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There's getting rich...
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Easy.
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Staying rich? Much
more difficult.
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Markus Jooste was one of the best
accountants ever in this country.
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He knew exactly how traditional
accounting should work.
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00:00:22,760 --> 00:00:24,599
And he knew the loopholes.
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I believe that he's
enriched himself
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00:00:26,960 --> 00:00:29,880
with hundreds of millions
of euros, if not billions.
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Theft must be theft. There's no
"irregularity". We need retribution.
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[Alec Hogg] But he was
so good and so clever
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00:00:36,200 --> 00:00:39,960
that you've got to be pretty
skilled to be able to uncover that.
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[reporter1] shockwaves in
corporate South Africa.
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There were accounting
irregularities...
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00:00:44,719 --> 00:00:46,358
[reporter2] accounting
irregularities...
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[reporter 3] Insider trading...
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00:00:47,880 --> 00:00:50,200
and possible tax fraud.
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The South Africa retail giant lost
billions from its market value
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00:00:54,679 --> 00:00:56,719
on the JSE and in Frankfurt.
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[reporter4] Dark days lie ahead for
Steinhoff and its CEO, Markus Jooste.
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[reporter5] Investors
want answers.
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[reporter6] Jooste will also most
likely face criminal charges.
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[Markus Jooste] I never lied about
the activities of the company
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as the allegation was made. Obviously
they're pointing fingers at me.
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December 2015, it's
the end of the year.
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Steinhoff decides it's going to list
in Frankfurt on the stock exchange.
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But days before it lists,
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the German police pitch up at Steinhoff's
headquarters, European headquarters,
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and raid the company.
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[sirens wailing]
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They mutter darkly about
accounting irregularities.
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They mutter darkly
about things like fraud.
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There suddenly came police, and
some other people here in my office.
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And they ask me, “What have
you done? What are you doing?”
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And I had nothing to
do with these things
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because the Rhein Finanz side
was all on the side of Markus.
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[Rob Rose] But Markus Jooste was very
quickly able to convince everyone
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that it was nothing more
than a wild goose chase.
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Markus told me, “Bruno,
that is a big lie.
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This is not true. This is not
that, and that. Believe in me.”
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So that it was, and
I believed in him.
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And the police here did find nothing
against Markus. Nothing, nothing.
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Markus's story was that there
was a former business partner...
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who had set the whole thing up,
who'd got the tax authorities
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to raid their offices to embarrass
Steinhoff ahead of their listing.
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Markus Jooste had done various deals
with somebody called Andreas Seifert.
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They were both retailers in
Europe, and they both had designs
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00:03:08,161 --> 00:03:11,199
on controlling Europe's
retail scene to some extent.
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00:03:11,879 --> 00:03:15,638
But then there'd been a massive fallout
between the two of them over a deal.
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00:03:15,639 --> 00:03:20,239
And Seifert had begun whispering that
things might not be what they seemed
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00:03:20,240 --> 00:03:23,880
to the German prosecutors, which
led to this German investigation.
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Here was our entrepreneurial
champion who's conquering the world.
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Why shouldn't he be
telling us the truth?
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He worked in the tax
office in South Africa.
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He understands how tax works.
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[Rob Rose] Despite the
criminal investigation
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and the fact that they'd been raided,
they go ahead with the listing.
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Steinhoff's entire board and CEO
Markus Jooste are meant to be there
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in Germany for the
listing in Frankfurt.
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It'll be the biggest listing in the
Frankfurt Stock Exchange that year.
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00:03:55,921 --> 00:03:57,758
It has massive fanfare,
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the entire stock exchange is
decked out in Steinhoff banners.
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The board is there, it's
gonna be a big deal.
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Markus Jooste was due to go to
Frankfurt for the listing of Steinhoff
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and he claims he has a bad
back and can't make the trip.
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That just doesn't fly. This is a guy who
used to spend his life on aeroplanes.
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00:04:20,439 --> 00:04:23,079
The Markus I knew would've
had a neck brace on...
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00:04:23,680 --> 00:04:27,160
and arrived at the listing
to take his plaudits.
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00:04:27,920 --> 00:04:30,599
Why did he not go if
he was so certain?
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And he told everybody that
there was nothing to this.
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00:04:34,360 --> 00:04:37,479
It must show you that
he must've been nervous
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that perhaps he'd go
there and get arrested.
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It should've been
a warning flag.
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So without Markus, Bruno Steinhoff stands
there in Frankfurt and rings the bell.
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00:04:51,839 --> 00:04:55,039
And signals Steinhoff's time as
a listed company in Frankfurt.
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This was the moment they'd been
working for, for 60, 70 years.
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00:05:07,879 --> 00:05:09,079
[pop music playing]
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After a lengthy wait, Steinhoff went
public on Frankfurt's DAX today,
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but not without the controversy
of a tax raid beforehand.
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Joining me now on the line is the
CEO of Steinhoff, Markus Jooste.
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[Markus Jooste] Hi,
Giulietta, thank you.
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00:05:28,680 --> 00:05:32,880
- Markus, what about the tax investigation?
- [Markus Jooste chuckles]
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The first question is, "Why did you only
tell the markets on the 4th of December
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00:05:37,040 --> 00:05:41,159
if the investigation took
place on the 26th of November?"
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[Markus Jooste] Well, they apparently
arrived at one of our German subsidiaries
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in the north of
Germany last Friday.
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And we, on Tuesday, had a video
conference with our lawyers.
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00:05:54,680 --> 00:05:57,958
But they don't have any
concrete things to mention.
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00:05:57,959 --> 00:06:01,078
And purely out of
transparency, on Thursday,
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00:06:01,079 --> 00:06:05,318
we decided to make a short announcement
so that it's out in the markets,
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00:06:05,319 --> 00:06:08,879
that we didn't spoil a nice day
like today, which it didn't do.
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[Giulietta Talevi] Yes, but there
was some suggestion on Friday
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that it should've been
communicated sooner...
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[Markus Jooste] But that's by
people that's got no knowledge
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of the matter, Giulietta.
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So, I'm very happy, and the whole board
is, that we followed the right procedure
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and we announced it
when it was appropriate
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and know what we can announce.
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I mean, you can't announce something
if you don't know what it's about.
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When that raid happened, the
board of Steinhoff appointed
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one of the largest forensic
investigating firms in Germany
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to interrogate every one
of the allegations made.
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They still gave me a report, and
the board, that it's all nonsense.
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Jooste's version is the truth.
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How did the lawyers
get it so wrong?
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Again, the Jooste black magic...
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[chuckles]
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It's the only explanation.
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Because these people had never
done business with Steinhoff.
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There was no relationship.
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A very highly regarded firm of
forensic investigators in Germany.
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00:07:18,959 --> 00:07:22,359
I made a lot of inquiries to
Steinhoff, "What happened?"
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00:07:22,360 --> 00:07:27,080
I think every single financial journalist
who was covering Steinhoff, also did so.
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00:07:30,240 --> 00:07:33,318
I've been a journalist
for 25 years.
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And Steinhoff was one of the big
stories I've covered over the years.
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My name is Ryk van Niekerk.
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We'll talk about the auditing
profession in the country.
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The perception, because of what
happened during state capture,
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and what happened at Steinhoff,
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00:07:46,040 --> 00:07:48,520
what happened at Tongaat,
what happened at EOH...
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00:07:48,521 --> 00:07:50,439
It's tainted the whole industry.
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It's not the media's role to go and look
at financial statements and find fraud.
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The key role of media is to expose
it and try and inform people,
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00:08:01,639 --> 00:08:06,239
stakeholders, shareholders, pension funds
and that and the like, of what happened.
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00:08:06,240 --> 00:08:10,359
But in general, I think people
believed what Steinhoff was saying.
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00:08:10,360 --> 00:08:12,560
The media believed what
Steinhoff was saying.
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00:08:13,079 --> 00:08:15,639
The feedback was, “Listen,
there's nothing wrong.
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00:08:16,480 --> 00:08:18,239
The Germans are fishing."
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00:08:18,240 --> 00:08:22,160
And I think maybe that was
taken on face value too easily.
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00:08:24,839 --> 00:08:28,838
We as South Africans said, "Not our
Markus. They must have it wrong."
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00:08:28,839 --> 00:08:32,079
I think it was a little bit
like, you know, this was our guy.
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And Markus was flying the flag
for South Africa in many ways.
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00:08:37,080 --> 00:08:41,319
Remember, the deal that he did with
Pepkor was the biggest ever deal
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00:08:41,320 --> 00:08:43,240
on the Johannesburg
Stock Exchange.
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This was a guy who was shooting
the lights out everywhere.
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00:08:48,161 --> 00:08:50,479
And we wanted to
believe it, I think.
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00:08:50,480 --> 00:08:53,839
And if the analysis that was
done made it easier to believe,
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00:08:53,840 --> 00:08:57,200
then... he had us
all on his side.
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00:09:06,559 --> 00:09:10,399
I believed Steinhoff
was a great company.
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00:09:11,000 --> 00:09:13,439
I liked the fact that
they produced stuff.
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00:09:13,440 --> 00:09:18,400
And I read a lot of analyst reports which
analysed Steinhoff and recommended a buy.
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00:09:42,039 --> 00:09:46,759
I know several of the board that
served at that time personally.
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00:09:47,200 --> 00:09:50,678
You know, Johan Van Zyl did
phenomenal work at Sanlam.
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00:09:50,679 --> 00:09:55,119
Steve Booysen likewise at Absa.
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Theunie Lategan, also. Very,
very highly regarded individuals.
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00:09:59,639 --> 00:10:02,279
And there was no reason to doubt
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00:10:02,759 --> 00:10:06,158
the financial statement out which
was really, really impressive.
147
00:10:06,159 --> 00:10:11,398
So yes, I invested. Luckily I
got out before the implosion.
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Not because I doubted the future
of the company, for another reason.
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I thought it was one of the best companies
in the country, hence the investment.
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00:10:22,039 --> 00:10:24,479
[director] So, why did
you sell your shares?
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00:10:24,480 --> 00:10:28,480
I used the money to put a
deposit on a house. [chuckles]
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And I'm very glad I did.
153
00:10:33,240 --> 00:10:36,558
Look, I think if you
analyse country by country
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00:10:36,559 --> 00:10:39,439
and you analyse business
sector by business sector,
155
00:10:39,440 --> 00:10:43,400
and you look at the different
segments within each business sector,
156
00:10:43,401 --> 00:10:45,079
you're gonna get very
different answers.
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00:10:45,080 --> 00:10:49,800
So that's why, you know, Godfrey, I'm
not a fan of macroeconomic statements
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00:10:49,801 --> 00:10:52,558
because they can
be very misleading.
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00:10:52,559 --> 00:10:54,638
When we looked at the
problem of Steinhoff,
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they there were
basically at two levels.
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00:11:00,679 --> 00:11:03,839
There was lack of diversity
at the board level,
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00:11:04,320 --> 00:11:05,880
but also at the exco.
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00:11:06,679 --> 00:11:09,079
Because remember, the way
the companies are run,
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00:11:09,080 --> 00:11:11,878
the board is mainly
there to guide.
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00:11:11,879 --> 00:11:16,278
The people who are running the
company on a daily basis are the exco,
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00:11:16,279 --> 00:11:19,678
the executive committee,
which is the CEO, CFO...
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00:11:19,679 --> 00:11:21,359
So maybe let's start
with the board.
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00:11:21,360 --> 00:11:24,320
So, when there's no
diversity at the board...
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00:11:25,320 --> 00:11:27,518
what tends to happen is that
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the people then start to almost
become a member of the chairperson.
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00:11:32,799 --> 00:11:38,638
And if they're coming from
the same either race, culture,
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00:11:38,639 --> 00:11:40,079
gender...
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00:11:40,080 --> 00:11:45,200
They're likely not to question
anything that the chairperson does.
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00:11:45,679 --> 00:11:49,599
So that then creates a problem, because
then people start to think the same way.
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00:11:49,600 --> 00:11:51,160
The same with the exco.
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That's why we will always say,
"Let's bring different people.
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00:11:55,720 --> 00:12:00,680
They're bringing different perspective,
you'll be able to see things differently.
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00:12:00,681 --> 00:12:06,079
They'll be able to show the impact
of what you are doing on others,
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00:12:06,080 --> 00:12:09,280
because when we are running a company,
a company's a corporate citizen.
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00:12:10,000 --> 00:12:12,999
The reason we've got organisations
like the Black Business Council
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00:12:13,000 --> 00:12:14,800
is mainly because of our past.
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00:12:15,320 --> 00:12:21,758
Remember, certain races were excluded by
law from participating in the economy.
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00:12:21,759 --> 00:12:25,558
Some of us could not even
do mathematics at school.
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00:12:25,559 --> 00:12:31,119
So, the Black Business Council is trying
to put pressure, and lobby, and advocate
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00:12:31,120 --> 00:12:36,278
for the excluded majority
to be in the economy.
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00:12:36,279 --> 00:12:38,638
To play a meaningful
role in the economy.
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00:12:38,639 --> 00:12:43,079
We still have less than 5% of the
economy owned by black people.
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00:12:43,080 --> 00:12:49,158
We've got the majority of the
CEOs of the JSE-listed companies
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00:12:49,159 --> 00:12:51,918
are still 65% white males.
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00:12:51,919 --> 00:12:55,799
So those are the issues we are
trying to bring to the fore.
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00:12:58,679 --> 00:13:01,359
[Christopher Rutledge] There was not
one board meeting that I attended
192
00:13:01,360 --> 00:13:07,120
in which the struggles of
cashflow, of profitability...
193
00:13:07,759 --> 00:13:10,398
of the difficulties that
the group was experiencing,
194
00:13:10,399 --> 00:13:13,319
wasn't mentioned, wasn't
discussed, wasn't on the agenda.
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00:13:16,799 --> 00:13:20,319
They were building loss-making
businesses upon loss-making businesses,
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00:13:20,320 --> 00:13:22,320
and there wasn't a core
that was profitable
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00:13:22,960 --> 00:13:27,479
other than some of the
Steinhoff operations in Germany.
198
00:13:27,480 --> 00:13:29,000
It did seem like...
199
00:13:30,440 --> 00:13:33,680
you know, building a bit of
pie in the sky, in a sense.
200
00:13:33,681 --> 00:13:38,079
Building a smoke and
mirrors kind of empire.
201
00:13:38,559 --> 00:13:42,038
It appeared to me
as if this urgency,
202
00:13:42,039 --> 00:13:45,638
almost a rush, you
know, to acquire
203
00:13:45,639 --> 00:13:50,119
was more about being
seen to be successful
204
00:13:50,120 --> 00:13:52,120
rather than actually
being successful.
205
00:13:53,639 --> 00:13:57,758
Every problem that any
of the business units had
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00:13:57,759 --> 00:13:59,878
was left to the
accountants to resolve.
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00:13:59,879 --> 00:14:02,999
Obviously you would try and fix
the problem through manufacturing
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00:14:03,000 --> 00:14:07,199
and having a profitable unit, but
ultimately it was left to the accountants
209
00:14:07,200 --> 00:14:10,839
to do a smoke and mirrors,
you know, to set out a...
210
00:14:10,840 --> 00:14:14,199
a profitable situation when
you're actually making a loss.
211
00:14:14,200 --> 00:14:17,120
How those things were
done, we were not sure.
212
00:14:21,279 --> 00:14:24,039
The auditors were mainly
working out of Stellenbosch.
213
00:14:25,159 --> 00:14:28,399
That connections into
the auditing firms
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00:14:28,960 --> 00:14:32,839
of classmates that emerged
out of Stellenbosch.
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00:14:32,840 --> 00:14:36,160
And that was part of the
reason, in my mind at least,
216
00:14:36,161 --> 00:14:38,599
why we were able
to float so long.
217
00:14:41,320 --> 00:14:45,878
Throughout the latter part of his
career, he must've been scared
218
00:14:45,879 --> 00:14:48,079
that somebody would
find out about this,
219
00:14:49,159 --> 00:14:51,639
and yet he brazened it out.
220
00:14:52,240 --> 00:14:55,160
He had this way of
looking in your eyes
221
00:14:55,840 --> 00:14:58,798
and lying directly, straight.
222
00:14:58,799 --> 00:15:01,319
We were all taught, well, you
know, if somebody's shifty
223
00:15:01,320 --> 00:15:03,479
and look down to the
left or the right,
224
00:15:03,480 --> 00:15:05,800
then you must know that
they're not telling the truth.
225
00:15:05,801 --> 00:15:09,758
But when somebody looks at you
in your face and has an open face
226
00:15:09,759 --> 00:15:15,119
and an "aw, shucks" way of
addressing things, you believe them.
227
00:15:15,919 --> 00:15:18,479
He's got a binary
mind, as far as I know.
228
00:15:19,159 --> 00:15:22,918
When I engaged with him, it was never...
There was very little grey area.
229
00:15:22,919 --> 00:15:24,278
He was always black or white.
230
00:15:24,279 --> 00:15:26,518
There were just two things
he was interested in.
231
00:15:26,519 --> 00:15:30,918
And the one was his business,
Steinhoff, which he was at for 28 years.
232
00:15:30,919 --> 00:15:32,639
And the other one
was horse racing.
233
00:15:34,320 --> 00:15:38,439
He was very lucky early on to get
involved in a very good horse.
234
00:15:38,440 --> 00:15:41,600
He turned into a champion racehorse and
then latterly a champion sire as well.
235
00:15:44,679 --> 00:15:48,879
This is The Conglomerate and
he's our 2016 Durban July winner.
236
00:15:49,960 --> 00:15:52,878
He raced in the silks
of Markus Jooste.
237
00:15:52,879 --> 00:15:55,079
[sports commentator1] The
Conglomerate sweeps into the lead!
238
00:15:55,080 --> 00:15:58,119
The Conglomerate in
front, and will win!
239
00:15:58,120 --> 00:15:59,999
[Robyn Louw] He then
picked up an injury
240
00:16:00,000 --> 00:16:02,959
so when they were looking for
a home for him after racing
241
00:16:02,960 --> 00:16:06,560
I was lucky enough to be considered,
and yeah, so I've had him ever since.
242
00:16:06,561 --> 00:16:10,398
He's got a bit of a fan club. People like
to have their pictures taken with him
243
00:16:10,399 --> 00:16:12,479
and pat him and stuff,
and he enjoys that.
244
00:16:12,480 --> 00:16:15,239
[sports commentator2] "And National
emblem has hit the front down the inside,
245
00:16:15,240 --> 00:16:16,880
National Emblem the leader.
246
00:16:16,881 --> 00:16:19,079
National Emblem is
digging down deep.
247
00:16:19,080 --> 00:16:23,120
Teal is coming with final coast on the
outside but National Emblem has won it."
248
00:16:23,600 --> 00:16:26,520
My first horse was a horse
called National Emblem
249
00:16:27,039 --> 00:16:31,999
which we bought in 1991 and you know,
he went on to win nine Grade 1s.
250
00:16:32,480 --> 00:16:36,599
Markus bought into National
Emblem, who turned out to be
251
00:16:36,600 --> 00:16:38,959
the best horse in the
country, but not just that.
252
00:16:38,960 --> 00:16:42,160
He also turned out to be one of
the best stallions in the country.
253
00:16:42,161 --> 00:16:47,479
So he made an enormous amount of money on
that investment on his very first horse.
254
00:16:47,480 --> 00:16:50,600
That's luck. It's like
winning the lottery.
255
00:16:51,240 --> 00:16:52,599
So that really made you hooked.
256
00:16:52,600 --> 00:16:54,920
And today, how many horses
in training do you have?
257
00:16:54,921 --> 00:16:57,398
The standard answer to
that is, "Too many!"
258
00:16:57,399 --> 00:17:01,239
It was reported at one point that he
had around 350 horses in training.
259
00:17:01,240 --> 00:17:07,160
That's a lot of money, so
nobody has unlimited money.
260
00:17:07,799 --> 00:17:11,199
And I guess he was also
in a time in his life
261
00:17:11,200 --> 00:17:14,080
where business was going well and
he had a lot of disposable income.
262
00:17:15,920 --> 00:17:19,639
From a business point of view, it
gives you a lot of social cachet,
263
00:17:19,640 --> 00:17:22,959
it gives you access to a lot
of high-net-worth individuals.
264
00:17:22,960 --> 00:17:26,919
He said to me that he always admired
people like Harry Oppenheimer,
265
00:17:26,920 --> 00:17:28,400
Laurie Jaffee.
266
00:17:28,880 --> 00:17:32,719
People who had lots of money
and lots of racehorses,
267
00:17:32,720 --> 00:17:34,439
and they would
win all the races.
268
00:17:34,440 --> 00:17:38,959
There's no question that he
got intense, intense enjoyment
269
00:17:38,960 --> 00:17:42,240
out of becoming the
country's leading owner.
270
00:17:45,039 --> 00:17:48,239
[Dr Giada Del Fabbro] I mean,
if we look at a personality type
271
00:17:48,240 --> 00:17:52,399
that would conform to
an antisocial model
272
00:17:52,400 --> 00:17:55,920
or a psychopathic model, there
is an attraction to thrills.
273
00:17:58,759 --> 00:18:02,959
Risk-taking is a big part
of that. So physiologically,
274
00:18:03,279 --> 00:18:07,318
individuals who are
antisocial or psychopathic
275
00:18:07,319 --> 00:18:09,639
have a high threshold
for arousal,
276
00:18:09,640 --> 00:18:13,399
so they need that much more
than the average person.
277
00:18:13,400 --> 00:18:17,879
So that world would've been
characterized by a lot of those elements.
278
00:18:17,880 --> 00:18:21,560
So the thrill, the gamble, the,
you know, win or loss stakes.
279
00:18:21,561 --> 00:18:23,599
And it might've been
very exciting to him.
280
00:18:29,839 --> 00:18:31,399
Let's move to Europe.
281
00:18:31,400 --> 00:18:34,800
I believe you spend quite a lot
of time there for your business...
282
00:18:34,801 --> 00:18:38,079
Is that's more in
Germany, France... Where?
283
00:18:38,559 --> 00:18:42,879
Yeah, look, where I work on a
daily basis, we're in 32 countries.
284
00:18:42,880 --> 00:18:47,399
So, I mean, I'm all over the
European Union for my day to day job,
285
00:18:47,400 --> 00:18:52,999
so obviously I find it very difficult
to attend racing in South Africa.
286
00:18:53,000 --> 00:18:56,598
I mostly have to watch
it on DVDs afterwards
287
00:18:56,599 --> 00:18:59,719
because I'm not that internet...
I'm too old, you know.
288
00:18:59,720 --> 00:19:03,880
I'm past that stage where you can
still understand the internet but...
289
00:19:04,279 --> 00:19:09,358
Yes, so I mean, to attend racing in Europe
is something that I would like to do.
290
00:19:09,359 --> 00:19:13,559
So we decided about three
years ago to expand.
291
00:19:14,240 --> 00:19:16,479
I've been involved in horse
racing for a long time,
292
00:19:16,480 --> 00:19:18,199
or was involved in horse racing.
293
00:19:18,200 --> 00:19:20,278
I sobered up and decided,
294
00:19:20,279 --> 00:19:24,358
you know, there's no easier way of
losing money than feeding something
295
00:19:24,359 --> 00:19:26,038
that eats while you sleep.
296
00:19:26,039 --> 00:19:32,399
In 2005, I was voted onto
the Racing Association.
297
00:19:32,400 --> 00:19:35,640
And when I arrived on the board,
I boxed a lot with Markus.
298
00:19:37,960 --> 00:19:39,840
[Robyn Louw] Mr Jooste
was very enthusiastic.
299
00:19:39,841 --> 00:19:41,798
But when he started
getting more involved
300
00:19:41,799 --> 00:19:44,838
with the administrative side of
things and got onto the various boards
301
00:19:44,839 --> 00:19:47,758
and then started making
some fairly big changes
302
00:19:47,759 --> 00:19:49,399
to things in how
things were run...
303
00:19:50,079 --> 00:19:52,159
the question marks started
getting a little bit bigger
304
00:19:52,160 --> 00:19:54,200
and people got a little
more vocal about it.
305
00:19:55,319 --> 00:19:57,798
[interviewer] Markus, well done,
a couple of runners in the race.
306
00:19:57,799 --> 00:20:01,278
Great to have you in the winner's box.
You must be very proud of this filly.
307
00:20:01,279 --> 00:20:03,639
[Markus Jooste] Yeah. I don't
get often the chance to come.
308
00:20:03,640 --> 00:20:06,240
So today I just had a
good feeling for the day.
309
00:20:06,920 --> 00:20:09,639
I think that Markus was
a little bit affronted
310
00:20:09,640 --> 00:20:14,879
by not being universally loved and
accepted by what he was doing in racing.
311
00:20:14,880 --> 00:20:16,640
He invested heavily.
312
00:20:17,160 --> 00:20:22,159
He became the champion owner in South
Africa through sheer weight of investment.
313
00:20:22,160 --> 00:20:26,600
He instilled his people into
positions of power in horse racing.
314
00:20:28,799 --> 00:20:32,799
For him, this was a
way of, I suppose,
315
00:20:33,519 --> 00:20:36,838
stoking his ego and
achieving some dreams
316
00:20:36,839 --> 00:20:39,799
that would just have been
dreams as he was growing up.
317
00:20:41,799 --> 00:20:45,679
One can understand that a lot of people
felt that he had captured the industry,
318
00:20:45,680 --> 00:20:48,239
because he very much applied
his business principle
319
00:20:48,240 --> 00:20:50,320
of owning the entire
production line.
320
00:20:50,321 --> 00:20:55,119
So, he really was involved
in every single aspect of it.
321
00:20:56,160 --> 00:21:00,120
The one thing I can say about Markus
is that he was just always on the go.
322
00:21:00,799 --> 00:21:04,078
So it was almost difficult to
keep up with him in many senses.
323
00:21:04,079 --> 00:21:07,279
So he'd be in and he'd be out,
he'd be here, he'd be there.
324
00:21:09,799 --> 00:21:13,199
Markus had a nickname by
the name of "The Seagull".
325
00:21:13,839 --> 00:21:17,358
And the nickname kind of
emerged out of an incident
326
00:21:17,359 --> 00:21:20,318
that happened at one of
the Cape Town factories.
327
00:21:20,319 --> 00:21:22,959
One Friday night,
Markus was there...
328
00:21:23,960 --> 00:21:26,078
and we had all stayed late.
329
00:21:26,079 --> 00:21:29,518
And then about nine or ten that
night, we got an SMS to say
330
00:21:29,519 --> 00:21:32,879
we've got to be back at work on
the Saturday morning at 8 o'clock.
331
00:21:33,839 --> 00:21:36,559
We then pitched up at
8 o'clock the morning,
332
00:21:37,039 --> 00:21:41,599
only to be confronted by a very
aggressive and angry Markus
333
00:21:42,079 --> 00:21:44,318
who basically read
us the riot act.
334
00:21:44,319 --> 00:21:49,239
That kind of became then
a buzz amongst the staff
335
00:21:49,240 --> 00:21:52,760
to say that "The Seagull"
flew in and shat all over us.
336
00:21:55,319 --> 00:21:58,479
[Dr Giada Del Fabbro] What we do find
with bullies is that they've often
337
00:21:58,480 --> 00:21:59,560
been bullied themselves.
338
00:22:00,960 --> 00:22:04,840
It's very much about being superior,
dominant, the top of the food chain.
339
00:22:05,400 --> 00:22:07,358
Those kinds of behaviours
340
00:22:07,359 --> 00:22:12,959
are usually linked to someone who is
very invested in power and status,
341
00:22:12,960 --> 00:22:15,199
but also interpersonally
manipulative
342
00:22:15,200 --> 00:22:19,680
and has a total disregard for individuals
that they don't have any use for.
343
00:22:20,240 --> 00:22:24,040
So, for example, someone that was
lower down in this in the hierarchy
344
00:22:24,041 --> 00:22:27,039
needed to be
humiliated and shamed
345
00:22:27,960 --> 00:22:33,278
in order to maintain power and
control and reinforce his authority.
346
00:22:33,279 --> 00:22:37,358
But someone that he needed
to gain power or status from
347
00:22:37,359 --> 00:22:40,919
would be charmed in a
very convincing way.
348
00:22:41,759 --> 00:22:44,919
I spoke to Christo Wiese. I said,
"You know what? He's a bully."
349
00:22:44,920 --> 00:22:48,280
He's like, "Yeah, but, china, all the
guys that run my companies are bullies."
350
00:22:49,519 --> 00:22:51,358
Your position when you
got involved in Steinhoff
351
00:22:51,359 --> 00:22:53,959
gave you greater insight than
most people into his character.
352
00:22:54,839 --> 00:22:58,518
Yeah, we went on a few...
353
00:22:58,519 --> 00:23:01,038
five or six shooting
trips together.
354
00:23:01,039 --> 00:23:04,518
Now, you know, that's when
you really get to know people,
355
00:23:04,519 --> 00:23:09,399
when you're out there, just a bunch of
guys on a shooting trip and, you know,
356
00:23:09,400 --> 00:23:13,480
lots of drinks and
chatting and... gossiping.
357
00:23:14,599 --> 00:23:18,679
But there was nothing that he
did that appeared to upset me.
358
00:23:18,680 --> 00:23:21,639
He was always very
courteous towards me.
359
00:23:21,640 --> 00:23:24,600
As he was with
Bruno Steinhoff...
360
00:23:25,319 --> 00:23:27,519
Very courteous, very correct.
361
00:23:28,559 --> 00:23:33,439
But my impression was that it was very
difficult for people to challenge him.
362
00:23:34,799 --> 00:23:39,599
I think Markus Jooste was too
crass. I think he was too gruff.
363
00:23:43,319 --> 00:23:48,999
So allegedly, the fact that Markus Jooste
did have a mistress in Berdine Odendaal
364
00:23:49,000 --> 00:23:51,120
wasn't too much of a secret.
365
00:23:53,319 --> 00:23:57,798
And I think that's a function of the fact
that when you fly as high as Jooste did,
366
00:23:57,799 --> 00:24:01,319
when you have the resources, or the
access to resources, that Jooste did...
367
00:24:01,920 --> 00:24:04,800
You know, having a mistress is
part and parcel of the deal.
368
00:24:06,599 --> 00:24:10,879
And when those stories started
coming out, it was obviously held up
369
00:24:10,880 --> 00:24:15,118
as an example of how Markus Jooste
conducted his personal affairs,
370
00:24:15,119 --> 00:24:19,079
And how that could've played
into his professional life.
371
00:24:25,880 --> 00:24:30,598
I don't want to sound like a goody
two shoes, but that's a no-no.
372
00:24:30,599 --> 00:24:33,479
I mean, for a CEO
to have an affair
373
00:24:33,480 --> 00:24:37,479
known to his
subordinates, is a no-no.
374
00:24:37,480 --> 00:24:43,159
I fired at least two senior
executives because of that.
375
00:24:43,160 --> 00:24:48,679
Because you lose the trust of
the people that report to you.
376
00:24:48,680 --> 00:24:50,800
If he could lie to his wife...
377
00:24:51,400 --> 00:24:55,479
of 40 odd years every day,
why wouldn't he lie to me?
378
00:24:55,480 --> 00:24:59,399
- Yeah, for sure.
- You know that can't be tolerated.
379
00:24:59,400 --> 00:25:02,320
Tracks I will forgive...
380
00:25:03,440 --> 00:25:05,558
A footpath I don't forgive.
381
00:25:05,559 --> 00:25:09,999
If the guy jumps the fence
once or twice, yeah, you can...
382
00:25:10,000 --> 00:25:14,400
But when he starts an affair, he goes
to the same address all the time,
383
00:25:14,880 --> 00:25:16,639
you've got to be very careful.
384
00:25:16,640 --> 00:25:21,038
I find that hard to believe that,
you know, the existence of a mistress
385
00:25:21,039 --> 00:25:23,118
would prevent you from
investing billions in a company
386
00:25:23,119 --> 00:25:26,758
which would return you a
couple of billion rand.
387
00:25:26,759 --> 00:25:29,679
But it just added to the
story of Markus Jooste.
388
00:25:29,680 --> 00:25:31,760
You know, this beautiful
blonde polo player
389
00:25:32,240 --> 00:25:36,320
set up at the Val de Vie
Polo Estate in Franschhoek...
390
00:25:39,359 --> 00:25:43,038
And then flying around
on a Jooste-sponsored jet
391
00:25:43,039 --> 00:25:46,598
attending polo tournaments in
Plettenberg Bay and being set up
392
00:25:46,599 --> 00:25:51,199
in a very exclusive apartment
in Bantry Bay in Cape Town.
393
00:25:52,119 --> 00:25:55,199
Berdine Odendaal was certainly a
feature of Markus Jooste's life,
394
00:25:55,200 --> 00:25:56,360
and a very public feature.
395
00:25:56,361 --> 00:25:59,278
His wife, apparently, was
very much aware of that.
396
00:25:59,279 --> 00:26:03,038
And that's the way of the
billionaire, I suppose.
397
00:26:03,039 --> 00:26:07,758
Private jets, polo clubs
and blonde girlfriends.
398
00:26:07,759 --> 00:26:10,959
This is kind of everything
that is wrong with our society.
399
00:26:10,960 --> 00:26:14,959
We have two worlds you know,
we have the one of the 1%,
400
00:26:14,960 --> 00:26:18,040
those who are accumulating
wealth at enormous rates.
401
00:26:18,041 --> 00:26:21,679
And there's enough studies and
research now for us to know
402
00:26:21,680 --> 00:26:24,840
this is a trend that has been
carrying on since the 1980s
403
00:26:24,841 --> 00:26:30,358
where wealth has been accumulated at
the top of the pyramid more and more.
404
00:26:30,359 --> 00:26:35,278
And those people at the top of the pyramid
had become disengaged from society,
405
00:26:35,279 --> 00:26:38,199
disconnected from the
reality of people's lives.
406
00:26:41,160 --> 00:26:44,719
I guess for Markus it was that
he became used to the money.
407
00:26:44,720 --> 00:26:46,679
He didn't have that
kind of money initially.
408
00:26:46,680 --> 00:26:50,400
And so, as he got all
this money, it became...
409
00:26:50,799 --> 00:26:52,559
something that corrupted
him as a person.
410
00:26:58,359 --> 00:27:03,759
Stellenbosch, as a university town, is
actually quite a humble non-flashy town.
411
00:27:06,799 --> 00:27:10,439
The, let's call it, the old money
and the old hands in Stellenbosch
412
00:27:10,440 --> 00:27:12,560
always spoke about
the "inkommers",
413
00:27:12,561 --> 00:27:14,078
people that are coming in.
414
00:27:14,079 --> 00:27:18,118
And having lived here for 35
years, or close to 35 years,
415
00:27:18,119 --> 00:27:22,319
I'm still regarded as an
"inkommer", an in-comer.
416
00:27:22,799 --> 00:27:26,159
And obviously, when you
arrive with the sort of noise
417
00:27:26,160 --> 00:27:28,719
that Steinhoff and the
Joostes arrived here,
418
00:27:28,720 --> 00:27:32,480
that was clearly "the new money
has arrived in Stellenbosch".
419
00:27:33,680 --> 00:27:37,439
And that obviously, it ruffles
the feathers, it upsets people.
420
00:27:37,440 --> 00:27:40,598
And that's when the whole
sort of, let's call it
421
00:27:40,599 --> 00:27:44,278
the jostling between the old
money and the new money started.
422
00:27:44,279 --> 00:27:49,679
Clearly there's legitimate new money
and then there is fraudulent new money.
423
00:27:50,960 --> 00:27:55,639
Old money certainly doesn't shimmer,
whereas new money in Stellenbosch
424
00:27:55,640 --> 00:27:57,560
kind of hurts your
eyes sometimes.
425
00:27:59,400 --> 00:28:04,078
There is a house where the owner
installed Perspex garage gates
426
00:28:04,079 --> 00:28:07,479
so the people can see the
Maybach 1 and the Maybach 2
427
00:28:08,279 --> 00:28:10,239
resting in the garage.
428
00:28:11,680 --> 00:28:13,439
But what motivates that?
429
00:28:13,440 --> 00:28:15,999
I don't know. It's
certainly not philanthropy.
430
00:28:16,000 --> 00:28:19,919
You know, Jooste is not known for
ploughing money into community projects
431
00:28:19,920 --> 00:28:21,760
like Johan Rupert,
for example, is,
432
00:28:21,761 --> 00:28:26,318
who spends a billion rand of his own money
every year in various upliftment projects.
433
00:28:26,319 --> 00:28:27,798
You know, that's not Jooste.
434
00:28:27,799 --> 00:28:31,639
Jooste wanted to sponsor the
South African Sevens rugby team
435
00:28:31,640 --> 00:28:33,399
so he went out and bought it.
436
00:28:33,400 --> 00:28:38,439
Jooste wanted to sponsor the Stellenbosch
University Rugby Club's rugby team.
437
00:28:38,440 --> 00:28:40,240
So he went out and did it.
438
00:28:40,720 --> 00:28:43,120
Whatever he wanted, he bought.
439
00:28:53,079 --> 00:28:54,679
But in all of this,
440
00:28:54,680 --> 00:28:58,719
I think certainly those in the
orbit of old money in Stellenbosch,
441
00:28:58,720 --> 00:29:02,400
were quite reviled by the
way, in which Jooste...
442
00:29:03,440 --> 00:29:05,879
announced his arrival in town,
443
00:29:05,880 --> 00:29:10,640
and then proceeded to flaunt his
wealth and his company's wealth.
444
00:29:12,119 --> 00:29:13,598
[Derek Watts] For
a multi-millionaire
445
00:29:13,599 --> 00:29:16,959
Braam van Huyssteen is a
back to basics sort of guy.
446
00:29:17,440 --> 00:29:21,560
And that was the philosophy he
applied to his business, Tekkie Town,
447
00:29:21,561 --> 00:29:25,358
which he started with
one store and R20 000.
448
00:29:25,359 --> 00:29:29,118
We started out with one shop in Mossel
Bay and ended up with 400 stores.
449
00:29:29,119 --> 00:29:31,999
[Derek Watts] He also
created a R100 million trust
450
00:29:32,000 --> 00:29:33,800
for emergencies for his staff.
451
00:29:34,519 --> 00:29:36,679
[Landezwa Dulaze] Tekkie Town
was a fast-growing business,
452
00:29:36,680 --> 00:29:39,719
a cash-generating
business, debt-free.
453
00:29:39,720 --> 00:29:43,120
I mean, who doesn't want to
be part of that business?
454
00:29:44,279 --> 00:29:47,879
One afternoon Braam called me and
he said, "Here's an idea for you."
455
00:29:50,799 --> 00:29:53,598
He said, "I had a
conversation with Markus
456
00:29:53,599 --> 00:29:56,999
about a parcel of
businesses within Steinhoff.
457
00:29:58,000 --> 00:30:00,038
They said, "Why don't you come
458
00:30:00,039 --> 00:30:05,078
and run this parcel of businesses
with your business methodology?
459
00:30:05,079 --> 00:30:08,078
It seemed to us at the time
460
00:30:08,079 --> 00:30:11,959
like a very, very nice,
engaging challenge.
461
00:30:13,440 --> 00:30:15,120
We were very excited,
462
00:30:15,121 --> 00:30:19,119
but it was, in hindsight,
a foreign culture for us.
463
00:30:19,680 --> 00:30:22,159
You know, if you spend any
time with us in George,
464
00:30:22,160 --> 00:30:26,199
you'll see that most days
we wear shorts and slops
465
00:30:26,200 --> 00:30:30,558
and it was a strange cultural
fit, but we were excited.
466
00:30:30,559 --> 00:30:32,758
It seemed ultraprofessional.
467
00:30:32,759 --> 00:30:36,279
It seemed like a really good
opportunity to extend our skills.
468
00:30:38,119 --> 00:30:41,639
[Derek Watts] Steinhoff had already
bought Pepkor from Christo Wiese
469
00:30:41,640 --> 00:30:44,520
for $5.7 billion,
470
00:30:45,000 --> 00:30:48,880
making Wiese the biggest Steinhoff
shareholder, and its chairman.
471
00:30:50,160 --> 00:30:53,800
Then Steinhoff made an offer
to Braam for Tekkie Town.
472
00:30:54,359 --> 00:30:56,799
The transaction
that was proposed
473
00:30:57,599 --> 00:31:01,038
was that we would swap
our controlling share
474
00:31:01,039 --> 00:31:04,799
of 57.5%, at the
time, in Tekkie Town
475
00:31:05,279 --> 00:31:08,199
for 43.5 million
Steinhoff shares.
476
00:31:08,599 --> 00:31:11,318
But what we didn't
know, what no one knew,
477
00:31:11,319 --> 00:31:15,359
is that the Steinhoff share
price was grossly overvalued.
478
00:31:16,799 --> 00:31:18,798
[director] Did you
perceive any red flags
479
00:31:18,799 --> 00:31:20,598
that something might be
wrong with the business?
480
00:31:20,599 --> 00:31:26,199
We really only had little over a
year within the Steinhoff structure,
481
00:31:26,960 --> 00:31:28,880
and during that time...
482
00:31:29,799 --> 00:31:34,479
nothing struck me as
anything being out of place.
483
00:31:34,480 --> 00:31:35,879
Actually, quite the contrary.
484
00:31:35,880 --> 00:31:40,318
I thought that what I perceived to
be their risk and audit measures
485
00:31:40,319 --> 00:31:42,559
were more stringent to
those that we were used to.
486
00:31:44,480 --> 00:31:45,560
[Rob Rose] Tekkie Town...
487
00:31:45,561 --> 00:31:48,959
Tekkie Town is interesting because it's
an example of people who got swindled.
488
00:31:49,440 --> 00:31:52,479
It wasn't just the big guys getting
nailed by the collapse of Steinhoff.
489
00:31:52,480 --> 00:31:55,199
It was entrepreneurs
who'd created businesses
490
00:31:55,200 --> 00:32:00,118
and ended up, you know, holding the
can while the company collapsed.
491
00:32:00,119 --> 00:32:05,479
There's obviously a few territories in
Europe we are not yet on a global basis,
492
00:32:05,480 --> 00:32:08,280
and we are looking in these
countries for a start.
493
00:32:08,281 --> 00:32:10,879
But, you know, the
opportunities come to us.
494
00:32:10,880 --> 00:32:12,640
We don't have to hunt them.
495
00:32:15,799 --> 00:32:19,518
Markus Jooste convinced a number of
the big wheeler dealers in Stellenbosch
496
00:32:19,519 --> 00:32:21,239
to buy into Steinhoff.
497
00:32:21,240 --> 00:32:25,640
Institutions like Allan Gray, Coronation
and others who managed pension funds.
498
00:32:26,279 --> 00:32:29,439
The PIC, the Public Investment
Corporation, for example,
499
00:32:29,920 --> 00:32:34,239
is the institution that invests money
collected on behalf of all civil servants,
500
00:32:34,240 --> 00:32:38,200
and they took a large chunk of money
and invested it in Steinhoff, too.
501
00:32:39,079 --> 00:32:40,679
The PIC invested in Steinhoff
502
00:32:40,680 --> 00:32:43,760
precisely because it presented
itself as a stable earner
503
00:32:43,761 --> 00:32:47,598
and as close as you could get to being
a sure bet for growing the pension fund.
504
00:32:47,599 --> 00:32:50,358
You can talk about whether the
PIC, the Public Investment Corp,
505
00:32:50,359 --> 00:32:52,959
had done the right kind
of research beforehand
506
00:32:52,960 --> 00:32:55,479
and they obviously hadn't
seen the crash coming,
507
00:32:55,480 --> 00:32:57,880
but it ultimately meant that
people's pensions took a knock.
508
00:32:59,680 --> 00:33:03,080
In 2016, Steinhoff began doing
some very conspicuous deals.
509
00:33:03,680 --> 00:33:07,120
They'd gone into America and bought
this company called Mattress Firm
510
00:33:07,121 --> 00:33:09,079
at double the price
they should've.
511
00:33:13,000 --> 00:33:14,080
The Mattress Firm...
512
00:33:14,680 --> 00:33:17,598
It's a big, big
business in the US.
513
00:33:17,599 --> 00:33:19,278
It had financial problems,
514
00:33:19,279 --> 00:33:24,919
and the price they offered was a
massive premium on the underlying value.
515
00:33:24,920 --> 00:33:26,919
It raised a lot of eyebrows,
516
00:33:26,920 --> 00:33:31,159
and it seemed like he wanted to
enter the US market at all costs.
517
00:33:31,160 --> 00:33:33,880
And in many ways it
didn't make sense.
518
00:33:34,400 --> 00:33:38,639
And at that stage the share price
actually started also to decline
519
00:33:38,640 --> 00:33:42,919
from the highs it hit 2014/15,
520
00:33:42,920 --> 00:33:44,720
and it steadily
declined from there.
521
00:33:45,680 --> 00:33:49,479
This is what tipped off a number of
the more alert investors to the fact
522
00:33:49,480 --> 00:33:53,919
that Steinhoff clearly wasn't pursuing
a rational investment philosophy.
523
00:33:53,920 --> 00:33:57,280
But what is clear in retrospect is
that Steinhoff was trying to cover
524
00:33:57,281 --> 00:34:00,239
the holes in its income
statement and its profit numbers
525
00:34:00,240 --> 00:34:03,800
by doing all these crazy deals,
and create the perception
526
00:34:03,801 --> 00:34:07,679
that it wasn't quite as frail as
it was and to justify the narrative
527
00:34:07,680 --> 00:34:11,040
that Markus was putting out there,
of the company growing and expanding,
528
00:34:11,041 --> 00:34:13,919
which wasn't happening in
a real operational sense.
529
00:34:13,920 --> 00:34:16,600
It wasn't just Mattress
Firm in the US it bought,
530
00:34:16,601 --> 00:34:18,959
they bought Poundland in the UK.
531
00:34:18,960 --> 00:34:20,400
[clock strikes]
532
00:34:22,760 --> 00:34:24,120
[telephone ringing]
533
00:34:24,121 --> 00:34:26,319
[man1] For hundreds
of amazing gifts...
534
00:34:26,320 --> 00:34:28,040
[dial tone]
535
00:34:29,000 --> 00:34:30,040
[doorbell rings]
536
00:34:30,559 --> 00:34:32,079
[man2] Mattress firm.
537
00:34:34,199 --> 00:34:36,479
Home of the Sleep
Happy Guarantee.
538
00:34:39,880 --> 00:34:42,760
♪ You've got an uncle In
the furniture business ♪
539
00:34:46,280 --> 00:34:48,759
- Only at Poundland, it's just over there.
- Just up there.
540
00:34:48,760 --> 00:34:49,840
Let's go to Poundland.
541
00:34:50,880 --> 00:34:56,200
He then tried to use Poundland
to sponsor the Epsom Hill.
542
00:34:56,760 --> 00:34:59,680
The famous Epsom Hill where they
have the Epsom horse race every year.
543
00:35:04,199 --> 00:35:05,799
And to some extent
it appears that
544
00:35:05,800 --> 00:35:09,479
that was Markus Jooste's attempt to
thumb his nose at the establishment
545
00:35:09,480 --> 00:35:14,080
and to say, "I'm the guy who represents
the most famous horse race in the world."
546
00:35:14,081 --> 00:35:17,158
And he wasn't the outsider that he
might've been when he started out.
547
00:35:17,159 --> 00:35:20,319
It seemed, in retrospect,
an ego-driven thing.
548
00:35:25,159 --> 00:35:27,439
[Alec Hogg] He'd moved
on to a different level.
549
00:35:28,760 --> 00:35:31,800
Once he'd conquered South Africa,
he wanted to conquer the world.
550
00:35:34,400 --> 00:35:37,919
With individuals such as this,
there's never satisfaction
551
00:35:37,920 --> 00:35:39,520
having reached a certain level.
552
00:35:40,639 --> 00:35:45,158
So it's almost as if the more
power and status and money you get,
553
00:35:45,159 --> 00:35:46,559
the more you need.
554
00:35:47,039 --> 00:35:48,558
The stakes almost get higher.
555
00:35:48,559 --> 00:35:52,078
If you can get away with a lie
or a deception or manipulation
556
00:35:52,079 --> 00:35:55,558
around people that are then more
powerful or have more status,
557
00:35:55,559 --> 00:35:58,679
it provides a sense, a
greater sense, of superiority.
558
00:35:59,920 --> 00:36:03,399
You know, as much as he was climbing
a ladder, what he would've needed
559
00:36:03,400 --> 00:36:05,999
to get the same sense of
thrill and superiority
560
00:36:06,000 --> 00:36:07,520
would've gotten
bigger and bigger.
561
00:36:09,800 --> 00:36:13,040
[Ryk van Niekerk] And I think
this massive acquisition drive
562
00:36:13,041 --> 00:36:16,678
made some people cautious because
the debt levels increased.
563
00:36:16,679 --> 00:36:21,198
He issued a lot of shares
to pay for those companies.
564
00:36:21,199 --> 00:36:26,279
And yeah, there were definitely some
eyebrows raised about the transaction.
565
00:36:26,920 --> 00:36:31,678
But again, Markus Jooste was
one of the top dealmakers.
566
00:36:31,679 --> 00:36:33,039
There's a saying in business...
567
00:36:34,039 --> 00:36:36,759
that, you know, the "too
big to fail" kind of thing.
568
00:36:36,760 --> 00:36:40,040
Now, that that's not something that
people just say, it's actually real.
569
00:36:40,041 --> 00:36:41,041
If you have debt,
570
00:36:42,280 --> 00:36:45,520
the worst thing you can do
is to have a little debt.
571
00:36:45,521 --> 00:36:47,678
It's best to have a lot of debt.
572
00:36:47,679 --> 00:36:50,479
You know, so that whoever's...
573
00:36:51,480 --> 00:36:54,560
loaned you that money, is
invested in you in a big way.
574
00:36:54,561 --> 00:36:57,598
And so they can't just pull the
plug, or can't just move on.
575
00:36:57,599 --> 00:37:01,839
So, in many ways, that was a model
that Steinhoff had used as well.
576
00:37:01,840 --> 00:37:05,399
Is to extend themselves
to such an extent
577
00:37:05,400 --> 00:37:08,518
that people were so invested
in their operations,
578
00:37:08,519 --> 00:37:10,599
that no one was prepared
to pull the plug.
579
00:37:13,159 --> 00:37:16,879
[Ryk van Niekerk] Late in 2017,
Manager Magazin in Germany
580
00:37:16,880 --> 00:37:22,080
published an article suggesting there may
be accounting irregularities at Steinhoff.
581
00:37:26,360 --> 00:37:29,319
It is a very respected magazine.
582
00:37:29,320 --> 00:37:33,359
The author was also very
respected, and we questioned it.
583
00:37:33,360 --> 00:37:35,718
We actually spoke
to the journalist
584
00:37:35,719 --> 00:37:41,239
to try and get a sense of
exactly what the issues were.
585
00:37:41,599 --> 00:37:43,718
We approached Steinhoff,
586
00:37:43,719 --> 00:37:47,078
and Steinhoff referred us back
to the legal opinion they had,
587
00:37:47,079 --> 00:37:49,799
that, "Listen, there's
nothing to be worried about."
588
00:37:50,280 --> 00:37:54,200
- Tax issues coming to the fore again.
- So let's get that on the table.
589
00:37:54,201 --> 00:37:55,799
This is an old issue
590
00:37:55,800 --> 00:37:58,520
that's been around for at least
18 months, that I can remember,
591
00:37:58,521 --> 00:38:01,879
and I think Chairman Christo
Wiese, and rather eloquently,
592
00:38:01,880 --> 00:38:05,600
referred to it as drivel, and I think
that neatly summarizes what it's about.
593
00:38:05,601 --> 00:38:09,759
I don't think there's an awful lot of
substance or any substance to this at all.
594
00:38:09,760 --> 00:38:13,839
But this is the second time that we have
heard from the German tax authorities
595
00:38:13,840 --> 00:38:15,279
and the investigation.
596
00:38:15,280 --> 00:38:17,200
So, where there's
smoke, there's fire?
597
00:38:17,201 --> 00:38:19,959
- The problem, however...
- Are you concerned as a shareholder?
598
00:38:19,960 --> 00:38:21,040
Not especially,
599
00:38:21,041 --> 00:38:25,238
because we know that the Steinhoff Group
is big enough now not to cut any corners.
600
00:38:25,239 --> 00:38:29,518
They are quite adventurous by nature,
but we generally are of the view
601
00:38:29,519 --> 00:38:31,119
that this will kind of go away.
602
00:38:31,960 --> 00:38:34,839
[Jean Pierre Verster] Management
teams always have an incentive
603
00:38:34,840 --> 00:38:37,839
to boost their share price to
show higher and growing profits.
604
00:38:37,840 --> 00:38:39,879
Their bonuses are
reliant on that.
605
00:38:39,880 --> 00:38:43,560
And I think it was Warren Buffett
who said that a management team
606
00:38:43,561 --> 00:38:47,559
who doesn't make the numbers, might
be tempted to make up the numbers.
607
00:38:51,199 --> 00:38:53,158
I'm probably a sceptic at heart.
608
00:38:53,159 --> 00:38:56,718
And I try to tell myself to
be sceptical but not cynical.
609
00:38:56,719 --> 00:38:59,119
It's important to keep a
balance between those two.
610
00:39:00,440 --> 00:39:04,720
So I'm a hedge fund manager.
I manage three hedge funds.
611
00:39:06,800 --> 00:39:09,839
And what a hedge fund does
is it looks for shares
612
00:39:09,840 --> 00:39:15,320
that the hedge fund manager thinks will
go up in price and it buys those shares.
613
00:39:15,639 --> 00:39:18,919
But in addition to that,
a hedge fund seeks shares
614
00:39:18,920 --> 00:39:22,240
that he thinks will fall in
price and shorts those shares.
615
00:39:22,599 --> 00:39:25,359
And in that way, a hedge
fund tries to make money
616
00:39:25,360 --> 00:39:29,080
both from rising share prices, as
well as from falling share prices.
617
00:39:29,081 --> 00:39:30,759
[bell ringing]
618
00:39:37,159 --> 00:39:41,959
In horse racing, people generally
bet on the horse they think will win.
619
00:39:41,960 --> 00:39:46,238
However, you can also bet on
that horse losing the race.
620
00:39:46,239 --> 00:39:49,359
Maybe you've learned something that
tells you the horse will struggle.
621
00:39:49,360 --> 00:39:52,680
And if that horse comes
last, you'll win your bet.
622
00:39:53,159 --> 00:39:54,799
This is similar
to short selling.
623
00:39:55,280 --> 00:39:58,560
Maybe you have information that
the company's financial position
624
00:39:58,561 --> 00:40:00,038
is not that healthy,
625
00:40:00,039 --> 00:40:03,679
and that the share price will
fall when the news becomes public.
626
00:40:04,159 --> 00:40:06,999
So you decide to take
a short position...
627
00:40:07,480 --> 00:40:11,158
You borrow shares in the company
from a long-term investor
628
00:40:11,159 --> 00:40:13,919
such as a pension
fund, for a small fee.
629
00:40:13,920 --> 00:40:17,118
You then sell the shares
and convert it to cash.
630
00:40:17,119 --> 00:40:18,159
Then you wait.
631
00:40:20,000 --> 00:40:23,399
When the information hits the
media and the share price drops,
632
00:40:23,400 --> 00:40:27,400
you buy back the shares at the lower
price and return them to the lender.
633
00:40:28,039 --> 00:40:32,879
Your profit is the difference between the
price you sold and rebought the shares.
634
00:40:32,880 --> 00:40:37,800
Short selling is completely legal and
a common practice all over the world.
635
00:40:39,480 --> 00:40:42,360
[Jean Pierre Verster] One is
almost more of a detective
636
00:40:43,239 --> 00:40:46,678
and you look for things
that, maybe, are overstated,
637
00:40:46,679 --> 00:40:49,399
things that are seen as
being too good to be true.
638
00:40:51,719 --> 00:40:54,118
There's a bit of a misconception
in the financial world
639
00:40:54,119 --> 00:40:56,078
regarding what short sellers do.
640
00:40:56,079 --> 00:41:00,839
Some people in the US, for instance,
call them un-American or unpatriotic.
641
00:41:00,840 --> 00:41:03,839
Because they bet on failure,
642
00:41:03,840 --> 00:41:07,919
but they are very important
participants in stock markets.
643
00:41:07,920 --> 00:41:14,279
You can't just have an environment
where you are incentivised to buy,
644
00:41:14,280 --> 00:41:20,000
because then you have an incentive
to also potentially overvalue assets.
645
00:41:21,000 --> 00:41:23,718
Companies have two
types of assets...
646
00:41:23,719 --> 00:41:27,439
Tangible assets such as
property and vehicles,
647
00:41:27,440 --> 00:41:29,558
and intangible assets.
648
00:41:29,559 --> 00:41:33,239
These are things like a
company's brands and goodwill.
649
00:41:33,599 --> 00:41:37,359
These intangible assets
can be extremely valuable,
650
00:41:37,360 --> 00:41:42,360
but the fair value has to be
assessed to ensure it's not inflated.
651
00:41:43,400 --> 00:41:48,959
So when Steinhoff went on a spending
spree between 2004 and 2016,
652
00:41:48,960 --> 00:41:53,118
its intangible assets ballooned
from around R5 billion
653
00:41:53,119 --> 00:41:56,799
to over R250 billion,
654
00:41:56,800 --> 00:42:01,200
largely because of their seven
most significant acquisitions.
655
00:42:01,719 --> 00:42:05,839
Unitrans, HOMEstyle, ERM,
656
00:42:06,440 --> 00:42:12,560
Conforama, Pepkor,
Poundland and Mattress Firm.
657
00:42:13,239 --> 00:42:18,518
Steinhoff paid R135
billion for these assets.
658
00:42:18,519 --> 00:42:21,799
But while they would seem to
make the company stronger,
659
00:42:21,800 --> 00:42:26,960
they only had a tangible net
asset value of R2 billion...
660
00:42:27,559 --> 00:42:32,678
Less than 2% of the value was therefore
underpinned by something physical,
661
00:42:32,679 --> 00:42:37,479
which suggests the intangible
assets may have been inflated.
662
00:42:39,880 --> 00:42:42,120
[Jean Pierre Verster] There was
always the feeling with Steinhoff
663
00:42:42,121 --> 00:42:44,118
that you were either
a friend of Steinhoff,
664
00:42:44,119 --> 00:42:47,718
and if you weren't a friend of Steinhoff
you were an enemy of Steinhoff.
665
00:42:47,719 --> 00:42:51,759
If your name was not on the door, you'd
not get into the results presentation.
666
00:42:51,760 --> 00:42:54,359
If you were not an analyst
friendly to the company,
667
00:42:54,360 --> 00:42:57,600
you weren't invited to analyst
meetings with the company.
668
00:42:57,601 --> 00:43:01,078
And if you are with them you
might get little hints of
669
00:43:01,079 --> 00:43:03,399
if business was
going well or not.
670
00:43:03,880 --> 00:43:07,598
And you would feel like you
were part of the boys club.
671
00:43:07,599 --> 00:43:11,078
And if you weren't close to the
company and you weren't friendly,
672
00:43:11,079 --> 00:43:14,638
and maybe your questions
were a bit more critical,
673
00:43:14,639 --> 00:43:16,519
then you weren't
part of that club.
674
00:43:18,519 --> 00:43:20,759
[director] Did you consider
yourself one of the boys?
675
00:43:20,760 --> 00:43:24,238
I wasn't one of the boys.
I wasn't part of the group
676
00:43:24,239 --> 00:43:27,439
that maybe drank some drinks
after the results presentation.
677
00:43:30,599 --> 00:43:33,678
So the first time I
saw some red flags
678
00:43:33,679 --> 00:43:37,678
was every year the tax
rate was abnormally low.
679
00:43:37,679 --> 00:43:41,199
Significantly lower than the
official tax rate in South Africa.
680
00:43:41,920 --> 00:43:45,600
There was also some negative
media around Steinhoff.
681
00:43:47,920 --> 00:43:52,118
There was a court case
where a judgment came out
682
00:43:52,119 --> 00:43:55,799
regarding a forestry
transaction.
683
00:43:58,559 --> 00:44:01,518
It was mentioned that the
executives of Steinhoff
684
00:44:01,519 --> 00:44:02,879
were parties to
that transaction.
685
00:44:02,880 --> 00:44:05,760
The executives made a lot of
money. That is a red flag.
686
00:44:10,079 --> 00:44:14,239
I wanted to put this to the
company and hear their side.
687
00:44:14,800 --> 00:44:19,678
So, I emailed Steinhoff and we set up
a meeting in Cape Town in Stellenbosch.
688
00:44:19,679 --> 00:44:25,198
And I flew down one morning, had the
meeting around lunchtime, and flew back.
689
00:44:25,199 --> 00:44:26,518
It took a whole day,
690
00:44:26,519 --> 00:44:30,359
but it was important enough because of
the seriousness of what I had found.
691
00:44:30,360 --> 00:44:33,319
And if what I found was correct,
692
00:44:33,320 --> 00:44:36,720
it meant that the profitability of
Steinhoff was significantly overstated.
693
00:44:36,721 --> 00:44:40,839
They gave very good answers, but
I still had a niggling worry,
694
00:44:40,840 --> 00:44:43,078
even after the meeting,
695
00:44:43,079 --> 00:44:46,598
where it just didn't fit well with
me, all the answers that they gave.
696
00:44:46,599 --> 00:44:50,239
So, I decided because of those
red flags, to short the share.
697
00:44:54,000 --> 00:44:59,520
There were too many things that they
were doing that were uncomfortable.
698
00:45:06,800 --> 00:45:08,640
[Zwelakhe Mnguni] It wasn't
generating cashflows.
699
00:45:08,641 --> 00:45:11,959
So, they generate cash from the
operations, they take that cash,
700
00:45:11,960 --> 00:45:17,118
spend it all in investments, whether to
replenish their existing infrastructure,
701
00:45:17,119 --> 00:45:18,799
or buy other businesses.
702
00:45:18,800 --> 00:45:20,959
The debts started building up.
703
00:45:20,960 --> 00:45:24,038
The board independence
was non-existent.
704
00:45:24,039 --> 00:45:27,759
So from outside it looked
like he could say this,
705
00:45:27,760 --> 00:45:30,040
and the board would
be, like, "Okay."
706
00:45:30,041 --> 00:45:33,638
I know it might not be the case,
but from outside that's how it felt.
707
00:45:33,639 --> 00:45:38,718
Then there was a German regulator who
stepped in and said there were tax issues.
708
00:45:38,719 --> 00:45:43,479
That also kind of said,
"Hey, maybe we're not wrong."
709
00:45:43,480 --> 00:45:46,319
And that led us to
make a decision later
710
00:45:46,320 --> 00:45:50,560
where we basically said, "Completely sell
out of this thing (Steinhoff shares)."
711
00:45:50,561 --> 00:45:54,078
It was, like, this thing...
We've never liked it,
712
00:45:54,079 --> 00:45:59,678
and we keep getting the pressure, but
actually we shouldn't own this thing.
713
00:45:59,679 --> 00:46:04,319
And we sold it completely. That
was 30th of September 2017.
714
00:46:08,400 --> 00:46:11,320
[Rob Rose] It looked like Steinhoff
had become a house of cards.
715
00:46:11,840 --> 00:46:15,280
It was just a question of time before
this whole thing came tumbling down.
716
00:46:27,400 --> 00:46:31,078
The auditors in Europe,
Deloitte, gets an anonymous box
717
00:46:31,079 --> 00:46:34,879
with tons of evidence of
things that made auditors,
718
00:46:34,880 --> 00:46:39,518
who are generally quite a
conservative and careful profession,
719
00:46:39,519 --> 00:46:42,999
made the auditors particularly wary
of signing off Steinhoff's accounts.
720
00:46:43,000 --> 00:46:46,118
At this point Deloitte's
a little nervous anyway
721
00:46:46,119 --> 00:46:48,399
because Steinhoff had just
been raided by the police.
722
00:46:48,400 --> 00:46:52,080
They've been assured by Christo Wiese
and the company that all was above board.
723
00:46:52,081 --> 00:46:55,199
But the anonymous package makes them
think that there's a lot going on.
724
00:46:55,679 --> 00:46:58,439
It now seems that what was
in the package was evidence
725
00:46:58,440 --> 00:47:01,520
that was contained in the
criminal investigation in Germany.
726
00:47:02,559 --> 00:47:05,279
Deloitte says, "We're not going to
sign off on the financial accounts
727
00:47:05,280 --> 00:47:08,320
until we've seen more evidence
that these deals are kosher."
728
00:47:10,039 --> 00:47:12,959
The results for the year to December
had to be signed and published
729
00:47:12,960 --> 00:47:14,678
by December 2017.
730
00:47:14,679 --> 00:47:18,158
And Markus Jooste has
been avoiding Deloitte,
731
00:47:18,159 --> 00:47:20,518
hasn't given them the
documents they want.
732
00:47:20,519 --> 00:47:21,359
Steve Booysen,
733
00:47:21,360 --> 00:47:24,040
chair of the audit committee, says,
"What do are you doing, Markus?
734
00:47:24,041 --> 00:47:26,078
Just give them the evidence,
let's get this done."
735
00:47:26,079 --> 00:47:28,239
He, at the time, doesn't
think there's anything wrong.
736
00:47:28,719 --> 00:47:31,439
But Deloitte is adamant, "We're not
gonna sign off on the financials
737
00:47:31,440 --> 00:47:33,760
until there's a
forensic investigation.
738
00:47:37,760 --> 00:47:39,120
The auditors say
to Christo Wiese,
739
00:47:39,121 --> 00:47:42,198
"Do you know that your management has
been defrauding the company for years?"
740
00:47:42,199 --> 00:47:44,518
And Christo says, "That's
just not possible."
741
00:47:44,519 --> 00:47:48,039
I said, "But you guys are crazy.
What are you talking about?"
742
00:47:48,440 --> 00:47:53,879
And they gave me their six points
that they queried, and I looked at it.
743
00:47:53,880 --> 00:47:56,880
I said, "But you signed off
on all these points last year,
744
00:47:57,360 --> 00:48:00,880
and for the previous 15 years.
Where does this come from?"
745
00:48:02,880 --> 00:48:04,200
So he calls Markus in,
746
00:48:04,201 --> 00:48:07,999
and Markus says, "This is just
the auditors being paranoid.
747
00:48:08,000 --> 00:48:10,840
I've given them all the information.
Just relax. It's not like that."
748
00:48:11,400 --> 00:48:16,040
I said, "These people say
you are a fraud and a crook."
749
00:48:16,480 --> 00:48:17,959
And he said, "On what basis?"
750
00:48:17,960 --> 00:48:20,560
I said, "Well, you
know, these six points."
751
00:48:20,561 --> 00:48:24,999
He gave the auditors
such an explanation
752
00:48:25,000 --> 00:48:27,158
in half an hour,
753
00:48:27,159 --> 00:48:29,439
that they changed
their entire tone.
754
00:48:29,440 --> 00:48:31,319
And he said he's
going to Germany,
755
00:48:31,320 --> 00:48:35,718
he will return on Monday,
and he will satisfy them.
756
00:48:35,719 --> 00:48:37,239
He will clear everything up.
757
00:48:38,119 --> 00:48:39,479
What does that
indicate about him?
758
00:48:39,480 --> 00:48:44,600
Obviously, he is a very, very smart
operator, and with nerves of steel.
759
00:48:45,000 --> 00:48:47,718
How do you do this for 15 years?
760
00:48:47,719 --> 00:48:49,999
And you have to get through
all these gatekeepers.
761
00:48:52,280 --> 00:48:54,600
[Rob Rose] Markus disappeared
off to Germany over the weekend,
762
00:48:54,601 --> 00:48:56,879
ostensibly to "get the
files", to give to Deloitte.
763
00:49:01,960 --> 00:49:04,680
As it turned out, he was going to
Bruno Steinhoff's 80th birthday
764
00:49:04,681 --> 00:49:06,039
to give a speech.
765
00:49:07,599 --> 00:49:09,999
Did you know what was
happening back in South Africa?
766
00:49:10,000 --> 00:49:12,120
I knew nothing. Nix.
767
00:49:13,199 --> 00:49:17,279
At my party here in Westerstede
Markus said 12 o'clock
768
00:49:17,840 --> 00:49:21,999
he has to leave because he was
sleeping in a hotel in Bremen
769
00:49:22,000 --> 00:49:28,038
to fly the next morning from Bremen
to Frankfurt for business reasons.
770
00:49:28,039 --> 00:49:31,239
I did not... I did not
have a smell, nothing. No.
771
00:49:32,760 --> 00:49:35,320
That was the last time
that I saw Markus.
772
00:49:37,760 --> 00:49:41,799
It would be crippling for someone
for whom lying was a problem,
773
00:49:41,800 --> 00:49:46,200
or who had a sense that they were
hurting other people by telling that lie.
774
00:49:46,880 --> 00:49:50,600
But if you have someone who has
a poorly developed conscience
775
00:49:50,601 --> 00:49:54,638
who sees people as a means
to a self-serving end...
776
00:49:54,639 --> 00:49:56,759
So if you have
someone like that,
777
00:49:56,760 --> 00:49:59,200
then the lie would be
experienced in a different way.
778
00:50:00,880 --> 00:50:04,640
It, first of all, wouldn't feel like a lie
because there'd be sort of a justification
779
00:50:04,641 --> 00:50:07,799
or a rationale for for
the deceptive behaviours.
780
00:50:08,480 --> 00:50:11,598
And I think for someone
who feels omnipotent,
781
00:50:11,599 --> 00:50:14,679
they see themselves
as almost untouchable.
782
00:50:15,119 --> 00:50:17,319
Which are all sort
of smoke and mirrors
783
00:50:17,320 --> 00:50:20,879
which are trying to guard against
feeling actually deeply inadequate.
784
00:50:20,880 --> 00:50:23,120
But they would actually not
anticipate getting caught.
785
00:50:23,121 --> 00:50:25,319
And sometimes the idea
that they might get caught,
786
00:50:25,320 --> 00:50:28,720
or there's a possibility of getting
caught, would feel quite exciting.
787
00:50:36,880 --> 00:50:38,399
[Christo Wiese] At that stage
788
00:50:38,400 --> 00:50:43,839
it was clear to me that the
auditors were never going to be able
789
00:50:43,840 --> 00:50:46,038
to sign off the accounts
790
00:50:46,039 --> 00:50:48,279
without a forensic
investigation.
791
00:50:48,800 --> 00:50:53,038
And over that weekend, I
then communicated with PWC
792
00:50:53,039 --> 00:50:57,279
and asked them to do a
forensic investigation,
793
00:50:57,280 --> 00:51:01,240
which I advised Jooste of
while he was in Germany.
794
00:51:02,000 --> 00:51:03,000
He knew it.
795
00:51:08,880 --> 00:51:11,959
[Rob Rose] He comes back on the
Monday. He says to Christo Wiese,
796
00:51:11,960 --> 00:51:13,999
"Gather everyone together,
I'll meet you in the boardroom.
797
00:51:14,000 --> 00:51:16,439
I've got all the documents,
see you in an hour.
798
00:51:16,440 --> 00:51:18,800
I'm just gonna go home
and have a shower."
799
00:51:19,760 --> 00:51:22,600
They wait. The auditors
wait, the lawyers wait.
800
00:51:22,601 --> 00:51:24,879
The audit committee
waits. The board waits...
801
00:51:24,880 --> 00:51:27,080
Nothing. In the end,
he just never arrives.
802
00:51:34,440 --> 00:51:38,439
Steve Booysen gets a message from
Markus Jooste, in Afrikaans, saying,
803
00:51:38,440 --> 00:51:40,959
"I'm just I'm just chatting
to my lawyer. No problem."
804
00:51:40,960 --> 00:51:43,240
And then he begins to
get messages in English.
805
00:51:43,679 --> 00:51:46,598
And he thinks, "Oh no, Markus only ever
communicated with me in Afrikaans."
806
00:51:46,599 --> 00:51:48,638
This is a sign the
lawyers have written this.
807
00:51:48,639 --> 00:51:52,518
And he realizes that there might
actually be veracity in the claims that
808
00:51:52,519 --> 00:51:55,799
that this was actually a giant
fraud, and they begin to panic.
809
00:51:59,760 --> 00:52:02,880
And at 5 o'clock,
he sent a lawyer
810
00:52:03,559 --> 00:52:06,238
who phoned me and said, "Christo,
are you still at the office?"
811
00:52:06,239 --> 00:52:07,558
I said, "Yes."
812
00:52:07,559 --> 00:52:12,158
He said, "Well, I want to come and see you
with a message from Jooste." Then I knew.
813
00:52:12,159 --> 00:52:15,479
The message was, "He's
offering his resignation."
814
00:52:17,119 --> 00:52:18,879
It's up to me to accept it.
815
00:52:19,840 --> 00:52:25,439
I phoned him and I said to him, "Look,
you can mitigate whatever you've done
816
00:52:25,440 --> 00:52:27,440
by coming back to the office...
817
00:52:28,679 --> 00:52:33,399
not resign, and help
people sort out the mess."
818
00:52:33,960 --> 00:52:36,439
And he said, "I'll see you
in two to three hours."
819
00:52:36,440 --> 00:52:39,799
Never saw him again. Never heard
from him again, to this day.
820
00:52:39,800 --> 00:52:43,000
- That's the last time you spoke to him?
- Last time I spoke to him.
821
00:53:10,480 --> 00:53:12,518
[Rob Rose] That night,
a couple of hours later,
822
00:53:12,519 --> 00:53:13,959
Steinhoff realizes
it has no option.
823
00:53:13,960 --> 00:53:16,520
So they put the notice out
in Germany late at night,
824
00:53:16,521 --> 00:53:19,279
and on the JSE in
Johannesburg the next morning.
825
00:53:20,679 --> 00:53:22,559
And that's when all
hell breaks loose.
826
00:53:28,920 --> 00:53:31,760
[Jean Pierre Verster] There was
this red headline over the screen,
827
00:53:32,519 --> 00:53:34,639
"Markus Jooste
resigns immediately."
828
00:53:35,599 --> 00:53:39,638
"Steinhoff not to issue
their financial statements."
829
00:53:39,639 --> 00:53:44,839
So that is what I saw early morning,
before the market even opened.
830
00:53:44,840 --> 00:53:46,999
Was I surprised? Yes.
831
00:53:47,000 --> 00:53:50,160
Because you don't think
that a company of that size
832
00:53:50,161 --> 00:53:53,558
and of that repute,
can crash so quickly.
833
00:53:53,559 --> 00:53:54,839
I could not believe it.
834
00:53:54,840 --> 00:53:57,880
There's no way this guy that
I'd known for 15 years...
835
00:53:58,360 --> 00:54:00,800
There's just no way that...
836
00:54:01,199 --> 00:54:04,359
he's done what he
appears to have done.
837
00:54:04,840 --> 00:54:06,320
I wasn't surprised.
838
00:54:06,880 --> 00:54:10,999
I'd been waiting patiently to hear
news that something was amiss,
839
00:54:11,000 --> 00:54:13,479
because it was clear
to me that, you know,
840
00:54:13,480 --> 00:54:15,839
the pieces of the puzzle
didn't fit together.
841
00:54:15,840 --> 00:54:17,600
The extent of it...
842
00:54:18,519 --> 00:54:19,439
surprised me.
843
00:54:19,440 --> 00:54:22,160
But the fact that, you
know, it happened, didn't.
844
00:54:22,161 --> 00:54:23,919
I actually celebrated,
I won't lie.
845
00:54:23,920 --> 00:54:27,919
And I said, you know,
"Finally we're gonna be paid
846
00:54:27,920 --> 00:54:31,879
for all the pain that we've
been taking, and the pressure."
847
00:54:31,880 --> 00:54:34,640
So, I did celebrate. [laughs]
848
00:54:38,559 --> 00:54:41,039
[Bernard Jooste] I got the SMS
from Markus that he's resigning,
849
00:54:42,039 --> 00:54:44,799
and I still replied
something to the effect of,
850
00:54:44,800 --> 00:54:46,880
"No man, you're not
going anywhere."
851
00:54:48,079 --> 00:54:51,638
So on that doomsday I actually
exchanged an SMS with him.
852
00:54:51,639 --> 00:54:55,679
And I said, "What a disaster. I
cannot believe what was happening."
853
00:54:56,320 --> 00:55:00,080
So I was actually, at the time,
didn't know that he was the...
854
00:55:00,081 --> 00:55:02,239
the devious mind and
the culprit behind it.
855
00:55:05,280 --> 00:55:07,480
Markus's way of operating
was quite unique.
856
00:55:07,960 --> 00:55:11,480
Always on the 3310 or the 3210,
or whatever it was called.
857
00:55:12,159 --> 00:55:14,359
Only using SMSes,
very seldom email.
858
00:55:14,360 --> 00:55:18,680
He never used WhatsApps and
never sort of put hand to paper.
859
00:55:19,159 --> 00:55:21,399
I basically said,
"What a stuff up."
860
00:55:21,920 --> 00:55:23,279
He came back to me, says,
861
00:55:23,280 --> 00:55:26,799
"I can only apologise for what's
going on. Again, sorry, Thys."
862
00:55:26,800 --> 00:55:29,839
At the time you thought he was
just an innocent victim of this?
863
00:55:29,840 --> 00:55:33,440
I mean, the question is why
didn't I know immediately?
864
00:55:34,199 --> 00:55:36,598
And it was a time of turmoil.
865
00:55:36,599 --> 00:55:39,558
I mean, I was still unsure
exactly what his part in it was.
866
00:55:39,559 --> 00:55:41,079
[telephones ringing]
867
00:55:43,280 --> 00:55:46,319
[Alec Hogg] I'd been working the
phones, as one does as a journalist.
868
00:55:46,320 --> 00:55:49,598
And got hold of people
very, very close to him.
869
00:55:49,599 --> 00:55:52,439
And they had no clue
what was going on.
870
00:55:52,440 --> 00:55:58,038
And that was a bit of a giveaway that
this was not just a misunderstanding,
871
00:55:58,039 --> 00:56:01,159
but that this was
very, very serious.
872
00:56:02,679 --> 00:56:05,558
In investment houses across
the country, and the world...
873
00:56:05,559 --> 00:56:07,759
The bomb goes off, the
share price collapses.
874
00:56:13,960 --> 00:56:17,919
[reporter1] The Steinhoff debacle has
sent shockwaves in corporate South Africa.
875
00:56:17,920 --> 00:56:21,238
Steinhoff shares have
fallen by more than 60%
876
00:56:21,239 --> 00:56:23,558
at the Johannesburg
Stock Exchange
877
00:56:23,559 --> 00:56:26,439
after the SA-based
global retailer
878
00:56:26,440 --> 00:56:29,400
was found embroiled in
accounting irregularities.
879
00:56:30,039 --> 00:56:33,399
[Rob Rose] R200 billion or so
was wiped off the stock exchange.
880
00:56:33,400 --> 00:56:36,520
The investment analysts I know,
the traders I've spoken to,
881
00:56:36,521 --> 00:56:39,678
said there was panic in the markets
like they haven't seen before.
882
00:56:39,679 --> 00:56:43,518
People scrambling to get out of
Steinhoff, scrambling to sell their shares
883
00:56:43,519 --> 00:56:46,399
as billions in value just,
essentially, vanished.
884
00:56:46,880 --> 00:56:49,680
[Jean Pierre Verster] It was
like that slow motion car crash
885
00:56:50,320 --> 00:56:54,198
to see the share price fall
so much in a single day,
886
00:56:54,199 --> 00:56:55,759
such a large company.
887
00:56:57,639 --> 00:56:59,879
It was sort of surreal
to see it happen.
888
00:56:59,880 --> 00:57:03,718
Even though I had concerns
and I had the idea
889
00:57:03,719 --> 00:57:06,359
that something could be
seriously wrong with Steinhoff,
890
00:57:07,000 --> 00:57:11,400
I was still very surprised at the extent
of the share price fall on that day.
891
00:57:11,880 --> 00:57:16,760
And during the course of the morning a
report was released by a group that...
892
00:57:17,400 --> 00:57:20,080
almost no one had ever heard
of before, called Viceroy.
893
00:57:22,400 --> 00:57:25,080
And they came out with
this report on Steinhoff
894
00:57:25,081 --> 00:57:27,999
that detailed a lot of the
findings that I also found,
895
00:57:28,000 --> 00:57:31,839
and it was put very
nicely in a report
896
00:57:31,840 --> 00:57:34,680
that was released, also
the morning of the seventh.
897
00:57:34,681 --> 00:57:38,959
It wasn't a reason for the
precipitous fall in the share price,
898
00:57:38,960 --> 00:57:44,160
because it came out quite a bit after
9 o'clock, after the market had opened.
899
00:57:44,519 --> 00:57:47,839
But it very nicely explained
900
00:57:48,360 --> 00:57:51,479
what the size of the hole on
the balance sheet might be.
901
00:57:51,480 --> 00:57:55,640
This week, Steinhoff said it could
not publish its full year results
902
00:57:55,641 --> 00:57:59,558
because its auditor, Deloitte,
refused to sign off on them.
903
00:57:59,559 --> 00:58:05,759
When the audit firm was probed about why
it did not put ink to paper, it said...
904
00:58:05,760 --> 00:58:09,279
[man3] "Due to our client
confidentiality obligations
905
00:58:09,280 --> 00:58:14,319
as well as the ongoing investigations,
we are unable to comment at this time.
906
00:58:14,320 --> 00:58:19,080
All questions should be referred to
Steinhoff International Holdings."
907
00:58:21,599 --> 00:58:23,239
Auditors do not...
908
00:58:24,199 --> 00:58:29,239
refuse to sign off statements, especially
not for a big company like Steinhoff.
909
00:58:29,719 --> 00:58:33,678
And when they didn't,
then I think it hit home
910
00:58:33,679 --> 00:58:37,439
"Listen, maybe something really,
really sinister is going on."
911
00:58:42,119 --> 00:58:45,759
Quite emotionally turbulent to realize
that you'd been conned by this person.
912
00:58:45,760 --> 00:58:48,959
Yeah. I think Christo Wiese said
it was a bolt out of the blue.
913
00:58:48,960 --> 00:58:51,399
Yeah, I mean, it's
more than that, Rob.
914
00:58:51,400 --> 00:58:53,959
It's more than that, because I've
been in the investment world.
915
00:58:53,960 --> 00:58:55,160
People look up to you.
916
00:58:56,079 --> 00:58:59,518
You have a reputation, but when
you realize that you've been conned
917
00:58:59,519 --> 00:59:03,118
and you've been conned in a big
way and conned by an insider,
918
00:59:03,119 --> 00:59:06,319
someone that that you
know where he lives.
919
00:59:06,320 --> 00:59:09,480
And that, I think, is
what's so upsetting.
920
00:59:13,800 --> 00:59:17,638
Apparently Markus said to his
wife, "Give this five years.
921
00:59:17,639 --> 00:59:21,119
By then it'll have blown over, and
then we can move on with our lives."
922
00:59:24,960 --> 00:59:28,038
[Bernard Mostert] I am
on holiday in Buffalo Bay
923
00:59:28,039 --> 00:59:30,999
just down the coast
from George, and...
924
00:59:32,039 --> 00:59:35,039
I have all these very
senior Steinhoff guys
925
00:59:35,480 --> 00:59:39,280
phoning me in disillusionment about
the fact that they've lost wealth.
926
00:59:39,760 --> 00:59:44,558
And that, "How could this have
happened?" and, "What happened?" etc.
927
00:59:44,559 --> 00:59:46,479
You know, I just said to people,
928
00:59:46,480 --> 00:59:50,400
"Come visit me. I'm here in
Buffalo Bay, come visit me."
929
00:59:50,920 --> 00:59:53,080
And every day we had these...
930
00:59:54,480 --> 00:59:57,198
big luxury cars pull in there,
931
00:59:57,199 --> 01:00:00,839
and I have grown men
sitting crying on my couch
932
01:00:00,840 --> 01:00:03,400
and not understanding what
the future holds for anyone.
933
01:00:03,800 --> 01:00:06,520
I said, "I just hope no
one commits suicide."
934
01:00:07,000 --> 01:00:11,479
And then what I started doing was, I
actually created a schedule for myself
935
01:00:11,480 --> 01:00:13,200
on which I checked
in with people.
936
01:00:15,639 --> 01:00:19,119
[Rob Rose] And when did you realize that
Markus had created this false picture?
937
01:00:19,880 --> 01:00:21,279
That took a long time.
938
01:00:21,280 --> 01:00:23,999
Because I did not,
I could not believe,
939
01:00:24,000 --> 01:00:28,919
what people told me about
Markus and about the company.
940
01:00:28,920 --> 01:00:30,520
This was overnight.
941
01:00:31,239 --> 01:00:32,439
I could not believe.
942
01:00:32,960 --> 01:00:36,439
I did not know what is
true, what is not true.
943
01:00:36,440 --> 01:00:40,200
And we had to help the
company to survive.
944
01:00:43,280 --> 01:00:45,720
[Rob Rose] So the board
is now in panic stations.
945
01:00:45,721 --> 01:00:48,198
They make Christo Wiese
the executive chairman,
946
01:00:48,199 --> 01:00:51,439
to run the companies of Steinhoff
until they figure out what to do.
947
01:00:54,000 --> 01:00:58,598
Why did so many people seem
to not see the red flags?
948
01:00:58,599 --> 01:00:59,999
And the reason is very simple.
949
01:01:00,000 --> 01:01:04,558
This company was massively successful
where it mattered on the numbers.
950
01:01:04,559 --> 01:01:07,158
I mean, the share
price up until 2017,
951
01:01:07,159 --> 01:01:10,558
in a five year period grew 300%.
952
01:01:10,559 --> 01:01:12,518
The numbers were spectacular.
953
01:01:12,519 --> 01:01:14,238
People who weren't
invested in Steinhoff
954
01:01:14,239 --> 01:01:16,519
were considered to be idiots
and considered to be fools.
89896
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