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SAP South Africa, a subsidiary of German software multinational SAP, paid bribes to obtain a December 2015 City of Johannesburg contract for a licence consolidation.
A few months later, in August 2016 and as part of the same deal, a SAP South African executive ordered a purported business development partner to make an “improper” R2.2-million to an entity’s account.
This despite it being known that the entity was involved in corrupt activities.
New York trips, golf and meals
“Chat messages between the SAP South Africa local account executive and a City of Johannesburg employee corroborate that the local account executive directed, and the business partner made, the improper payment.
“In addition to these cash payments, SAP South Africa paid for trips to New York for government officials in May and September 2015, including the officials’ meals and golf outings on the trips.”
These and other details are contained in a US Securities and Exchange Commission findings document that was released on Wednesday, 10 January 2024.
It said that between December 2014 and 2018 — which, barring a few months in 2018, coincided with the second half of Jacob Zuma’s presidency — SAP used third-party intermediaries and consultants to make improper payments to government officials to get and retain business in South Africa, as well as other countries including Malawi, Kenya, Tanzania, Ghana and Indonesia.
While the document does not state it, media reports have before emerged, including via the #GuptaLeaks, that SAP had dealings in South Africa with a company controlled by members of the Gupta family, associates of Zuma’s who are now wanted for State Capture crimes in South Africa.
The National Prosecuting Authority on Thursday, 11 January, also confirmed Gupta involvement.
Read more in Daily Maverick: amaBhungane & Scorpio #GuptaLeaks: Software giant SAP paid Gupta front R100-million “kickbacks” for state business
On Wednesday, the same day as the Securities and Exchange Commission findings document was released, the US announced a major development in the scandal.
R4-billion fine
It said that SAP agreed to pay $220-million — more than R4-billion — “to resolve investigations” conducted by its Justice Department and the Securities and Exchange Commission into violations of the US’s Foreign Corrupt Practices Act.
“SAP’s resolution with the department stems from schemes to pay bribes to government officials in South Africa and Indonesia,” the US’s Office of Public Affairs said in a statement.
“According to court documents, SAP and its co-conspirators made bribe payments and provided other things of value intended for the benefit of South African and Indonesian foreign officials, delivering money in the form of cash payments, political contributions, and wire and other electronic transfers, along with luxury goods purchased during shopping trips.”
The US Office of Public Affairs added that it had worked with South Africa’s NPA.
Tainted contracts and the Guptas
On Thursday, 11 January, the NPA issued a statement saying SAP effectively blew the whistle on itself and that “SAP South Africa entered into tainted contracts with Transnet, Eskom, SARS, Prasa, the
Department of Water and Sanitation (DWS) and the Gauteng Department of Finance, among others”.
The statement continued: “Several of these tainted contracts were intermediated by the Gupta family companies CAD House (Pty) Ltd, Global Softech Solutions (Pty) Ltd and Lejara Global Solutions (Pty) Ltd to whom SAP paid aggregate amounts of more than R100-million to secure contracts at Transnet, Eskom and SARS.”
It said the NPA was coordinating parallel action via the Special Investigating Unit (SIU).
Payback and criminal investigations
Money SAP was paying authorities would also be channelled to South Africa.
“SAP will pay an amount of R750-million into South Africa’s Criminal Assets Recovery Account as punitive reparation payments, in recognition of the social and economic harm caused by its conduct in South Africa,” the NPA statement said.
“In addition to these commitments to monetary reparation, SAP South Africa and SAP Global have committed themselves to provide full co-operation to the South African authorities to assist their criminal investigations into the former SAP executives and employees, their intermediaries, and the public officials whose corrupt conduct was responsible for the tainted contracts between SAP and organs of state.
“SAP has already conducted its own thorough investigations into the corruption involving its South African executives and shared the fruits of that investigation with the NPA.”
The US’s Acting Assistant Attorney General Nicole Argentieri on Wednesday said it looked forward to strengthening ties with South Africa.
“SAP paid bribes to officials at state-owned enterprises in South Africa and Indonesia to obtain valuable government business,” she said.
“This case demonstrates not only the critical importance of coordinated international efforts to combat corruption, but also how our corporate enforcement policies incentivise companies to be good corporate citizens.”
The US Securities and Exchange Commission findings document detailed some of the bribery that involved South Africa.
It said that SAP South Africa had retained several third-party consultants in the country “to offer or pay bribes to government officials or intermediaries in order to obtain contracts with public sector customers”.
The findings further stated: “SAP South Africa recorded the payments as legitimate business expenses in SAP’s books and records, despite the fact that certain intermediaries could not show that they provided the services for which they had been contracted.”
Transnet and the ‘corrupt company’
The findings referred to Transnet.
It said in December 2014, SAP South Africa closed a $4.4-million (more than R82-million) deal with Transnet, via an intermediary third party, identified simply as SA Intermediary 1, who apparently acted as a business development partner.
“SA Intermediary 1 is a South African tech company, known for various corrupt business activities, and is controlled by a South African-based family,” the findings said, without identifying any individuals.
According to the Transnet deal, SA Intermediary 1 was set to receive a 10% commission and was to perform certain duties.
Read more in Daily Maverick: State Capture Central: How Transnet became the hub of the Gupta looting frenzy
But the US findings stated: “In reality, it did not perform any actual work for SAP. There is no record of SA Intermediary 1 ever being present at meetings with Transnet, nor does SA Intermediary 1 appear to have a credible IT background or experience.
“Furthermore, bank records indicate that shortly after the deal closed, SA Intermediary 1 paid $562,215, characterised as ‘loans,’ to an individual known to be involved in making bribe payments.”
‘No tangible services’
SAP South Africa had used another intermediary, which was controlled by the same South African-based family that handled SA Intermediary 1, to help it secure another $6.58-million Transnet contract.
The South African-based family, “known as a conduit for bribing government officials,” was not named in the findings but was directly linked to SA Intermediary 2.
“SAP South Africa paid approximately $1-million in commission fees to SA Intermediary 2, a South African 3D printing firm despite the fact that it provided no tangible services to SAP. SAP South Africa and its employees knew about the red flags relating to SA Intermediary 2’s ownership.”
This aspect of the US findings appears to be what Susan Comrie, for amaBhungane, reported on in June 2018, suggesting SA Intermediary 2 could be the Guptas, or the 3D printing firm linked to them.
Read more in Daily Maverick: What global software giant SAP really knew about the Guptas
At the time in 2018, she wrote about purported “commissions” SAP paid “to Cad House, a small Gupta-controlled company in Centurion that sold 3D printers.”
Comrie also reported that SAP “had paid roughly R100-million in ‘commissions’ (that looked like kickbacks) to a Gupta-linked company in order to secure contracts from Transnet and Eskom.”
Eskom, millions, and zero work
As for Eskom, according to the US findings released on Wednesday, SAP closed a $28.58-million deal with it in November 2016 to renew software licences.
“Internally, SAP South Africa set aside several million dollars from this renewal fee to pay SA Intermediary 3, a purported IT consultant on the Eskom project. SA Intermediary 3, however, never performed any services,” it said.
Read more in Daily Maverick: Eskom: Zuma, Molefe, Koko and Singh branded key players in State Capture
The Guptas may also feature in these Eskom dealings.
According to the US findings, “SAP also retained SA Intermediary 2 to perform vague services on Eskom contracts dated March 2016 and November 2016 that, as a 3D printing company, SA Intermediary 2 was unqualified to perform.”
SA Intermediary 2 was still paid “a total of $5.18 million in consulting fees.”
In between the Transnet and Eskom dealings, the South African Revenue Service (SARS) was also in SAP’s sight.
The US findings said that SAP South Africa again used SA Intermediary 2 for this — a June 2016 contract with SARS.
It did not go into further details on the SARS deal.
Business as usual
On Thursday in response to a Daily Maverick query, SAP said it had cooperated with authorities.
“The company separated from all responsible parties more than five years ago,” it said.
“SAP has made significant enhancements to our compliance program and internal controls over the past few years. Indeed, both the US and South African authorities specifically highlighted SAP’s strong remediation, robust controls, and compliance enhancements.”
Meanwhile, on 8 January, two days before the US announced that SAP was set to pay the R4-billion fine, the company announced it appointed a manager, Emmanuel Raptopoulos, as president to oversee a newly created region, that included Africa.
Raptopoulos, in a statement, said: “Our customers have high expectations. They rely on SAP to run their most critical business processes, to digitally transform, to boost their sustainability, and to future-proof their organisations…
“[This region’s] next chapter will be fueled by accelerated cloud and AI innovation, underpinned by our purpose, our people, and our partnerships.”
No mention was made of the R4-billion fine or what the US has labelled SAP’s “bribe payments” to government officials in South Africa. DM
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