THE BOTTOM LINE
Market’s shrug at Harmony fine bodes ill for Steinhoff
Companies can easily spend a fortune of shareholders’ money dragging out cases of irregular financial conduct
The market didn’t seem too concerned about the record-breaking R30m fine recently levied on Harmony Gold by the regulator. In the 10 days or so since it was announced the share price has, for the most part, moved steadily upwards.
It may be that shareholders believe the events that prompted an investigation by the Financial Sector Conduct Authority occurred so long ago they no longer have a bearing on the mining company’s operations.
The fine related to “misleading financial statements” that Harmony released in April 2007. The financial statements under scrutiny were for the quarter ending March 2007. Management failed to pick up R250m of costs, which was equivalent to around 5% of the total costs at the time, and so significantly overstated the profits.
Once the R250m was discovered and included, Harmony’s first reported profit in years became a loss. And its high-profile CEO Bernard Swanepoel resigned.
There was little fuss about the “misleading statements” both in 2007 and in early October 2018 when the fine was announced. Instead of being commended for staying the course the regulator has been criticised for taking 11 years to complete its investigation. Little has been said about the level of cooperation it received from Harmony.
The sad reality is, as we will likely see with Steinhoff, is that companies can easily spend a fortune of shareholders’ money dragging out these cases and the regulators are accused of tardiness.