Steinheist. Rob Rose
lost R693bn in its last year, $67bn, while Steinhoff at its peak was R350bn. This makes Steinhoff the largest corporate fraud, globally, of the last two decades.”
So, if that’s where it ended up, how did it get there?
2
Farm to Table
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In the beginning, there was war. The Steinhoff story begins in November 1937, in a small town about an hour outside Münster in northern Germany called Herzebrock. It was there that Bruno Steinhoff was born, one of five boys in what was, for a short time at least, an idyllic life on the farm. At the time, only the eldest boy got to inherit the family farm. The others were left an inheritance which they were meant to use, in the German tradition, as seed capital for their own farms. This milieu is freeze-framed in a watercolour painting of the farm, as it was in the misty years before Adolf Hitler laid Germany to waste, that hangs outside Bruno Steinhoff’s fourth-floor office in Westerstede, next to the towering Steinhoff warehouse. In that painting, horses graze absent-mindedly next to a rambling double-storey farmhouse, with only the odd farm implement nearby to imply any technological context. The Steinhoff farm was the pre-war incarnation of that modern corporate cliché: an end-to-end solution. It did everything – cows, maize, potatoes, hogs, whatever you needed. That was mostly the way it worked in the rural areas of Germany in the early twentieth century.
Then came Hitler, the Third Reich and the grainy years of mud and war. Bruno Steinhoff, now 80 years old, remembers it as a time of grim attrition. “I was very young, but I remember how terrible it was. I remember seeing the fighting, I remember seeing planes get shot down,” he says, recalling those early years from his office in Westerstede.1
What would ultimately shape Steinhoff’s future was Hitler’s miscalculation in Operation Barbarossa, when he invaded Joseph Stalin’s Russia in June 1941. Ultimately, Hitler’s hypothermic Nazi soldiers failed to take Moscow, but as the offensive was continuing, the Germans took five and a half million Russian prisoners. This proved a headache for the Nazis: while they had 23 Russenlager prisoner-of-war camps and 12 concentration camps, they were all bursting at the seams. So, Hitler ordered that more than 130,000 Russians be repurposed as “forced labour” on German farms.
When the Russian prisoners first arrived at Steinhoff’s farm, Bruno was only 5 years old. It would be a formative experience for the youngster and instrumental in shaping a furniture empire that would straddle the Iron Curtain. But, as Bruno tells it, it was also an experience that taught the Steinhoff boys about fairness and how to treat others. “My parents insisted everyone got the same treatment,” he says. “Every day, the Russian prisoners ate with us, and we all got the same food. During the day, they worked on the farm.” It would have been one of the more benign experiences for Russian prisoners of war in Germany. In what is widely credited today as one of the forgotten atrocities of a war that was renowned for its casual brutality, 3.5m of the 5.7m Russian prisoners died in Germany – 6,000 a day in some cases.2 A witness at one of the camps recorded: “The hunger is so terrible that a mile away, they can be heard groaning and shouting ‘food’. They eat grass. Dozens die from starvation.”3
But at Steinhoff’s farm, the prisoners not only survived but also began teaching Bruno their language. He was a quick learner too, picking up phrases and conventions that would come in useful later. Not that there was much else to do with his time. The nearest school had been converted into a Red Cross nursing station for wounded soldiers. “When the war ended, many of the Russian soldiers didn’t go back home. They’d seen another life and that we weren’t the crocodiles they’d been told about. And at home, Stalin was a dictator and they knew it,” he says. “Our Russian soldiers, the ones who’d lived on our farm, begged us to be safe when they left. My parents had been nice to them.”
After the war ended in 1945, Germany was just a husk. Rural Germany had been hollowed out even more, as the weary procession of troops across the shelled countryside had sunk their nails into whatever they could from the farms as they hauled their way back to the bombed-out cities.
The Steinhoffs wanted to send their children back to school, but they couldn’t. “At that stage, all the German families wanted to send their children to schools to learn . . . but for nearly a year going to school was not possible,” he says. There were too many children looking for schools, and far too few schools in total.
Within a few years, Bruno Steinhoff took an internship at a factory near Münster, about thirty kilometres from his parents’ house, which made upholstered furniture. “For many years after the war, there were no jobs, nothing. We were hungry, and just wanted to survive – nothing more, nothing less. So that factory was where I did my learning,” says Bruno today. But while the factories began churning out furniture, there weren’t many people who could afford to buy their products.
After he’d finished his internship, Bruno Steinhoff did a basic business course. Then, with a short CV consisting of his furniture experience, the young man made his way to Berlin. “There, I was able to get a job at a large furniture retailer, where I learnt retail. But this retailer, it had an import company, which was bringing furniture from the east. One of the jobs I had was to negotiate how to sell that furniture,” he explains.
Berlin, at the time, was the fulcrum of a wider geopolitical split in ideology. To the east, you had Stalin’s Soviet Union expanding its tentacles to encompass everything under the rubric of communism; to the west, you had countries aligned to the United States, governed typically by free-market democratic ideals. Berlin was split down the middle, with a 3.6-metre-high wall that stretched for 66 miles as a tangible symbol of the divide.
Bruno Steinhoff straddled both worlds. He’d arrived in Berlin before the wall was built, almost overnight, in 1961. But over the three years he worked in the divided city, he developed an enviable black book of contacts from both sides of this ideological wall.
From Berlin, he went to Bavaria, where he took the position of sales manager at the largest upholstery furniture producer in Germany. “I soon realised that I could do this all myself,” he says. “The East Germans knew me well, and they said to me, ‘Oh Bruno, welcome’. I know how to produce furniture, and I know how to do the marketing. The East Germans said, ‘Oh, this is better now with Bruno.’ ”
This is how the Steinhoff enterprise, the one that would meet its reckoning in a boardroom in Cape Town more than five decades later, was born in July 1964.
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At first, Bruno Steinhoff Möbelvertretungen und -vertrieb was simply an importer. It didn’t make any furniture, but it was able to arbitrage through the Iron Curtain, buying a smorgasbord of products from East Germany, and hawking it on to the West. Furniture, of course, was Bruno’s first love, and would become the foundation on which Steinhoff’s fortunes were built. But back in 1964, he imported everything. Chances are, if you saw an advert for an umbrella or a clock in the pages of Die Welt, Steinhoff had imported it. “The first wristwatch that was advertised in Germany for 9.99 Deutschmarks was from me. I sold millions at the time. I was well known at the time,” he says.
In faded black-and-white photographs of Steinhoff at the time, he appears as the exemplar of the post-war German trader, with impeccably slicked-back hair, double-knotted tie, crisp and piercing brown eyes. It helped that for the thoroughly modern German entrepreneur, politics were considered to be something indulged in by people with too much time on their hands.
And, philosophically, it was clear there was no common water between him and the communist states, as he remained the embodiment of the hard-nosed, unrelenting capitalist. “I always had a rule: unless you’re going to make money, you won’t achieve anything. There’s no reason to get out of bed in the morning if you’re not going to turn a profit that day.” While this notion of individual incentives may have been antithetical to the East Germans, their country had teetered on bankruptcy from day one, so it needed the cash.
Where Steinhoff had the advantage over any prospective rivals was that he could speak Russian, thanks to the tutorials he’d received from the prisoners on his family’s farm. It provided a trade bridge for Steinhoff between the