Nicola Mawson
By its very definition, a third-party company is effectively one with which a business has a contract in the same vein as a supplier arrangement and is not meant to be involved in its business affairs.
However, Steinhoff wasn’t hands off when it came to companies outside of its business conglomerate as, again through a series of complicated transactions and funding deals, it not only provided some funding for deal-making but also used these entities to move money around.
One chapter of PwC’s investigation details the complex deal-making involving Campion and its subsidiaries.
PwC’s report, the outcome of a lengthy investigation, stated that: “We have identified the Campion Group as an alleged third-party group of companies which the Steinhoff Group has had a business relationship with.”
Campion, which was incorporated in 2014, owned all of Fulcrum Investments Partners. Campion, in turn, was owned by three individuals, each with an equal share. As these people have not been named regarding any probe by the Hawks and subsequent investigation by the National Prosecuting Authority, they cannot be named as per the Protection of Personal Information Act.
Subsequently, as of December 2017 and following a series of deals, Fulcrum owned 21 entities located in the UK, Switzerland, South Africa, and Mauritius. In 2019, during the investigation, a Steinhoff employee, who cannot be named, told PwC that, when it came to “accounting for the Steinhoff Group transactions in the financial records of the Campion Group, this was disclosed as being transactions with a possible related party”.
After Fulcrum acquired several entities, Steinhoff, via some of its units, invested R4.6 billion in Fulcrum, with R3.3bn being provided through intercompany transactions.
An additional R6.6bn was then moved around from company to company. More accounting shenanigans also took place, with, among other techniques, money being written off “because it would cause a tax loss in Mauritius”.
In another chapter of the probe, PwC stated that there were design deficiencies within and surrounding the consolidations when it came to accounting for these in that journals can be deleted and changed after having been posted.
“These deficiencies created an opportunity for manipulation. They also increase the risk of error within and surrounding the consolidation,” its report stated.
It also noted that there were other instances where the Steinhoff Group was involved in the business affairs of the Campion Group. Among these, the 7 000-page report that Business Report obtained through a Promotion of Access to Information application, were records that showed that financial transactions took place.
PwC also found that that Deloitte questioned the Steinhoff Group’s position of control over the Campion Group.
Steinhoff collapsed after its then auditors Deloitte confirmed there were accounting irregularities in 2017 and has become known as South Africa’s largest corporate scandal to date. The fallout included former and disgraced CEO Markus Jooste’s reported suicide, while several executives were charged and, in some cases so far, have been found guilty of fraud.
When news emerged of accounting irregularities, Steinhoff lost 97% of its market capitalisation between August 2017 and March 2019 as investors reacted to the news. Steinhoff was delisted from both the Frankfurt and Johannesburg stock exchanges and officially liquidated on the same day: October 13, 2023.
Overall, PwC found that €6.5 billion – or R125bn – artificially went through Steinhoff's books between 2009 and 2017 when the lid was on what is South Africa’s biggest corporate scandal to date was blown.
BUSINESS REPORT