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Best of 2022: Shareholder demands forensic on TWK accounts after Jooste’s Steinhoff chum resurfaces as Audit Committee chair
This article was first published on the 17th of February 2022
A TWK shareholder has demanded an independent forensic audit of the CTSE-listed former farming co-op because he believes one of Markus Jooste’s Steinhoff intimates, Piet Ferreira, is up to the tricks similar to those exposed in SA’s biggest ever fraud. His suspicions were aroused after a member of the audit sub-committee of the TWK board issued four falsified FNB bank “guarantees” for an R11m company debt. FNB encouraged the shareholder to lay a charge of fraud against the TWK director, which has been done. That came on top of a massive increase in TWK’s profits and asset values – rubber stamped by Ferreira’s central role as a director and chairman of the company’s audit committee.
By Martin Welz
TWK Investments Ltd (TWK) listed on the Cape Town Stock Exchange on 30 November last year. There are 39 million issued shares (at a listing price of R35 per share) giving the company a market capitalisation of R1.6bn.
Hendrik Johan Karel Ferreira is said in TWK Investments Ltd’s “Integrated Report 2021” to have been a director of the company since June 2017 – which happens also to be the year his long and eventful career at Steinhoff International ended. Steinhoff finally collapsed in December 2017.
HJK Ferreira, with a B.Compt (Hons) and CA(SA) after his name is Chairman of TWK’s Audit and Risk committee and of its Nomination committee.
Most of the local shareholders in the farming districts where TWK was originally established as a farmers’ co-operative, were until very recently unaware that Ferreira had been included as “part of the dirty (half) dozen of Steinhoff” in a BizNews article.
Or that as Wikipedia succinctly notes: “Piet Ferreira [as HJK was then better known], a former investment banker who joined Steinhoff in 2002, was instrumental in structuring its public offerings and complex acquisitions during his 15-year tenure.”
He is definitely the same person, as Steinhoff’s “Piet” and TWK’s “HJK” are recorded in the official CIPC register with the same ID number.
A lot has happened at TWK since Ferreira’s arrival there, including the appointment of his nephew, Thomas Ignatius Ferreira, as deputy chairman of the TWK board.
TWK used to be the acronym for Transvaalse Wattel-Kwekers kooperasie (Transvaal Wattle Growers co-op), with farmer members in places such as Paulpietersburg, Piet Retief, Ermelo, Amsterdam and Carolina. In the new dispensation it was converted to a company with shareholders, who were mostly the same farmers.
But in recent years, various non-farming acquisitions were made and in December last year it became a listed company with its shares listed on the newly established Cape Town Stock Exchange.
Shareholders now included investors, “players” and speculators found trading on all stock exchanges. The appointment of an ex-Steinhoff director to the board is another reflection of those changes.
Ferreira’s involvement might explain some of the questions posed by a concerned shareholder at today’s Annual General Meeting that took place at the Welverdiend Guest House in Piet Retief.
On 11 February, Frederick Carl Kluckow, the commercial director of Shift Capital (Pty) Ltd and erstwhile mergers and acquisitions consultant, wrote to TWK’s company secretary asking for access to the accounting records underpinning the TWK’s published Financial Statements for the year ending 31 August 2021.
He required access for a Forensic Audit which he wanted to be done by Grid Forensic Accounting and Auditing.
Amongst the issues Kluckow wanted interrogated was possible overstatements of:
- R214m in TWK’s disclosed profit;
- R496m in its operating cash flow; and
- R222m balance sheet manipulation of land and buildings.
Kluckow, who received no response from TWK, claimed there are various inconsistencies in the figures and valuations and a lack of the disclosure required by international accountancy rules and standards
He says numerous categories of assets – fixed property, plant, equipment, trade and other receivables, and more – are valued based on so-called “level 3 fair value assumptions”, referring to intangible factors which are not easily comparable. Steinhoff applied this approach to manipulate its financial statements.
International financial reporting rules require that the valuation technique employed must be fully described in the accounts; it must include quantitative information about the “significant unobservable inputs”, and a reconciliation from the opening balances to the closing balances.
Kluckow claims that TWK’s latest accounts don’t disclose any of the detail required. He maintains this should be of concern to anyone using the Financial Statements as a source of credible information.
He maintains: “I have strong reason to believe that the Board have intentionally misstated the Financial Statements for the year.“
TWK’s CFO, Eddie Fivaz’s response via the CTN stock exchange reads: “The trading statement issued prior to the release of the 31 August 2021 financial results is factually correct in informing shareholders of record profits. […] profit before tax increased by R142m from R159m to R301m.
“Highlights for the year included the recovery of the profitability in the Timber segment and the Retail segment. The performance delivered by the mining timber products and timber sales from own plantations supported sales in the timber markets which increased by 27%. The profitability in the Retail segment was supported by excellent trading conditions, increased fertiliser volumes sold and significantly increased sales through the New Holland agencies.”
The information above is extracted from the Report of the Financial Director included in the Integrated Report [not from the Year-end financial statements themselves.].
Fivaz added: “The accounting policies were consistent with the policies applied during 2020. However, management appreciate the fact that the requirements of International Financial Reporting Standards (IFRS) and international Accounting Standards (IAS) could be confusing for certain shareholders and therefore encourage them to discuss any issue or uncertainty with us or our auditors.
“As per IFRS and IAS rules the gain on property revaluation is not included in Profit for the year and therefore not included in earnings per share.” Which misses the point as such revaluation obviously inflates the stated net asset value of the company.
In addition, Kluckow also requested more information about a subsidiary company listed as “TWK Guarantee Company RF (Pty) Ltd“ which provided various guarantees underpinning borrowings listed in the annual financial statements for 2021.
“The reason for this request is due to GHB Prinsloo, director and Internal Audit Committee member, issuing illegitimate FNB guarantees and his use of an illegitimate FNB Power of Attorney in December 2021 and January 2022.”
Gerhardus Beukes Prinsloo is a qualified attorney who practices as PGW Attorneys Inc in Ermelo. He has been on TWK’s board of directors since February 2020. Like HJK Ferreira, Prinsloo is also a member of the company’s Audit and Risk committee and is recorded as having attended all the latter committee’s meetings since his appointment.
In December 2021 and January of this year, Prinsloo issued four FNB “guarantees” for a total sum just short of R11 million. Shortly thereafter FNB confirmed they were “not legitimately prepared, issued or authorised and were therefor null and void”.
The guarantees were tendered to cover a balance owed by a wholly-owned subsidiary of TWK Investments to Shift Capital, as determined by an adjudicator, for the development costs of a shopping mall and filling station in Wesselton. Both are currently up for sale.
On 15 December 2021 Prinsloo’s law firm addressed a letter to Shift Capital’s attorneys, Cox Yeats, in which he stated:
“Attached hereto a bank guarantee issued by Firstrand Bank for your attention. Our client denies owing the amount claimed, which dispute will be [re-]adjudicated by way of arbitration, notwithstanding the award [already made by a jointly approved adjudicator].”
As, pending arbitration, the legal principle of “You pay now and argue later” applies, the TWK subsidiary was required to immediately pay the full amount awarded by the adjudicator, before it could take the matter to arbitration. […] But, wrote Prinsloo, “our client will not be terrorised into making payment of a superficial determination […]
“Our client has evinced (sic) its bona fides by providing the attached guarantee. The guarantee therefore constitutes unconditional security until finalisation of the arbitration,” Prinsloo, wearing his attorney’s hat declared.
Shift Capital’s attorneys, Cox Yeats were not convinced of his bona fides: they could find no such guarantee listed on FNB’s online register of guarantees.
When Cox Yeats wrote to FNB querying the proffered “guarantees” this is the reply they received on 22 December 2021 from Gys Wilson, FNB’s Product Head – Guarantees: “Thank you very much for informing the bank of this. The purported guarantee is not legitimately prepared, issued of authorised by the bank, and thus no reliance can be placed on it.”
Apparently unperturbed, on 19 January, Prinsloo issued three fresh FNB guarantees [so-called PIM3 guarantees] that together covered the original guarantee amount.
He then brazenly registered them on the FNB website for property mortgage loan guarantees – even though they did not relate to a mortgage loan, but explicitly to payment of an arbitration award. (The FNB contract contains a clause that specifically states: “This guarantee will be null and void in the event of any of the conditions not being related to a property transaction.”)
When challenged, on 24 January 2022 Prinsloo offered this bizarre explanation: “The reason for the three guarantees is to prove to your firm as well as your client that our firm is holding money on behalf of our client that can be used as security for payment of any amounts due to your client. The money was only transferred from TWK Investments into our trust account for purposes of delivering the guarantees.
“We confirm that the guarantee issued will be honoured“ and, he added, “the 3PIM [FNB] guarantees which are applicable to property transactions will now be cancelled.”
In a letter dated 25 January 2022 FNB Commercial in Johannesburg informed Shift Capital: “We have investigated your query and are able to confirm that [three replacement] guarantees were issued [by Prinsloo] on 19 January in favour of [your] attorneys through FNB’s 3rd Party Investment Manager (3PIM) system.
“As indicated in the wording of the guarantees under the Property Conditions section, ‘The guarantee will be rendered null and void in the event of any of the aforementioned conditions not being related to a property transaction.’
Given that the condition listed on the guarantees is not related to a property transaction, the guarantees are all null and void, and they have subsequently been cancelled by the bank.
“No reliance should be placed on the purported guarantees. Failure to abide could result in losses and/ or legal implications.
“The Bank recommends that the matter be reported to the South African Police Services by Shift Capital (Pty) Ltd. The Bank will provide its co-operation to the SAPS should we receive a subpoena for any information.”
As a consequence, criminal charges have been laid against TWK Investments director Prinsloo with the Hilton police in which he is accused of fraud, forgery and uttering.
In a letter addressed to the regulator at the Cape Town stock exchange, TWK’s Chief Financial Officer, Eddie Fivaz states: “TWK is currently investigating allegations pertaining to actions of a director and management member of the Group and will act in the appropriate manner, depending on the outcome of the investigation and on advice of our legal counsel Cliffe Dekker Hofmeyr Inc.
“TWK is committed to acting with honesty and integrity in the performance of their duties and their personal conduct, according to the highest moral and ethical standards.”
- Stellenbosch and Pretoria University educated Martin Welz has dedicated his life to exposing malfeasance and abuse by the rich and powerful, occasionally ending up in court as a result of his disclosures. After decades of producing award-winning exposés for major newspapers, Welz founded Noseweek in June 1993.
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