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EDINBURGH — The near-collapse of Steinhoff hammered investment portfolios and has put thousands of jobs around the globe in jeopardy. But before its former CEO Markus Jooste stepped down in December amid allegations of financial impropriety, Steinhoff was a stock market darling and its bosses were regarded as South Africa’s experts in globalisation. So mesmerised with Steinhoff’s success were stockbroking analysts and bankers that they failed to spot signs of trouble within the multinational retailer with South African roots. Now, as forensic accountants piece together deals and the authorities probe whether individuals should go to jail for corporate crimes, a group of University of Stellenbosch Business School academics has sized up the rise and fall of Steinhoff. Their work is republished here on BizNews as a five-part series. – Jackie Cameron
The Steinhoff story
By Brett Hamilton, Marius Ungerer, Daniel Malan and Mias de Klerk*
The Steinhoff saga, possibly the biggest case of corporate fraud in South African business history, has dominated financial and general news since the company’s share price collapsed on 5 December 2017. Part of our role as a business school is to reflect on real-life business cases and to extract general lessons to be learnt. Much can be gleaned from business success stories, but even more revealing sometimes are business failures.
In presenting this mini case study on Steinhoff International, we find no joy in knowing that significant financial losses have been incurred not only by institutional investors and leading business personalities but also by millions of ordinary people. Living and working in close proximity to Stellenbosch, we see the painful effects of the company’s reputational loss on friends, employees, pensioners and families; not to mention the misery caused to people around the world by the swift financial decline and uncertain future of this once-revered global retail giant.
In this section we look at the remarkable Steinhoff success story, which spans 55 years and is defined by three successive periods of business expansion: (1) the expansion from West Germany to the East (1963 ‒ 1993), (2) the new era of expansion to the South (1994 ‒ 2013), and (3) the last few years signalling Steinhoff’s ascent as a truly global retail company (2014 ‒ 2017).
Steinhoff and governance
“Investors find Steinhoff impossible to analyse from one year to the next, given its frenzied deal-making. I can understand that feeling, but you must always take the facts into account and forget the noise, né? It is now a big business and it’s in lots of countries, so, of course, it will be complicated … With real due respect – I mean this – everyone’s entitled to their opinion. I like to argue with anyone because you learn, but take the last results presentation, then look category by category – now you must really not have to go to Harvard to understand the figures.” – (Markus Jooste, former CEO, Steinhoff International, 22 September 2017)
In this section, we address two intriguing leadership questions as they relate to the Steinhoff case:
What business lessons can be learnt from the Steinhoff case?
In this last section we attempt to distil from earlier sections some key learning points from the Steinhoff case. It is too early to give a full interpretation of what has precipitated the recent fall of this corporate giant and we must keep an open mind about how things may eventually play out.
Nevertheless, the various topics covered in the case study – Steinhoff’s business vision and fast-expanding operation over the years, and the company’s approach to governance and leadership – provide some important business lessons for small entrepreneurial concerns and large corporates alike.
- Brett Hamilton holds an MBA from the University of Stellenbosch Business School where he is a visiting lecturer in Corporate Finance. He is also a director of First River Capital.
- Marius Ungerer is Professor of Strategy at the University of Stellenbosch Business School.
- Daniel Malan is Associate Professor of Corporate Governance and Head of the Centre for Corporate Governance in Africa, based at the University of Stellenbosch Business School.
- Mias de Klerk is Professor of Leadership and Human Capital Development, and Head of Research at the University of Stellenbosch Business School.