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Steinhoff: it’s your money

Dec 09 2017 10:34
Susan Erasmus

FORTY-eight hours is a long time in the world of finance: ask the Steinhoff executives. On Tuesday, Steinhoff International [JSE:SHF] shares were trading at R46.25 and by Friday morning, you couldn’t give them away at R6.

And the bloodbath continues. The company is now minus a CEO (Markus Jooste), who seems to have headed for the hills muttering vague and unconvincing apologies in his wake.

Finances and politics have this in common: whether you are interested in them or not, they affect your family life, your working life, and your wallet.

It’s the poor who suffer most

And the sad thing is that the people who cause collapses, both financial and political, are seldom the ones who end up not having money for food. Look at Zimbabwe's Robert Mugabe – cosseted in luxury, while all around him there is financial desperation.

I do not lay claim to any great understanding of the financial world. I have a rudimentary idea of how it works, but whether I understand it or not makes no difference: I have been a participant in it for decades through no choice of my own.

I have contributed to the profit margins of financial institutions for years by means of interest on student loans, huge bank charges, interest on personal loans, overdrafts, credit cards, and probably the most heinous of all – twenty years of interest payments on my modest home.

We pay for everything

And just about everyone I know is in the same position. We are taxpayers, we pay VAT, we contribute to medical schemes, pension funds, to brokers’ fees, insurance costs and we pay municipal charges. We may not always understand how everything is put together, but that does not seem to be a requirement for our money to be handed over. Cash is king – and no more so than in the case of the recipient of it.

And hand over we do.

The average person in the street has no choice but to trust an expert for financial advice. And that is what the world of finance boils down to in the end: trust.

If someone has a reliable track record with investments, we assume we can trust him or her. If someone is affiliated to a reputable institution, we think they have to be trustworthy. If an institution is large, growing and provides good returns, we never think of the awful possibility that there could be some auditing shenanigans going on behind the scenes. 

We think we are doing our bit by sticking with the reliable names, and not giving our money to some friend of a friend to invest for suspiciously high returns.

Money and assets can disappear

But that’s just the thing about money, investments, possessions, unit trusts and property. It can be stolen. Either carted away by a thief in the night, or rendered valueless by a scandal, by a downgrade, by a legal (just) sleight of hand, by the dishonesty of someone we trusted.

Money and investments in all their forms have to do with attributed value, and what we can sell something for. Money in itself is valueless – it’s just a piece of paper after all – and so are share certificates. What we deal in are expectations and perceptions.

And when a company does something that damages that perception of trustworthiness, it can all fall apart like a house of cards. The sellable assets often do not make up a fraction of the liabilities.

The plight of the pensioners

The sad thing though is that it is ultimately the people who have little to begin with who suffer the most, such as the pensioners whose pension funds are heavily invested in companies that go belly up.

The people responsible for the crisis will seldom experience real hardship, but the pensioner, whose monthly payment is slashed in half because of the crash, will suffer badly. (Think Transnet, think Fidentia.)

So what can we do? Keep the money under the mattress? In short, we are not allowed to. Pension funds have to be invested with registered financial providers by law, to stop people from being fleeced out of their pensions by unscrupulous thieves.

But what happens when those very financial advisers turn out to do exactly the same? And in their turn are hoodwinked by large companies in which they invest your cash?

I don’t have the answer, but I do feel as if I am trapped in a world of smoke and mirrors, and as if the illusionist who is about to saw me in half really does have it in for me. And to think that I paid for the privilege. 

  • Susan Erasmus is a freelance writer. Views expressed are her own.



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