If it was a surprise that the Reserve Bank suddenly attached former Steinhoff boss Markus Jooste’s assets it was certainly a welcome one, and one that matters a great deal in an SA macroeconomic and political context.
It is almost five years since extensive fraud was disclosed in December 2017, when the company admitted to accounting “irregularities” that caused the share to lose R200bn of its value on the JSE, and Jooste resigned from Steinhoff with immediate effect.
But he’s been sitting in his Hermanus mansion since then with little sign of any action by the law enforcement authorities, in SA or indeed in Germany, where Steinhoff’s creative accounting was key to some of the alleged fraud. The only action that’s been taken against him so far is a fine of more than R100m for insider trading levied by the Financial Sector Conduct Authority. But the National Prosecuting Authority (NPA) is still nowhere to be seen.
The Reserve Bank’s raid on Tuesday was therefore important not just because it was a step forward for the case itself but also because it signalled at least some resolve by SA’s regulators and law enforcers to hold him and his colleagues to account.
There’s little doubt the more than R1.4bn worth of property, artworks, vehicles and other assets that were seized were just a fraction of the fortune he amassed. And the foreign exchange contraventions of which the Bank suspects him — with good enough grounds to get the court to approve the asset seizure — are probably a relatively small part of a hugely complex series of allegedly fraudulent transactions that artificially inflated the value of Steinhoff over many years. But it’s the old Al Capone approach — if the law enforcers can’t get him on the big charges, it’s worth catching him on smaller ones. In the US’ Al Capone case it was tax fraud. Here it is alleged forex contraventions and potentially money laundering too.
Progress prosecutions
One big reason it’s important that the Bank has taken action now is the greylisting issue. SA faces greylisting by the Financial Action Task Force (FATF), the global body that monitors countries’ compliance with antimoney laundering and antiterror financing. Faced with likely greylisting when the FATF reports back in February, SA’s financial and economic policymakers have hastened to ensure SA has the requisite legislation, regulations and institutional framework in place to monitor money laundering.
But it is at least as important that it show it has the capacity to enforce all these rules and regulations. And the NPA’s seeming inability to progress prosecutions on any big financial crimes is a big problem. The NPA’s enrolling of the nine “seminal” cases related to state capture by September as promised could be helpful.
But there are grave doubts in the market about whether it has the expertise or will to prosecute a case as complicated and technical as Jooste’s. There have been offers of help from private sector experts, and the NPA should surely find a way to take advantage.
Meanwhile though at least the Bank, in its capacity as forex regulator, has finally made a start, with the backing of the courts. The optics and the juicy details will go down well with SA’s citizenry and perhaps internationally too.
The other big reason the Bank’s step forward on the Jooste case is important is simply that this is a case that is politically important in the context in which the state is hopefully going after those who perpetrated and benefited from state capture.
In a country of deep divides, it’s important that the state be seen to prosecute those in the private sector alleged to have done corrupt and criminal things just as avidly as it prosecutes those in the public sector, and to chase rich criminals just as fiercely as poorer ones. That helps to provide law enforcement with the legitimacy it needs.
If taking down a billionaire for forex fraud in a JSE-listed company gives greater legitimacy to taking down the crooks who undermined the fabric of SA’s democracy, it will be a win.
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