OBITUARY | Markus Jooste: The man who orchestrated South Africa’s largest ever corporate crash

The original article can be found here.

Markus Jooste, who died on Thursday, aged 63, was a self-made billionaire who worked himself up from nothing.

By all accounts, he was a brilliant man, with his roots in Pretoria, where he worked at the Receiver of Revenue for years. He became the financial director at a small furniture factory in Ga-Rankuwa, called Gomma-Gomma. This was where his path crossed with that of a German retailer, called Bruno Steinhoff, a man who had come to South Africa post-1994 to invest in a country in which he saw tremendous potential.

In 1997, the German bought a stake in Gomma-Gomma. The business rapidly expanded under Jooste’s guidance and, in 1998, Steinhoff listed locally on the Johannesburg Stock Exchange, at a listing price of R4 a share.

It would reach the dizzying heights of R96 a share. Between 1998 and 2015, the group experienced phenomenal growth. In the period 2006 to 2015, Steinhoff’s revenue increased from R30.1 billion to R134.8 billion, a remarkable 346% increase.

Even more spectacular were the profit numbers. In the same period, profit increased from R2 billion to R13.15 billion, an astounding increase of 553%. In the five years between 2010 and 2015, Steinhoff’s share price grew by 300%. The numbers were spectacular and, if you weren’t a Steinhoff shareholder, you were considered foolish.

In 2011, Jooste and his family relocated to Stellenbosch, where Jooste quickly felt at home among some of South Africa’s most successful entrepreneurs, and developed friendships with some leading businessmen in the Boland, including Jannie Mouton, the founder of PSG. Jooste helped Mouton out of a tough spot when the Absa Group tried to take over Mouton’s business. Jooste simply started buying up PSG shares as fast as possible, staving off the attempt in the process.

Happiest at the race track

Jooste was at his happiest at the horse racing track and ardently pursued his passion for horses and horseracing, mingling with the blue blood of the racing world, both locally and beyond. By December 2017, Jooste was known to own the second-largest number of horses globally, second only to the Sheik of Dubai.

Steinhoff made Jooste a very rich man. In the 15 years to 2017, the Financial Mail estimated that his salary and bonuses alone totalled R492 million. He also owned nearly 69 million Steinhoff shares, which, before the crash in December 2017, were worth more than R3 billion.

Nearly everyone caught up in the Steinhoff story was simply swept along by the wave of success. It included the likes of business giants like Christo Wiese, Johan van Zyl and Steve Booysen. What was most galling to many shareholders was how these senior businessmen had not seen the crash coming.

It was further disconcerting to note that, for years, the Steinhoff auditor – Deloitte – had been giving the company a clean bill of health, with clean audit after clean audit. There was little for sceptics to question. If all these people and entities were happy, and the share price was going up, why rock the boat? Perhaps the wheels started coming off in 2015 when Steinhoff decided to register itself as a Dutch company and moved its primary listing to Germany.

The first whiff that something was off was an article in a German magazine, called Manager Magazin, in August 2017, where Jooste was named as being investigated by German authorities. As usual, he was able to brush off the concerns of those around him with little effort. However, this time, the auditors – the audit had moved to the Netherlands – were seeking some answers and, by December 2017, were refusing to sign off on the annual statements.

Collapse of Steinhoff share price

Instead of addressing the auditor’s concerns, Jooste resigned as the CEO of Steinhoff. Steinhoff’s share price went over a cliff and, within 24 hours, the group – active in 32 countries at the time – saw its market capitalisation lose R117 billion in value.

The total value destruction for Steinhoff and its related entities, like Shoprite, which saw its share price affected due to its links to Steinhoff, was estimated to be R300 billion. That is three times the amount that state capture is estimated to have cost the South African economy.

Jooste retreated to his mansion in the seaside town of Hermanus.

Following the Steinhoff crash, Jooste only officially appeared in public once, when he was forced to appear before Parliament in September 2018. He was accompanied by two senior counsel and two lawyers. Parliamentarians, barring one or two opposition MPs, seemed to be more fascinated by the man than interested in holding him accountable, and Jooste was able to provide a version of events that was completely contrary to what had transpired. He insisted that there had been no fraud and blamed the entire situation on some form of corporate sabotage, led by an Austrian businessman.

In the seven years since December 2017, the authorities failed to charge him locally. However, investigations were ongoing, and some institutions took action, including the Reserve Bank, which froze his assets.

The Financial Sector Authority, in the week before his death, slapped Jooste with a R475 million fine.

Finally, the Hawks also issued a warrant of arrest for Jooste.

He was to appear in court on the day following his death. This may have all been too much to bear.

His death at this moment, when South African authorities have finally issued an arrest warrant against him, will come as a disappointment to those who have seen their own lives, families and livelihoods destroyed by the corporate collapse of Steinhoff.

They will never see Jooste in court and never hear the full details of what transpired under his management. The investigation into what really happened and who else should be brought to book continues.

Jooste died on Thursday of a self-inflicted gunshot wound in the seaside town of Hermanus, about two hours drive from Cape Town.

He is survived by a wife and three adult children.

James-Brent Styan is the author of ‘Steinhoff: Inside SA’s biggest corporate crash’.