to set a precedent that ‘white-collar crime’ is every bit as serious as muggings in the streets and that no-one must escape the consequences of their crimes. However it is not just individual CEOs and companies who must be put in the dock, but the whole monopoly capitalist system which Steinhoff exemplifies, driven by the greed to enrich a powerful ruling class at the expense of the majority.
It is a system whose watchwords like ‘me-first’ and ‘to-hell-with-everyone-else’ have spread from the private corporate world into the public service and throughout society. To counter this we have to return to the values of the Freedom Charter, nationalise the banks and other monopoly financial institutions and run them democratically in the interests of the people of South Africa and not the corrupt and greedy capitalists we see being exposed.