8 December 2017

South Africa: EFF Statement on Steinhoff Fraud Investigation

Photo: Courtesy of Steinhoff International
Steinhoff International CEO Markus Jooste resigned with immediate effect after the retail giant's admission of financial irregularities that led to an investigation, and a drop of more than 60% in its shares.
press release

The EFF notes the announcement by the public prosecutor’s office of Oldenburg in Germany announcement that it was still investigating possible accounting irregularities and fraud at Steinhoff. This announcement led to the stock of Steinhoff International falling by a record of 62% on Wednesday and the implicated corrupt CEO Markus Jooste resigned in the wake of irregularities in the company’s accounts.

The unfolding revelation about Steinhoff clearly demonstrates that big white-owned business is just as incredulously corrupt and unaccountable as government. Christo Wiese's shenanigans are not just a sideshow or once off accounting mistakes but it demonstrates an endemic historical culture of deceit and puts pensioners and shareholders at risk because their earnings have been destroyed in a flash.

Steinhoff’s share price wiped out more than R121 billion from its market capitalization in one day, affecting pensioners’ monies invested through the Public Investment Corporations (PIC).

The EFF is extremely concerned that what the German authorities are investigating is a web of fraudulent transactions, of which at the core is efforts to aggressively avoid taxes as much as it is meant to mislead potential shareholders. This is happening at a time when South African Revenue Services (SARS) is struggling to collect maximum taxes and the amount of money that is lost due to aggressive tax avoidance, base erosion and illicit financial flows is drastically increasing at a persistent level.

The investigation by German authorities also demonstrates that South Africa’s legislation lacks the necessary fundamental sophistication to deal with business sophisticated crimes used to bypass the law.

The Financial Intelligence Centre (FIC), the South African Reserve Bank, SARS and the National Treasury have all demonstrated that they cannot deal with the scourge of big business financial crimes. What worsens the problem is the weak penalty regime which lets big business get away with such heinous financial crimes. It took German authorities less than a year and a half after Steinhoff moved its primary listing from Johannesburg Stock Exchange (JSE) to Frankfurt Stock Exchange to discover their shenanigans, while Stellenbosch mafias have been operating in South Africa using the same modus operando, yet not even a single transaction has been investigated.

The EFF calls on Freedom Under Law, OUTA, other civil society and all political parties to be consistent in not just pursuing government in tens of accountability. We cannot fight corruption in public sector while big business is left to continue with their heinous financial crimes. Corruption is like a mathematical equation, what is done on one side must be applied equally on the other side of the equation to balance.

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