The SA Reserve Bank is being sued for allegedly enabling Steinhoff to move assets worth €19bn overseas while the group was technically insolvent – and allowing its local entities to settle claims by foreign investors ‘to the detriment of the South African economy’.

A Fin24 report says the litigation brought against the central bank by Steinhoff’s BEE partner Lancaster 101, which is 50% owned by the Government Employees Pension Fund represented by the Public Investment Corporation, appears to be aimed at challenging the lawfulness of Steinhoff’s efforts to enter into a ‘global settlement’ with litigants.

Lancaster 101's chairperson is Jayendra Naidoo, who until recently was also the chairperson of Steinhoff's subsidiary Pepkor.

Naidoo stepped down from Pepkor's board in February due to the litigation between himself and the retail conglomerate.

Significantly, the Lancaster application against SARB is the first case in which some form of liability for the Steinhoff collapse and its aftermath are being placed at the door of the Reserve Bank.

Both the Reserve Bank and Steinhoff have indicated they will oppose the litigation by Lancaster 101, which wants the Gauteng High Court (Pretoria) to review and set aside the central bank’s decisions in relation to the Steinhoff restructuring and its current settlement efforts.

Steinhoff received approval from the SARB for cross-border payments to be made as part of the settlement at the beginning of December last year.

The approval lasts for 12 months.

In a 8 December 2020 letter attached to the Lancaster 101 court application, the Reserve Bank’s deputy governor Kuben Naidoo states that, in giving its approval for the global settlement to go ahead, the bank considered Steinhoff's ‘potential liquidation if a settlement is unsuccessful’ and the ‘potential devastating effect thereof on South African entities’.

It remains to be seen how the PIC – which provided Lancaster 101 with the loan that it needed to buy the Steinhoff shares – will respond to the case, notes the Fin24 report.

The PIC inquiry found that, as at the end of February 2019, the amount outstanding on a loan given by the PIC to Lancaster 101 to buy the Steinhoff shares was ‘approximately R11.6bn with interest accrued’.

‘The loan has not been serviced by L101 to date,’ the inquiry stated.

Naidoo reportedly said Lancaster 101’s ‘application to seek a review of the SARB’s decisions in respect of Steinhoff is an entirely separate matter’ from the loan it had received from the PIC to buy the Steinhoff shares.

Steinhoff is currently facing about 100 legal claims in SA, Germany and the Netherlands amounting to well over R100bn, stemming from the precipitous plunge in its share price in late 2017 when an accounting scandal first came to light.

Lancaster 101, for example, has lodged claims against Steinhoff totalling over R12bn. In court papers, Naidoo claims that it has now been offered a €13mn (roughly R230m) by Steinhoff to settle these claims ‘fully and finally’.

This proposed settlement, he says, was far below that Lancaster 101 was suing Steinhoff for.

Lancaster 101 is now seeking to challenge that settlement by attacking both the SARB decisions that enabled Steinhoff’s overseas restructuring in 2014, as well as its 2020 decision to ‘permit Steinhoff’s South African entities to settle claims by foreign investors, all to the detriment of the South African economy and South African investors’.

Full Fin24 report (subscription needed)