Indication of misconduct in South African public sector deals — SAP corruption probe

Elias Hubbard
March 8, 2018

A probe by law firm Baker McKenzie found that the payments were made by the German software giant to third parties as commissions on contracts with state utility Eskom Holdings SOC Ltd. and ports and rail operator Transnet SOC Ltd.

It centred on the relationship between SAP and Gupta-related businesses - the Gupta family is known to have strong links to South African president Jacob Zuma - and focused on six contracts SAP won from state-run railway and electric firms Transnet and Eskom.

The three Gupta brothers, Atul, Ajay and Rajesh, went to South Africa in the early 1990s and built a commercial empire stretching from computers to mining and media.

SAP has received notice that the Companies and Intellectual Property Commission has laid charges against the company with the South African police related to contraventions of the Companies Act, Fox-Martin said.

A number of other executives were also put on leave, and most have since left the company.

It's found compliance breaches and indications of misconduct in these public-sector deals.

"SAP has been clear from the outset that it will not tolerate misconduct or wrongdoing", said the German firm. But three senior SAP executives who were suspended in July past year have since resigned after being investigated by the company.

Neither was there evidence that the integrity and value of the software and services provided to Eskom and Transnet were "undermined in any way" by the use of these intermediaries, SAP said. No severance was paid to any employee, and SAP reserves its rights in respect of these executives. The fourth individual was placed on administrative leave but has since returned to work.

The company has also strengthened its independent Compliance Committee in the SAP Africa region, and augmented the mandatory annual compliance training that every SAP Africa employee must complete.

"We have left no stone unturned in our investigation", Adaire Fox-Martin, an executive board member, said on a call with reporters Thursday.

SAP said it was also banning sales commissions on public sector contracts in countries with high corruption ratings, such as South Africa.

Meanwhile, all South African partners are going through revised due diligence processes.

"While we cannot turn back the clock, we can promise to do better".

U.S. consultancy McKinsey said a year ago it had made "several errors of judgment" while working for Eskom, while auditor KPMG said work it did while auditing Gupta companies was sub-standard and several executives quit. "We remain committed to this country and the rest of the continent, and to growing our business and investment here".

Other reports by Click Lancashire

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