The South African Reserve Bank (SARB) has frozen billions in Steinhoff accounts linked to the company's local operations, which are said to hold a cumulative value of about R5.5bn. This intervention will tie a knot in operations but has not been declared in so many words in Steinhoff’s latest annual financial statements. The SARB seems to have a strong suspicion that Steinhoff, under the management of ex-CEO Markus Jooste, breached the country’s exchange control regulations.
In May, the central bank’s Financial Surveillance Department ordered FirstRand Bank to freeze five accounts linked to Steinhoff International Holdings (Pty) Limited, Steinhoff Investment Holdings Limited, and Steinhoff Africa Holdings (Pty) Limited. The accounts are said to have held at least R5.5-billion at the time, a figure supported by the company’s latest annual financial statements.
The freezing order allows no funds in the Steinhoff accounts to be withdrawn without the SARB’s express approval. If the SARB finds that Steinhoff did indeed contravene South Africa’s exchange control regulations, a part or the entire sum of frozen cash can be forfeited to the state. Based on a hot-headed court fight between the SARB and polo-playing socialite Berdine Odendaal, who was the beneficiary of at least R60-million in questionable Steinhoff money, which last year was also frozen under Project Castle, we know that SARB carefully scrutinizes all applications for withdrawals and is prepared to delay or decline the release of funds when deemed necessary. All applications for the funds must be made under oath.
A freezing order being one of the SARB’s sharpest teeth, the length of time it will take to effect any payment to any creditor, the possibility that the entire sum may be forfeited to the state, and with the Odendaal example on their front stoep, Steinhoff management can therefore expect the SARB freezing order to influence operations possibly materially.
Steinhoff’s total liabilities exceed its assets, and solvency and liquidity are already under pressure. Surprisingly, nothing appears in Steinhoff’s latest financials that sounds like “Dear Creditor and Investor, SARB froze our bank accounts.” There is no mention of the SARB using one of the most brutal measures available against the company in the financial statements section headed “regulatory engagement” or under “risk management.” The heading “events after the reporting date” notes this questionable sentence.
The ambiguous description of the latest Steinhoff crisis appears under the headings “regulatory engagement” and “risk management” and in an explainer underneath the cash flow statement. The question then is whether the Steinhoff financial statements document is clear enough to assist a person not educated in forensic financial investigations to differentiate between the movement of legal funds and that of suspicious, frozen funds which may be forfeited to the state.
