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It's not the first time FirstRand has had a bout of blushes

Business

It's not the first time FirstRand has had a bout of blushes

Steinhoff revelations recall some previous awkward situations

Ann Crotty


Latest details of related party transactions that made fortunes for key individuals in Steinhoff’s “inner circle” recall what grim experiences FirstRand has had with the South African retail sector over the years.
In particular it raises memories of FirstRand’s exposure to the Retail Africa Group, whose liquidation in 2002 was the subject of a high-profile section 417 inquiry.
The inquiry, which was held in public, proved to be extremely embarrassing for FirstRand. Rightly or wrongly the bank emerged from the process as the chief culprit in a liquidation that cost around 2,500 jobs. It was the lead bank in a consortium that decided to pull the plug on a R160m funding facility that the precariously positioned RAG depended on.
The marauding it got from the RAG inquiry might explain why FirstRand executive Theunis Lategan, a major player in the RAG inquisition, was so keen to ensure another of its retail exposures, Profurn, caused less embarrassment.
According to Bloomberg, back in 2002 Lategan asked German industrialist Claus Daun, who met Steinhoff CEO Markus Jooste in 1995 and was instrumental in building Steinhoff into a global retail group, to help rescue struggling furniture retailer Profurn.
Profurn had grown like topsy by providing unsecured credit to almost anyone who ventured into their stores. While this strategy is a sure way to boost the top line, it very quickly ends up in tears as well as a gaping hole where everyone thought the profit was. At the time of its near-implosion FirstRand held 78% of Profurn.
In early 2003 the JD Group issued 53.7 million shares valued at R18.42 a piece to Profurn shareholders and secured control of the company. The share issue resulted in FirstRand ending up with 25% of the enlarged JD Group, which it sold on to Daun for, according to Bloomberg, R14.17 each.

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