Steinheist. Rob Rose
the Germans began to chip away at the Berlin Wall. And in South Africa, FW de Klerk, a former hardliner, took over as president from the twitchy PW Botha. By Christmas, he’d decided “we’d have to make a 180-degree turn”, and so, on 2 February 1990, he told the white Parliament he was unbanning the ANC and releasing Mandela.
This synchronized unravelling of both totalitarian regimes, the Soviet Union and South Africa, was marvellous for millions of people. For Steinhoff, however, it was an utter disaster. “When the Iron Curtain came down, my business went down too,” Steinhoff says. The closeted business model of buying furniture cheaply in tinpot dictatorships and flogging it to the cash-flush West had run its course. “I had to make a change,” he says. “I couldn’t continue to import furniture, so I took a decision to build my own factories, or buy them from my suppliers. So, we bought factories across the world, even in South Africa.” Steinhoff snapped up eight struggling factories in East Germany, owned by the government, built others in Hungary and Poland, and bought two existing manufacturers in the Ukraine. The company was no longer mainly an importer: it was going to make what it sold.
In all fundamental respects, this step marked the genesis of Steinhoff International.
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Bruno Steinhoff’s second venture into South Africa was far more successful. It all happened thanks to a close friend of his, a textile mogul who’d begun his career as a tax lawyer named Claas Daun, who lived a short distance away in a town called Rastede. Both men, Bruno Steinhoff and Claas Daun, were the kings of their respective towns, the big swinging dicks of rural northern Germany. “Claas had become a director of one of my companies a few years before,” says Steinhoff. “The banks insisted. They said they’d lend me money, as much as I needed, but I had to put in place a proper board in case I got sick or whatever. So, we became good friends. He’s a clever man.”
Daun, speaking in an as-yet-unreleased tape recorded in 2013 to celebrate Steinhoff’s fifteen years on the JSE, described how he’d first decided to invest in South Africa, setting in motion the Steinhoff journey.5 During the oppressive 1980s, he said, he visited South Africa and felt an overwhelming sense of the country’s potential – despite apartheid. “I was travelling this country, and every time I was there, I said: why is this world so negative? The country is far better and even black people I met at that time were friendly and were optimistic; the country was wonderful and I saw a gap between the perception of the world and my own experience travelling.”6 So, in the late 1980s, Daun bought a house in Cape Town. Thanks to the recent invention of the fax machine, he ran many of his German businesses remotely from the Cape. He was there, he said, when the Berlin Wall collapsed – something he never saw coming. “For me, being with my family in South Africa – being at heart a capitalist, an entrepreneur – I said: that’s paradise for South Africa that these communist systems have proven that they’re not working.”
Things moved quickly after that. In February 1990, when Mandela was released, Daun commented, “I was one of the very few white faces on the Parade in Cape Town. I don’t know how many – fifty thousand [people] or whatever. The excitement was there.” Daun says it was after hearing Mandela speak that day that he decided “now is the time to start. A few weeks later, I bought the Morkels chain from Federale – 75% or 76% of the shares.” Morkels had been a household name in South Africa, founded in the early part of the twentieth century by Philip William Morkel, who, famously, got the money to seed his early stores from a man he was chatting to at a pub, who took Morkel’s only form of security: his car. Daun not only bought the hundred Morkels furniture shops, he also got 50 Totalsports stores for less than 10 million Deutschmarks. “A comparable group of stores in Germany would be ten times or more,” he said.
After that, he travelled around the country to visit the stores, where he spoke to many South Africans who thought he was insane to be investing when “the blacks” would be taking over. “They had indoctrinated all of the white South Africans who’d heard all their lives about the swart gevaar. They were pessimistic . . . [but] I was getting more optimistic,” he says.
Daun hauled out the chequebook once more. In 1994, his company Daun & Cie bought a relatively anonymous furniture company situated south of Joburg near the township of Soweto called Victoria Lewis – which made its name building and selling discount bedroom suites to what was coyly described as “the mass market”.
But it was the following year that Daun made the decision that would lift him onto the road to the modern-day Steinhoff. In 1995, one of Daun’s colleagues came to him and told him about a commercially minded young accountant named Markus Jooste. “There’s an entrepreneurial guy, an Afrikaner. Young guy with a huge factory in Gomma Gomma,” this colleague said. In the landscape of the furniture industry at the time, Gomma Gomma was nowhere. It was just a speck, making unremarkable couches and lounge furniture from its base in Ga-Rankuwa, a dusty rural nowhereland north of Pretoria renowned for absolutely zero. Telling the story, Daun said at the time that he was understandably reluctant. Nonetheless, he went to meet Jooste for the first time in Joburg’s Carlton Hotel – then the tallest building in Africa, and the site where Mandela, in 1994, declared South Africa to be “free at last”.
It was late on a Sunday afternoon, but they chatted casually at the bar, with Daun stand-offish at first. “I was a little bit cautious, but then we set up a second meeting in May 1995. Beforehand, Markus had sent me figures and a balance sheet, and I remember, in this meeting, he showed me the factory in a photograph. It was massive – huge.”
Jooste told Daun he was having trouble with his bank, Absa, and needed an investor. Daun was hesitant, in part because “it was a big amount of money at that stage – I had to pay R20m in cash to the bank”. But over three or so meetings, Jooste sold him on the rationale. “In the end, I said: ‘Markus – handshake, you are my man. We’ll work together.’ It was a decision from my gut feeling, and I was not always right in my life – I got other experience very badly [wrong]. But with Markus, it was a very lucky and good decision.”
For Jooste, what stuck with him was the fact that Daun had done the deal – agreeing to repay the banks and settle the debt – based entirely on a handshake. In retrospect, a few years down the line, Daun would be justified in feeling less unambiguously positive about that decision. But in 1995 it seemed like a good idea.
Today, Bruno Steinhoff says his initial decision to invest in Gomma Gomma came after he got a call from Daun, asking him to help save his South African factories, which were all struggling to turn a profit after interest rates had spiked to 25%. “Claas phoned me and said, ‘Bruno, I need your help, because all my factories, my supplier has gone bankrupt.’ He said, ‘I now have to buy these factories from bankruptcy, otherwise I have no suppliers.’ So, I said, ‘Claas, it is possible, but I’ll have to invest a lot of time.’ So, he said, ‘Let’s make this Steinhoff in Africa – and you’ll get half the shares in it.’ ” So in 1997 Bruno Steinhoff bought 35% of Gomma Gomma, and this became the foundation for the modern Steinhoff.
Already, Daun had been leaning heavily on Bruno’s expertise. He would regularly send his best furniture buyers over to Westerstede, to speak to Steinhoff about design and the new technology used to make furniture. “What Markus was lacking in Gomma Gomma was the latest technology in furniture production. And Bruno, with his factories, invested huge amounts of money into new equipment and technology . . . I said to Markus: ‘We must bring this together, try to form a partnership.’ ”
So one day in October 1995, a confident, good-looking man walked into Steinhoff’s Westerstede office as an emissary from Daun’s team in South Africa. Good afternoon, he told Bruno, I’m from Gomma Gomma – my name is Markus Jooste.
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Today, it would seem an exaggeration, but not altogether untrue, to say that Bruno Steinhoff has been irretrievably shattered by what happened to the company that carries his name. But it’s clear the episode has clobbered him pretty badly. You sense he is not as certain as he once was, when he talks about certain deals Steinhoff made. At times, he seems to carry the hesitant humility of the recently divorced. Yet there is still that fierce competitiveness in his eyes that helped his company prosper. When trying to make a point, he