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As it happened - Parliament holds first hearing into Steinhoff

2018-01-31 09:31

A joint sitting of three Parliamentary committees heard from regulatory oversight bodies and Steinhoff's top leadership about the challenges facing embattled retailer, and how they are impacting on South Africans.

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Last Updated at 05:22
31 Jan 19:15

This is the end of the live updates from Parliament. To recap some of the day's top news:

*Heather Sonn, the Steinhoff's new chair, said that the company had reported its former CEO Markus Jooste to the Hawks, on suspicion that he had committed offenses under the Prevention and Combating of Corrupt Activities Act. Steinhoff members said they would consult with lawyers to see whether they could make the reasons public. 

*Christo Wiese, the Steinhoff board's former chair, has said that the problems at Steinhoff came like a "bolt out of the blue" to him, and described as "absolute turmoil" the days in early December after news of the accounting scandal broke. 

*The Financial Services Board is investigating two cases of possible insider trading in Steinhoff shares between August 2017 and December 2017. The FSB is also investigating one case of possible false, misleading or deceptive statements. 

*Top National Treasury official Ismail Momoniat has said that up to R200bn in shareholder value could have been lost due to the decrease in Steinhoff's share price.This would have affected global and South African investors, he said, both private and institutional. "For the crimes that have been committed people must go to jail," he said. 

*Steinhoff executives have said that, apart from Jooste, they had not (yet) referred any other Steinhoff executives to the Hawks for prosecution. 

*A forensic investigation into Steinhoff's finances by PwC is of key importance. This investigation is still ongoing, and Steinhoff leadership could not yet say when it would be completed. Steinhoff's leadership, and members of regulatory bodies tasked with financial oversight, both said the report's findings would be critical to how they proceed. 

*Government employee pension funds lost about R20bn from the steep decrease in Steinhoff shares, altough this is a relatively small percentage of their total assets. 

*The JSE is not, at the moment, considering halting trade in Steinhoff shares. 


31 Jan 17:53

MP's are now asking the PIC about a R9.3bn loan it provided to Lancaster 101, a special purpose vehicle set up in 2016 to propel transformation at Steinhoff. 

"The Public Investment Corporation, Steinhoff's second largest shareholder will facilitate the Lancaster subscription and the total proceeds of the Lancaster Subscription will be approximately €303m," Steinhoff had said in a media release in September 2016. 


31 Jan 17:25

The PIC said it asked for former Steinhoff chair Christo Wiese to step down in a letter to Steinhoff's board shortly after its share price collapsed in early December. 

Wiese, who earlier gave evidence before the committee, stepped down in mid-December. 

It is not clear, however, to what extent the PIC's demand influenced its decision. 

The PIC has also asked to be represented on the Steinhoff board, and wants to see two new independent directors. 


31 Jan 17:22

"Those who made money out of this [Steinhoff's share price decline] are those who took short position," says the PIC. 

While investors on the whole make money on stock exchanges when the price of stocks rise,  investors can at times make money when the price of stocks decrease, a practice known as short selling.

The investment corporation CEO Daniel Matjila said it doesn't take short positions in stocks, as it is a long-term investor. 

The PIC is the last of the oversight and regulatory bodies briefing a trio of Parliamentary committees about accounting irregularities at Steinhoff .

The investment corporation says it is not selling Steinhoff shares, and says it believes the firm still has some "nice underlying assets", says Matjila.   

"We don't believe Steinhoff is worth zero," he says. 


31 Jan 16:40

The Government Employees Pension Fund is now briefing Parliament on its losses. The GEPF says it has lost about R20bn from the drop in Steinhoff's share price. 

On November 30, its Steinhoff shares were worth R24.1bn. On January 18, these shares were worth only R3.1bn.

The group holds 392 million Steinhoff shares, about 9.1% of the retail conglomerate's  shares. 

The Public Investment Corporation, the state employee pension fund asset manager, meanwhile, said that it was of the view that Steinhoff's board had the "best brains". 

The PIC manages funds on behalf of the GEPF.

The PIC also said that Steinhoff had historically produced good returns. 


31 Jan 16:14

IRBA's chief executive officer Bernard Agulhas said the regulator has not yet been able to go through documents that it was provided by Deloitte on Monday. 

"We haven't been able to pull our staff off the KPMG investigation and other big investigations," he said. 

He said Deloitte had delivered a "massive" cache of electronic files. 

Agulhus earlier said that IRBA was set to start its investigation into Deloitte's auditing of Steinhoff in February. 

Agulhas said that he understood that there was a public interest in the Steinhoff case, and IRBA would make an effort to complete its investigation quickly. 

He said the investigation would cover whether the Deloitte missed any accounting irregularities, and/or broke IRBA's code of ethics. 


31 Jan 15:24

IRBA's chief executive officer Bernard Agulhas says the regulator will start its official investigation into Deloitte in February. 

Deloitte has for many years been the the auditors of Steinhoff International.

On December 5 it flagged irregularities in Steinhoff's audits, which precipitated the firm's massive share price decrease. 

The company's 2017 audit has been delayed, and its 2016 will now need to be restated. 

Agulhas said the investigation would look into Deloitte's Steinhoff audits of 2014, 2015 and 2016.

MP's are arguing that there should be better regulatory oversight of the SA auditing profession. 


31 Jan 15:15

The committee is set to hear from the Independent Regulatory Board for Auditors, which has jurisdiction over registered auditors in SA. 



31 Jan 15:11

The briefing has recommenced. 

The DA's David Maynier says that, after the briefing of the FSB, if he were Markus Jooste he would "not be quivering in my boots".

He is criticising the FSB for not replying to his questions in detail about when they first started investigating Steinhoff.

The FSB, in turn, replies that its two investigations into insider trading, and one case of possible false, misleading or deceptive statements were started in November and December 2017.  

Maynier earlier called for Jooste to be subpoenaed to appear before the committee.  


31 Jan 14:53

With the lunch break almost over, here is a recap of some of the most newsworthy facts that have come out of the briefing so far. 

*Heather Sonn, the Steinhoff's new chair, said that the company had reported its former CEO Markus Jooste to the Hawks, on suspicion that he had committed offenses under the Prevention and Combating of Corrupt Activities Act.

Steinhoff members said they would consult with lawyers to see whether they could make the reasons public. 

*Christo Wiese, the Steinhoff board's former chair, has said that the problems at Steinhoff came like a "bolt out of the blue" to him, and described as "absolute turmoil" the days in early December after news of the accounting scandal broke. 

*The Financial Services Board is investigating two cases of possible insider trading in Steinhoff shares between August 2017 and December 2017. The FSB is also investigating one case of possible false, misleading or deceptive statements. 

* Top National Treasury official Ismail Momoniat has said that up to R200bn in shareholder value could have been lost due to the decrease in Steinhoff's share price.This would have affected global and South African investors, he said, both private and institutional. "For the crimes that have been committed people must go to jail," he said. 

* Steinhoff executives have said that, apart from Jooste, they had not (yet) referred any other Steinhoff executives to the Hawks for prosecution. 

* A forensic investigation into Steinhoff's finances by PwC is of key importance. This investigation is still ongoing, and Steinhoff leadership could not yet say when it would be completed. Steinhoff's leadership, and members of regulatory bodies tasked with financial oversight, both said the report's findings would be critical to how they proceed. 


31 Jan 14:32

"We do not get a keen enough sense of decisive action," says the briefing's chair Yunus Carrim. 

He was speaking after hearing updates from the FSB and National Treasury into Steinhoff.  

The briefing is now breaking for lunch and will resume at 15:00. 


31 Jan 14:09

The Treasury's Ismail Momoniat has said that up to R200bn in shareholder value could have been lost due to the decrease in Steinhoff's share price. 

This would have affected global and South African investors, he said, both private and institutional. 

"For the crimes that have been committed people must go to jail," he said. 

The committee has also heard that Steinhoff has applied to move money from South Africa to Europe, to help prop up its European ventures which are understood to be facing more severe liquidity issues that its SA firms. 

No decision has yet been made, however. 

 


31 Jan 13:47

The FSB's Solly Keetse, the head of department for the directorate of market abuse, has said the group is currently investigating two possible cases of insider trading between August 2017 and December 2017. 

The FSB is also investigating one case of possible false, misleading or deceptive statements. 

He did not name who carried out these trades. 

He said the FSB was liaising with its counterparts in Germany around the trades. 

'Viceroy group'

Keetse said that it wrote to the U.S. Securities and Exchange Commission in the USA to ask about who Viceroy Research is, a group that wrote a report into Steinhoff outlining what it said were financial regularities. 

This is the same group that on Tuesday published a report into SA Bank Capitec. 

A spokesperson for the SA Reserve Bank, meanwhile, has said he did not believe that the collapse of Steinhoff poses a financial stability risk. 

He said the bank was also investigating whether any exchange control laws were broken.

"At this stage we not not think so ... however we can't say so definitively [yet]," he said. 


31 Jan 12:59

The Financial Services Board's deputy executive officer for pensions Olano Makhubela is now briefing the committee. 

He said if the 1951 'active' funds that the FSB has oversight over, 1080 responded to a FSB request to report their exposure to Steinhoff in the wake of Jooste resigning. 

He said that, of the 1080 funds that responded, 948 - or 88% - had exposure to Steinhoff. 

Individual fund exposures ranged between 0.01% and 6.04%, he said. 

These figures do not include the investment exposure of the Government Employees Pension Fund. 

He said that the 1080 funds that replied lost a combined R18bn between December 1 and December 8. 

Steinhoff's share price was trading at R6.58 a share on Wednesday at 13:00, down 3.2% on the day. 

The shares are over 80% lower than they were on December 5 before Jooste resigned. 



31 Jan 12:43

Ismail Momoniat from National Treasury is now updating the hearing.

He notes that Steinhoff is not regulated by Treasury legislation, as it is not a financial institution. 

Momoniat says that Steinhoff has a very complicated structure, and that Steinhoff is incorporated in the Netherlands, which is a low tax jurisdiction.

The group has its primary listing on the Frankfurt Stock Exchange, and a secondary listing on the JSE. 

It is headquartered in Stellenbosch. 

'Fragmented regulatory environment' 

He asks whether different regulators in SA and Europe are indeed talking to each other. 

"This is an issue of jurisdiction, jurisdiction, jurisdiction," he says. "One needs to know who is responsible for what."

A number of different regulatory bodies in the Netherlands and Germany also have oversight over Steinhoff, he says.   

"This is a very sophisticated crime," says Momoniat, noting that Steinhoff's auditors Deloitte appears to have missed it before flagging it in early December 2017.  

He notes that Steinhoff's share price fall has had a relatively small impact on government employee pension funds, when compared to the total asset base of the funds. 

The Government Employees Pension Fund (GEPF), via its asset manager the Public Investment Corporation, is one of the largest shareholders in Steinhoff International. 

The PIC has previously said that it owns about 10% of Steinhoff's shares. 


31 Jan 12:19

"The collusion ... was not only inside the company [Steinhoff] but outside the company," a Steinhoff employee has told the committee, mentioning Switzerland. 

He said that internal company confirmation that there were accounting irregularities at Steinhoff took place on December 5. 

The following day - December 6 - the company announced that Jooste had resigned.  


31 Jan 12:03

Yunus Carrim, the chair of today's briefing, has suggested that Steinhoff reply in detail to written questions within ten days of them being asked. 

This after some MP's suggested that they keep posing oral questions to Steinhoff. 

Carrim notes that National Treasury, the PIC and other bodies still need to brief the committee, and committee members may be able to ask more detailed questions after these briefings.  


31 Jan 11:55

Steinhoff says that it will consult its lawyers to see whether it can make the charges against its former CEO Marus Jooste available to members of the committee. 

Steinhoff's Louis du Preez says the group cannot yet say whether it will lodge additional complaints against other employees. 

Du Preez says that the group's focus has been, over the past few weeks, in making sure that Steinhoff businesses worldwide have sufficient liquidity. 

He says he cannot yet speak about its losses and value of its assets, as these are "price sensitive", and he cannot yet say when the forensic report by PwC will be made public. 

He says that Steinhoff is set to meet with PwC later in the week. 

Heather Sonn, the group's new chair, has again reiterated that the PwC investigation will leave "no stone unturned".


31 Jan 11:44
"I can only say that cleverer people that this board have been duped before by people committing fraud."

That was one of the answers of former Steinhoff chairperson Christ Wiese to why Steinhoff's board had not flagged irregularities before December 2017. 

He said that, until forensic auditors PwC, and the firm's statutory auditors had finalised their reports, it was impossible to know the extent and scope of the alleged fraud at the company. 

"I can only refer to many instance around the world ... to detect fraud in a company is an extremely difficult if not impossible task". 

 


31 Jan 11:28

Among the questions that have been posed to Steinhoff's leadership and the JSE, include:

* Did anyone short sell Steinhoff stock before the news broke of Jooste's resignation?

* Is Steinhoff's format, with its headquarters in Stellenbosch, its seat in the Netherlands and its listing on the Frankfurt Stock Exchange (and the JSE) too complicated for credible oversight? 

* Who besides Jooste is facing possible prosecution? 

* When will PwC complete its investigation?

* Why didn't Steinhoff in 2015 start investigating its corporate governance after German authorities started investigating it. 

*What was the group's investment strategy?


31 Jan 11:20

Members have been given a strict timeline of three minutes to ask questions. 

The EFF's Ntombovuyo Veronica Mente is asks who else, beside Jooste, may have been involved in wrongdoing. 

The EFF's Floyd Shivambu has asked Christo Wiese if is has any companies considered as "tax havens", and how it can be that he only came to learn of problems at Steinhoff tree days before Jooste resigned. 

"How can the shareholders trust you, if you are as surprised as them?" asks the Sibusiso Christopher Mncwabe of the NFP. 


31 Jan 11:10

With almost 40 members present in the house, members have been given only three minutes to ask questions.

David Maynier of the DA is now asking questions. 

"I think that the truth, when it emerges, is that Markus Jooste probably was at the centre of corporate fraud, but he had accomplices."

He said that Steinhoff problems were "hidden in plain sight". 

He said that Steinhoff directors appeared to have "monumentally failed" in their oversight role. 

Maynier says he is being "shut down' by the chair as he does not have enough time to ask questions. 

He has also asked Sonn for more information on the why it had referred him to the Hawks. 


31 Jan 10:49

JSE CEO Nicky Newton-King has said that Steinhoff has been cooperative in providing the JSE with information when asked. 

She also noted that Steinhoff International is primarily regulated by the Frankfurt Stock Exchange, where it has had its primary listing since 2015, and in Holland, where it is registered. 

She said that in 2016 and 2017 Steinhoff was audited by Dutch auditors.  

Suspension

"What suspension does is it stops individual investors from exiting a company. People would not have been able to trade out of it," she said.

She said that the FSE has said would not suspend Steinhoff for failure to submit its audited 2017 consolidated financial statements on time.

She said that, if the JSE stopped trade in Steinhoff, then foreign investors would still be able to buy and sell shares. 

"We do not want to prejudice SA shareholdres," she said. 

She said however, that the JSE's investigation was ongoing and the exchange was still "a way away form getting to the bottom of what happened."

She noted that the JSE was also waiting for the results of PwC's investigation. 

"Fraud is extremely difficult to catch anywhere in the world," she said, adding that there was room to verify that checks and balances against fraud and mismanagement at SA companies were working as intended.  


31 Jan 10:39

A briefing by Steinhoff leadership and oversight bodies to Parliament has only been ongoing for an hour, but it has already resulted in breaking news.  

To recap

*Heather Sonn, the group's new chair, said that Steinhoff had reported its former CEO Markus Jooste to the Hawks on suspicion that he had committed offenses under the Prevention and Combating of Corrupt Activities Act.

*Christo Wiese, the board's former chair, has said that the problems at Steinhoff came like a "bolt out of the blue" to him, and described as "absolute turmoil" the days in early December after news of the accounting scandal broke. 

 

31 Jan 10:27

Steinhoff's former chair Christo Wiese, who stepped down from Steinhoff's supervisory board in mid-December, says the problems at Steinhoff came like a "bolt out of the blue". 

"It was absolute turmoil," he said. 

Wiese is giving a briefing to Parliament about Steinhoff. 

He said he got to know former Steinhoff CEO Markus Jooste in the early 1980's, when he was an articled clerk working for some of Jooste's companies. 

Wiese said that in 2011 he became a smallish shareholder in Steinhoff. 

In 2013 he was appointed to the board, and got to know the company better. 

in 2015, he sold Pepkor for almost R60bn in exchange for Steinhoff shares. 

"[This] made me then the largest shareholder in the group," he said. "I was happy with the management and with what I saw". 

He said the firm's vision was to build from Africa an "African champion" to become an internationally recognised retailer player. 

"Things went very well," he said. "I then decided after two years to also sell my interest in Shoprite into the group through a complicated structure that most people would have taken note off."

He said that he was working on this process when the "bomb exploded". 

"We were in that process when this bomb exploded. It literally came like a bolt out of the blue". 


31 Jan 10:01

Steinhoff's new chair Heather Sonn has said that Steinhoff has reported its former CEO Markus Jooste to the Hawks. 

Jooste abruptly stepped down as the conglomerate's CEO in early December 2017 amid an accounting scandal. 

Sonn said that Jooste had been reported to the Hawks on suspicion that he had committed offenses under the Prevention and Combating of Corrupt Activities Act.

"The matter is now in the hands of the Hawks for further investigation and prosecution," she told Parliament on Tuesday.

She did not provide more information. 

Shares in Steinhoff International, the multinational's parent company which is dual listed on the Frankfurt and Johannesburg Stock Exchanges, have lost over 80% of its their value since this news broke that Jooste was resigning. 

The former Steinhoff CEO has not publicly spoken to the media since resigning. 

But shortly after he resigned, in what appeared to be an informal, personalised letter to colleagues - which Fin24 received from two independent sources in December - he wrote that he made "some big mistakes".

Former Steinhoff chair Christo Wiese is now set to give evidence. 



31 Jan 09:55

Steinhoff's acting chairwoman Heather Sonn is providing a briefing. 

She has said the group is "deeply constrained on what it can say, legal and otherwise".

"We come to this gathering open and if we could communicate everything today, we would communicate."

She said the group understood the public interest in the group's finances, and how is has impacted South Africans and investors. 

She also promised that the group would "prosecute wrongdoing" but added that investigations were still ongoing. 


31 Jan 09:50

The three committees are probing the Stellenbosch-headquartered retail giant, because the company's share price has suffered a precipitous decline since its board announced on the evening of Tuesday December 5 that its CEO Markus Jooste was stepping down “with immediate effect”.

The board also at the time announced that new information had come to light relating to “accounting irregularities requiring further investigation”, and that PricewaterhouseCoopers would conduct an independent investigation into its books.  

This investigation is still ongoing.

Steinhoff is facing at least five different probes in South Africa and Europe, in addition to the PwC probe. 

These include investigations by the Johannesburg Stock Exchange, the Financial Services Board, the Department of Trade and Industry and the Companies and Intellectual Property Commission, and a long-simmering German criminal probe. 

It is also facing a German criminal probe. 


31 Jan 09:36

Parliament will on Tuesday for the first time be briefed on what happened at Steinhoff International.

Three committees of Parliament will hear from, among others, the JSE, the Financial Services Board, the state's employee pension fund, the public investment corporation and the SA Reserve Bank and auditors.

The bodies will be asked about the status of their investigations. 

Steinhoff leadership is present, and will be providing a briefing. 

Yunus Carrim, the chair of the  Standing Committee on Finance, of the chairperson of the briefing. 

The committees involved in the briefing are the Standing Committee on Finance, the Standing Committee on Public Accounts, better known as Scopa, and the Standing Committee on Appropriations.

The Portfolio Committee on Public Service and Administration/Planning, Monitoring and Evaluation, is also attending the briefing but not in an official capacity. 

Carrim said members of all committees will be able to pose questions. 


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