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Steinhoff’s fall from grace has been even more sudden than the company’s rapid rise as one of the world’s largest retailers. The growing accounting scandal is now threatening the reputation of its biggest shareholder, Christo Wiese, South Africa’s richest man, as well as the country’s globe-trotting business community.

Steinhoff had been one of South Africa’s most highly feted international business successes following its debt-fuelled acquisition spree over the past decade, including the purchase of companies such as Mattress Firm in the US and Poundland in the UK.

But the group has this week been forced to scramble to recover assets and shore up debt after revelations of a probe into irregular accounting caused a share price collapse that wiped more than $10bn off its market value.

Malusi Gigaba, South Africa’s finance minister, said he had noted Steinhoff’s statement on accounting irregularities with “grave concern”, adding he had requested reports from regulators on South African retirement funds’ exposure to Steinhoff.

“Investors rightly expect the highest degree of honesty and integrity in the financial statements and reports of companies such as Steinhoff” to protect them from market abuse, Mr Gigaba said.

The dismantling of the group has already begun. After announcing the discovery of “accounting irregularities” and the resignation of its long-time chief executive Markus Jooste, Steinhoff said on Wednesday it was seeking to recover €6bn of assets outside South Africa. It wants to raise €3bn through asset sales to refinance looming debt repayments — adding to growing fears about the size of the hole in its finances.

On Wednesday a short-seller, Viceroy Research, published a highly critical 37-page report alleging impropriety in relation to the accounting treatment of Steinhoff’s earnings and losses.

Steinhoff said that it was not in a position to provide any information other than that available to the public through the stock exchange news service. Mr Wiese said that he could not comment on matters relating to Steinhoff as he was busy in meetings on Thursday.

Some investors had already become concerned over its levels of debt and acquisition spree in recent years, even as the company appeared from the outside to be the most successful of a recent trend of South African groups diversifying away from slow growth and political risk at home.

Magda Wierzycka, chief executive of Sygnia, the investment fund, described it as “the biggest corporate failure” on the South African stock exchange given the company’s connections to state employee pension funds.

The alleged irregularities and financial complexity are a long way from Steinhoff’s modest origins as a family-owned German furniture retailer, and Mr Wiese’s own beginnings running retail stores in South Africa’s Northern Cape, a sparsely-populated backwater, in the 1960s.

But Mr Jooste had ambitions to turn Steinhoff into one of the world’s biggest retailers — saying last year that “Ikea was the driver for me to build” the company. By the time Steinhoff bought Mr Wiese’s Pepkor in 2014, he had transformed it into one of Africa’s biggest retailers. Mr Wiese also owns a stake in Shoprite, the continent’s biggest grocer.

As early as 2012, Mr Jooste told South African media that Steinhoff’s expansion was being built on taking advantage of record-low interest rates to finance acquisitions. “I would actually say that I would frown on management that does not make use of debt to grow their businesses,” he said.

True to his word, soon after sealing the $5.7bn takeover of Pepkor, Mr Jooste tapped loans from banks to launch raids on retailers around the world. Some of the bids, such as for France’s Darty and Argos in the UK, were unsuccessful.

But others, including Poundland in the UK and Mattress Firm in the US, gave Steinhoff an increasingly international footprint beyond South Africa. At the same time, Brait, an investment vehicle controlled by Mr Wiese, also went on a dealmaking spree in the UK, buying New Look, the clothing retailer, and the Virgin Active chain of gyms.

Aiding Steinhoff’s rise has been a web of friendships between Mr Wiese, Mr Jooste and financiers in South Africa’s close-knit Afrikaner business community. Their connections are centred on the region of Stellenbosch close to Cape Town, a well-to-do area of villas and vineyards where the two men own properties.

Investec, the South African investment bank, which had advised Steinhoff on last year’s deal to buy Poundland, the British discounter, invited punters at this year’s Epsom Derby in the UK to watch the horse races from “Poundland Hill” as part of its long-time sponsorship of the festival.

PSG, the South African financial services group that provides listing services to Steinhoff, is more than a fifth owned by Steinhoff and led by a personal friend of Mr Jooste. They have invested in a Stellenbosch wine estate together.

But as Steinhoff’s acquisitions mounted, so did red flags identified by investors in its increasingly complex accounts.

Steinhoff’s business model “makes absolutely no sense,” Ms Wierzycka said. “They went on a complete frenzy of buying, raising debt, and more buying.”

Christian Strenger, a German corporate governance expert, said the collapse of Steinhoff shares reminded him of Parmalat, the Italian dairy company that collapsed under the weight of €14bn in debt after the value of some of its assets were questioned.

He said the admission board of the Frankfurt Stock Exchange could have been more circumspect given Steinhoff’s complex structure, with too many interdependent companies.

The dealmaking machines created by Mr Wiese and Mr Jooste have also shown signs of juddering to a halt in recent months. A long mooted tie-up with Shoprite, using Mr Wiese’s stakes in both groups, foundered late last year over a disagreement among shareholders. A spin-off by Steinhoff of its retail assets in Africa was seen as part of a second attempt at combining with the grocer.

Then came this week’s accounting bombshell — and with it questions over Mr Wiese’s role. In August he dismissed the first reports of the German probe into Steinhoff’s accounts as “rumour mongering” and called claims that the company’s reputation was at risk “drivel”.

This week, analysts at Kepler Cheuvreux said “we are wondering if the investigations may not also be extended to Mr Wiese” given that he was a party to some transactions and had supervisory responsibility as Steinhoff’s chairman. Mr Wiese would not comment when contacted by the FT.

“I do not get involved in businesses I do not control,” he told South African radio last year. Having already watched his net worth halve during this month’s bloodbath in Steinhoff shares, Mr Wiese may yet be tested further.

Additional reporting by Patrick McGee

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