Fund boss warns on ‘Wiese contagion’

Fear that businessman may ‘dump’ shares in related companies to pay off debt

● Businessman Christo Wiese’s halo effect may be losing its shine, with a top fund manager calling for him to quit as Shoprite chairman after calling him a “contagion risk”.

Wiese, who serves as chairman of Africa’s biggest grocer and holds about 16% of the retailer’s shares, has been at the centre of embattled retail group Steinhoff’s accounting scandals, which have seen it lose more than 90% of its value within amatter of weeks.

Zwelakhe Mnguni, chief investment officer at Benguela Global Fund managers, which manages about 3% of Shoprite, said “the risk that we see in Shoprite at the moment is the risk of contagion in having Christo Wiese as a controlling shareholder.”

Mnguni said they were about to initiate a process asking the Shoprite board to request Wiese to resign.

“The risk is more from the contagion of having Wiese as chairman and the fact that it would create doubt.

“I don’t think the whole truth is out yet on Steinhoff and I think when it does come out, people will have valid reasons to question his chairmanship in other companies,” Mnguni added.

According to Bloomberg data, Wiese sits on several boards, holding four chairmanship positions — at Pepkor (owned by Steinhoff), Shoprite, Tradehold and Invicta; and three board memberships at Iceland Bondco, Pallinghurst Resources and Brait.

In December, when Steinhoff’s share price took a knock, Wiese’s other holding companies followed suit, with Brait falling as much as 6.4% and Shoprite down by 4.1%

Benguela is among South African fund managers joining VEB, the Dutch Investor Association, to pursue a civil claim against Steinhoff on behalf of all investors.

“If you look at our size as a firm, to go and take on Markus Jooste in a civil claim would cost a lot of money. What we wanted to do is to go the criminal route, so that evidence can be ventilated in a court and we can then take the evidence and pursue a civil claim on behalf of investors,” said Mnguni.

Jooste was CEO of Steinhoff International at the time of the company’s collapse, and was implicated in falsifying the accounts of the retailer, while Wiese was chairman and the company’s largest shareholder when the share price plummeted to its lowest.

Since then Wiese has managed to distance himself from the scandals, even suing Steinhoff for R59-billion.

Delphine Govender, chief investment officer at Perpetua Investment Managers, said the contagion concerns started to emerge when it appeared that he would have to sell his other holdings in order to settle some of the debt associated with his Steinhoff holdings — that was the main contagion factor.

“Wiese had typically quite big stakes in these companies and the boards of these other companies likely became concerned he might become a forced seller of these stakes, causing a potential overhang over their shares.”

Earlier this month Wiese quit as chairman of Brait, citing time constraints that would limit his ability to contribute to the group.

However, Govender said: “While there have been several instances where we can prove that his behaviour has not been in the interest of all shareholders but has been in the interest of his own ... if you look at what he was able to build post-Steinhoff, his view would be that shareholders have done well by investing in the businesses in which he invested.”

Friedrich Esterhuyse, CEO of Tradehold South Africa, said Wiese had for many years been one of South Africa’s leading business figures, and enjoyed a high public profile.

“I want to stress that apart from the fact

I don’t think that the whole truth is out yet on Steinhoff

that Wiese also acted as chairman of Steinhoff (for only one year and was a non-executive director before that), there is absolutely no connection whatsoever between the two companies.”

Esterhuyse said: “Wiese remains a committed chairman of Tradehold through all the changes Tradehold has undergone over the years, from a retail company to the property company it is today, and we currently do not think it poses reputational risks.”

Esterhuyse said the board had not formally discussed Wiese’s position.

Wiese was not available for comment.