EN­EMY

Financial Mail - - FEATURES - War­ren Thomp­son thomp­[email protected]­nesslive.co.za

In the end, it was no con­test. Markus Jooste’s Shake­spearean fall from grace — from the top ech­e­lons of Stel­len­bosch roy­alty dur­ing his stint as CEO of Stein­hoff, to pariah in the coastal town of Her­manus — made him a shoo-in for the FM’S news­maker of the year. It was no small feat: in 2018 the head­lines were dom­i­nated by the oust­ing of SA’S pres­i­dent, Ja­cob Zuma, and by US leader Don­ald Trump spark­ing a global trade war.

But it is the fall­out from Jooste’s overnight “res­ig­na­tion with im­me­di­ate ef­fect” on De­cem­ber 5

2017, and Stein­hoff’s si­mul­ta­ne­ous ad­mis­sion of “ac­count­ing ir­reg­u­lar­i­ties”, that will haunt SA for years to come. This year, there have been al­most weekly rev­e­la­tions of how Jooste mas­ter­minded se­cret “re­lated-party deals” that en­riched him, as well as rev­e­la­tions of how Stein­hoff’s own books were cooked. It has sparked wide­spread out­rage.

In one of the last in­ter­views he gave be­fore quit­ting in 2017, Jooste fa­mously dis­missed the Ger­man in­ves­ti­ga­tion into him and Stein­hoff’s ac­count­ing. “The au­thor­i­ties world­wide are look­ing for more tax ... you must re­mem­ber, it’s a game for money,” he said. It was a prophetic choice of words.

A year later, and the game is up. It’s a steep fall: for so long the gilded king of the lo­cal re­tail scene, Jooste em­barked on a debt-fu­elled ac­qui­si­tion spree to drive Stein­hoff to the pin­na­cle of the global fur­ni­ture in­dus­try. It be­came the sec­ond-largest fur­ni­ture re­tailer in Europe, be­hind Ikea.

But in the two decades that fol­lowed the com­pany’s 1998 list­ing on the JSE, Jooste’s greed be­came a can­cer that brought the com­pany to its knees, and may yet fell it en­tirely.

In a mul­ti­plic­ity of deals that have since come to light, it turns out he had taken se­cret stakes in en­ti­ties that were ben­e­fit­ing from Stein­hoff’s deal­mak­ing. Fi­nally, the risk-tak­ing be­came so dar­ing that it could no longer be ex­plained away to the com­pany’s au­di­tor, Deloitte, and to nonex­ec­u­tive di­rec­tors.

That Stein­hoff has sur­vived un­til now, with­out en­ter­ing into for­mal bank­ruptcy pro­ceed­ings, is an achieve­ment. Stein­hoff’s re­con­fig­ured board, led by chair Heather Sonn and the ex­ec­u­tive team, ini­tially led by Danie van der Merwe, have man­aged to con­vince cred­i­tors and le­gal claimants that keep­ing the com­pany alive is the best long-term so­lu­tion for all.

On De­cem­ber 14, Stein­hoff con­cluded a lock-up agree­ment with the com­pany’s cred­i­tors which, it hopes, will bring “a new pe­riod of fi­nan­cial sta­bil­ity for the group and en­able man­age­ment to fo­cus on max­imis­ing the po­ten­tial of [its] var­i­ous busi­nesses”.

The trick now for Sonn’s board is to fig­ure out what to do with its crown jewels: Stein­hoff’s di­rect stake in Pep­kor Europe (which it owns out­right), and the 71% of the Pep­kor group, which listed last year on the JSE as Stein­hoff Africa Re­tail (Star).

The FM has been led to be­lieve the sale of Pep­kor Europe could fetch any­thing be­tween R50bn and R60bn. One op­tion touted in cor­po­rate fi­nance cir­cles would unite the two Pep­kors un­der Pep­kor Hold­ings. Here, the largely ungeared bal­ance sheet of Pep­kor Europe could be used to fi­nance its ac­qui­si­tion by Pep­kor Hold­ings.

Stein­hoff still has other global re­tail­ers un­der its um­brella. These in­clude French chain Con­forama, US com­pany Mat­tress Firm (which re­cently emerged from bank­ruptcy), Pound­land in the UK and Free­dom in Aus­tralia. It re­mains to be seen which ones will stay in­side the group.

But the real ques­tion for those who de­mand ac­count­abil­ity for the R200bn lost in mar­ket value is: what will hap­pen to Jooste?

Given the com­plete evis­cer­a­tion of the Na­tional Pros­e­cut­ing Au­thor­ity un­der Zuma, there seems lit­tle con­fi­dence that he will be held ac­count­able for his sins in SA. Per­haps the Ger­man pros­e­cu­tors will prove more adept. But even the Ger­mans have been in­ves­ti­gat­ing Jooste for more than three years, and haven’t brought charges.

Many peo­ple have been wait­ing for Pwc’s foren­sic re­port to emerge to see where blame should be placed. But though it was ini­tially ex­pected this month, Stein­hoff now says the probe is only “ex­pected to be com­plete by the end of

Feb­ru­ary 2019”.

Even then, there’s no guar­an­tee the full foren­sic in­ves­ti­ga­tion will be re­leased — an alarm­ing about­turn on its ear­lier un­der­tak­ing. Should it fail to do so, share­hold­ers will cer­tainly fight that in court.

That doesn’t mean jus­tice will come quickly for the thou­sands who have suf­fered from the huge loss of value. As it was, 948 of SA’S 1,651 pen­sion funds had ex­po­sure to Stein­hoff, and were cru­elly ex­posed as the share price fell from R96.94 in April 2016 to just R1.74 at the time of go­ing to print. It would be a trav­esty if no-one is held to ac­count for that.

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