eBusiness Weekly
Tongaat Hulett chair Louis von Zeuner assured shareholders attending Monday’s AGM that the board “will take action where we believe it needs to be taken” but stopped short of committing to taking action against external auditor Deloitte.
Much of the focus of the two-hour-long meeting was on Deloitte’s role in the near-collapse of the company.
“The fact that we are not public in our discussions does not mean we’re not willing or will not take action,” said Von Zeuner, adding that Deloitte is “very aware of the fact that the case against it is not closed”.
Shareholder activist Chris Logan, who tagged problems at the sugar group as far back as 2014, questioned whether the board realised “how badly Deloitte let the company down”.
Logan said the issue was not just the repayment of audit fees.
“If Deloitte had done its job properly and had picked up the massive misstatements early on, it would have alerted shareholders to the gross mismanagement in this company three, four or five years ago, and shareholders would have been able to change management.”
“So it’s not just a matter of getting fees back — the R12 billion write-off is the real damage.”
Von Zeuner told Logan that the board “fully understood that to be the case”.
He said the board has approached the JSE as well as the Financial Sector Conduct Authority (FSCA) and is continuously engaging with the Independent Regulatory Board for Auditors (Irba) on the issue. (Recently appointed Irba CEO Jenitha John was previously a Tongaat director and chair of the audit committee.)
The various approaches appear to be part of a concerted attempt to build a watertight case against the audit firm.
“I absolutely agree this isn’t just a fee matter,” said Von Zeuner.
In financial 2020 Tongaat paid Deloitte R88 million in fees, equivalent to 10,5 percent of the company’s current market capitalisation.
Linda de Beer, current head of the Tongaat audit committee, told the meeting the steep fee increase — up from R30 million in 2019 — was because of the “massive additional work that had to be done”.
In addition, the company was dealing with a difficult major asset sale and other debt restructuring initiatives and felt it needed an auditor with knowledge of the company. De Beer said the board could not have “the firing discussion while we have to work with them (Deloitte)”.
Deloitte will remain as the group’s auditor this year but is expected to be replaced in 2022.
De Beer acknowledged that the matters relating to the misstatement were not complex but indicated that preparing a strong legal case was a complicated matter. Deloitte Africa’s newly-appointed chair Ruwayda Redfearn, who was attending the meeting, was asked by Von Zeuner to comment on the issues but declined, referring to the ongoing Irba investigation.
Board commended
Financial analyst Dave Woollam, who had early on warned the board of the extent of the problems within the group and had written an extensive report on the matter, commended the board at Monday’s AGM for steering the company “away from the abyss”.
“It doesn’t seem right that the company that suffered the damage has to pay twice to rectify the situation. You must get back money from anyone who was paid to do a job and didn’t do it.”
Woollam queried the group’s remuneration policy, which used considerably larger companies for benchmarking purposes, as well as the payment of R100 million to the top six executives. — Moneyweb.
