Markus Jooste built a small South African furniture firm into a global retail empire. Then everything fell apart amid claims of a €6bn black hole in the accounts. Jane Lewis reports.
“Sorry that I have disappointed all of you. I never meant to cause any of you any harm,” Steinhoff boss Markus Jooste wrote in a letter to colleagues following his abrupt resignation in December. He hasn’t been seen since, says The Sunday Times, and who can blame him for going to ground? Once a hero of South African business, credited with building an international retailing powerhouse spanning five continents, Jooste is now under investigation for his role in what’s been dubbed “South Africa’s Enron”.
Steinhoff shares have lost 90% of their value following the shock discovery of “accounting irregularities” late last year. Since then, the company has admitted that some €6bn, perhaps more, “has gone walkabout from its international operations”, which in Britain includes discount store Poundland, the furniture retailer Harveys, and Bensons for Beds. Now the scandal is already “blowing a hole through Wall Street bank earnings”, says Business Insider, as firms such as Goldman Sachs, Bank of America and JPMorgan write down hundreds of millions of dollars of exposure linked to Steinhoff and its shareholders.
Young man in a hurry
Jooste, 56, “wasn’t just a CEO”, says HuffPost South Africa. “He was the face of the conglomerate” and “appeared to have a spotless reputation”. A member of the so-called Stellenbosch mafia, the close-knit group of individuals that dominates business in the Cape, his big passion was racehorses (he owned some 350) and seemed to live a charmed life in an array of beautiful houses, praised by friends as a regular “boytjie” (talented young man), with no airs and graces.
Jooste – the son of a postman who passed on his love of punting on the gee-gees – credits a cash-strapped youth for his later success. Having emerged from university with R100,000 in debt, “I was very hungry”, he told BizNews in 2016. So he put his qualification in chartered accountancy to good use, and was soon appointed financial director of a publicly listed company – furniture firm GommaGomma – while still in his 20s.
“My life has always been about relationships,” Jooste told Biz News. “Trust each other and eventually you will do something good together.”He found an early mentor in Claas Daun, a German entrepreneur who invested in GommaGomma. That led to him meeting the other “game changers” in his career: Bruno Steinhoff – who owned a German business that merged with GommaGomma in 1998 – and, later on, retail magnate Christo Wiese. Steinhoff’s purchase of Wiese’s retail holding company Pepkor for $5.7bn in 2014 was one of those “pillar transactions” that catapulted the company into the international big league, and Weise became the chairman and largest shareholder in Steinhoff.
Last year Weise and Jooste tried to merge Steinhoff with supermarket Shoprite. The deal collapsed amid investor opposition and Weise is now selling some of his Shoprite stake to pay off loans secured against Steinhoff shares. Shoprite’s other shareholders now look fortunate not to have been dragged into Jooste’s orbit. “With headlong expansion came apparently ballooning profits,” concludes The Sunday Times. “Only now is the ugly truth starting to emerge: frantic deal-making concealed huge financial fragility.”