Steinhoff fairy tale turns to nightmare on high street
As the retail giant grapples with an accounting scandal, Ashley Armstrong charts its rise and fall
‘Ihad never seen anything like it, it was like an ebay auction but the bidders were playing with hundreds of millions of pounds,” one banker recalled of Steinhoff ’s frenetic rapid-fire bidding war in 2016 for French electronics retailer Darty against rival Fnac.
At the time it was considered exciting, if not unusual, behaviour for a retail conglomerate. But now that an accounting scandal has left the South African company’s share price and its reputation in tatters many are asking why the warning signs hadn’t been spotted earlier.
For many shareholders it was the case of following the money and blindly believing in the seemingly never-ending successes of two wealthy men: Markus Jooste and Christo Wiese.
From 2012 to the end of 2016 Steinhoff ’s share price trebled as it expanded rampantly outside South Africa by snatching assets in the US and Europe, including Poundland in the UK. The company became a sprawling global £40bn dealmaking giant with over 200 subsidiaries in 30 countries.
Long-time friends Wiese and Jooste were instrumental in reinventing Steinhoff, modelled on Jooste’s respect for the world’s largest furniture company Ikea and its founder Ingvar Kamprad. “We purely followed what he did. Our only problem was we couldn’t build a brand, so our strategy was to buy the number one or two around Ikea in every country,” he told South Africa’s Financial Mail in a glowing article just three months ago.
Jooste joined Steinhoff when it bought a lounge furniture maker in 1998 where he was a finance director, but he first met Wiese while as a trainee accountant auditing the books for the billionaire’s Pepkor retail business. The man became Jooste’s mentor for the rest of his career.
Both men were members of the so-called “Stellenbosch mafia”, a group of close-knit Afrikaans-speaking businessmen that lived and owned vineyards in the exclusive hills around Cape Town. Jooste has claimed 10 of Steinhoff ’s executives are his “best friends”. Both men bottle their own wine. Wiese is passionate about game keeping and has his own reserve in the Kalahari. Jooste, whose father worked for the Post Office, is passionate about racehorses and owns and breeds stallions all over the world.
Wiese started his career by taking on the clothing chain his parents had founded. Based on the idea that cash-strapped families could dress their children for less than one rand, equivalent to 5p, he quickly propelled the family business through audacious acquisitions, building up his fortune and a reputation as a serial dealmaker along the way. He turned Pepkor into a global brand with 3,700 shops worldwide and simultaneously ran Shoprite, the biggest food retailer in Africa.
Wiese is also the biggest shareholder in Brait, the South African investment vehicle that owns a stake in Iceland Foods, Virgin Active and New Look. Shares in Brait have halved in the last year on the back of New Look’s troubled trading and been knocked by Steinhoff ’s recent troubles. The firm insists that it has not been caught up in Steinhoff ’s accounting scandal and has had no indication that Wiese wants to sell down his stake, despite him selling shares in other holdings.
Wiese was already a major shareholder in Steinhoff when it bought Conforama in France in 2011 for £1bn, the start of its acquisition spree financed by cheap debt. By the time Steinhoff splurged £4bn on the takeover of Pepkor three years later it was already one of Africa’s biggest