Global software giant, SAP has provided update on an investigation into allegations that it paid over R100 million in ‘kickbacks’ to Gupta-linked companies for contracts with Transnet and Eskom.<\/p>\n
The group said that is providing the update voluntarily, adding that it has initiated disciplinary procedures against three employees and made significant changes to its global sales deal processes as a result of the findings, to date.<\/p>\n
SAP said that it will publish the full investigation once it is complete, but has so far not found any misconduct relating to direct payments to government officials or those at Transnet or Eskom.<\/p>\n
“(The investigation) has, however, uncovered indications of misconduct in issues relating to the management of Gupta-related third parties. To this end, SAP has instituted formal disciplinary proceedings, in accordance with South African labor law, against three employees who were placed on administrative leave at the beginning of the investigation,” the group said.<\/p>\n
A fourth employee that was placed on administrative leave was found to have not been involved, and will return to work, it said.<\/p>\n
Deals with Gupta-linked companies<\/strong><\/p>\n It was revealed in July through a series of leaked emails that SAP had paid a Gupta-linked company as much as R100 million in apparent kickbacks, for helping the software group secure contracts with Transnet.<\/p>\n The agreement SAP had with the company \u2013 CAD House \u2013 was to pay a 10% commission for any contracts secured over R100 million. The R100 million payment to CAD House implies the firm secured R1 billion in government contracts for SAP.<\/p>\n While commission agreements are not uncommon in SAP\u2019s field, questions were raised around why CAD House was selected. The group sells 3D printers and has little marketing or sales capability \u2013 and it was going through business rescue at the time.<\/p>\n Investigations by amaBhungane found that CAD House was run as a subsidiary of the Gupta-owned Sahara Computers; and it became apparent that it was chosen because of the family\u2019s close links to government officials.<\/p>\n It was further revealed through the leaked emails that confidential SAP contracts were forwarded to the Guptas.<\/p>\n SAP South Africa initially reacted to the reports by denying any wrongdoing, and threatening to take action against the media houses reporting on the matter.<\/p>\n Investigation confirms reports<\/strong><\/p>\n The software group hired law firm Baker McKenzie to investigate its contracts with the South African government and state-owned companies.<\/p>\n Baker McKenzie initially focused its investigation on SAP’s contracts with Transnet and Eskom – \u00a0this part of the investigation will conclude by the end of 2017, SAP said.<\/p>\n To date, the investigation has determined that, between December 2014 and November 2016, SAP concluded two contracts for the sale of software to Transnet and two contracts for the sale of software to Eskom, each with the assistance of an entity currently understood to have been Gupta-related.<\/p>\n “In connection with these four contracts, SAP provided software and received revenue totaling approximately R660 million, and paid commissions to entities currently understood to be Gupta-related totaling approximately R94 million,” it said.<\/p>\n “The amounts actually paid to the third parties totaled approximately R107 million because, by contract, each commission payment included an amount of VAT for taxes due on the receipt of the funds.”<\/p>\n In December 2016 and June 2017, SAP concluded two additional contracts to provide software and services to Eskom with the assistance of an entity currently understood to have been Gupta-related.<\/p>\n No revenue has been received or commissions paid in connection therewith, it said.<\/p>\n Taking action<\/strong><\/p>\n As part of the action being taken in South Africa regarding government contracts, SAP has decided that it will no longer have\u00a0sales commissions in public sector deals in countries with a Corruption Perceptions Index (according to Transparency International) below 50, effective immediately. South Africa\u2019s rating is 45.<\/p>\n Further, it said it has initiated \u2014 on a global basis \u2014 extensive additional controls and due diligence into relationships with sales agents and value-added resellers, including additional audit functions.<\/p>\n “SAP will allocate additional legal compliance staff to the SAP Africa market unit. They will be based in South Africa and report into SAP\u2019s Global Compliance organization.<\/p>\n “SAP will further strengthen its Compliance Committee in the SAP Africa region, consisting of local management, compliance and other corporate functions, to ensure individual deal sanity and integrity, and promote compliance generally,” it said.<\/p>\n
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