South Africa

Steinhoff, EOH, and Tongaat Hulett crushed South Africa’s financial image

Steinhoff, EOH, and Tongaat Hulett exposed the myth that JSE-listed companies had strong governance and were immune to widespread corruption.

This is the view of Financial Mail editor and Steinheist author Rob Rose, who was at the forefront of reporting on the Steinhoff scandal.

The three corporate scandals liked to these JSE-listed companies are summarised below.

  • Steinhoff collapsed in December 2017 after former CEO Markus Jooste suddenly resigned following the exposure of accounting irregularities at the company.
  • Tongaat Hulett executives were involved in a multi-billion reporting scandal in which accounts were misstated, incorrect profits were declared, and huge bonuses were awarded.
  • EOH was closely linked to state capture, which included unsubstantiated payments, tender irregularities, and other unethical business practices linked to its public sector business.

After these scandals were exposed, the share prices of these companies plummeted, costing shareholders and pension funds billions.

Financial Mail editor Rob Rose

Speaking to Business Day TV, Rose said that before these corporate scandals, people perceived South Africa’s financial governance as top-notch and unimpeachable.

“People thought our corporates were somehow immune from the wider fraying of ethics in society,” he said.

Steinhoff, EOH, and Tongaat Hulett showed that it was not the case, with executives and auditors facilitating and supporting corruption and fraud.

Part of the problem is state capture which fed into the moral decay at large enterprises that should have been averse to poor governance.

Rose recalled how Michael Katz, the chairperson of ENSafrica, was discussing a corporate structure with an executive he was advising.

Katz told the executive the plan was illegal, but he responded: “But Michael, look around you at what is happening in the country.”

It illustrated how many executives were willing to turn a blind eye to regulations and rules because of the example set by the state.

Rose said Steinhoff, EOH, and Tongaat Hulett had changed business in South Africa.

“The way audit committees now work means it takes a lot longer to get things done,” he said.

“Non-executive directors are weary of small problems in a part of a business they had not considered coming back to haunt them later.”