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When Success Seems Too Good to Be True Steinhoff: South Africa's Biggest Corporate Scandal

Ayse Ceyda Oral

Behavioural division


 Imagine waking up one morning to find that the pension fund of over a million government workers had been suddenly put at risk, not by a market crash, but the emergence of the truth of a deception. That is exactly what happened in December 2017, when Steinhoff, once celebrated as one of South Africa's greatest corporate success stories, lost more than 80% of its share price within days.

What appeared to be a rapidly growing global retail empire was soon revealed to be built on deception done by using accounting irregularities to inflate profits and mask losses.

So how did a company of this scale collapse so suddenly, despite maintaining the growth and success appearance for years?


This case shows that the biggest frauds are not hidden but ignored in environments where pressure, power, and complexity discourage questioning.


In 1964, Steinhoff was founded as a furniture distributor in Germany. It expanded to South Africa and started to trade on Johannesburg Stock Exchange (“JSE”). From there, the company expanded globally by improving its distribution and manufacturing, mainly through aggressive acquisitions and adding new business lines. What set Steinhoff apart from others was also its vertical integration into both manufacturing and ownership of property. At the time, it was considered one of IKEA's biggest rivals in Europe.


The numbers looked extraordinary: from 2000 to 2016, it expanded rapidly, increasing its revenue from under $1 billion to nearly $15 billion with its market capitalization increasing from $717 million to $22.1 billion, reflecting an average annual growth rate of around 24%. At the center of it all was CEO Markus Jooste, a businessman widely regarded at the time as exceptional, which we will further discuss in detail in this article.


In 2017, something seemed off as the numbers were no longer adding up anymore and; the board announced that CEO Jooste had resigned, and an independent investigation was launched. After the announcement on 6 December, the share price of the company fell by more than 80% and lost approximately $12.7bn in market value.


Findings from PwC revealed that, between 2009 and 2017, the company had recorded roughly $7.4 billion in non-genuine transactions. It was found that the company was inflating profits and masking losses by using various methods.


In a nutshell according to M&G's analysis of PwC's findings, the fraud was done by artificially boosting profits (almost 50% of them were not backed by real cash flows), property values, and inflating the amount of cash flow. Intangible assets were inflated through acquisitions, largelyfunded by debt. Investments were used to remove losses off the balance sheet and overstate income.

Steinhoff was in the top 15 stock by market value on JSE, and many fund managers included its stocks in their portfolios. This meant that all investors, including pension funds, were faced with reality as their portfolio values significantly declined. The damage was particularly severe for South African pension workers. The Government Employees Pension Fund (GEPF) with approximately 1.2 million members was one of the biggest shareholders of Steinhoff. Many were directly affected, with some facing severe financial distress.


Moreover, if the company had gone bankrupt, many people would have been at risk of unemployment, since the company had over 130,000 workers across multiple countries.

To add to the broader effect caused by Steinhoff, the scandal raised serious concerns about South Africa’s reputation as a safe and regulated place for international business.


Scandals like these do not happen overnight. They often persist for long periods until they are exposed. Most of the time there are signals that could uncover the truth but because of personal gains, profits and even most of the time- fear, people and companies choose to look at the other way.

Some observers, in this article we will use findings from M&G, had been skeptical of Steinhoff for years. Their concerns pointed to a pattern that, taken together, should have alerted many, investors, authorities, etc. As we mentioned before, Jooste was seen as an exceptional businessman that brought the company to its peak, and to its collapse. The CEO’s personality and management style raised concerns, as according to M&G he was described as a dominant CEO who demanded respect and ruled with an iron fist, someone whose views were rarely challenged by executives beneath him, contributing to secrecy and pressure. In corporate environments like these, challenging authority could result in negative consequences for employees. Even though there could be suspicions or even some indications of wrongdoing, many workers would not go to authorities in fear of losing their jobs and future career prospects. This professional risk causes potential whistleblowers to stay silent.

Although Steinhoff’s board officially included independent directors, many had close ties to CEO on a personal level or were connected through related business relationships. This brought into question the independence of the board, particularly considering the personal connections in senior management.


In addition, the company’s pay structure also seemed suspicious. Executive bonuses were tied to ambitious long-term targets but mainly focused on operating cash flow. This meant that otherimportant factors, such as debt and capital spending, were largely ignored. Hence, this could help explain why the company was engaged in fictious accounting.


The role of auditors is harder to understand. Steinhoff's audit fees were higher than comparable companies, and different auditors were responsible for different parts of the group, which was another major red flag. Steinhoff’s auditor Deloitte was also criticized at the time.


Moreover, acquisitions were complex and often structured through intermediate companies. Many transactions happened at the end of accounting periods. These created non-economic earnings and unusually strong returns. Overall, complexity is often a way to mask fraud, and the nature and structure of these acquisitions support this concern.


To add more to this, the lack of transparency was concerning. Steinhoff did not take questions at results presentations; many transactions were not disclosed properly. The source of business was unclear with many private entities involved.


Individually, these red flags may not be sufficient to decide something was seriously wrong with the company. However, when combined, an unchallenged CEO, an unreliable board, incentive structures misaligned with financial reality, fragmented audit, and a culture of opacity, point out a system where oversight was limited and challenging the authority was almost impossible.The case was all over the news at the time, and case till today is still ongoing. South African regulators fined Steinhoff, although the penalty was reduced given that the fraud had been carried out by former employees and the company cooperated with investigators. Before the December 2017 announcement, Jooste had warned personal contacts to sell their shares; he was later fined for insider trading. Shortly after an arrest warrant was issued and a $25 million fine handed down, he was hospitalized following a self-inflicted gunshot wound. He later died, leaving unanswered how he managed to orchestrate €6.5 billion in fraudulent transactions and deceive Deloitte's auditors for so long.

Also, Steinhoff’s former CFO, Ben la Grange sentenced to 5 years prison in South Africa after he pleaded guilty, making him the most senior executive to be held accountable in this case. In the end, Deloitte paid €67mn to settle claims with Steinhoff’s creditors, without admitting liability. 

After almost 10 years, the case is still ongoing. Former director and board member Peter Schelbert was sentenced to prison. Hein Odendaal pleaded guilty on a court hearing on 12 March, after entering a plea-sentence agreement. Making the former executive the fourth person convicted in South Africa in this criminal case. The Stephanus Johannes’s, former treasurer, case has been postponed to 14 May 2026.


In conclusion, it remains questionable how such irregularities were not identified earlier, particularly by external auditors and governance structures, and unacted upon for so long considering the major red flags. This is a story about what happens when governance structures become performative rather than functional: when boards lose independence, when auditors miss or overlook what is in front of them, and when institutional culture makes challenging feel too risky. The signs were present however they were not acted upon. And that, more than any single accounting entry, is what allowed this fraud to grow to the scale it did.


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