Steinhoff; South African IKEA?

Part of the Portfolio since 2015 (yes! long before the drop!)

Steinhoff began as an honest South African furniture group and, under CEO Markus Jooste, metastasised into a sprawling global retailer: Conforama in France, Poco in Germany, Mattress Firm in America, Pepkor, and a stake in seemingly everything that flat-packs. By 2016 it was dual-listed in Frankfurt, feted as a German-South African champion and backed by the billionaire Christo Wiese. The story was growth-by-acquisition. The reality was acquisition-by-storytelling.

On 5 December 2017 the wheels came off in the most modern way imaginable: the auditors, Deloitte, declined to sign off. Jooste resigned within hours. The share price did not so much fall as evaporate – more than 95% in days. Tens of billions of market value became a rounding error before the office Christmas party.

What PwC eventually found, after a long forensic dig, was almost artistic. Profits had been overstated by roughly €7.4 billion over several years, through fictitious and irregular transactions booked with a small circle of insiders and friendly “third parties” who were not, on inspection, especially third. Revenue that never existed. Liabilities wearing the wig of assets. The furniture was real; the numbers were the flat-pack.

The losses were not abstract. The scandal erased over half the fortune of Christo Wiese and gouged the pension savings of millions of ordinary South Africans – the public funds holding what everyone had filed under “safe industrial blue-chip.” This is the part the museum does not find funny: the worthless share now in our cabinet was, for a great many people, a retirement.

The endgame dragged on for years, as these things do once the lawyers outnumber the assets. Creditors – mostly hedge funds – ended up taking 80% of the equity, leaving existing shareholders with 20% of not very much. In 2022 a compensation “pot” of around R25bn was arranged for retail investors, the corporate equivalent of a sympathy card. On 13 October 2023, Steinhoff International Holdings was liquidated. The shares ceased to exist.

Markus Jooste never reached a courtroom. German prosecutors in Oldenburg indicted him; South Africa’s regulator fined him R475 million. On 21 March 2024, one day after that fine, he died by suicide near Hermanus. The chief architect closed the file himself.

For the museum the moral is the oldest one, restated in Afrikaans and German at the same time: when a serial acquirer’s reported profits keep climbing while the cash mysteriously never arrives, you are not looking at a compounder. You are looking at a creative-writing department with a stock ticker.