Steinhoff’s desperate efforts to conceal its financial skeletons have failed as court demands transparency

By Sam Sole and Caroline James for amaBhungane

5 Dec 2024

Supreme Court of Appeal judges unanimously ordered the release of the Steinhoff forensic report and confirmed the primacy of the Promotion of Access to Information Act’s public interest override. They also slammed Steinhoff for its efforts to keep the details secret.

On Wednesday, 4 December 2024, the Supreme Court of Appeal (SCA) threw out Steinhoff’s appeal against a high court decision ordering the company to release the full report of a forensic investigation into the massive fraud that pitched Steinhoff into free-fall and eventual liquidation, costing investors more than R200-billion.

In a ringing judgment, the five justices excoriated Steinhoff’s attempts to claim litigation privilege and avoid the implications of the law governing mandatory disclosure in the public interest, at one point describing Steinhoff’s strategy as “untenable”.

In March 2019, PricewaterhouseCoopers (PwC) disclosed the full report — comprising 4,000 pages and 3,000 pages of annexes — to Steinhoff, but the company’s board took a decision to publicly release only a 14-page summary.

The Financial Mail and amaBhungane requested disclosure of the full report in terms of the Promotion of Access to Information Act, but Steinhoff refused.

The company cited as reasons its claim that the document was legally privileged and that the public interest override in the act did not apply.

Section 70 of the Promotion of Access to Information Act provides that disclosure is mandatory if the disclosure of the record would reveal evidence of:

A substantial contravention of, or failure to comply with, the law.

Imminent and serious public safety or environmental risk.

The public interest in the disclosure of the record clearly outweighs the harm contemplated in the provision in question.

The judges held firm that this was exactly such a case.

It is worth quoting Justice Schippers, who penned the judgment, in some detail.

He noted that the PwC summary itself disclosed that the wrongdoers inside Steinhoff had perpetrated irregular transactions and concealed them for nearly a decade, clearly indicating that they were committing fraud on a large scale.

Justice Ashton Schippers further noted that “in addition, this is a classic case where the public interest in the disclosure of the report clearly outweighs any potential harm to Steinhoff. The harm it alleges comprises superficial assertions… (They) do not bear scrutiny… The public interest, more specifically, the right of South African society at large to know the facts about the Steinhoff scandal, goes beyond the narrow interests of Steinhoff, and is best served by exposing the nation’s biggest corporate scandal through complete transparency, to avoid a recurrence.”

He observed that the Steinhoff scandal “led to a massive and precipitous drop in its share price (98%) and affected a large majority of South Africans with some form of retirement savings invested in Steinhoff”.

Schippers said the evidence of company secretary Nicholas Lewis was evasive, noting that “Lewis’ answer to all of this is cagey, and one of avoidance. He simply says: ‘I do not accept the applicants’ summary’, and contends that the media respondents assume that the causes and consequences of the accounting irregularities have already been determined. And this, after publication of the overview, which describes the irregular transactions that caused the profits and assets of the Steinhoff Group to be grossly inflated.”

“What all of this shows is that Steinhoff used dishonest and illegal ways to maintain its businesses and deceived investors into believing that the company was more profitable than it actually was. Billions of rand were wiped off the Johannesburg Stock Exchange, and the pension funds of millions of ordinary South Africans suffered huge losses. Steinhoff was once regarded as one of the most successful companies in South Africa, with a strong commitment to corporate social responsibility. There is simply no basis to shield the report from public scrutiny: Parliament has decreed that the public interest override must be applied in a case such as this. Accordingly, I conclude that the public interest override applies in relation to the report.”

Read more: Steinhoff and access to information — what’s at stake?

While the judge ruled that the public interest override cut across other justifications allowed by the Promotion of Access to Information Act for companies to refuse disclosure — such as the various forms of privilege attached to communication between a lawyer and his/her client — he also rejected Steinhoff’s argument on this ground on its own terms.

Effectively, the judge found that Steinhoff had tried to retrofit a privilege claim based on the argument that the PwC report had been prepared for the purpose of litigation.

Justice Schippers held that this claim was not supported by the facts, which showed that PwC had been engaged to conduct a fact-finding investigation long before any litigation was contemplated.

Steinhoff itself has ceased to exist, but its legal rights are held by a successor company, Ibex RSA Holdco Limited, which is incorporated under the laws of England and Wales, with its registered office in London and its operating office at Steinhoff’s former premises in Stellenbosch.

Ibex RSA now has control of the report and has unhindered access to certain books, documents and other data storage media of Steinhoff.

If the company does not appeal against the ruling it has 10 days to hand over the report. DM

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