DUBLIN — As elections edge closer and the lights stay off, many South Africans are seriously asking themselves who they can really trust. And as the polls show, many of them are answering, “No one.” Trust in South Africa’s political parties is at a relatively low ebb, and many voters feel like political orphans, with no party out there that truly represents them. This week, Alec Hogg and I discuss the political entrepreneurs who are trying to take advantage of this dissatisfaction. We also look at how the Eskom disaster may affect the elections as gloom settles over many parts of the country. And we pick up on another untrustworthy bunch – the wrongdoers at Steinhoff. This week, there were some names named in Parliament, but it looks like some of the big names may have been skipped. Alec unpacks what he thinks is going on as the fallout from the Steinhoff collapse continues to play out. – Felicity Duncan
Hello, and welcome to this week’s episode of The Editor’s Desk here on Biznews Radio. I’m Felicity Duncan and with me, a newly-returned Alec Hogg.
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Now Alec, we’re going to kick off talking about the elections again because I think that’s really what’s on everybody’s minds. I was looking earlier this week at some interesting data out of Ipsos. It was a poll that they conducted in the beginning of the year and one of the things that struck me was a large of number of South Africans – 38% of eligible voters and 37% of registered voters – were saying, “There’s not a political party out there that really reflects their views. Now, that’s a big lot of unsatisfied voters and you see that in many democracies around the world.
There’s a lot of people who will vote for somebody but they don’t really feel like that somebody is representing them and to me, this represents a big political opportunity in South Africa for an astute political entrepreneur. Somebody like a Macron in France who can look at the electorate and say, “Geez, you know there are a lot of people out there who are not feeling a connection to any of the parties that are available – any of their options. Let me take advantage of that to create something new.” And we’re seeing some interesting moves in political entrepreneurship in South Africa, trying to capitalise on this fact.
Yeah. People are thinking differently. It was just over a year ago, that I had lunch with Kanthan Pillay in Sandton and at the time, Macron had just won the election and there was a lot of enthusiasm and exuberance in France about this different way – this new party that went across all party lines, but just acquired people from society who wanted to serve. So, no more professional politician. These are people who had achieved various things or felt that they wanted to get into public service. This was a way to do it and they were also dissatisfied with what was going on in the whole political environment. The consequence of that was that Kanthan said (and he’d done an enormous amount of work on the project by then already) that this was an opportunity to give people an alternative. Now, Kanthan’s an interesting guy. I worked with him for a few years when he was the Head of News at ETV.
Back then, at Moneyweb, we were supplying the business content to ETV. I was on air for quite a while and clearly, he was a guy who knew television very, very well. I was deeply respectful of his mind at that stage and of the contribution that he could make to uplifting my own skills in this area. We stayed in touch since then. He’s Princeton University-trained, so he’s not your guy who’s coming out of a hole who’s saying, “Let me go and make some money quickly out of this political environment.” He is somebody who thinks very deeply. When he was taking me through his plans over a year ago, he was addressing big issues like the high level of rape in South Africa (or femicide – women being vulnerable) and how do you address that, and then looked at it with a completely fresh approach and came up with this innovative idea to say, “Every girl child should be trained how to use a firearm at school because this is a life skill that you need to be prepared at a young age for what happens afterwards.
The result of that – in his thought and his pretty logical process – is that a would-be rapist would think twice about attacking a vulnerable person if there was the possibility that the vulnerable person had a firearm and knew how to use it. So, it’s that kind of a thought process that deals with real issues that are happening in society. He had similar approaches to things like cash heists – how they would address that. i.e. Use less cash in society. Move to a cashless society, then you don’t need to move cash around and then the criminals would have nothing to go and heist. I really like the way he thought about these and he’s got some like-minded fellows. They don’t have a party leader in the ZACP (the Capitalist Party). They’ve got ten people who are co-founders and none of them are standing up. Although Kanthan, because he is media-savvy and certainly has been a driving force behind it, is the one having a lot of the airtime. But he says that it’s completely multi-racial. It’s young, brainy, smart people who think differently so, yes. I wrote a year ago that there is a Macron type movement, which they are hoping to launch in SA. He, so far has certainly put the cards that he’s played are certainly suggesting that this is something new and something that is going to appeal to perhaps a good percentage of those 38%. You know, Felicity, the whole world is going through radical change.
We know that from, we term it the Fourth Industrial Revolution (4IR) and some people get irritated by the description. You could call it the ‘second machine age’ which is in fact where it first stared with Andrew McAfee and Erik Brynjolfsson, the MIT professors who kind of did the groundwork in this area. Or even before them, their friend, Thomas Friedman who is a New York Times columnist and wrote the earth is flat, for instance and the Lexus and the Olive Tree. So, there’s a lot of this understanding that the world is changing and it’s changing in ways that technology has brought. We’ve become more aware. We’ve got access to more information but politics also has to change. The old political system, which has been with us for hundreds of years is no longer fit for purpose. It makes no sense to anybody who is aware, conscious or thinks about these things that you vote for a political party every five-years. When they lie to you about what they’re going to do, then they don’t do what they’ve lied to you about, and five-years later they lie to you again and you must vote them back in. None of that makes sense so, it’s not surprising that you’re seeing these radical shifts in other parts of the world and now even in SA, where there is an option for those, who perhaps have got to that position in their minds and saying, ‘I don’t buy into the old system. I don’t buy into a party that lies to me or a party that can’t even run its own affairs efficiently,’ or ‘only when it’s forced into a corner does it become honest with me.’ I want to look for something different and well, these young South Africans have done their bit to offer that option.
Looking for honesty in the world is not of course, only difficult in politics, right, but we’ve also seen, I think, a lot of an honesty deficit in our business leaders in SA in the last few years, and I’m thinking here of course particularly about Steinhoff. We had some developments on the Steinhoff front this week with the Parliamentary hearings and the naming of eight people responsible for the chicanery and malfeasance on the Steinhoff side, and you had some interesting thing to say about that, particularly about the particular people who got named.
It is a company that I know well. I’ve served on a couple of boards with Markus Jooste, The Racing Association Board, and then as a consequence of that, on the Phumelela Board. So, I got to know pretty well through our mutual interest in horseracing. It was quite an ironic thing on Sunday when I was in SA ‘The Sunday Times’ has a property section and, on the day, that the Steinhoff report from PwC, or certainly the summary of it, was all over the Sunday newspaper. There you had, in ‘The Sunday Times’ – property section, on the front page, the white house, which not too many people, I suppose are aware of, but it is the old Steinhoff headquarters, the real headquarter in Johannesburg. It used to be Grant Andrew’s Office Furniture – it’s on that hill as you go along Jan Smuts Avenue towards the city in Parktown and it’s on the left-hand side – quite a prominent building. That is where Markus use to hold court. Every year he would have a Christmas party. As I don’t drink, I never really got into the festivities but as a courtesy when I was invited, I would arrive and you would see the ‘only men’ sometime scantly clad waitresses and then different entertainment that had been arranged for these insiders.
I often wondered how a business could be run along these lines. We used to have our Racing Association board meetings in the white house so, this was pretty Markus Jooste’s lair, if you like. A little bit like the sale of this for R28.5m – that’s what it’s on the market for, is another reflection of the end of an era for Steinhoff. But what is coming out here is really, in a way, pretty strange. You have a new CEO, Louis du Preez, who was with Work’s Man, so he’s a lawyer. Also, on his group, there’s a small group of Steinhoff Directors who, from the board, who are involving themselves in the actions with PwC and where to next? Now, it’s very interesting when you have a look at the members of that sub-committee, there’s an American who is a litigation specialist, there is another attorney who has also been busy in mergers and acquisitions and that kind of litigation, and of course you have du Preez, who himself is from that background. So, it’s not surprising to me that they only released an 11-paged summary and in lots of legalese. You had to go through it carefully to try and understand exactly what they were saying, but what they were saying was, as follows. Whenever Steinhoff needed extra profits to either bolster the poor operating performance or to push up its profits ahead of an acquisition, they simply created it. So, they created these third parties and they used people outside of the group to put together these ostensibly independent but definitely not entities, which would then ‘buy services’ from Steinhoff. Inflate the profits of Steinhoff, and the numbers then looked really good.
These entities were all in Europe so, they were not audited by Deloitte. They were audited by a small firm in Germany, who were obviously in on the game. What the PwC report has said is that over 10-years there was an amount of €6.5bn that was added to Steinhoff’s bottom-line, in other words, added to its profits through this mechanism. What it didn’t do was identify who the people were who were involved. Now, through a process of elimination and also, by having a looking at what the people who were close to Jooste over these 10-years, because remember it started 10-years ago. You then get a little cadre of individuals. I named them as the Steinhoff dirty half-dozen, led by Jooste, with another five – their financial director, the head of M&A. His real, inner-circle, which interestingly enough did not include the COO, Danie van der Merwe, who must be feeling really awful because he’s lost everything plus. He’s got huge debt, because that’s the way they used to gear up at Steinhoff, and he wasn’t even in on the game with the Jooste confidantes, who’ve all left.
Now, in Parliament clearly somebody must have read that story because the politicians then asked du Preez, and badgered him and said to him, ‘We want names.’ And he gave 8 names but interestingly enough he gave 4 of those names with third parties, so they were not easy to find out but 4 people, European people, who had created these entities, and then another 4 names were Jooste, and Dirk Schreiber, who we knew was the CFO of the European operations – clearly, he’s right in the middle of it. But then two other names, which were unusual to me because those two people, Stéhan Grobler and Ben le Grange, had both been specifically excluded in Jooste’s letter, which he wrote to the staff. So, he said, ‘these two guys didn’t know about, if you like, made of 17thfloor.’ But he didn’t say anything about the other members of the ‘dirty half-dozen’ which I named. Now, there was another thing that was quite interesting to me in all of this. As you read carefully through the PwC report it says that legal documentation was created after the event. Now, neither le Grange, nor Grobler have any legal knowledge. The ones an accountant and the other guy was the company’s Secretary, so who was the legal guy doing all of this? He wasn’t named.
Well, it’s not difficult to work out that it would be the chap who is very close to Jooste called Johan du Plessis, who’s their legal head, who was an advocate of the High Court and was the Legal Counsel but he wasn’t named by du Preez. Now, all of this is very interesting and it will only come out in time but it appears that there’s a small group of people who were instructed by Jooste to do certain things and those people are not starting to emerge, either as State Witnesses, so helping and we do know from the PwC report that somebody who was on the inside is helping them. Or that they’re lying low and waiting for their day in court so, it’s a fascinating development but one which is SA’s version of Bernie Madoff’s operation, which was the most publicised – the $50bn Ponzi scheme. This was another Ponzi scheme as well, but in a corporate sense where they used the creation of fictitious profits to draw money in from the investment community, globally. If you do that. If you’ve got something like that operating in a company and you don’t have auditors who can ring the bell, and in this case, Deloitte was not allowed to look at those books. They were being by audited by a German firm. Then you really are at the mercy as an investor, and I guess the best thing we can learn from this as investors or as people who entrust others with your money is just triple check who the audit firm is that is involved and unless you know who they are – steer clear.
