Private sector’s genius by reputation lies exposed

On Steinhoff’s board of erstwhile gentlemen and a paltry two women are five chartered accountants, and on these most hallowed of seats, well up until a few weeks ago, sat three former chief executive officers of major corporations. Among the people leading the company along with retailing legend Christo Wiese and his 36-year-old son, Jacob, are heavy hitters such as Steve Booysen, former CEO of Absa, and Johan van Zyl, the former head of Sanlam, who has been credited with inspiring its comeback story over the past decade. For good measure, in its executive management, Sean Summers, former Pick n Pay CEO, is listed as a retail executive.

That’s quite an impressive bunch of CVs that would on any given day pass any credibility test. Yet these very same people have somehow been duped, missing fraud that amounts to billions, for which former CEO Markus Jooste has admitted ultimate responsibility.

We’ve become accustomed to such stories in the realm of our deteriorating state utilities in recent years, a common theme in the narrative that has sent the country’s creditworthiness into junk status. What the collapse of Steinhoff — what else is one to call it? — tells us is that there’s a much bigger problem of governance beyond the corridors of government departments.

How can one honestly explain why the chief executive officer of what’s essentially a Steinhoff subsidiary, the JSE-listed STAR, which houses Pepkor, was the chief financial officer of the listed parent in

Germany? When you think of it, it makes absolutely no sense, but investors, and stakeholders such as myself in the financial press, let it be, believing the retailing geniuses that reside in the nexus of Wiese and his now disgraced protégé, Jooste, knew what they were doing.

Were there such an arrangement in the public space one can only imagine the column inches that would have been dedicated to this rather obvious conflict of interest. An investor in either one of these companies is rather justified in asking whose interest Ben la Grange was actually serving.

At least Steinhoff’s woes are helping to lift the lid on the governance struggles of some of the most trusted companies in the country. The questions over how Naspers and its subsidiary, MultiChoice, have cosied up to the government for favours will one day be answered and, given that their dealings were with state representatives such as Hlaudi Motsoeneng, one can only imagine what thread would be weaved to save Africa’s biggest media firm from further embarrassment. EOH, the technology firm whose rise has surprised many, has also fallen victim to governance failures, which threaten its survival.

South African corporates are prone to such governance lapses — one need only think back to the collapse of African Bank. The CEO, Leon Kirkinis, had a board that bowed to his whim, so much so that they were “seemingly” as surprised as everyone when the unsecured lender crumbled. No doubt there’ll be more such stories in years to come.

It says much about our state that I’ve been all too relieved that the focus has shifted from governance failures in state-owned enterprises such as Eskom to those of the private sector. The fact that I’m relieved that the narrative has shifted should not in any way detract from what should be clear, Mervyn King or not, that the problem of governance is a cancer much deeper than we had realised.

And a corrupted private sector will in turn corrupt the public sector, and vice versa again. These are two agents that in any country are joined at the hip. In the context of South African history, it is rather unfortunate that one leg is largely defined as black-led and the other white.

And in more than two decades we’ve operated on the basis that a black government will lead its people, and the more established businesses will continue operating as before, minus the ticking of a few empowerment boxes and other social spend. Now it’s true that the disregard for governance by public institutions comes at a much higher cost to the country, but the cutting of corners by executives in the private sector also has its costs. The most obvious is to shareholders. But what about those other stakeholders, the employees? Steinhoff, through its host of subsidiaries, employs thousands of people. The bulk, I’d argue, are in South Africa. It’s collapse, given our unique structural faults, could affect many more. This would only further depress our state.

In truth, I shouldn’t, nor should anyone else, be relieved that the focus has shifted to the private sector’s dodgy accounting tricks. At the end of the day, we all pay an expensive price.

Steinhoff lifts the lid on governance of most trusted companies