06/12/2017 08:47 GMT | Updated 06/12/2017 08:47 GMT

SA's Capitalist Class In Crisis: Steinhoff, Naspers Battered

The two behemoths face serious crises, as tough questions about conduct and company ethos are posed.

Mike Hutchings / Reuters
South African magnate Christo Wiese has taken charge of flagging conglomerate Steinhoff.

Two of South Africa's biggest companies –– Naspers and Steinhoff –– find themselves in the middle of raging storms, as allegations of impropriety and unethical conduct are levelled at the two behemoths.

South Africans awoke to the news that Steinhoff CEO Markus Jooste, one of the country's most celebrated business barons and a favourite in Stellenbosch social circles, has resigned because of questions about the company's financial reporting.

Add to the mix the news that a US law firm is investigating the possibility of instituting a class-action suit against internet and media giant Naspers over the MultiChoice debacle, and it's clear that South Africa's capitalist class is in crisis.

Steinhoff's share price plunged 60% when the local markets opened on Wednesday.

"I'm not surprised at this turn of events at all," economist Iraj Abedian from Pan-African Investment and Research told HuffPost. He believes that the actions of both companies' leadership teams have fallen short of the principles that they themselves purport to represent.

"They (Naspers and Steinhoff) react the same way that politicians do. They deny, deny, deny –– until there is no room left for denial. Then they try to deflect and justify," Abedian said.

He believes that Koos Bekker, non-executive chairman of Naspers, is unable to understand the gravity of the situation. "I find it unbelievable. It's tragic, but I just think he doesn't get it. When business displays unethical conduct, they need to man up."

Bekker has admitted that Naspers was "slow to respond" to the unfolding events around MultiChoice, but is adamant that there was nothing illegal about the latter's dealings. He has also emphasised that Naspers is careful not to override the boards of companies it owns.

Magda Wierzycka, outspoken CEO of Sygnia Capital Management, believes big business is sluggish to take a public stand against corruption because it is easier to pay bribes than to "live under the burden of regulation".

Writing for BusinessLive, Wierzycka said that companies caught in a web of deceit fall into the same trap of denial, but once the media and public smell blood, there is no stopping the feeding frenzy.

She thinks companies need to be swift in instituting an independent inquiry, and never opt for blank denial. They should hold disciplinary hearings for those involved, and make grand reparations to the country.

Steinhoff, founded in Europe, shifted its headquarters to South Africa in 1998, where it has a secondary listing on the Johannesburg Securities Exchange (JSE). The company has announced that Christo Wiese will take over the leadership in the interim.

Naspers, founded as a newspapers company in 1915, now operates globally and is known as a technology innovator. It has promised an investigation into MultiChoice.

"The actions of people and companies like these hurt the image of 'Brand South Africa'," said Abedian. "It is hurtful to the economy, and even though they portray themselves as captains of industry, they don't seem to realise that their seemingly unethical conduct hurts job creation and stifles growth."

South Africans –– rightly –– "go to town" when politicians and bureaucrats are accused of ethical shortcomings. The same should go for captains of industry, said Abedian.

"But South Africa's problems lie deep. We have an ethics crisis in this country. Everybody behaves that way: teachers, nurses, politicians and businessmen."