HOW DID THE JSE MISS STEINHOFF CORRUPTION?
AFTER the Johannesburg Stock Exchange (JSE) applauded President Cyril Ramaphosa’s fiscal stimulus for the economy, I could not help wonder why the JSE had not, 26 years into democracy, tried opening up the stock market to black companies.
In part one of this series, “The capture of the JSE”, I described that only 2% of companies registered with the JSE are 100% black.
Part of the reason for low investor confidence and slow black participation in business is enshrined in the JSE’s gate-keeping for the past 26 years.
In 2018 the JSE said it was investigating whether Steinhoff broke disclosure rules after the firm admitted to accounting irregularities that triggered a slide in its shares that wiped more than R200 billion off its market capitalisation. More than two years later, the JSE is still mum on the probe’s findings.
I don’t want to suggest Steinhoff got away with murder because it was a white company, but how did the JSE miss such blatant and ominous corruption at the firm?
Last year agri-processing company Tongaat Hulett applied for voluntary suspension of its listing. It later released 2019 results, reporting a headline loss of R923 million. The group said its revenue declined 2% to R17.07bn.
The group said it was considering civil claims against senior executives fingered in the PricewaterhouseCoopers (PwC) report, which would involve recovering bonuses and benefits paid. The group also said it would seek court orders declaring relevant people delinquent directors.
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Slow black participation in business is enshrined
in JSE’s gate-keeping
There was clearly something sinister in Tongaat’s books. But how did the JSE, with “some of the best stock analysts in the world” miss it, again?
In 2017, the Labour Department revealed that 50 JSE Securities-listed companies, including the JSE itself, had been found non-compliant with the Employment Equity (EE) Act.
The department found the “JSE had showed little or no diligence in promoting employment equity”.
A total of 41 employers were issued Director-General Recommendations and given 60 days to comply.
Nine underwent prosecution for failure to prepare Employment Equity Plans.
Parliament initially set out to investigate the JSE, but abandoned the idea.
As a South African company, the JSE has failed in its core duty to represent all South Africans, open the market to new players, expose corruption and set goals that transform the economy. The Steinhoff and Tongaat Hulett scandals is evidence of that.
Ideally, capital providers earn a return on their investments via dividends and capital growth, thereby increasing the overall wealth of the nation, while the organisations in which they invest provide jobs and drive economic development.
Here, only 2% of firms registered with the JSE are 100% black and hundreds of billions are wiped out in Steinhoff’s precipitous fall and the JSE isn’t moved!