Pieter du Toit, Stellenbosch Mafia: Inside the Billionaires’ Club (Jonathan Ball, 2019)

THE term ‘Stellenbosch Mafia’ was concocted, it seems, by two well-known financial journalists by way of wry commentary. Appropriated by interests such as the amoral British public relations firm Bell Pottinger, covering up state capture by the Guptas and others, it has become part of the narrative of supposed white monopoly capitalism (WMC). According to Julius Malema, WMC pulls the strings of the economy, judiciary, banks and mines. This grand conspiracy is allegedly centred on Stellenbosch.

Pieter du Toit, with his roots in what he calls that ‘smug little place’, dismisses the claim about political control, but admits that the business community wields considerable economic clout by owning nine of the top forty companies (and sixteen of the top hundred) on the Johannesburg Stock Exchange. Clem Sunter has argued that the end of apartheid liberated Afrikaner capital, formerly shackled by entitlement, and kick started a ‘Great Trek into business’. Naspers is the best example, now worth R1.5 trillion.

Du Toit says little or nothing about the fact that Stellenbosch was the intellectual cradle of apartheid, but provides a detailed account of the business empire of the Ruperts, father and son.  Anton was endorsed by Nelson Mandela after a lifetime opposing the National Party government while flourishing as a businessman. He was clearly part of the selective upliftment of the Afrikaner community, a shedding of social inferiority. But volkskapitalisme was competitive, not acquisitive like present-day black economic empowerment, and sought to channel existing agricultural capital into industry. (However, Du Toit does not question how that original wealth in land was acquired.)

Business flourished under apartheid, but Anton Rupert was no ideologue and argued that it could do even better without racial restrictions. Hendrik Verwoerd himself killed off a Rupert initiative to develop coloured business partnerships. Rupert, the first Afrikaner international businessman, also clashed with P.W. Botha and then appeared before the Truth and Reconciliation Commission. His Rembrandt group was responsible for the Small Business Development Corporation.

The clustering of powerful business houses in Stellenbosch – Remgro, Mediclinic, PSG and Capitec, for instance – has a strong cultural component. And they are generally known for good corporate governance. However, the local community was rocked by the university rugby financial scandal engineered by Jurie Roux, although this did not impede his ascent to administration at national level. It was a precursor to the spectacular rise and collapse of Steinhoff, which had migrated from Johannesburg.

Rugby sponsorship was a factor in common, although some questioned why what appeared to be a furniture company would be interested in student sport. A point upon which all serious commentators agreed was that Steinhoff was opaque, a ‘difficult company to understand’; its corporate culture brash, flash and superficial. It flaunted a wealth whose source was hard to trace; but some R84 million of it was squandered on the 2015 World Cup. Its CEO Markus Jooste invested heavily in horse racing and made business decisions in a cavalier fashion; for instance, investing five days due diligence in the purchase of Mattress Firm, an American company of dubious stability, for $3.8 billion.

Steinhoff was an elaborate Ponzi scheme and when the inevitable collapse came in December 2017 it amounted to the biggest corporate fraud in South Africa’s history. Within three days Steinhoff’s credit rating had been reduced to junk by Moody’s. The losses are staggering, but the most alarming example is the Government Employees Pension Fund, which shed R18 billion. This is very much a story of our greedy, narcissistic times: Jooste had used charm to elicit unwarranted trust, employed fashionable meaningless words like ‘passion’ to hide illegality, and then admitted to ‘mistakes’ before disappearing into comfortable obscurity. He did reappear briefly, backed by a heavyweight legal team, before a parliamentary portfolio committee of limited insight and managed to disperse blame before absenting himself – remorseless – for good.

There are differing interpretations of the uncontested facts that off-balance sheet companies were used to hide debt and inflate revenue and that supposedly hard-headed businesspeople operated on blind faith in a context of lies. Sygnia’s Magda Wierzycka has questioned the competence of asset managers who failed to spot a likely pyramid scheme faced by figures that lacked sense, irrational acquisitions and out-of-control debt. As with Enron, too many people were making money to ask basic questions and those who did, like Stellenbosch’s cautious corporations, stayed at arm’s length.

Du Toit emphasises that raising debt and issuing equity on false figures is straightforward criminality, but it is doubtful if anyone will be called to account given the complexity, stealth and longevity of the fraud. Tick box compliance and auditing standards, however comprehensive, are apparently no match for an absence of ethics and blatant dishonesty. Jooste and other executives were obviously living vastly beyond their means at the expense of shareholders and a lifestyle audit was clearly required. Instead, industrial-scale fraud was whitewashed by auditors. The likelihood of punitive consequences is low.

The author started to write one book and ended up with another. He provides good reason to reject the idea of a controlling mafia in favour of a community of business interests loosely bound by cultural background and living in a virtual enclave. There is no evidence of a modern-day Broederbond. Instead, one of the offshoots of this influential network is the Millennium Trust, which funds amaBhungane, Freedom under Law and Corruption Watch, all tenacious opponents of state capture under the Zuma administration. This alone is ample good reason for the mafia myth. 

But Stellenbosch was indeed the headquarters of a spectacular fraud, although the venue could have been anywhere and the perpetrators were inkommers. Steinhoff, Jooste and his accomplices criminally deprived millions of South Africans of their finances; yet another sorry saga in the history of commerce. But most compelling is the commentary of Wierzycka, which highlights the negligence of well-paid fund managers and auditing companies that allow ruthless liars to get away with theft of this magnitude at the expense of the public.