Many people remember Steinhoff as a major corporate scandal. But for retirement fund trustees, the real lesson is about oversight: how easily boards can become too comfortable, ask too few questions, and rely too heavily on others.
Steinhoff was widely held by South African retirement funds. It was seen as a mainstream investment, not a fringe bet. That is what made the collapse so significant. It showed that even large, well-known listed companies can fail badly, and when they do, members’ savings can be much less. hurt.
For trustees, three dangerous assumptions often come up which can lead to weakened effective oversight:
- A clean audit means an investment is safe.
- A big or well-known company needs less scrutiny.
- Once asset managers are appointed, the trustees’ job is done.
Steinhoff showed that none of these assumptions is true. Trustees are allowed to rely on asset managers, consultants and other specialists for their expertise in investment management, risk analysis and technical advice. But trustees cannot hand over their oversight completely.
The Pension Funds Act requires them to act with care, diligence and skill, and in the best interests of members and beneficiaries. That means they must apply their minds to the decisions being made on behalf of the fund.
This does not mean trustees must uncover fraud themselves. They are not investigators or forensic accountants. But they must understand, at a basic level, what the fund is invested in, what the main risks are, and where members’ money may be exposed.
That is where good oversight matters. If an investment is too complicated to explain clearly, trustees should pause and ask more questions. If one company or sector makes up too much of the portfolio, they should look at concentration risk. If there are governance concerns, unusual structures or aggressive expansion plans, those issues should not be ignored just because the investment is well known.
Steinhoff also reminded trustees that governance risk is real investment risk. Poor leadership, weak controls and confusing structures can destroy value quickly. These are not side issues. They can directly affect returns and the safety of members’ retirement savings.
Some funds were better protected because they asked harder questions, limited their exposure, or insisted on clearer explanations. That is the key lesson: trustees do not have to know everything, but they do have to stay alert.
Since Steinhoff, the FSCA has made it clear that relying on experts is allowed, but blind reliance is not.
What the FSCA may look for
If the FSCA reviews the fund, trustees should be able to show:
- that they understood the main risks when investing in specific companies
- that meeting minutes reflect real questions and debate
- that they monitored concentration, complexity and downside risk
- that there was a process to raise concerns and act on them
- that the board learned from problems instead of only looking for someone to blame
