I won’t be calling the shots, says Shoprite’s Christo Wiese
But departing Shoprite chair holding on to special voting rights
● Christo Wiese says he will not be relinquishing his special voting rights when he steps down as chair of Shoprite next month after 41 years at the helm, but this does not mean he will still be calling the shots.
“I will not be calling the shots because there is an independent board andwe’ve appointed an independent chairperson.”
The appointment of current Absa Group chair Wendy Lucas-Bull to chair the group was announced last week.
“With 38% I’m the single largest voting shareholder, but that’s not calling the shots,” says Wiese, who owns around 10% of the shares of the group he built into one of the largest retailers on the continent with R157bn annual revenue.
His resignation as chair was announced last year after 61% of shareholders voted against his reappointment.
There has been shareholder pressure to unwind what many see as an anachronistic structure that gives him an unhealthy level of influence through his voting preference shares, but they have balked at the more than R3bn he’d have to be paid out.
“There were shareholders who thought it was time a year and a half ago to unwind that situation. I was approached by independent board members to ask if I would consider selling those shares back to the company to come into line with the general practice today.”
But he made it clear that if 15% of shareholders indicated they’re not happy with the terms he agreed with the board, the deal to unwind would not proceed.
“A large majority of overseas shareholders agreed but South African shareholders were not happy so we called off the deal.”
This was for 20-million ordinary Shoprite shares to be issued to him at the then ruling share price of about R3bn.
“This subsequently fell so the number was closer to R2bn. Some wanted to negotiate the price. I said forget it, it’s becoming a circus. They’re free at any time to approach me again.”
He says the vote against his reappointment as chair was “a spillover from the whole Steinhoff disaster, and partly the new approach to life whereby the chairperson should be independent”.
Those demanding an independent chair “don’t understand how life works”, he says.
“I’ve always thought that it helps to have someone in the company who has massive skin in the game.”
Massive skin
He had massive skin in the Steinhoff game, of course, which didn’t do it much good. After swapping his Pepkor shares for Steinhoff shares in 2014 he owned nearly 20% of the company worth R86bn to him before collapsing to R176m after it admitted to “financial irregularities ” in December 2017.
“I suppose you can make that point,” he says. “But as the PwC investigation revealed, massive fraud had been committed at Steinhoff for over a decade.
“So how does that speak to independent directors? Why did they not pick up on it?” Why didn’t he, for that matter?
He was on the board for three years and chair for 16 months before disaster struck. What kind of due diligence did he do? “Exactly the same due diligence as the people who had invested R100bn in terms of Steinhoff’s market cap in the company. All the institutional investors, all the largest banks in the world, all the analysts had placed a value of R100bn on a company which it now appears was worth nothing.”
How does one person manage to pull off such a massive fraud over more than 10 years without anyone including the board suspecting anything?
“It boggles the mind.”
Even when the Germans began investigating the company after it listed in Frankfurt?
“The board immediately, in December 2015, appointed a very large forensic investigation in Germany by one of the top firms. To the last day before CEO Markus Jooste resigned they filed reports to the board saying there was nothing wrong, that everything was in perfect order.”
What about local analysts who warned about Steinhoff?
“The bulk of the analysts and institutional investors and banks all disregarded those analysts’ concerns.”
Raised flags
Among their concerns was that the financials of Steinhoff seemed intentionally not understandable. Shouldn’t this have raised any flags?
He says he looked at the financials himself.
“They were prepared by one of the big four audit firms, Deloitte. Do you expect me to be a super auditor?
“Tell me what I or any other board member should have done. We made sure there was an internal audit function, there were component auditors of a high calibre. Finally, there were the statutory auditors, Deloitte.
“What do you expect any board member to do when everything has gone through that entire process? Must I now do a super-audit and say, you’re all wrong?
“Clearly, by Deloitte signing off there was every reason to accept that the right procedures had been followed over more than a decade.”
He says he can’t understand why Steinhoff still hasn’t made the 3,000-page PwC forensic report public.
“They’ve conceded that a massive fraud has been committed.”
He says he sees “every prospect” of Jooste being brought to book, but adds that the fact that prosecuting authorities in SA and Germany have been dealing with the matter for years without making any arrests indicates how complicated the situation is.
Did he never wonder if Steinhoff’s seemingly stellar performance might be too good to be true?
“I never saw it as a stellar performer. It traded at a very modest multiple compared with Pepkor.”
Then why was he so eager to swap his extremely valuable Pepkor shares for such a modest performer’s paper?
“Because it was a large, international group.
“My ability to acquire more businesses in SA due to Competition Commission constraints was limited. I had to look to make a big move to grow the group internationally.”
He says it’s “hogwash” to suggest that he invested in Steinhoff because it was the perfect vehicle to diversify his assets away from politically risky SA.
He was close to putting his then 20% stake in Shoprite into Steinhoff as well.
“We were on that track. If Jooste had got away with his fraud for another year or two that may well have happened.”
It’s why even after losing his R59bn investment in Steinhoff the 79-year-old Wiese sees his glass as half full.
Some wanted to negotiate the price [for his shares]. I said forget it, it’s becoming a circus Christo Wiese
Outgoing Shoprite chair