SAP Admits ‘Misconduct’ In South African Deals

German software giant SAP has released the final results of a legal investigation into a number of public sector deals in South Africa, which shows that ‘payments’ were made to close friends of the former President Jacob Zuma.

The payments were made to companies owned by the Guptas, who were closely allied to Jacob Zuma throughout his time in office.

South Africa in recent years has been rocked by corruption and graft, and Zuma had been facing more than 700 charges of fraud and corruption.

The charges were controversially dropped soon after he became president, despite the fact that both the High Court and Supreme Court ruled it was ‘irrational’ to do so.

Payments Admission

Into this sordid mix SAP ‘tendered’ for a number of public sector contracts in South Africa, namely Transnet SOC Ltd (SA’s rail-freight company – two contracts) and Eskom (the state electricity supplier – four contracts).

After news of the sheer scale of corruption within South Africa broke, SAP initiated a probe in July 2017, which was conducted by law firm Baker McKenzie.

It found that payments were made to Gupta-linked companies. Indeed, SAP admitted it paid more than $9 million (£6.5m) to intermediary companies controlled by the Guptas.

The Guptas (Ajay Gupta, Atul Gupta and Rajesh Gupta) ran a family business after moving to South Africa from India.

Atul Gupta has now been declared a fugitive from justice and fled South Africa after Zuma was forced out of office by the ANC last month.

SAP also said that “irregularities” had been found in the management of third parties and adherence to SAP’s compliance processes, but that there was “no evidence of payments made to Eskom, Transnet employees or any government official.”

However, the main concern was payments to the Gupta intermediary Santosh Choubey.

When the scandal broke last year SAP placed both the MD and financial director of its South African unit on administrative leave.

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

“The central findings confirm that there were payments to Gupta-related entities, indications of misconduct relating to the management of Gupta-related third parties and irregularities in the adherence to SAP’s compliance processes,” SAP admitted.

“SAP has been clear from the outset that it will not tolerate misconduct or wrongdoing,” said the firm. “Presided over by independent senior legal counsel, SAP instituted disciplinary proceedings against three senior executives, who were put on administrative leave in July 2017 and formally suspended in October 2017.

“These executives have since resigned from SAP,” said SAP. “Under South African labour law, a disciplinary process cannot continue if an employee resigns. No severance was paid to any employee, and SAP reserves its rights in respect of these executives. As reported in October, the fourth employee placed on administrative leave has since returned to work.”

Tighter Controls

SAP said it has made significant changes to its global compliance processes, and the company has allocated additional legal compliance staff to the SAP Africa unit.

“SAP 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,” it said. “This includes the certification of SAP’s Code of Business Conduct, with anti-bribery rules.”

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

“The investigation has confirmed that even strong compliance systems are vulnerable and therefore require eternal vigilance,” SAP board member Adaire Fox-Martin said in a statement. “While we cannot turn back the clock, we can promise to do better.

“To this end, we would like to reiterate the apology we made last year to our stakeholders in South Africa,” said Fox-Martin. “We remain committed to this country and the rest of the continent, and to growing our business and investment here.”

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