Publications
Partners
Putting culprits in jail and taking away their "stuff" are the only ways to deter the kind of scandal from happening that took place at Steinhoff, according to James-Brent Styan, author of Steinhoff en die Stellenbosse Boys.
He was part of a panel discussion on Steinhoff at an event hosted by 10X Investments in Cape Town on Wednesday.
"The question is, which other companies like Steinhoff are we not picking up? Where were the accountants who had to question matters at Steinhoff?" asked Styan.
Steinhoff International Holdings [JSE:SNH], domiciled in The Netherlands and with a primary listing on the Frankfurt Stock Exchange, has had to face the fall-out after an accounting scandal was exposed. The group's operating loss for the first half of the current financial year was €152m, for instance.
The retailer operated in 33 countries with different boards and different audit committees. Former CEO Markus Jooste quit when the accounting irregularities came to light and the Hawks - among others - are investigating the matter.
Asked how a business-savvy billionaire investor like former Steinhoff chair Christo Wiese could have been duped by what was actually taking place at Steinhoff, Styan said that, in his view, Wiese had a relationship of trust with Jooste based on the growth numbers he was shown.
"There are so many subsidiaries at Steinhoff. The system is sick, and the public sector is underfunded to deal with it. The question is how the manipulation was done to convince senior management," said Styan.
"I can't see how one can stop this kind of thing. Maybe bring back the Scorpions with some real experts to investigate and hit those breaking the law very hard."
Styan added that without a whistleblower at Steinhoff, the company would likely still be continuing with "business as usual" to today.
- READ: Someone must take the fall at Steinhoff - maybe even more than one individual, says strategist
Steven Nathan, CEO of 10X Investments, was another member of the panel. He said one must be careful about judging after the fact.
"Look at what was public information and what was non-public information. A company always promotes itself. Management is always positive. They are paid to say things that are positive," said Nathan.
"The auditors have access to non-public information. They should ask questions. An auditor is a bit like a ratings agency. And where was the SA Revenue Service (SARS) in questioning Steinhoff's taxes over the years?"
In Nathan's view one cannot rely on regulation to address the kinds of issues raised by the Steinhoff scandal. This is because regulation is essentially "backward looking" and not adequate to predict the future. Regulators tend not to understand the issues and then over-regulate, in his view.
"Don't trust the financial services industry blindly. The issue is that toxic products are being sold," said Nathan.
Like Styan, he too says there should be accountability.
"There are people paid to do a job and they failed. The board failed, the executive management failed. There were also lawyers and banks when Steinhoff raised money. They all failed to do something," he said.
"Regulation can succeed, but regulators do not get to the heart if the issue. There are too many loopholes. Make it simple and punish those who break them."
In his view, processes should be simple and transparent.
"The concern I have with Steinhoff is that now we know there was fraud, so many people are trying to investigate it and being paid lots of money for such investigations. Yet, we still do not know what is going on," he said.
"So, how can we expect auditors to know as the company structures are unbelievably complex. Tax should be simple. If all the experts after eight months do not understand what is going on at Steinhoff, how can the board understand it?"
Nathan emphasised that if there is no accountability, then the incentives remain for what happened at Steinhoff to continue in the industry.
* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER
