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Johannesburg – SA Inc will embark on a number of initiatives to protect pensioners and South Africa's financial markets following the Steinhoff fallout, according to Finance Minister Malusi Gigaba.
Gigaba was speaking at a briefing following a meeting with the CEO Initiative, leaders of the JSE and the manufacturing sector, as well as the head of the Independent Regulatory Board of Auditors (IRBA) and executives of the Black Business Council at the JSE on Friday.
“Government takes the developments regarding Steinhoff extremely seriously. They have had a major impact on financial markets and savings and investments of ordinary South Africans.
“They raise important questions around corporate governance, ethical and accounting concerns,” said Gigaba.
He added that stakeholders are well within their rights to question how serious accounting fraud could have taken place at a company as important to the economy as Steinhoff, especially in a highly regulated environment. Gigaba said those implicated in the fraud will be held accountable.
“Government is responsible to protect the interests of the South African public,” said Gigaba. For this reason regulators such as IRBA, the South African Revenue Service and the Financial Services Board will establish a regulatory task team to deal with the matter decisively, he explained.
These regulators will also work with German and Dutch regulators, he said. Steinhoff's primary listing is on the Frankfurt Stock Exchange in Germany and it is also registered in the Netherlands.
Further steps will be taken to mitigate the effects of job losses. Another step involves greater representation of the Public Investment Corporation on the boards of companies it invests in, Steinhoff included.
There will also be ongoing monitoring and reviewing of the regulatory landscape, to “strengthen the integrity and efficiency” of South African financial markets, said Gigaba.
Steinhoff lost as much as 91% of its value following former CEO Markus Jooste’s resignation, which had consequences for the markets.
“Financial markets are a key strength of South Africa as a developing country and we must protect it zealously. Business is considering an SA Inc roadshow to reassure international investors of the integrity of markets," he said.
Gigaba: Treasuy met with regulators, JSE execs to discuss protecting the financial markets @Fin24 pic.twitter.com/UMwCh3VvuV
— lameez omarjee (@LameezOmarjee) December 15, 2017
"We are concerned that the extent that the damage caused by this sad episode should be mitigated in terms of the country’s reputation and the reputation of our business and public sector leadership. That is why we have undertaken to embark on a roadshow to reassure investors, as SA Inc we are dealing with situations of this nature," he reiterated.
Stakeholders, especially government employees, have raised concerns over the possible damage done to their pensions.
Gigaba said government is concerned about losses to investors and citizens' savings, and not just government employee pensions but private pension funds too.
“The PIC indicated some value was lost,” he said. But the PIC has a diversified portfolio, which means the losses are manageable.
“Government pensioners must not panic. Their assets are in good hands and we will continue to protect them,” assured Gigaba.
Corporate governance
Gigaba further emphasised the value of corporate governance, referring to how PIC’s concerns about corporate governance at Steinhoff had been continually ignored.
For this reason there should be initiatives to strengthen the independence of auditors and non-executives, and to ensure the mandatory rotation of auditors. “Regulators must ensure auditors and board members are refreshed regularly to ensure their judgement is not undermined in the long term,” said Gigaba.
Gigaba on the importance of corporate governance and protecting pensioners @Fin24 pic.twitter.com/gwdarfA3YT
— lameez omarjee (@LameezOmarjee) December 15, 2017
IRBA’s CEO Bernard Agulhas confirmed that Deloitte as an auditor of Steinhoff will be investigated for the years 2014 to 2016.
IRBA issued a statement following the briefing, in which it indicated that Deloitte has agreed to cooperate with the investigation.
During the briefing Agulhas said situations like these reaffirm the role of government and institutions like IRBA in protecting public and investor interest.
He stressed the importance of local regulators working together with each other and not just with international regulators to give assurance to the public.
“Public trust is gained in good regulatory systems in the economy and in the financial sector. We are lucky in SA Inc to have good regulatory systems.”
A spokesperson from the CEO Initiative also expressed the importance of a coordinated approach to dealing with the "complex situation" as there may be knock-on effects if it is not dealt with appropriately.
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