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Steinhoff fiasco: Here’s how much Coronation, Foord, Sanlam and friends lost investors!

EDINBURGH — The Steinhoff fiasco has highlighted a scary truth about South Africa’s investment and savings industry: the highly qualified, extremely well paid unit trust managers we entrust with our savings do not have their collective eye on the ball. The allegations of financial impropriety at Steinhoff have echoes of the Abil meltdown, which took unit trust investors’ savings down as the bank collapsed in a debt scandal. Enrico Liebenberg, a Chartered Accountant, provides the estimates of how much money has been lost in the hands of companies like Coronation, Foord, Sanlam and Investec. He notes that one person cannot operate alone in a corporate like Steinhoff and he asks why not a single analyst seems to have raised the alarm that all was not well within the bosom of Steinhoff. Liebenberg ponders, too, whether the individuals at these investment companies have taken a hit to their own individual wealth. – Jackie Cameron

By Enrico Liebenberg CA(SA)*

Enrico Liebenberg

The last 72 hours has been a roller coaster for every single South African. The melt down of Steinhoff has left us all as confused as a dear in head lights. This got me thinking – one of Buffett’s “rules” of investing is that you should never invest in anything unless you fully understand what you are getting into. No single one of us can know every business on every stock exchange. That is why we pay, yes pay, professionals to advise us. These so-called professionals occupy various roles in the world ranging from brokers, financial advisor, portfolio analyst to fund manager and so on.

What baffles me is that we all are now looking for the proverbial blood of the chief who allegedly orchestrated this whole house of cards. But no one man can operate a structure at that magnitude on his own with so many eyes watching and no one asking any questions. What is of huge concern to me is that by Friday 01 December 2017 the values invested by our dearly beloved asset managers looked as follow:

R’m
Coronation          3 550
Foord          2 680
Sanlam          1 950
Investec          1 510
Liberty          1 460
Nedgroup          1 170
Old Mutual             530
Allan Gray             370
Discovery             310

By close of trading on Tuesday 06 December 2017 the respectively lost the following:

R’m
Coronation   (2 700.00)
Foord   (2 030.00)
Sanlam   (1 490.00)
Investec   (1 150.00)
Liberty   (1 110.00)
Nedgroup      (890.00)
Old Mutual      (400.00)
Allan Gray      (280.00)
Discovery      (230.00)

Collectively the group listed above has lost their unitholders just shy of R 9 billion. Let that sink in…

This raises a few questions – did no single one of the analysts at anyone of these reputable asset managers suspect anything? Don’t they have a mandate to manage funds on behalf of investors and act in the interest of the investors? Why did they not withdraw their funds if they had unresolved concerns around the accounts of Steinhoff?

How is it possible that other less well-known analysts and asset managers opted to steer clear of the unknown and our “beloved” big corporates stuck to it?

A Steinhoff International Holdings NV logo sits on display outside the company’s offices in Stellenbosch, South Africa. Photographer: Waldo Swiegers/Bloomberg

We as shareholders have the power to appoint directors to the board and we ultimately put them in power, we trust our hard-earned money in the hands of these so-called asset managers who couldn’t spot a $1bn discrepancy in the statements. And what are we doing about it? I haven’t seen one asset manager volunteer the minutes of their investment committee meetings where the decision was made to keep the funds invested at Steinhoff? No one is asking any uncomfortable questions to them.

Maybe we should stop being intimidated by these guys we trust to manage our money and ask them straight up why are you choosing that business? And where is your own money? We need to know why the investment teams at the asset managers listed above allowed their portfolio managers to keep the position in Steinhoff.

Read also: Magda Wierzycka: Money managers should have foreseen Steinhoff’s disaster. They must pay up.

Yes, what happened yesterday will forever be imprinted in our memories and will serve many case studies in auditing and corporate governance in decades to come. But we need to accept that we are to blame for some of the losses we incurred. We are supposed to know the assets we are investing in like the palm of our hands – and your buddy telling you around a braai doesn’t count. Not all of us has the skills to analyze and understand financials that is why we pay people to manage our funds. We need to keep them accountable and honest. Track record doesn’t tell you much about a fund managers ability to critically evaluate a set of financial and pick-up on nuances of ratios that doesn’t make sense. It only tells you how frequently in the past did he get it right.

I am in the boat with you, having incurred huge losses over the last week or so. We need to go back to the drawing board and identify the things that we don’t know and make a plan to get people who do understand it. We need to accept some responsibility for the losses incurred – but what about the pension funds where the members don’t really have any influence over the equity mix? Who looks after their interest. I am really concerned that to many people are in denial that only the Steinhoff board is to blame – we as corporate citizens should have acted long before June 2017.

  • Enrico Liebenberg is a financial manager at a large retailer. Apart from his passion for investments and wine-making and appreciation, Enrico takes a keen interest in picking winning investment portfolios. To keep body and soul balanced, Enrico loves a round of golf, follows professional cycling and enjoys relaxing with his wife, but not necessarily in that order of importance.

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