Thu. Jun 20th, 2019

Steinhoff probe uncovers inflated profits and dodgy deals

PwC has released its report into Steinhoff, finally giving shareholders and the public at large a view into what went so monumentally wrong at the firm.

The post Steinhoff probe uncovers inflated profits and dodgy deals appeared first on The South African.

steinhoff probe uncovers inflated profits and dodgy deals - Steinhoff probe uncovers inflated profits and dodgy deals

A 10-page summary was released on 15 March. It does not go into details about those implicated at the firm but gives a window into the actions that led to 95% of Steinhoff’s market value being erased.

Markus Jooste, who was at the helm when the irregularities at Steinhoff came to light, has been unavailable for comment about the contents of the report.

Questionable deals and inflated earnings

The report details an elaborate network of transactions between companies which allowed Steinhoff to inflate its earnings and hide the extent of its debt.

It would appear that Steinhoff entered into transactions with companies that on the face of it would seem to be completely independent. It now has come to light that these entities were all closely related to a small group of ex-Steinhoff executives and outsiders.

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Former Steinhoff of retail group CEO Markus Jooste(C-L) gives testimony about the massive drop of value of the multinational company, in the South African Parliament before the Parliamentary committee on finance, public accounts, trade and industry and public administration, on 5 September 2018 in Cape Town. Markus Jooste told lawmakers on 5 September 2018 he had no knowledge of accounting irregularities that caused the company to lose 95% of its market value. At the end of 2017, Steinhoff revealed it was under criminal and tax investigations, with a reported $7-billion hole in its accounts. Photo: AFP/RODGER BOSCH

During the period from 2009 to 2017 $7.4 billion worth of transactions took place between Steinhoff and the eight firms in question, as reported by Money Web. Steinhoff said in its summary of the report:

“The transactions identified as being irregular are complex, involved many entities over a number of years and were supported by documents including legal documents and other professional opinions that, in many instances, were created after the fact and backdated.”

The “fictitious and/or irregular” transactions between Steinhoff and these outside firms as well within the Steinhoff group is said to have had the effect of inflating the overall value of the firm.

The PwC report will put further pressure on the Hawks to act against Jooste and anyone else implicated. Up to now, the corruption watchdog has failed to act in the matter claiming that they were awaiting additional information about the scandal.

Watch: Devan Murugan discusses the report

The post Steinhoff probe uncovers inflated profits and dodgy deals appeared first on The South African.

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