How Markus Jooste sold Steinhoff its headquarters

The notion that Steinhoff had any semblance of financial control over related-party transactions is slipping as steadily as the company’s share price ahead of the much- awaited findings of PwC’s forensic investigation.

An exposé by the FM and amaBhungane two weeks ago showed how — over two decades of self-dealing involving multiple entities designed to disguise their interests — former CEO Markus Jooste and the Steinhoff family enriched themselves at the expense of shareholders.

It’s becoming increasingly hard not to think of Steinhoff as anything other than a giant corporate piñata that Jooste thrashed with a bat every time he wanted a sweet.

Now it has emerged that the Stellenbosch office park where Steinhoff has its head office was first bought in 2006 by a company apparently owned by Jooste called Phahamiso Trading & Investments. A few years later, Phahamiso was then sold to Steinhoff.

The multitenanted De Wagenweg Office Park (loosely translated as "the wagon road") comprises nine freestanding office buildings that can be accessed via Adam Tas Road. Among its tenants are the private bank arms of Absa and Nedbank.

Deeds records show that Phahamiso bought certain De Wagenweg units for R18.8m each in October 2006. Jooste had been appointed Phahamiso’s sole director a few months earlier.

André Markgraaff, whose company, ATM Group, developed the 10,000m² De Wagenweg in the mid-2000s, told the FM that the deal was done more than a decade ago.

"Markus was one of the investors we sold it to, for about R14,000 per square metre. I’m not sure which entity the property was transferred into," he says.

It turns out that Danie van der Merwe — Steinhoff’s acting CEO and a longtime colleague of Jooste — was also a shareholder in the company.

"I was a 50% shareholder in Phahamiso, but it was 100% funded on loan account by Markus or one of his companies. It was a private investment and had nothing to do with Steinhoff," he told the FM.

A few years later Phahamiso was sold to Steinhoff — though this was never disclosed to shareholders as a deal between related parties.

In the entrails of Steinhoff’s 2010 financial statements, in a small note on acquisitions, it lists Phahamiso Trading & Investments under "various other" transactions. No other details are provided.

In 2011 Steinhoff relocated its head office to De Wagenweg from Wynberg in Joburg.

In response to questions from the FM, Van der Merwe recalls that Steinhoff’s property division was tasked with finding or building a new head office when the decision was made to move to Stellenbosch.

"The property group’s management eventually identified De Wagenweg as a good opportunity to settle our head office and they proposed to buy the shares and loan account in Phahamiso at the original purchase price plus holding costs," he says.

Van der Merwe says this was still a cheaper option, per square metre of space, than other units adjacent to it being sold at the time.

"This was approved at the Steinhoff Africa Property board meeting and the related parties were disclosed," he says.

However, while it may have been disclosed to the Steinhoff Africa Property board, it is understood that board consisted of executives who reported to Jooste. The deal appears not to have been disclosed to Steinhoff’s main board.

One Steinhoff director says as much: "There was no related-party deal disclosed to the board about Markus’s involvement in owning the head office property."

Nor was there any disclosure of such a related-party deal made to investors in any of Steinhoff’s annual reports.

One person close to the company says the impression was that when it came to Steinhoff’s property deals, "Markus was the dominant force" who called the shots.

Van der Merwe says: "To the best of my knowledge, no profit was made on the deal as the equity was worth nothing, and the loan which financed the purchase price was paid back with holding costs."

However, Steinhoff has not disclosed what it paid for Phahamiso. It also remains unclear whether Jooste made a profit on the funding leg of the transaction, given that he financed the initial deal.

It is understood that this deal involving Steinhoff’s head office was flagged in the investigation by forensic auditor PwC, which is expected to wrap up its probe this month. But at this point, it remains unclear whether Steinhoff will release the full findings of the PwC investigation, given that the company is facing a slew of legal claims from investors.

Asked about the head office transaction by the FM, Steinhoff said only that the company had "taken a decision not to comment on any past transactions or relationships until we have the results of the PwC investigation".