The Sunday Read by Ferial Haffajee: Why Markus Jooste and Jacob Zuma are two peas in a pod | Fin24
 
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The Sunday Read by Ferial Haffajee: Why Markus Jooste and Jacob Zuma are two peas in a pod

Jun 30 2019 09:31
Ferial Haffajee

Former Steinhoff CEO Markus Jooste and former president Jacob Zuma have a lot in common: both have perpetrated the biggest frauds in South Africa, the former in the corporate sphere; the other on the public who elected him to serve it. 

Both are insouciant crooks, given succour in corners of South African life where their brand of arrogant consumption and fraudulent practice are applauded rather than ostracised. 

Jooste, for example, is regularly seen at his favourite eating spots around Cape Town, both in Stellenbosch and in the City Bowl where he is shameless enough to frequent his regular haunts. While some who attend send photographs around in surprise, there is an air in those rarefied circles that he is a “boytjie” – an admired anti-hero for his corporate chutzpah and for getting away with it.

He appears to have been assisted by a sophisticated PR and personal clean-up operation. The Wikipedia first entry on Jooste has been cleaned up. The bit most people read on search engines will only tell them this: “Markus Johannes Jooste is a South African businessman and the former CEO of Steinhoff International. He is an avid horse breeder, and in 2016 was reported to be one of Africa's richest people, worth $400 million.”

And he is being given the benefit of time by bankers. Earlier this year, Bloomberg reported that it had seen an agreement between Mayfair (Jooste’s personal investment company) and lenders to give him until the end of the year to sell as much as R2.08bn in assets to repay on defaulted loans.

The same attitude is clear with Zuma who delivers lectures and tweets with enthusiasm and abandon which suggest he did not mastermind state capture which the National Director of Public Prosecutions, Shamila Batohi, said on Thursday that state capture has cost South Africa R1.4 trillion. Zuma is regularly retweeted by an admiring throng who think uBaba is quite The Man.

Getting away with it

Both Jooste and Zuma are getting away with it. Zuma has spent almost two decades evading his day in court even in relation to the relatively small charges of receiving bribes of about R500 000 in relation to the arms deal. From the slow pace of progress at the National Prosecuting Authority, it seems Zuma is at least a decade away from any legal accounting for his role in state capture from the Gupta and Bosasa patronage networks he appears to have been in central command of. 

Steinhoff’s board reported Jooste and other executives to the Hawks early in 2018 for the execution of an estimated R100bn fraud at the furniture retailer which ran aground in 2017 after it failed to produce accounts. Despite being provided with evidence, the Hawks told parliament in March this year that it had failed to make any progress on the investigation. On Thursday, speaking at the Daily Maverick’s Business Against Corruption gathering, Batohi said the NPA did not have the in-house skills to prosecute commercial crimes like those involving Steinhoff, but she said they were not off the hook. 

Alternative forms of justice

But with a criminal prosecution years off, the Steinhoff board, headed by Sonn, struck in June delivering civil demands for nearly R1bn to both Steinhoff and the chief financial officer Ben le Grange. Sheriffs were despatched to five properties in Cape Town, Stellenbosch and Johannesburg belonging to both executives whom Steinhoff averred were in breach of their employment contracts and extravagant bonus schemes.

In Johannesburg, it was announced that Zuma would appear before the Zondo commission of inquiry into state capture.

In both instances, and in a single week, alternative forms of justice – the one a judicial commission of inquiry; the second a civil action - were being executed in the absence of handcuffs and court dates.

In court documents, Steinhoff’s caretaker board argue that Jooste and Le Grange took their lavish salaries, performance bonuses, strategic/project bonuses and incentives schemes as part of a contract and as the court papers put it: “without demur”. 

In a deliciously lawyerly smackdown, Steinhoff’s board argues that: “It was an express alternatively implied further alternatively tacit term of the first and second defendants’ (Jooste and Le Grange) employment with (Steinhoff)…” and then goes on to argue that their salaries, bonuses and incentives were tied to the company's “successful financial performance”. It further argues that bonuses and incentives, via their contracts, could not be sought “in the absence of sound and successful financial performance by (Steinhoff).”

The multinational furniture retailer, which Jooste once dreamed would take on Ikea for global market dominance, is, of course, a wreck now. It’s going concern status is up in the air and it has been ripped apart by a fraud of at least R100bn masterminded by Jooste and later with the assistance of Le Grange.  The claw-back action is only for one percent of the total fraud allegedly committed but the symbolism is important. It reflects an innovative strategy to ensure accountability. 

'South Africa’s biggest ever corporate fraud'

The court papers allow Steinhoff’s board to do what it has, until now, not been able to: it lays bare the details of what Financial Mail editor and the author of the book Steinheist Rob Rose has called South Africa’s biggest ever corporate fraud.  

It’s all in the papers which sue the two to pay back R850m in bonuses, incentives and other payments for their role in “artificially inflating the profit and asset value” of Steinhoff; for “fictitious and/or irregular transactions”;  for “fictitious and/or irregular incomes created (at subsidiary levels); for “non-recoverable loans and receivables from fictitious transactions or accounting irregularities”.  

The papers make public the methods the Steinhoff fraudsters deployed including: “set-off arrangements…into different assets…using intergroup payments and (the) assignment of debt; by reclassifying non-recoverable loans and receivables into different classes of assets…increases in the value of fixed properties; increases in the value of trademarks…the effect of which was to create the impression that the non-recoverable loans and receivables had been settled, and resulting in other asset values being inflated.”

A date with destiny

Sonn and her team have delivered a novel way of getting the extent of the Steinhoff fraud into the open by suing Jooste and Le Grange for the repayment of their earnings from the company and for finding them in breach of their contracts. The figure of over R800m is calculated by a careful line-by-line accounting of what they earned from their dates of appointment by the company.

Jooste had 10 days to respond on whether or not he intends to defend himself from the date of serving of papers on him (dated as June 14 2019) in the Western Cape High Court. Le Grange, who is said to be less implicated, has been given 20 days. In other words, both have a date with destiny. So has Zuma. This week, his lawyer Dan Mantsha tried to spit fire across the Zondo commission and to question its credibility; to which Zondo replied that it looked forward to Zuma’s testimony from mid-July.

In regards to both Jooste and Zuma, it has been a significant week for accountability in the face of men who have thumbed their noses at the era of truth and reform. This is part of a salvo of litigation involving Steinhoff: civil class action litigation by shareholders has been launched in the Netherlands and is being contemplated in South Africa. The company is dual-listed. 

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