[intro]Although most South Africans are more focused on eking out a living than tracking share prices or company ethics, for a number of reasons the Steinhoff story directly affects us all. The Steinhoff scandal severely challenges the notion of a white business sector entitled to fabulous wealth due to its principled corporate brilliance.[/intro]
Under its billionaire chairperson Christo Wiese and high-flying Chief Executive Officer Markus Jooste, leading members of an elite predominantly Afrikaner business network with links to the town of Stellenbosch, Steinhoff grew from a modest furniture company to a global retail giant with over 40 local brands, operating in more than 30 countries.
Although Dutch registered, and listed on the Frankfort and Johannesburg stock exchanges, the company was regarded as a South African corporate success story – the price of its shares tripled between 2012 and 2016 – before spectacularly crashing in the first week of December. Jooste resigned due to unexplained accounting irregularities, and the company’s share price plummeted by approximately 80% wiping out around R200 billion in value. Wiese stepped aside a few weeks later. Depending on the nature of the irregularities, which span the 2016 and 2017 financial reporting periods, both gentlemen could face criminal charges.
Although most South Africans are more focused on eking out a living than tracking share prices or company ethics, for a number of reasons the Steinhoff story directly affects us all.
The first reason is public accountability. It is said that private companies exist to profit their shareholders, and are therefore not accountable to the rest of us (the public) as state-owned companies are. But that’s only half true. When public funds are invested in private companies, as South African pension funds are, the lines of accountability or non-accountability blur. When the country’s integrity as an investment destination is placed at risk through questionable corporate governance we all feel the pain.
According to a recent Bloomberg report, “Three non-executive directors have been tasked with keeping a closer eye on governance. They include Steve Booysen, who was already head of the audit and risk committee.” So, according to Steinhoff it is self-correcting – and we should feel reassured by that. We are not.
The second reason speaks to private sector responsibility in the democratic era. When we sat down with the apartheid regime to negotiate a peaceful settlement we could never have anticipated that 23 years after the advent of democracy, the gap in living standards between rich and poor would have become more pronounced. That, 21 years after the introduction of a world acclaimed constitution affirming equal rights for all, black people in general and black women in particular remain largely excluded from the economy.
It feels as if, while the state battles along with the resources of a limited tax base (remember, the treasury the ANC inherited in 1994 was all but bankrupt), the same individuals and companies that prospered in the past from the sweat and toil of black people are even more prosperous today. Yes, we live in a capitalist society and capitalism encourages individuals to acquire personal wealth. But surely in a country such as ours, with its particular history of exclusion, there is a special onus on the corporate sector to contribute to our sustainability.
The third reason is about inter-racial business trust. Non-racialism is a defining policy of our ruling party and government. It was our ability to almost seamlessly evolve from the racialised skunk of the world to an inclusive democracy – besides the caliber of the ANC leadership at the time – that bought us massive global respect. But the truth, inside the country, is not quite as harmonious. To put it bluntly, many black people feel that the white business community gets away with the corporate equivalent of murder, while black businesspeople are generally viewed with suspicion and mistrust.
What’s happened at Steinhoff has placed this point in the foreground of public consciousness, with reportage of the company’s hundreds of billions of rands of losses attributed to accounting “mistakes” – which sounds like the equivalent of a traffic violation compared to the fraud and corruption labels applied to black people. Let me be clear, I reject corruption by anyone.
Steinhoff has become a poster-child for white economic privilege – squarely in the headlights of the societal debate on economic transformation.
The company’s growth, the ease with which it was able to leverage money from lenders, generate fabulous lifestyles and keep it in the family, so to speak, powerfully symbolises the country’s structural inequality.
Economic transformation is not a coded description for corruption; nor is it a stick with which to beat the rich. It is an investment in non-racial, social and economic sustainability.
Many years ago, in its report handed to then-President Nelson Mandela in 1998, South Africa’s Truth and Reconciliation Commission stated that the, “huge and widening gap between rich and poor is a disturbing legacy of the past, which has not been reduced by the democratic process… It is morally reprehensible, politically dangerous and economically unsound to allow this to continue. Business has a particularly significant role to play in this regard”.
These are conversations we need to have if we are to build the fair, dignified and inclusive society envisaged by the drafters of our foundational Freedom Charter and lauded constitution.
Democracy has brought economic space for the country to prosper. Instead a few have prospered at the expense of many. Those at the top of the economic pyramid like Wiese and Jooste seem to have exploited opportunities without caring about those who cleared the way for them. This is a strong message to corporate South Africa that it is not simply corporate brilliance but the goodwill and money of millions of South Africans, through pension funds that have handed them business possibilities that should not be carelessly squandered.