BUSINESS REFLECTION
After the Bell: Steinhoff and Sanral, a tale of two executives
Markus Jooste’s lawyers claimed there was no evidence that he knew of the accounting irregularities behind SA’s biggest corporate scandal.
Here is an irony: Two senior executives at two very different organisations have made precisely opposite declarations about the disasters in their organisations. I, on account of being of a deeply suspicious nature and generally uncouth demeanour, don’t believe either of them. In fact, I believe precisely the opposite of what they claim. I do have reasons.
What on earth am I talking about here?
First, former Steinhoff CEO Markus Jooste claimed on Tuesday in a hearing before the Financial Services Tribunal to appeal two R7.5-million fines imposed by the JSE, that if there were accounting irregularities at Steinhoff, he wasn’t aware of them.
If this were Twitter, or X, as we are now forced to call it, you could well imagine a whole bunch of people using the “bwahaha” emoji, which looks like this if you are interested. 😂
If one were being uncharitable – a charge to which I would readily plead guilty – you might call this the “I am incompetent” defence.
Jooste’s lawyers claimed there was no evidence that he knew of the accounting irregularities behind SA’s biggest corporate scandal. He doesn’t claim there weren’t irregularities; he simply claims he was entitled to rely on information provided to him by his underlings – and did so.
Lawyers for the JSE claim a) he could not not have known about them, because obvs, and more pertinently, b) that even if he didn’t, the JSE listing requirements clearly state that directors who delegate their duties are not absolved of their responsibilities. In other words, the “I was incompetent” defence is not an excuse.
The other example concerns national roads SOE, Sanral, where the situation is, as mentioned, precisely the opposite: the board chair claims the enormous additional expenses incurred by the organisation after it nullified tenders worth around R17-billion were not because of incompetence, but because the board under chair Themba Mhambi were, again, the opposite: they were ultra diligent. 😂
In reply to my questions about this, Sanral said, “In keeping with the obligations under the Public Finance Management Act, the Board decided to act after it discovered in January 2020 that the construction contractor bid evaluation process in the organisation had a major, and potentially corruptive, flaw.
“The process allowed the same service provider to do design drawings for an infrastructure project; develop the technical specifications for the tender for that project; and determine the technical bid to be recommended for award by the Bid Evaluation Committee if it meets other criteria.”
Thus, five contracts, already signed off by management, were summarily cancelled, including Africa’s largest bridge project, the R4-billion Mtentu Bridge, and Sanral’s largest project ever, the R5-billion N2/N3/EB Cloete interchange upgrade.
But is this ultradiligence or just, how should we put this, kinda dubious? The inclusion of project designers in the project award process is an industry norm, for the very obvious reason that when it comes to the technical evaluation of bids, it helps to have the expertise of the bid designers on board. Consulting engineers are not contracting engineers. Far from being a “major and potentially corruptive flaw”, it is actually financially effective, apart from being just commonsensical.
The board claims this decision was subsequently ratified by the Treasury and that senior counsel’s legal opinion confirms its view. Well, not to be overly cynical, but if you shop around, it’s not impossible to get a legal opinion that suits your own, particularly if you are forking out the boodle.
But the fact remains that nowhere in the world is this considered a conflict, unless of course the consulting engineers are also contracting engineers in the bid, which almost never happens, and was certainly not the case here.
But it goes further. The board, in its wisdom, insisted the rule be applied retrospectively. When it discovered that Sanral management didn’t, in fact, do that, it decided – brandishing more of that wisdom – to suspend two of its senior managers who outrageously didn’t think the board were nuts enough to want this absurd rule applied retrospectively, particularly since the board didn’t make that absolutely clear this is what they wanted.
This process cost around three years in construction time and billions of rands, and a whole new bidding process had to be initiated. However, this did give the board the opportunity to fiddle with the BEE rules and the SMME rules. The net result is that three of the contracts have been won by Chinese construction companies.
Personally, I welcome foreign companies winning construction contracts. But how, you may ask, does that help BEE? Local construction companies – those that are left, anyway – have an overwhelmingly black employee core. They have big BEE investment schemes, they train, they buy locally, and their profits go to local shareholders.
But the main point is that we have seen this whole playbook before at Eskom and Transnet and the Post Office and elsewhere. The pattern is instantly recognisable: Contracts cancelled, crushing new BEE rules imposed, expertise departs in droves, new contracts handed to obliging clients. This is precisely the modus operandi that dooms these organisations.
But perhaps I’m being too harsh.
Perhaps we should defer to the board’s caution, innate expertise and knowledge. Because, after all, the board chairman’s previous job was as an English lecturer. I am not making this up. He may even be distantly related to the engineering expert politician who appointed him, Blade Nzimande. That obviously qualifies him to upend long-established engineering processes.
Sometimes you can’t help thinking the ANC actually wants SA to fail. BM
- Article corrected to reflect that Sanral board chair Themba Mhambi was appointed by Nzimande not ANC Secretary General Fikile Mbalula, although the main events described here happened during Mbalula’s term of office as Transport Minister between 2019–2023.
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It is extremely hard to believe that Jooste would admit to not knowing what was going on.
Firstly he is admitting to being too dumb, That is doubtful for this guy, even if admitting this would cost time in jail. His ego does not fit that admission.
Secondly, the companies act places an obligation on a CEO (never mind a R400m a year CEO) to know.
Never invested a penny in his circus, but I really hope that this clown spends the rest of his life in a difficult prison. He is a stain on the CA qualification.
Unsurprisingly, he is NOT unique in staining what is generally a noble profession and calling. Cast your mind back to one Yakhe Kwinana. At least the professional body that she was a member of levied a singularly harsh sanction on her.
…and cast your minds back to KPMG – still sitting pretty with an ostentatious building in Cape Town.
I completely agree – especially on the jail bit. Wish they’d bring back hard labour for the likes of Jooste.
What else do you expect from a SANRAL board containing no significant expertise at professional engineering level. As I understand it has long outstayed its original tenure and needs bringing up to date with appropriate expertise. The procedure which they overturned had decades of acceptable experience without any hint of corruption or mismanagement, but in their wisdom they decided to overturn it. I say this with 60 years of experience in road engineering including being head of national roads for a long time and later nine years as DDG and often actg. DG of Transport.
How does an English lecturer (with respect), become the Chair of a Roads company? At what point did those who appointed the Chair look at the qualifications and say, “damn, this guy has a great track record in roads – perfect for the job.” I suspect that the CV said “I have read and tutored the following: ‘On the Road, by Jack Kerouac'” at which Mbulala’s eyes would have glistened in excitement, his hands shaking in anticipation because Kerouac sounds vaguely East European. Mbulala’s mind (such that it is) would have been thinking ‘he must be a roads engineer from Hungary, probably under the great István Dobi, the glorious leader when our Soviet friends invaded and caused thousands of deaths and hundreds of thousands to flee. Yes, this is our man for the job.’
That must be it! 😂
Brilliant.
In thirty years, as the only woman in the board room (several boardrooms) I have been called the “moral compass of the company”, I have repeatedly been told “forget ethics, we have to look after the business” and when I stood my ground I was looked upon as a stupid woman who didn’t really understand what business was about. I do not understand why people do not apply ethics. It is clearly not inherent in most people. The only way to make sure it is applied is through the law. When, as in SA, there is no law and criminals sit in the highest positions in the land, ethics doesn’t stand a chance. I open my phone every morning and read about more criminals stealing and disobeying the law in every possible way and I feel sick. We have the laws, we do not have the implementers and day by day we sink into uncivilised anarchy.
Hear, hear!
The previous Act spelled out who sat on the Commission. There were four officials, being the DG, the two DDGs (just two of them in those days) , and a Commissioner. Then there was a member to represent the motorist. The CEO of the AA did that. There were two truckers, an environmentalist , a civil engineering academic, a municipal engineer, a representative of the civil engineering profession, and a military man. All as sharp as razors. It was an honour to serve and it cost them or their organizations money, even though there was a stipend , and expenses .
Well said Paul. Those were the days when engineering principles and not politics prevailed. My main sympathy is for the engineering executive of SANRAL such as Louw and others who are answerable to a board with very little knowledge of roads and cannot talk back to them as you and I can.
Mally.
Mark, I have often wondered whether the ANC actually had a brainstorming session 30 years ago, to decide how to F…. RSA up totally, or whether they are just enjoying what comes naturally? Because the way they’re going now, it seems to me that it is a well-thought-out plan of total destruction. A new ‘Scorched earth policy’ so to speak.
Actually they had something similar. Soon after 1994 when I was actg. DG in the DoT all DGs were required to attend a 3 day seminar on how to transform the public sector. The seminar was managed by a leading, “Ivy League” American university with impeccable liberal principles.
Jooste saying a version of ‘I was just following orders’ …. just boggles the mind. Needs to do jail time to get his ego back in check. An English major running Sanral is not so much of a surprise. We’ve had a school teacher who was Minister of Mines, a President that was a school drop-out , another President who denied AIDS existed, a Minister-of-Finance-for-a-weekend etc…….so an English major could even be a step up, if of course his degree is legit.
And a nurse running the Department of Transport who showed how little she knew about her function in the taxi debacle in Cape Town recently where the DA Mayor showed how a person with a spine operates.
Amazing how no one is accountable for anything in S.A. No one admits to anything. Everyone, especially CEOs and senior government officials, sprouts the official lines: “haven’t done anything wrong” and “didn’t know anything” in the belief that absolutely noithing will happen and that there are no consequences.