Former Tongaat CFO denies responsibility for accounting fraud

Former Tongaat Hulett CFO Murray Munro has attempted to distance himself from the inaccurate financial statements presented by the company during his tenure.

Munro appeared before the Financial Services Tribunal on Wednesday to appeal against the JSE’s sanctions imposed on him in 2023, which barred him from serving as a director of any listed company for the next decade for his alleged role in SA’s second-largest corporate scandal after Steinhoff. Munro, who is also facing criminal charges over the alleged accounting fraud, was also fined R6m by the bourse.

The censure came after revelations of major financial irregularities at Tongaat came to the fore. A JSE investigation found that the accounting misconduct took place on Munro’s watch and that he had the duty to take corrective actions to ensure that Tongaat’s financial information was precise and provided a truthful representation of the company’s financial status.

Financial impropriety brought the sugar and property giant to the brink of collapse from 2011-18. These irregularities resulted in it restating its financials, slashing its assets by R10.3bn and income by R1.6bn.

Unreasonable

During the tribunal proceedings on Wednesday, Munro’s lawyer, Andrew Morrissey, argued that it was unreasonable to expect Munro to have knowledge of every transaction during his tenure as CFO. Munro could not be expected to personally scrutinise every financial transaction and was entitled to rely on his team, Morrissey argued.

Munro had taken all reasonable steps to ensure the accuracy of Tongaat’s financial reports, and maintained that he should not be held accountable for the fraudulent activities that transpired, he said.

“Munro did everything any reasonable human being could have done to ensure transactions were accurate,” Morrissey told the tribunal.

However, the JSE argued that as the chair of the audit and compliance committee for Tongaat’s subsidiary, Tongaat Hulett Developments (THD), Munro was intimately involved in the oversight of the company’s financial practices.

The exchange said Munro had direct knowledge of the questionable processes relating to land sales, which were prematurely recognised as revenue. Letters from external auditors, addressed to Munro, highlighted unresolved issues with THD’s land sales documentation.

Investor trust

The JSE emphasised that the accuracy and reliability of financial information were crucial for market transparency and investor trust. “If the CFO is not responsible for the financial transactions, who is going to take responsibility?”

The JSE also challenged Munro’s reliance on others as a defence. The bourse pointed to the schedule 21 declaration, a requirement for all directors of listed companies, which states that delegating duties does not absolve directors of their responsibilities.

Despite Munro’s claims of being uninformed about the detailed findings of the PwC report, which was key to uncovering the extent of Tongaat’s financial misreporting, the JSE maintained that accountability rested with him.

Tongaat, which survived a business rescue process, in 2020 initiated proceedings against Munro, the company’s erstwhile CEO Peter Staude and former finance executive Sean Slabbert, demanding R450m from them based on a damning PwC forensic investigation released a year earlier. In 2022 Munro and Staude were charged with fraud amounting to R3.5bn.

According to the provisional indictment, they acted with a common purpose to commit the crimes between 2015 and 2018 related to about 69 property deals involving THD.

With Kabelo Khumalo

Correction: July 5 2024

An earlier version of this article said that Sean Slabbert had been criminally charged; he has not been criminally charged. 

goban@businesslive.co.za