The South African Reserve Bank (Sarb) this week moved to attach more than R1.4 billion in assets linked to former Steinhoff chief executive Markus Jooste, five years after it told Parliament it was investigating whether Steinhoff had violated the country’s exchange control laws.
Starting in 2014, the Sarb gave Steinhoff permission to move €19 billion overseas to fund its European expansion and restructuring. Its decision was based on financial information that subsequently proved to be fraudulent.
It was reported last year that Steinhoff’s black economic empowerment partner, Lancaster 101, was suing the Sarb for enabling Steinhoff to move the assets offshore while the group was technically insolvent.
The Sarb’s Financial Surveillance Department’s Compliance and Enforcement Division started investigating alleged exchange control transgressions at Steinhoff International Holdings in early 2018.
EWN reported that the head of the Hawks, Godfrey Lebeya, told Parliament’s Standing Committee on Public Accounts (Scopa) yesterday that he expected criminal prosecution against Jooste to have taken place.
According to the report, DA MP Alf Lees put Lebeya “on the spot” during a meeting of Scopa. “I’m thrilled to see at least the Reserve Bank is able to reign in Markus Jooste even if the Hawks – after all these years – still have not charged him with anything,” it quoted Lees as saying.
Lebeya said Hawks investigators and prosecutors have been using the same affidavit as has the Sarb to pursue a case against Jooste, EWN reported.
“In certain processes, we were of the view that we can already move, but we are not prosecuting. But we’ll present the evidence as it comes to our attention,” he was quoted as saying.
Did grey-listing threat play a role?
Correlation does not imply causation. However, one cannot but notice that the Sarb’s move against Jooste takes place when the South African authorities are under pressure to prove to the inter-governmental Financial Action Task Force (FATF) that they have the will and capability to act against financial crime, including money laundering.
News24 said it “understands” the central bank’s move came “after a renewed push by the government to co-ordinate efforts on the investigation as South Africa faces the real risk of being grey-listed by the FATF next year”.
The publication called the Sarb’s move to attach Jooste’s assets “a surprise”, saying the National Prosecution Authority “was expected to make the next move”.
Business Day said that although this was the first action taken against Jooste in South Africa, it related only to suspected exchange control contraventions, “rather than the wider fraud involving R106bn in ‘fictitious and/or irregular transactions’ that duped a wide array of pension funds and investors in the country. As it stands, no arrests have yet been made by the Hawks of anyone related to the Steinhoff fraud.”
The publication also said the Sarb’s move “suggests the authorities have the appetite to unravel the labyrinthine corporate structures Jooste put in place to hide assets”.
According to Business Day, Peter Armitage, the chief executive of asset and wealth manager Anchor Capital, said “it is great for South Africa’s image that we [are] actually doing something about the fraud. The Steinhoff debacle ruined many people’s lives. This matters a lot for South Africa.”
Anchor Capital had clients who lost money when Steinhoff’s share price collapsed, wiping out R200bn in retirement fund assets and other investments.
Although Armitage said that prosecution of “such a complicated case was likely to be difficult”, the Sarb’s application to freeze assets could be seen as the first step in the process, and evidence that the authorities were serious about prosecuting financial crimes, the Business Day report said.
“With grey-listing a threat for South Africa, there is comfort for other global players that the authorities are serious about [acting],” Armitage was quoted as saying.
In a subsequent editorial on the freezing of Jooste’s assets, Business Day commented that “swift action” to address the FATF’s concerns might even avert grey-listing. “In this context,” the Sarb’s action in freezing Jooste’s assets “are a welcome indication that some institutions do work”.
In October 2020, the FSCA found Jooste guilty of insider trading in Steinhoff shares and fined him R162 million. But the fine was set aside by the Financial Services Tribunal in December last year, and the tribunal referred the matter back to the Authority for reconsideration.
News24 quoted Ninety One’s deputy managing director, Sangeeth Sewnath, as saying that the attachment of Jooste’s assets and the prosecution of private sector and former state executives implicated in a R398.4m Transnet fraud and corruption case could help South Africa to negotiate the deadline for getting its ducks in a row to avoid grey-listing.
Sewnath was reported as saying there was still a possibility that the FATF will look at these events and conclude that South Africa was starting to take notable action.
“The seizure of Jooste’s assets isn’t coincidental,” he was quoted as saying. “We could [earn] sympathy [to get] more time.”
Reaction from ex-Steinhoff chairperson, Christo Wiese
Former Steinhoff chairperson Christo Wiese praised the Sarb for attaching the assets linked to his former business colleague.
“I still believe in the rule of law and the old adage that the wheels of justice may turn slowly, but they do turn,” News24 quoted Wiese as saying.
Wiese, who chaired Steinhoff’s supervisory board between May 2016 and December 2017, described the Sarb’s “unexpected intervention” as the first “very hurtful move against Jooste”.
News24 reported Wiese as saying: “Some people have been unnecessarily harsh in their criticism of the South African authorities, suggesting they are incompetent. But one has to bear in mind that even the German authorities have been dealing with this issue for more than five years now, which indicates how complicated this fraud was and how it had been committed very cleverly over more than a decade.”
In an interview with Business Day, Wiese was quoted as saying: “It [the Steinhoff scandal] caused too much damage, not only the financial damage, the damage to the reputation of individuals, but the damage to the reputation of the country as a whole.
“The damage to … the reputation of businesspeople in South Africa was enormous. It’s something that should never be allowed to go unpunished.”
Wiese has a particular interest in the fate of one of the properties that was attached on Tuesday, Lanzerac wine estate in Stellenbosch. He is suing Jooste and Lanzerac Estate Investments – the company that bought the estate from him in 2012 – to have the property returned to him.
Eight respondents to the application
The urgent application to attach the assets was brought before the High Court in Cape Town on 6 October by the Sarb and its deputy governor and the chief executive of the Prudential Authority (PA), Nomfundo Tshazibana.
The Sarb invoked its powers under regulation 22C of the Exchange Control Regulations. This regulation provides for the recovery of any money or goods, no matter in whose possession they are, when a person has benefited from or has been enriched as a result of a third party contravening the regulations. The Sarb may block and attach linked assets, including “clean” assets that are not the direct proceeds of the original crimes.
The ex parte application was heard in chambers by Judge Andre le Grange, who signed the court order.
The eight respondents in the case were:
- Jooste’s son, Michael (first respondent), and businessmen and friends Gary Harlow (second respondent) and Rian du Plessis (third respondent), in their capacity as the trustees of the Jooste family trust, Silveroak (formerly the Markus Jooste Kindertrust).
- Markus Jooste (fourth respondent) and his wife, Ingrid (fifth respondent).
- Lanzerac Estate Investments (sixth respondent).
- The Registrar of Deeds in Cape Town (seventh respondent). The registrar was included in the order so that the office is aware it cannot transfer the five properties linked to Lanzerac to new owners.
- Jooste’s chauffeur, Petrus Venter (eighth respondent).
The respondents can challenge the order in court. They have 90 days in which to ask the Sarb for detailed reasons about why the assets were attached. From the date on which the reasons are received, they have 180 days in which to take the court decision on review.
Three attachment orders
The court authorised the Sarb to serve three attachment orders signed by the PA’s Tshazibana, against the trustees of Silveroak, Markus Jooste, and Lanzerac Estate Investments.
The order against Silveroak includes Jooste’s 7 000-square metre property in Voëlklip, Hermanus. The attachment order says the trust’s assets, as declared in its 2019 audited financial statements, include an art collection valued at almost R99 million, “other financial assets” worth R1.2bn and loans owed by borrowers of more than R131m.
The attachment order in respect of Lanzerac Estate Investments includes the historic Lanzerac winery, hotel and spa in Stellenbosch, and four other properties in the area.
The order in respect of Jooste authorises the Sarb to attach his personal assets, including jewellery, paintings and firearms with realisable value of R795 400, as well as all moveable assets at his premises in Hermanus and Lanzerac, “excluding clothing of those persons present or resident on the property and any foodstuffs and living essentials”.
It also includes five vehicles, two of which are registered in the name of his wife and three in the name of his chauffeur.
Although the moveable assets at the Hermanus and Lanzerac properties have been attached, they may not be removed, on condition that the sheriff may photograph the goods and draw up an inventory.
Search for evidence
Jooste is directed to declare, under oath, within five days of the service of the court order, the whereabouts of his assets – wherever they may be situated – acquired since December 2019. There is similar order against Ingrid Jooste, although the acquisition date is from December 2017.
Trustees Michael Jooste, Harlow and Du Plessis were directed to declare, under oath, within five days of the service of the court order, the whereabouts of all the assets acquired by the Silveroak Trust since its 2019 financial statements to date.
They were interdicted from removing or disposing of any of the trust’s assets.
The court order authorises the Sarb to search and examine the Hermanus and Lanzerac properties for any books or documents containing information relevant to possible exchange control contraventions. This information includes correspondence, bank statements, details of fund transfers, accounting records, and agreements entered into by Jooste or entities related to him.
The Joostes must grant forensic experts access to their electronic devices and servers, and the forensic experts are authorised to make a mirror image of all data, including any deleted data, on these devices and servers.
The court order sets out how the documents and electronic data shall be managed and stored, as well as the timeframes for Jooste to object to the applicants’ accessing, analysing or using information.
The physical and electronic documents must be given to a “safeguarding attorney” who represents neither Jooste nor the Sarb.
Jooste has 15 days from the date on which the order was granted to state which documents he deems confidential and should not be handed over to the Sarb. He needs to provide legal grounds for objecting to the information seized and specify exactly which documents should not be handed over to the Sarb and why.