Steinheist. Rob Rose
in the development of Steinhoff”. “A year later, a lot of problems came out from [inside] Afcol: losses, bad business from the United States . . . we were lucky to reject this,” said Daun.
The Cornick deal would be a template for the “Steinhoff way”, which other executives would cite admiringly as evidence of Jooste’s ability to wring a good deal out of any scenario. Danie van der Merwe, a logistics expert who linked up with Jooste when Steinhoff bought his logistics company, Roadway, as a better means to transport furniture, remembers that Afcol deal well. He reckoned it was the “wise old men” of the business who had tempered the impetuous younger Steinhoff executives, who might otherwise have got into a bidding war over Afcol the year before.34 “Claas said: ‘You never pay too much for a business. You must never want it too badly, because otherwise you’re going to overpay. And once you’ve overpaid, you never get that money back.’ And Bruno said: ‘We are all hunters. You must load your gun and wait. The animal will come. You must be patient. ”
Danie van der Merwe would become a fundamental cog in Markus’s machine. The relationship had first warmed back in 1997 over one of their shared passions: rugby. “I gave him four seats in our box at Ellis Park [the rugby stadium south of Johannesburg], he gave me four seats at Loftus [the stadium in Pretoria] and that’s how we started communicating,” he said. But Van der Merwe would end up as one of the big losers from Steinhoff’s implosion in December 2017. His family had owned 6.1m shares in Steinhoff, which, at their peak, would have made him fabulously wealthy with a fortune of R550m. By September 2018, those shares would have fetched barely R15m.
When Jooste quit overnight, it was Danie whom the board asked to step into the role of CEO – much to the surprise of those who’d seen their close relationship deepen for decades.
* * *
The Cornick coup changed Steinhoff in more ways than one. Firstly, and most obviously, up to that point the early Steinhoff was a relatively inconspicuous furniture maker in South Africa. Sure, it had the Gomma Gomma factory, Bakker & Steyger making case goods, and a few businesses that made lounge foam, but it wasn’t a big deal. It didn’t have much clout when it came to getting its product into the big stores. “All of a sudden, we had all the brands,” says one insider. “We became the dominant player in South Africa, all of a sudden. We had the manufacturing sewn up, and we could really go into negotiations with retailers and be someone.”
But the second shift was more intriguing. While the Cornick takeover was indeed a dramatic catalyst, the intense desire to make it work and show the rest of the industry how smart Steinhoff was raised other sharp questions. Christopher Rutledge says that already there were some blinking red lights. What happened after the deal, he says, “was a shock for all of us”. Initially, he says, there was no sense that Jooste would permit any corners to be cut. Rutledge tells the story of how, early on, it emerged that one of the managers was cooking the books. “It seemed that this person wasn’t passing along the credit notes, in which we acknowledged we owed somebody for something, to the accounting guys. This would obviously have meant it wasn’t accounted for as a liability, so it would have made our profits look too good. But when Markus heard about it, he lost his nut.” At that stage, he says, Jooste appeared to stand for clean governance.
This is how many of Jooste’s advisers saw him at the time. In the words of one of Jooste’s long-term bankers, who’d known him for years and had often gone to dinner with him and his wife: “I’d never have suspected this in a million years. I always saw him do everything by the book. He was conservative, smart. He never once asked us to do anything we felt compromised by doing.”35
Allen Swiegers, who’d gone to school with Jooste, said he’d often bump into Markus Jooste from time to time. Swiegers, by that time, was climbing the ranks at Deloitte, which audited Gomma Gomma’s accounts and, later, Steinhoff’s. While Swiegers wasn’t involved in those audits, he’d see Jooste a few times a year at client events. “He was still the same Markus I knew at school: very confident, pleasant and entrepreneurial. He wasn’t shy of speaking his mind – if something was wrong, he’d tell someone to fix it, in very direct language. But never in my wildest dreams would I have suspected him of the things currently alleged in the media.”36
But as the years went on, and Jooste’s prestige and wealth expanded, it seems he began to believe the myth of his own grandiosity – that his presence somehow demanded grovelling respect. There is one story that deftly illustrates this point.37
Veteran journalist and radio presenter David O’Sullivan emceed a few Steinhoff events for Jooste. They knew each other, in other words. So, one day, at Cape Town’s airport, O’Sullivan bumped into Jooste. “Hey, Markus, how you doing?” he asked, making conversation.
At that point, Jooste’s wife Ingrid stepped between them and glared at O’Sullivan. “How dare you speak to my husband like that,” she spat. “It’s Mr Jooste to you.”
Behind her, Markus Jooste stared at O’Sullivan with cold, lifeless eyes, saying nothing.
Well, screw you, thought O’Sullivan. Who does this guy think he is?
It’s an interesting question. The answer, most likely, is that Markus Jooste thought he was corporate royalty, in the presence of whom others should display unbroken fealty.
But many businessmen found Jooste suave and charming – even if their wives, in many cases, didn’t agree. Over dinner, he’d dish out aphorisms that were the sort of pearls that could, perhaps one day, be collected into a Rough Guide to Business by the Rough. In one case, an executive was describing how his company was being rationalised, which meant job cuts and departments shrinking. Jooste leant into him and whispered knowingly: “Hey, be careful you don’t cut yourself to bankruptcy.” Which is sound advice.
But with the Cornick deal, some felt a discernible, if subtle, shift. Says Rutledge: “Cornick was losing money hand over fist. Yet shortly afterwards, Steinhoff claimed it was showing profits from those assets. We knew that company well, and we just couldn’t see where they were getting that profit. Our suspicion was always that the finance guys were shifting around assets to manufacture a profit.”38
Whether anyone who might have been doing this saw it as crooked is, however, uncertain. Those who knew the company at the time say there was a sense that Steinhoff would use every accounting trick it could to make its figures look better than they were. But this wasn’t seen as blunt crookery; rather, it was just being smart, and moulding the system to suit one’s purposes. “The guys working there, like me, understood that the business would be run on the basis of ‘smoke and mirrors’. All the focus was on the accounting, and how to present something,” says Rutledge. “We’d know, for example, how one of the companies was struggling, yet then we’d read in the annual report how well it was doing. It was astonishing.” This, he says, is the essence of the discomfort he felt around Pat Cornick.
It was never obvious enough that people felt compelled to say something, but, intuitively, they sensed that something felt wrong. It was hard to put your finger on it. But every time it came to publishing financials, the Steinhoff accounting boffins had found some way to capitalise some expense or other, or discontinue some business, so it wouldn’t reflect in a way that looked bad. This magic – the ability to transform companies that looked sickly into models of corporate vigour – burnished the legend of Markus Jooste. It would become his trademark.
Another manager who was there at the time says he left the group precisely because he spotted certain “accounting tricks” that he wasn’t happy with. “Right from the beginning, I believed that companies were being set up – special purpose vehicles – specifically to hide certain losses, and make it seem like the profits were much better than they were. It made me feel uncomfortable. I didn’t want to be part of it.”
Of course, hiding losses in companies that don’t reflect in your accounts – an “off-balance sheet company”, in accounting terms – is one of the oldest tricks in the journal. This is ultimately what felled Enron, when it emerged that it owed far more debt than it had let on. It is ironic that those adrenalised early years at Steinhoff coincided with the last few years of Enron’s