Steinheist: Markus Jooste, Steinhoff & SA's biggest corporate fraud

by Rob Rose

The Steinhoff crash wiped more than R200bn off the Johannesburg Stock Exchange, erased more than half the wealth of tycoon Christo Wiese and knocked the pension funds of millions of ordinary South Africans. When this investors’ darling was exposed as a house of cards, tales of fraudulent accounting, a lavish lifestyle involving multimillion-rand racehorses and ructions in the ‘Stellenbosch mafia’ made headlines around the world. As regulators tally up the cost, 'Financial Mail' editor Rob Rose reveals the real inside story behind Steinhoff. Based on dozens of interviews with key players in South Africa, the UK, Germany and the Netherlands – and documents not yet public – Steinheist how Bruno Steinhoff formed the company by doing business in the Communist bloc and apartheid South Africa; how the ‘Markus myth’ started in the dusty streets of Ga-Rankuwa and grew thanks to a ‘bit of luck’ in a 1998 takeover; how Jooste insiders shifted nasty liabilities off Steinhoff’s balance sheet to secretive companies overseas in order to present a false picture of the profits; how Wiese was lucky to lose only R59bn and how Shoprite narrowly escaped getting caught in Steinhoff’s web; and what happened behind closed boardroom doors in the frantic week before Jooste resigned.

Genres: South Africa, Nonfiction, Business, Africa

398 pages, Kindle Edition

Published October 31, 2018

Reviews

[Kay · Rating 5 out of 5]

Well-written, well researched, and very important account of the astonishing scale of fraud that led to collapse of Steinhoff. Would have choked on the scone I ate recently at lanzerac had I know the estate was effectively owned by Markus Jooste and his dodgy associates. The very guy who effectively helped himself to a sizeable chunk of my (and so many other ordinary South African’s) pension funds.

[Jurate Stanaityte · Rating 5 out of 5]

'(...) on 4 December [2017], the day before Jooste resigned and the share price collapsed off a cliff, there were 17 analysts who covered Steinhoff, 11 of whom recommended that investors “buy” the share, 6 who recommended they “hold”, and exactly zero who called it as a “sell”.'

This was my next in queue following 'Bad Blood' by John Carreyrou, thus continuing with the seemingly new fashionable genre of corporate fraud literature. Yet in comparison between the two stories of fraud engineering, 'Bad Blood' was a child's game.

'Steinheist' is a fresher story, also somewhat more exotic (how often do we come around a detailed business saga from South Africa?!), and those in accounting/finance will enjoy both diving into technicality and being shown the wider implication. This also is a superb piece of corporate governance literature. Having been granted a front row seat part (or was it a role of some invisible fixer of notes for the orchestra?) in a twisted corporate maelstrom for almost two years, I surely appreciated the crude descriptions of how mergers and acquisitions happen in real life as opposed to the usual celebratory entries we get to read in the news.

Drawbacks: for someone risk-averse, it's a potentially anxiety-inducing cautionary story. Markus Jooste did it all – self-dealing, tax heavens, playing German GAAP concepts, non-disclosures, forgeries, 'accounting irregularities' and plain lies whenever and wherever – while Steinhoff’s board of directors, auditors, legal forensic teams, and banks' analysts were ignorant or even played along. Am I relieved about not joining the Big4 upon my graduation? Yes.

Lessons: lack of diversity in boards of directors' is asking for trouble (even Steinhoff's three PhDs in Accounting onboard was no insurance); corporate psychopaths thrive in change/growth/whatever chaos they can get into.

If anything, this gives hope for us-the-mavericks (let me leave this citation here, surely not to argument the point for misfits, but to reflect the scrupulous detail throughout the book):

'Take Barry Norris, an untypical fund manager, if ever there was one. Unlike the squadrons of blue chino accountants who leave university with commerce degrees, Norris graduated from Cambridge with a master’s degree in history in 1996. The year after, he added another master’s degree in international relations, which he later supplemented with the CFA qualification. He is predisposed to think of things a little differently.'

Overall, a very well researched work that also relies on the author's erudition and knowledge of how - in a 'perfect storm' of way - structures and networks are rigged to produce a 'black elephant'.

[Lwazi Bangani · Rating 4 out of 5]

More like an insider guide to the dark side of dealmaking in corporate South Africa.

The book also presents interesting history of some of South Africa’s highly regarded figures of commerce and offers a lot of valuable lessons on the ‘creative accounting’ that happened during Markus Jooste’s time at Steinhoff.

Ultimately, it was a quick read given that I had first watched the dramatised version of it on showmax. But, it was insightful and educational rather than just entertaining.

[Joss Du Trevou · Rating 4 out of 5]

A real eye opener. I was fascinated to read how Jooste (and probably many other execs and
companies) manage to accumulate such wealth using intricate schemes to inflate or deflate asset values by many multiples, creating significant wealth, always at the expense of someone else.

[Yonnique · Rating 5 out of 5]

I couldn’t put this book down! A story of conflicts of interests, brotherhood-type trust, poor governance, and obscene wealth

[Isaac Gill · Rating 4 out of 5]

The author is quite talented but values drama over truth a bit. The book is enjoyable, especially found the author's sense of humor refreshing. But it is about 120 pages too long. The parts about horse racing could've been cut down. I watched the Steinheist documentary before reading this book. The documentary took some liberties (having a psychologist opine on Markus Joostes personality, meh) - but it was overall rather entertaining.

Back to the book: I found the repeated use of Afrikaans quotes to be annoying thankfully it stopped at like half way through the book. I had to use Google translate on each one! Why not provide a translation in quotes? Is the book just for SA'ers?

Baffling that nobody has gone to prison for the Steinhoff fraud. I thought once Zuma was out and someone competent like Ramphosa came in then surely Jooste would get sent to prison but no! Craig Butters catching the fraud early is fascinating; generally as a rule don't lie to people who are trained in statistics. They're better than average people at catching lies. That Bruno Steinhoff was not complicit in the fraud (with his initial ownership of Kluh/Fihag deal to buy the forests) beggars belief. I will say that South Africa is a weird dysfunctional country with overzealous and highly vindictive tax authority so when a businessman tells you he's structuring a deal in a convoluted way and justifies it as being to escape the evil taxman's clutches you tend to believe it. Also it is very easy to be fooled by a fraud when it has run for a long time cause you see it going on and on and your internal skepticism gets drowned out. The whole unbelievable story of Christo Wiese not knowing what was up is just that - unbelievable. All those loans Wiese took out against his Stienoff shares ("steinies"), if those loans were recourse how would he not be in the poor house by now? He comes off as thoughtful and forthright though. As the author mentions it overwhelmingly seems like Wiese wanted to swap his SA assets for overseas cash, and the way he did that *seems* to have been selling his SA assets to Stienhoff and then borrowing heavily against his Stienhoff shares using (what appears to be) no-recourse loans outside of SA from international banks (who were dumb enough to lend). It's great how the author got Wiese to contribute to the book but still presented a (somewhat) balanced perspective of him. Parts about GT Ferreira could've been cut down as they were too long and not particularly relevant.

I really wish Fraser Perring's thoughts were not elicited by the author as he's a LARPING dissembler with very little credibility. These sort of blurbs give him credibility he does not deserve.

Joostes madness is perplexing. Running a massive fraud to basically blow your fraudulent proceeds on horses; reminded me of Rita Crundwell who was a comptroller and treasurer of Dixon, Illinois who embezzled 50 million $$ to spend on horses. Horse people = weird people. I strongly suspect he still has a lot of his loot safe though. Good thing Joostes Austrian nemesis Seifert worked so doggedly to bring this fraudulent enterprise down. If not for him it'd have gone on till Covid-19 broke out probably. Or perhaps longer?

Another book where the author takes the populist line is that shell companies, registered in jurisdictions that offer a modicum of privacy/efficient tax structure to owners (although pretty much every major financial center now gets UBO declarations thanks to idiotic multilateral agreements), are the source of all the world's evils.

Good book. A bit slow. But if you're interested in financial fraud then you'll likely find it enjoyable.

[Niel · Rating 3 out of 5]

This was an informative and intriguing read into the Steinhoff collapse. I agree fully that Marcus Jooste is largely responsible for the mess Steinhoff finds itself in, but what about the various boards who had oversight, what about Deloitte, what about the analysts and investors that backed this share so hard to the bitter end (when there were obvious accounting 101 warning signs - it was implied that the banks were biased in order to not prejudice advisory work on M&A deals stemming from Steinhoff).

I believe that there are many parties at fault and its actually a bit odd how much of that is overlooked or at best given a brief mention. Not that I am in any way defending Marcus - I hope that justice finds him.

[Protea Hirschel · Rating 4 out of 5]

Provides an easily understandable account of how Markus Jooste cooked the books and providing some of the timelines leading up to the meltdown, and particularly in reconstructing the last week before Jooste's resignation. Many people lost a lot of money and it is astonishing how much investment values declined. This book and all the reports it references surely have enough to prosecute so the question to me is why there are no criminal charges or why there is no progress on bringing Jooste and his co-conspirators to book.

[Daniel · Rating 5 out of 5]

Well written and well researched book. The author has managed to make a complicated story about corporate fraud seem simple. And while the machinations of jooste were complicated in the end it is a simple story about a man who decided that it was easier to play accounting games than to build a company that would last for generations. Furthermore the story is not new its the same as enron but in a different country.

[Gideon · Rating 5 out of 5]

Phenomenally researched and written eloquently, this takes you into the details of the Steinhoff collapse (not failure - the company unlike the likes of Enron that it is compared to, is of course still running.)

Rob Rose has very clearly been access to all key players and stakeholders with the exception of Jooste.

Probably the only question I thought left unanswered was if was any law broken or was Jooste purely just playing a (broken) system...

[Anandh Sundar · Rating 4 out of 5]

A good book on the fraud of the South Africa homegrown champion who was hoping to displace Ikea. The book strikes a good balance on the facts(how the fraud was done) versus the narrative(keeping excitement). Relevant for anyone interested in Asian or African equities, to see how the biggest stocks can fall, and how short sellers can be canary in the mine as early alert.

[Jan Rabie · Rating 4 out of 5]

This was honestly one of the most interesting books I have read in a very long time. I just couldn't put it down. Definition of "megalomaniac": A megalomaniac is a pathological egotist, that is, someone with a psychological disorder with symptoms like delusions of grandeur and an obsession with power. A person who behaves as if he/she is convinced of their absolute power and greatness.

[Antony · Rating 4 out of 5]

Well written and impecibly researched, this book provides a remarkable insight into one of the biggest corporate frauds of recent times

[Bofelo Lentswe · Rating 4 out of 5]

Interesting take and perspective on executives and how complex fraud can escape even the most seemingly qualified of NeD.

[Khetha Dlamini · Rating 2 out of 5]

Interesting, especially if you missed the details of this particular saga. Not very well written though. Could have done with more editing.

[Nadine · Rating 4 out of 5]

Disturbing but also intriguing.

[Leon Kock · Rating 5 out of 5]

Fantastic book, superbly researched, well written and gripping.

[Vincent · Rating 5 out of 5]

Intriguing. Rob does a great job telling the back story of Africa's biggest corporate fraud.

[Matthew Field · Rating 4 out of 5]

The fact these people aren't rotting in jail is depressing

[Josua · Rating 4 out of 5]

Very well researched and well compiled book. I have enjoyed this book and learned alot!

[Joelene Draper · Rating 5 out of 5]

A dive into the biggest corporate fraud in SA indeed. This book keeps you on the edge and in total disbelief of the brazen fraud that took place and the fascination of white collar crime.

[Gerhard Swart · Rating 5 out of 5]

Excellent.

[Lore · Rating 4 out of 5]

South African Enron.
Rob untangles a complicated questions of « what happened ? And « who did it?
After this book I will not be surprised if he’s sitting under a tree in a beachfront villa.

[Henk Venter · Rating 5 out of 5]

Captivating

Rob Rose takes the reader on an epic recounting of the Steinhoff debacle and lys it out - plain to see. A truly emotionally evocative read.