Steinhoff debacle shows corporate governance is in a parlous and risky state

It’s almost two years to the day that a group of government and business leaders had to hurriedly form a coalition to travel around the world reassuring investors that South Africa was still a great place to put their money, despite a ruinous president who had fired a finance minister without a justifiable reason. An important part of the international tour was also to convince ratings agencies not to lower South Africa’s investment grade. Among those who accompanied then finance minister Pravin Gordhan on this tour was retailing legend Christo Wiese, who is still among the country’s richest businessmen.

What a week it has been for Wiese! Steinhoff, the vehicle through which he was hoping to consolidate his decades-long run of wheeling and dealing in the retailing space, sits on the verge of collapse. Shares in the group, which aimed to become South Africa’s answer to the likes of Ikea and Wal-Mart, will open trading in Johannesburg tomorrow at R6, their lowest level in over 13 years. It’s a cataclysmic 89% collapse over the past week alone.

At the centre of its turmoil is possible fraud or theft by one of Wiese’s protégés, Markus Jooste.

When Wiese was travelling and speaking to investors in Washington, New York, London and Asia with the rest of Team South Africa two years ago, he would have emphasised the country’s virtues — which presumably included the fact that we have strong governance institutions and a private sector that is held to the highest corporate standards in the world.

When investors quizzed the team about political uncertainty resulting from the implosion of the ruling party, Wiese and others would have acknowledged the problem but would also have cited the robustness of companies such as Steinhoff and Naspers as a sign of

South Africa’s overall good health.

They would have argued that governance in the private sector was strong and that auditing standards were among the best in the world.

It is ironic, therefore, that the unravelling of Wiese’s empire this week was caused by the collapse of those very virtues at Steinhoff.

As strong as Steinhoff’s board was in the eyes of outsiders — a board that one would think would have the ability and the know-how to rein in the executive — it simply failed in its fiduciary duty.

Again, as has been the case several times recently — perhaps most prominently in scandals relating to the Gupta state capture saga — the role of independent auditors is under critical scrutiny.

What the Steinhoff collapse shows us is something we do not talk about enough: all is not well with South Africa Inc.

The lack of adherence to proper governance principles in the public sector, and the corruption and manipulation that are rife within it, are also proving to be prevalent in the private sector.

The two sectors are closely linked and we would therefore be shooting ourselves in the foot as a society if we believed that we could fix one without fixing the other.

MultiChoice’s deal with the Gupta-owned channel ANN7, as well as claims that the country’s largest media company unduly influenced the government to formulate a settop-box technology policy that put smaller competitors at a disadvantage, are but two examples of why this is so; remedial action has to be applied to both private and public sectors.

It is time to clean house and let that other virtue that we still have, an independent judiciary, deal with the excesses.

Being soft on corruption, whether in the private or the public sector, can only lead us to ruin.

The Steinhoff collapse shows us all is not well with South Africa Inc