Nicola Mawson
Through using 21 different financial terms such as marketing contributions, professional fees, rebates, retail concepts, and rent, rates and services, Steinhoff helped poorly performing business units either inflate revenue or reduce cost.
This, a comprehensive PwC investigation showed, had been ongoing for, in some cases, 10 years. PwC’s probe, a copy of which is in Business Report’s possession, was the result of Steinhoff’s auditors, Deloitte, flagging accounting irregularities in 2017.
The news of what has become known as South Africa’s largest in the business world resulted in Steinhoff losing 97% of its market capitalisation between August 2017 and March 2019 as investors reacted to the news.
Overall, PwC found that €6.5 billion – or R125bn – artificially went through Steinhoff's books between 2009 and 2017 when the lid was on what is South Africa’s biggest corporate scandal to date was blown.
Eight companies are listed in the report as having been used by Steinhoff to artificially inflate its revenue between 2009 and 2017. Steinhoff had operations in about 30 countries spanning Africa, Europe, Asia, North America and Australia in sectors including retail, manufacturing and automotive through 650 entities.
PwC noted that it was alleged that Steinhoff Europe Group Services GmbH (SEGS GmbH), a German subsidiary of Steinhoff International Holdings Limited, paid contributions for various reasons to several subsidiaries within the Europe structure of the Steinhoff Group to “inflate their revenue figures or reduce their cost”.
Through these contributions, called everything from marketing contributions, professional fees, rebates, retail concepts, to rent, rates and services, were the device through which the irregularly created income in SEGS GmbH was distributed to operating companies.
PwC noted that while investigating this, it became apparent that these contributions were used to increase the operating entities’ profits or results between at least the 2009 to 2017 financial years.
This “income” was paid from either Steinhoff or a company that was purportedly a third-party, when it was very often the case that Steinhoff controlled these so-called third-party companies.
PwC noted that the transactions should have eliminated when the entities were consolidated but did not.
In addition to the financial fallout, which resulted in Steinhoff being delisted from both the Frankfurt and Johannesburg stock exchanges, the company was officially liquidated on October 13, 2023.
Jooste, the kingpin behind what has become known as the biggest corporate scandal in South Africa, reportedly killed himself on March 21 last year, a day before he was scheduled to hand himself over to law enforcement officers.
Several people have been arrested in connection with the fraud. The most recent saw two additional executives, Hein Odendal and Iwan Schelbert, hand themselves over to police as part of the Hawks’ ongoing investigation into fraud at the company. The two, who were charged with several contraventions of legislation, were released on bail of R150 000 at the Pretoria Specialised Commercial Crimes Court.
Odendal, Schelbert, and another accused, the company’s former legal head, Stephanus Grobler, will appear in court again on May 30. Grobler is also out on bail of R150 000.
Last October former CFO, Andries La Grange was sentenced to 10 years behind bars, with five years suspended for five years on condition that he is not found guilty of fraud during this time.
La Grange’s sentencing followed that of Gerhardus Burger, who pled guilty to three charges of insider trading in contravention of the Financial Markets Act on September 26. Burger was given a five-year suspended sentence and had to pay back the proceeds of insider trading.
BUSINESS REPORT