FEDUSA Meets PIC over Steinhoff Scandal
11 December 2017
The Federation of Unions of South Africa (FEDUSA) and its public sector affiliates the PSA; SAOU, NAPTOSA, HOSPERSA and SAPTU met with the Public Investment Corporation (PIC) Chief Executive Officer Dr Dan Matjila and his advisors to discuss the alleged massive corruption, fraud and gross negligence concerning the accounting irregularities at Steinhoff, which has a primary listed in Frankfurt and secondary listed on the JSE.
FEDUSA is concerned about the Government Employee Pension Fund (GEPF) members and pensioners and what financial impact this alleged corporate scandal at Steinhoff would have on the fund. The Federation would like to assure GEPF members and pensioners that their funds are fully protected based on the fact that the GEPF is a defined benefit fund. Market fluctuations do not affect the quantum of pension benefits, and therefore public servants can be reassured about the security of their funds.
It is unclear what the PIC’s losses are, with estimates ranging from R10-billion to R15-billion. Steinhoff, has been battling to shake off allegations of accounting fraud and corruption after news broke that German authorities were investigating the company.
FEDUSA and its affiliates are concerned about the level of corruption, fraud and the lack of ethical corporate governance in our listed companies generally and the negative impact this has on the broader economy, job creation and in this instance, the 120 000 employees of Steinhoff.
In a move to spin off their Africa assets in Steinhoff, the PIC was involved in a separate JSE listing of STAR AFRICA RETAILERS (STAR) which owns brands such as Pepkor, Ackermans, Dunns,JD Group and Hi-fi Corp. STAR has not suffered the same extent of share price decline as Steinhoff. The majority of the 120 000 Steinhoff employees sit under the Star listing as opposed to Steinhoff International. This provides a certain level of comfort for job protection in South Africa. FEDUSA and its affiliates need to satisfy themselves that these jobs are protected.
The outcomes of the meeting with the PIC suggested that the Steinhoff board of directors is ultimately responsible for the gross lapses in corporate governance and that adequate steps need to be taken to address these concerns. As fraud and corruption are still alleged, it is prudent to analyse the outcomes of independent forensic investigations currently underway at Steinhoff by Price WaterHouse Coopers (PWC) on various practices, including rampant equity/debt issuances on the back of false accounting records.
The meeting with the PIC today suggested as the first course of action would be to investigate the eligibility of the entire board of directors as fit and proper persons. This is also exacerbated by the retention of the Chief Financial Officer, Ben La Garnge, who has not offered his resignation following that of disgraced CEO, Marcus Jooste.
The meeting also suggested that a completely independent investigative commission be appointed. The PIC has been vocal about transformation and board representations of some of its listed investments. Prior to the successful listing of STAR, the PIC had appointed a board member to sit on the board of Steinhoff. Transformation remains an important key stone of the PICs investment philosophy and FEDUSA and its affiliates echoed the call for there to be at least one worker elected board member to drive further governance.
FEDUSA and its affiliates have also made calls for the investigations to be conducted by South African regulatory and oversight bodies, as well as the international regulatory bodies with jurisdiction to Steinhoff’s dealings.
The meeting with the PIC covered the investment benchmark prescribed to them in the mandate set by the GEPF and the steps they take to adequately deliver the returns of the benchmark. The exposure to Steinhoff that the benchmark held had increased over the past few months and has adjusted accordingly given the share prices movement experienced in recent days.
As the future of Steinhoff is unclear at this point, the PIC continues to hold the shares as the benchmark prescribes. The PIC and FEDUSA expressed disappointment at the lack of auditor rotation at Steinhoff, an issue that the PIC has raised with management several times. The current auditors, Deloitte have held back on releasing the financial statements of Steinhoff.
FEDUSA and affiliates have joined hands with PIC and the GEPF to reassure members that the investment process at the PIC is sound and they will do all in their power to drive stronger and more transparent corporate governance in the listed investments.
FEDUSA calls on the JSE as the regulator to take more decisive action on Steinhoff. FEDUSA echoes the sentiment that Corruption is Corruption, Fraud is Fraud and Theft is Theft, and that the Law must prevail equally.
Steinhoff Skandaal: SAOU ontmoet OBK en Owerheidspensioenfonds
11 Desember 2017
Die SAOU het later vanoggend ‘n formele vergadering met die Owerheidswerknemers Pensioenfonds (OWPF) en dié se portefeuljebestuurder, die Openbare Beleggingskommissaris (OBK) insake die Steinhoff skandaal wat daartoe gelei het dat die OWPF ‘n verlies van bykans R20 miljard gely het. Die SAOU wat die beste belange van sy lede en voormalige lede wat nou pensioenarisse is, kan onmoontlik nie die huidige stand van sake aanvaar nie. Hulle pensioenvoordele moet beskerm word. Die doel van die gesprek sal wees om die volgende van die OWPF en die OBK te eis:
- Dat die oorspronklike ondertekenaars en aandeelhouers van die Steinhoff ooreenkoms gedurende 2015 se moontlike kennis van die onreëlmatighede en kunsmatige opblaas van die aandeelprys, ondersoek moet word. Die persoonlikhede wat betrokke is, is allermins naïwe en onervare sakemanne.
- Dat die geskiktheid en gepastheid van die toenmalige en huidige direkteure van Steinhoff volledig ondersoek word aangesien dit duidelik blyk dat uitvoerende en nie-uitvoerende direkteure nie hulle fidusiêre pligte nagekom het nie.
- Die ondersoek na moontlike kriminele optrede met spesifieke verwysing na die direkteure se moontlike bedrieglike optrede en opsetlike weerhouding van wesenlike inligting. In die verband is die werklike rede waarom die ouditeure selfs geweier het om die finansiële state beskikbaar te stel van wesenlike belang.
- Dat die JEB ‘n ondersoek moet gelas met die oog daarop om die verdere verhandeling van Steinhoff aandele op te skort.
Die vergadering vind om 11:00 in Pretoria by die kantore van die OBK plaas. Die SAOU sal daarna verdere inligting beskikbaar stel.
Steinhoff Scandal: SAOU to meet the PIC and the GEPF
11 December 2017
The SAOU will meet with the GEPF and its portfolio manager, the Public Investment Commissioner (PIC) later this morning in regard to the Steinhoff scandal that led to a loss of almost R20 billion for the GEPF. The SAOU that always serves the best interest of its members and past members, who are now pensioners, cannot just stand idly by. We need to protect their pension benefits. The aim of the meeting will be to demand the following:
- That the possible knowledge of the irregularities and artificial inflation of the share price of the original signatories and shareholders of the Steinhoff agreement during 2015 must be investigated. They are all knowledgeable and experienced business men.
- That the fitness and propriety of the previous and the current directors must be investigated as it is becoming evident that they did not comply with their fiduciary duties.
- The investigation of possible criminal procedures against the directors’ fraudulent and deliberate withholding of substantial information. In this regard the reason why the auditors refused to release the financial statements will be of particular significance.
- That the JSE must investigate the possible suspension of trading in Steinhoff shares.
The meeting will take place at 11:00 in Pretoria at the offices of the PIC. The SAOU will make further information available thereafter.
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GEPF en Steinhoff skandaal:
Die SAOU het op 7 Desember gesprek gehad met die Openbare Beleggingskommisaris wat nms die Pensioenfonds beleggings hanteer en ons absolute misnoë gekommunikeer.Die GEPF is via die OBK die 2e grootste aandeelhouer in Steinhoff, nl. bykans 321 milj aandele. Die daling vd aandeelprys v R55.89 pa na R16.70 pa verteenwoordig ‘n verlies van ongeveer R12,5 miljard.
Die verlies is werklik ernstig, maar moet in konteks beskou word as % van ‘n totale bate portefeulje van amper R1,6 triljoen. In reële terme nie bedreigend vir die voortbestaan vd Fonds en lede se voordele nie.
Die SAOU beskou die saak as besonder ernstig. Dit moet ook beskou word teen die agtergrond van ander swak beleggings vd OBK, asook die mate waartoe die Raad vd OBK en Trustees vd GEPF hulle fidusiêre pligte versaak het, en saam daarmee, die gepaardgaande aanspreeklikheid.
Die SAOU is besig om verdere advies in te win insake moontlike opsies ter aanspreek vd saak en gepaste regsaksies. Lede sal op hoogte gehou word v ontvouende verwikkelinge.
Lede word verseker dat die verlies hoegenaamd nie die pensioenvoordele negatief sal beïnvloed nie.
GEPF and Steinhoff scandal:
On 7 December the SAOU had discussions with the Public Investments Commissioner who handles investments on behalf of the Pension Fund and conveyed the SAOU’s absolute displeasure in regard to the above report.
The GEPF, via the PIC, is the second largest shareholder in Steinhoff, namely, approximately 321million shares. The fall of the share price from R55.89 ps to R16.70 ps represents a loss of around R12,5 billion.
The loss is indeed serious but needs to be seen in context: it is a % of an asset portfolio of close to R1,6 trillion. In real terms, therefore, it is not a threat to the survival of the fund and member benefits.
The SAOU regards the matter as extremely serious. It must also be viewed against the background of other bad investments made by the PIC as well as the extent to which the Council of the PIC and Trustees of the GEPF neglected their fiduciary duties and associated accountability.
The SAOU is in the process of taking further advice regarding possible options to address the matter as well the appropriate legal actions.
Members are assured that the loss will in no way whatever negatively affect their pension benefits.