Jooste’s Steinhoff racehorse has pulled up lame
Friends rally to the side of disgraced business tycoon
That Steinhoff is no longer the global powerhouse it was a week ago goes without saying, but in addition to the financial fallout is the likely shattering of decades-long relationships, judging from the stunned responses of those who know its former CEO, Markus Jooste.
Though he is virtually radioactive right now, Jooste built a strong, tight and loyal team around him, with many of his executives having worked with him for decades. He also has loyal, long-standing friends through business and horse racing.
“I’ve known Markus for close to 30 years, and I have known him as a man of absolute integrity and a guy that is totally trustworthy,” said David Sussman, who founded the JD Group and left as executive chairman.
“He’s a very competitive guy. In my opinion, I would not have expected him to do anything that is against the law . . . It is a heart-breaking event that has affected many. Hopefully the investigations reveal that it is not as dire as the market is expecting.”
Sussman got to know Jooste when the JD Group was GommaGomma’s biggest customer. Years later, Steinhoff bought out the JD Group, which effectively salvaged the ailing company.
“Without the resources of Steinhoff, JD wouldn’t have been able to restructure itself as it has because JD at the time was about 80% reliant on credit.
“They had to re-engineer that business and current management have done a fantastic job,” said Sussman.
He questions why more investigation was not done earlier if there were so many rumours about the company.
A Germany-based analyst, who did not want to be named, said there had to be someone who paid for the damage at Steinhoff, “. . . it just needs to be seen whether the accounting will be restated or not”.
“Trust in management is very difficult at this stage, so there should be some change in management . . . all in all it’s bad news.”
Supposed genius
Steinhoff was due to release annual financial results on the new services of the Frankfurt and Johannesburg stock exchanges this week, but this has been postponed.
While markets digest the developments at the furniture maker and retailer in the weeks to come, and wonder whether it has a future, it is the supposed genius of Jooste that has stirred much interest.
Jooste, who has been called the Robin Hood of Epsom [Downs Racecourse in England], seems to have made most of his business deals in the stands at racecourses.
A horse-racing industry insider who did not want to be named said: “There are other big [horse] owners in South Africa who have been severely burnt about what’s happened [at Steinhoff] and whose companies were acquired by Steinhoff, who also happen to be major racehorse owners . . . They may also sell up in parts; there are a lot of sponsorships that will also be effected.”
Chris van Niekerk, former CEO of PG Bison, which was acquired by Steinhoff, is probably the second-biggest racehorse owner in South Africa, after Jooste.
Braam van Huyssteen, who was the man at the helm of Tekkie Town, which was recently acquired by Steinhoff, is also a major racehorse owner.
When it came to Jooste’s character, the insider said: “Whatever character analysis I can give of Jooste, we’ve all been proved wrong.”
Straight shooter
Despite having lost some money holding Steinhoff shares, the insider said “he has always been very supportive of me and backed me to the hills [sic]. I’ve always found him a highly intellectual straight shooter and what you see is what you get, and despite the negative assessments and comments that have been made about Steinhoff from time to time, I don’t [think] anybody ever saw anything of this magnitude coming.”
Central to Jooste’s rise has been his relationship with retail tycoon Christo Wiese. It’s a relationship similar to that between Wiese and retired Shoprite CEO Whitey Basson.
Jooste had done his articles as a chartered accountant when he met Wiese. Their friendship grew to a point where Jooste became the “heir apparent” to Wiese. Some say the two had an almost father-son relationship. There is a view (which Wiese strongly denies) that Wiese backed Jooste to “externalise” his assets offshore.
Independent analyst Syd Vianello told Bloomberg the trust between the two was now broken, which was why Jooste was out.
On the rich list
Jooste, 56, has long attracted the support of those he met along the way. At 27 he became the financial director of GommaGomma and met German industrialist Claas Daun. Daun introduced him to Bruno Steinhoff, a German billionaire and founder of Steinhoff International. Jooste joined Steinhoff in 1988 and became the group’s CEO in 2000.
Jooste has long been on the list of South Africa’s wealthiest individuals, often in the past few years in the top 20 of the rich list.
Steinhoff expanded to five continents across 30 countries, with many brands.
Since the dramatic fall of its share price this week, the nerves of corporate South Africa have been shot, and every research house has a view on this massive corporate failure. Shane Watkins, chief investment officer of All Weather Capital, has long cautioned against the company.
“I have always said that while Steinhoff may not be a complete accounting scam, but if it was a scam, this is exactly how it would look: continuous corporate activity, acquisitions and disposals, reclassification of assets, issue of shares, issue of debt, issue of other exotic convertibles, changes in the year-end and so on.
Proper analysis of the financials has been almost impossible,” said Watkins.
Jooste’s friends remain cautious and have been unwilling to make a call on the week’s developments.
Hassen Adams, chairman of Grand Parade Investments, owns racehorses with Jooste and declined to comment other than to say that Jooste has been a great friend. “I regard him as a person of integrity,” he said.
Rian du Plessis, CEO of Phumelela Gaming and Leisure, said he and Jooste had been friends for nearly 40 years and that he had great admiration for Jooste.
“I am devastated, but does he not deserve at least a fair trial?” asked Du Plessis.
Stepping down
Du Plessis said Jooste was possibly the most intelligent and astute person he had met.
“There is a furore over Steinhoff, and in the interests of the company he called me and asked to step down from the [Phumelela] board and I respect that. He has lots of other interests outside of Steinhoff and I would expect him to follow those.
“I don’t know if he has made mistakes. If he has, he’s man enough to stand up and be counted for those mistakes. But over 40 years I don’t see him as a crook, at all.”
Jean Pierre Verster, portfolio manager at Fairtree Capital, had shorted Steinhoff based on concerns he red-flagged from publicly available information.
These included investigations by German tax officials, the Dutch commercial courts looking into a joint-venture disagreement between Steinhoff and its partners, and in Switzerland the existence of off-balancesheet entities in which Steinhoff sold brands for tax purposes and housed the Capfin and JD Group debtor books.
Verster asked why Jooste was being made the fall guy.
“Can you really say this is all Markus?” he asked.
“The aggressive tax structuring and use of off-balance-sheet entities, plus Wiese’s previous involvement in Southern View Finance [Capfin’s holding company] suggests much wider involvement.”
I am devastated but does he not deserve at least a fair trial? Rian du Plessis CEO of Phumelela Gaming and Leisure
Civil liability
Charles Allen, a senior retail analyst with Bloomberg Intelligence, said it was rare for a company to be found guilty although it might have to admit to a civil liability about misleading shareholders who bought shares when the accounts had been misstated.
“The degree of seriousness of the misstatements will determine the effect on shareholders,” said Allen.
Verster said Steinhoff had more than R100-billion in debt, but also stakes in listed companies such as Steinhoff Africa Retail, the PSG Group and Kap.
He said Steinhoff might be forced to sell these stakes.
The retailer said it had had expressions of interest which would release a minimun of ¤1-billion (R16-billion) in liquidity into the company.
Chairman Wiese has taken over as CEO, supported by former Pepkor CEO Pieter Erasmus.