Reserve Bank and Ibex reach final settlement of R6.3 billion on Steinhoff fraud

The Citizen

2 days ago

Steinhoff imploded in December 2017 when the auditors refused to sign off on the financial statements due to irregularities.
The South African Reserve Bank (Sarb) has reached a final settlement with Ibex of R6.3 billion after an extensive and complex investigation into the affairs of Steinhoff International Holdings and people or entities regarding possible contraventions of exchange control regulations.
Ibex was formerly known as Steinhoff International Holdings.
After its investigation, Sarb took administrative action against certain entities within and associated with the Steinhoff Group, because they did not comply with the exchange control regulations.
The discovery of the now well-known accounting irregularities in the Steinhoff Group in December 2017 led to a sharp and immediate decline in the Steinhoff share price on both the Frankfurt and Johannesburg stock exchanges, eroding approximately 90% of the company's market capitalisation.
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According to the Sarb the Steinhoff Group's external debt exceeded 10 billion euros (approximately R155 billion) at the time. The crisis threatened the Steinhoff Group's continued existence and risked consequences, including forced asset sales or 'fire sales', significant losses to South African and foreign financial institutions and investors and extensive job losses.
There was also a risk that it could significantly affect South Africa's reputation as one of the most robust and well-regulated financial markets in the world, Sarb points out.
Steps to restructure Steinhoff debt
Complex multi-jurisdictional debt restructuring and settlement processes were implemented between 2018 and 2023 to prevent an uncontrolled liquidation and mitigate the financial distress facing the Steinhoff Group.
These processes resulted in the Steinhoff Group fully repaying more than R28 billion owed to South African banks in 2018, as well as compensation to other South African investors amounting to approximately R18.5 billion as part of the global settlement, that involved a total settlement value of approximately R29.6 billion at the time and was approved and sanctioned by international and local courts.
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The Sarb says the Public Investment Corporation (PIC) was one of the main beneficiaries of the global settlement due to its investment in the Steinhoff Group.
South African creditors and banks were able to exit and recover all or most of their money, as foreign creditors agreed to a restructuring of their debt and a deferral of their rights. According to the Sarb, these foreign financial creditors granted forbearance of their claims against members of the Steinhoff Group, ultimately to 30 June 2026, to enable the settlement of various other creditors, who were mainly South African, first.
Disputes between Ibex and Sarb
Various disputes arose between the Ibex Group and the Sarb in early 2023 regarding the Sarb's administrative actions against Ibex Group due to various alleged contraventions of the exchange control regulations revealed by the investigation.
The Sarb says these disputes resulted in multiple legal proceedings between the parties, including the intervention of at least one of the Ibex Group's financial creditors.
One of these disputes involved the forfeiture of an amount of about R6.3 billion for the benefit of the state, while others concerned the Sarb's blocking and prohibition orders over the Ibex Group's funds and assets that arose as part of the investigation.
In line with legal advice and after careful consideration by the Sarb, all the disputes between the Ibex Group and the Sarb were ultimately resolved in a comprehensive settlement.
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The Sarb says In concluding the settlement agreement and fully and finally resolving the disputes between them, the Sarb and the Ibex Group considered the public interest, the Sarb's mandate to enforce the exchange control regulations and the importance of enhancing investor confidence in South Africa.
They also wanted to promote regulatory certainty by allowing the Ibex Group to settle its contractual obligations to its foreign financial creditors.
'In fulfilling these aims, the Ibex Group forfeited R6.3 billion plus interest of its funds to the state in full and final settlement of the Sarb's enforcement action against the Ibex Group regarding the alleged contraventions,' the Sarb says.
Ibex granted permission to wind down and repay creditors
In return, the Ibex Group withdrew its legal challenge to the forfeiture. In addition, the Sarb granted the Ibex Group permission to implement and take all steps necessary for the Ibex Group to implement its Dutch court-approved structured winding down process and repay its creditors and operational expenses.
By agreement between the Sarb and Ibex Group, the High Court set aside the prohibition orders restricting the Ibex Group's ability to deal with some of its shares in Pepkor Holdings Limited and the Sarb agreed not to take any further administrative or enforcement action against the Ibex Group regarding the alleged contraventions.
In addition, the Ibex Group and the Sarb, with the support of the majority of the Ibex Group's current creditors, withdrew all the litigation they instituted, while the Ibex Group and the financial creditors abandoned the judgments obtained in the course of the litigation.
'The Sarb as well as the Ibex Group consider the settlement reasonable, proportionate and justifiable considering the complex and competing interests.
'Considering the long history of the Steinhoff/Ibex matter, the wider ramification of the continued dispute between the Sarb and the Ibex Group for investor appetite for future investments in South Africa and the interests in finality, the Sarb and the Ibex Group consider this final settlement to be in the best interests of South Africa,' the Sarb says.