Last Thursday, news broke that Marcus Joester was being fined R475 million by the FSCA, the Financial Sector Conduct Authority. Yes, got it right, even though most of us only learned the name of that body last Thursday. So we immediately decided we were going to tell the story of this massive fine and the impending seeming criminal case by the state against Marcus Joester and we were getting work.
requests to do it on all the different socials. We could never have known that by that evening Marcus Joester would be dead. And now South Africa is lit with so many questions. Is that money still going to be recovered? Is the case against him and the group of people who were involved in the alleged criminal conduct going to continue?
But the core question for a lot of us South Africans still in this very messy and hard to understand case of grand private multinational corporate fraud is. What did Marcus Joerster actually do, allegedly? So, let's explain.
This is the issue with Marcus Joerster. Thanks so much for joining us on the issue with Dan Korda. South Africa is a movie.
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And also go check out our Patreon where once a week, every week, we release an expert exclusive interview with somebody who knows a lot about what they're talking about. on some of the biggest issues and stories facing South Africa. Right, let's talk about this insane story. Now, I know what you're thinking. Dan, are we really going to do Oyaluta 99?
He's probably the biggest looter in South African history. But, you know, he's just departed. And yes, there are not going to be a lot of jokes in this episode.
But it's also hard to put him on the leaderboard for now. Because no one really knows how much Marcus Joerster stole. We know how much he was paid formally in fees as CEO while he was the boss of Steinhoff.
We know how much Steinhoff allegedly overinflated their books, but we don't actually know how much he looted. Maybe that will be discovered in the coming weeks, months and years of investigation. So what we're going to do is explain what Marcus Joerster actually did, allegedly.
cut through the noise and get clarity because there's so much noise around Marcus Joester. There's his mansions and his mistress slash mistresses. There's his frankly insane collection of horses.
He owned hundreds of them. At one point, he had the second most privately owned horses in the world after some shake from the Middle East. We're going to cut through all of that, even the circumstances of his death, and we're just going to understand what he allegedly did. So the man who pulled off South Africa's largest corporate fraud in history started out training as a private accountant. He then became director of a small furniture manufacturer called Goma Goma and it was at that time that he met a German entrepreneur called Klaas Daun who coached him in business.
And it was through Klaas Daun that Joost met Bruno Steinhoff of the Steinhoff Furniture Company which he created and developed in Germany. So the companies became one. and were listed on the Johannesburg Stock Exchange in South Africa, as well as the Frankfurt Stock Exchange in Germany.
And in 2000, Joester became CEO of this company. Steinhoff grew rapidly and quickly came to dominate the South African furniture industry by buying out tons of its competitors including the likes of Joshua Dore and then it started making massive moves. In 2011 it bought the French furniture company Conforama. It followed that up with purchases in different key markets around the world including Poundland which is in the UK and Mattress Firm which was in the United States. Steinhoff also did business in Asia and Australasia and Marcus Justus started being talked about as some kind of miracle businessman.
Some kind of literal freak of nature because to be clear respectfully Steinoff is just a furniture company Fighting in a national and international furniture industry, which was very competitive and yet Steinoff was growing so fast They were growing at up to like 36% growth a year between around 2012 and 2014 by 2016 Steinoff employed 130,000 people across five continents. They were the 15th largest company on the Johannesburg Stock Exchange and with a share price of 90 rand per share. They were the biggest rival to IKEA in Europe. And people were wondering how were they doing this? It's not like Steinoff had some kind of genius technology which made them different from all of the other competitors.
They just seemed to be making incredible growth and incredibly large amounts of money. And some people were going, what is the truth behind this image of Markus Joester? the maverick genius business person.
Steinhoff paid Joester 651 million rand between 2014 and 2017 as their CEO but he also had masses of shares and so Forbes Africa in 2015 speculated that Joester was worth a cool 400 million rand. million US dollars which in those days rands equated to 5.2 billion rand and everyone was on the Marcus Eustace hype train more than 340 investment funds in South Africa alone held Steinhoff shares and many of them were pension funds which means that pension funds tasked with holding and managing normal everyday South Africans as pensions were investing those values into Steinhoff because it was seen as such a safe bet a stable stock option, and that the share value continued to rise. And German financial authorities were getting suspicious of this frankly unbelievable freakish growth of Steinhoff.
In fact, they raided the Steinhoff offices in Germany in 2015. But Steinhoff continued to explode and balloon and share prices kept going up. And it was the following year when Steinhoff had their highest ever share price on the JSC. It's at 90 round a share.
But by 2017, the numbers literally weren't adding up and serious questions were being asked about whether or not Steinhoff's books, their publications and claims about their own finances, their own state of their company were reliable, trustworthy, true. Because if the books weren't accurately reflecting how well Steinhoff was doing, then they were in massive trouble. It is absolutely illegal to lie and falsify your company's business records.
It breaks a bunch of laws. A simple, obvious one that we can all understand is that you can't lie. to the tax revenue service you can't lie to sars because they need to tax you the right amount by south african law but there's a bunch of laws that you specifically break when you lie about the reporting the state of your own company when your company is publicly listed basically if your company is publicly listed it is on a stock exchange where everyday people and investors and investment funds can buy shares in your company so if your company grows then their part of the value, their chunk of their company that they own of yours becomes more valuable.
And you have to be honest about how your company is doing so that investors can make a clear-sighted in-the-know call about whether they want to invest your money with you. Because if your company is doing worse than you claim, and then the company hits dire straits, but investors have put in money and purchased parts of your company's value based on what you said was the company doing better, then... then you have misled them and deceived them and basically led them into spending money on investments that they thought were one thing but were actually a much worse other thing.
And by late 2017 it looked like that's what Markus Joester had been doing for years and years and years. Lying about how well Steinhoff was doing. writing fake lines into their balance books of transactions that never happened or purchases that were way over inflated or sales revenue that just wasn't as large as the claim that they made their sales revenue was to make it look like steinhoff was doing better than it actually was to encourage investors to go wow steinhoff is doing super great i'm going to part of that action to buy shares from steinhoff steinhoff was basically doing fake unbelievably well when they actually in real life were not doing well at all but once you get the momentum of people going wow steinoff is the one and throwing in all their money the value of your stocks goes up which means that steinoff has more resources and better reputation so they can continue to steamroll down the road making more and more purchases and more and more money for their big guys in the company and by late 2017 marcus yursta resigned as ceo of steinoff He saw the writing on the wall and he resigned and he admitted to accounting irregularities and big mistakes. But he never admitted willful wrongdoing. He never, ever admitted to breaking the law.
And with all the rumors swirling, between the 5th and the 7th of December 2017, the value of Steinhoff's shares went from R46.25 a share to R10 a share. Meaning that... all those investors and investment firms and pension funds who had bought what they thought were safe reliable value stocks in steinhof had the value of those stocks rapidly depreciate in value the value of steinhof shares dropped 98 percent by the end of the month meaning that for every one rand put into steinhof by an investor or an investment fund often an investment fund managing everyday south africans's pensions they came out of it with two cents. Steinhoff lost nearly 200 billion rand in value and the Johannesburg Stock Exchange went into a panic as investors started to think how could this happen? How could South Africa's financial regulators drop the ball and allow this grand deception, this fraud to take place?
Which means that investors started pulling investments from all other places and the JSC ended up losing 295 billion rand, which was at the time the value of 8% of South Africa's entire GDP. The accountancy firm Deloitte that up until then was supposed to be auditing and checking Steinhoff's books were kicked out and they were replaced by PricewaterhouseCooper. And PwC's report was horrendous.
Steinhoff for 2015-2016 had claimed to have made a 1.4 billion euro profit. But PwC found that for that year, actually, they'd made a 237 million euro loss. So it turns out, on Joost's orders, Steinhoff had been cooking their books to make them look way better than they were four years.
By some estimates, Steinhoff's books had in them 106 billion rands worth of fiction. fictitious or irregular transactions. And some of the victims were massive investors who look it really sucks but they had so much more money that it was awful for them but they are fine.
But many of the victims of this horror fraud, the biggest in South Africa's history, were everyday people who lost their pensions. And some of them were so devastated by that crisis taking away their money. the money that they'd carefully put together to see out the end of their lives, that they ended their lives. And Steinhoff's horror disaster slammed South Africa's international reputation as a good place to do business and a good and reliable and safe and well-regulated place to invest.
Another quote from a regulator said that the loss to the market also affected market confidence and South Africa's reputation as a well-regulated and safe market, which means that the whole country has suffered what Marcus Joester and his cronies did. So what have the consequences been for Joester? Well, until a few days ago, very little. Steinhoff was fined by the FSCA 1.5 billion rand for their malpractice. But later, that fine was reduced to just 53 million rand because the regulators realized that if they'd kept it to 1.5 billion, most of the people who would suffer Steinhoff and what remained of Steinhoff after it had fallen apart, most of the people who would suffer having to pay that 1.5 billion fine were investors who'd already basically lost it all.
So it was reduced to 53 million. But then Joerste was fined 121 million Rand for a whole other law that he broke. Because Joerste clearly did some insider trading. So insider trading is basically when if you are in control of a publicly listed company, which has shares on a stock exchange, and you have inside intelligence that something big is about to happen.
Like, say, a big announcement that's really going to affect the share prices in a company, in this case, causing it to drop. You pull out your shares, you sell them quickly to protect the value of your money. But insider trading is if you go and tell friends of yours who also have shares that that is about to happen. Because that essentially means that you have sway over the fate of a set of shares, including those of people, other people who you don't tell, but you only tell a few people so they get out in time.
It's called insider trading. And it turns out that just a few days before Joerste would announce his resignation, he texted four friends of his in what is known as the most expensive SMS in all of history. He's telling them, sell, because something is about to happen.
Of course, the something was him resigning. He let some of his friends know that they should sell, sell, sell quickly because they were about to lose all of that value. Totally illegal insider trading.
Joerste was fined 121 million Rand for that. But aside from that, the National Prosecuting Authority in South Africa has been slowly trying to painstakingly build a case of criminality, criminal charges against Joerster for like seven years. But I don't know if you've noticed, in the last seven years, the NPA has had a bunch of other cuck going on.
It's been compromised and stayed captured and then they've tried to go through renewal and kick out a bunch of corrupt people. So all of the NPA's work has gone incredibly slowly until recently. when it seemed like they'd finally put their case together and were ready to put Joerste in court. So one Thursday we saw that Markus Joerste was being fined 475 million rand by the Financial Sector Conduct Authority and had until the 19th of April to pay.
That was Thursday morning. We were like, right, we're going to tell the Markus Joerste story. But at the same time, the hawks were bearing down on Joerste and about to arrest him on a criminal charge. for which the NPA had assembled essentially the A-team, the dream list of Avengers, including the likes of like SC Vim, Tren Grove and the rest, the best lawyers in South Africa to conduct the trial and prosecute Jooste for this disaster. And with the hawks bearing down and the fine to pay, Jooste did what he did on Thursday evening.
And here we are. And where do we go from here? Well, A lot of the legal process is to try and recover all of the money that's been lost, get it to people who lost that money, actually convict other people who helped Joerster and were his kind of disciple, crony acolytes in committing all the things that they did. All of that is ongoing. One of Joerster's close allies spent the night in prison.
His financial officer in Germany has been convicted for three and a half years in jail for what he did in Germany side. But Joerster himself will never truly face justice now. Cool, I hope you get it. It took us a long time to get it.
We'll figure out Uyeluta at some point. Thank you so much for watching The Issue with Dan Korda. Now you know everything involving this extraordinary mess and its consequences on South Africa's economy, South African society and South African people involving all of the crazy criminal, honestly evil acts of Marcus Yuster. We'll be back on Thursday with the next episode of The Issue. Thank you so much.
I know that was a lot.