The Steinhoff logo. Steinhoff's share price has gone into precipitous decline following the disclosure of financial irregularities.
JOHANNESBURG – The South African Reserve Bank (Sarb) is weighing Steinhoff’s bid to take money out of South Africa.
Steinhoff International wants to do so to help with its liquidity challenges abroad.
Days after an accounting scandal hit Steinhoff, the company’s shares dipped by a whopping 85 percent.
The company is now attempting to make plans to keep itself afloat abroad by shifting more cash to its European operations.
Reserve Bank Deputy Governor Kuben Naidoo says it not ideal, but the bank needs to weigh its options.
“The Reserve Bank has to evaluate this request very carefully. On the one hand, we don’t want too much money leaving South Africa and on the other hand, if those liquidity issues are not managed then you will have a disorderly unwinding of the group. Given the structure of the group, it will increase the losses and the potential likelihood of job losses in South Africa,” he said.
But one economist says Steinhoff needs to be direct with what the money will be used for, if the request is granted by the Reserve Bank.
“In this case, we are not sure what the money will be used for and for how long. If the Reserve Bank says yes, the conditionality must be planned accordingly,” Wits business science Professor Jannie Rossouw said.
Rossouw says the Reserve Bank will need to look at the economic impact of such a move.
“Under such circumstances, the Reserve Bank will need to take economic impact into consideration in applications to take money abroad and will take a decision accordingly on what is the best interest of all the stakeholders and South Africa as a whole. So under these circumstances, the Reserve Bank may reach a conclusion that it is indeed in the best interest to allow money to flow out of South Africa."
The bank is investigating whether any exchange-control laws or regulations had been breached by Steinhoff.
The answer will only be received once a forensic audit is complete.