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Govt pension fund wants seat at the Steinhoff table in future

Dec 13 2017 18:19
Jan Cronje

Cape Town - The government employee’s pension fund and its asset manager the Public Investment Corporation said on Wednesday that they would insist on the appointment of at least two independent non-executive directors on Steinhoff’s board following its dramatic share price collapse.

The precipitous decline was caused by an announcement last week that Steinhoff’s audited year-end results had been delayed, and its CEO Markus Jooste was resigning "with immediate effect" amid accounting irregularities.

Steinhoff’s shares have, over the past week, lost more than 80% of their value.

They were trading at R9.98 at 17:00 on Wednesday. On Tuesday last week, before the CEO's resignation was announced, Steinhoff shares were changing hands at around R46.25. 

READ: A Steinhoff guide for dummies

The GEPF, via the PIC, is the second largest investor in the Stellenbosch-headquartered furniture conglomerate, and owns about 10% of its 4.32 billion shares. 

"The investment loss recorded was 0.6% of the total GEPF portfolio on December 6, 2017. Despite the fall in Steinhoff shares, the total GEPF equity portfolio had created a value of approximately R140bn over the preceding 12 month period, and had performed better than the equity benchmark," read the joint statement. 

“It is important to note that notwithstanding the collapse in the Steinhoff share, the GEPF portfolio remains financially healthy, because of its diversified nature. It is also important to note that GEPF members’ benefits will not be changed by these developments, given that the GEPF is a defined benefit pension fund." 

The GEPF and the PIC said they want to appoint two directors to the boards of both Steinhoff International Holdings and Steinhoff Africa Retail. 

In response to a request for comment, a Steinhoff spokesperson on Wednesday afternoon noted that the global retailer's audit committee was working with its statutory auditors Deloitte to release its audited financial statements.

"In addition we have commissioned an investigation by PwC into the allegations of accounting irregularities. Until we get concrete feedback on progress from both these workstreams, we will unfortunately not be in a position to comment on any of the issues involved," the statement read. 

A seat at the table 

The GEPF and PIC added that following a meeting on Tuesday, they would also insist on representation on the company’s board committee tasked with investigating the Steinhoff situation, “so as to ensure that the process is transparent and that, amongst other matters, the terms of reference addresses critical governance issues”.

In addition to this internal investigation, Steinhoff announced last week that it had retained PwC to perform an independent investigation into “accounting irregularities requiring further investigation”.

The global retailer is also being investigated by the Financial Services Board, the JSE and the Companies and Intellectual Property Commission. It is still unclear when any of these investigations will be in a position to publish their initial findings.  

READ: Steinhoff said to win some bank support for credit extension

Steinhoff, which employs over 130 000 staff in about 30 countries, has promised to update the market as the PwC investigation proceeds, but as of Wednesday afternoon had not yet provided further information.

The PIC, which manages a total of R1.928trn in assets, added that while it had “engaged with Steinhoff consistently” it had often “not received positive feedback from the company”.

“Specifically, the PIC has previously pointed out structural issues relating to the material shareholding of the Steinhoff and Wiese families, which are perceived to create the dominance of controlling shareholder representatives on the Board and as a result, potential conflicts of interest,” it said. - should this perhaps read Jooste

Christo Wiese took over running the company on a temporary basis after Jooste abruptly stepped down.

* Update: This article was updated on Wednesday December 13 at 19:22 to include comment by a spokesperson for Steinhoff. 

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