SAP in more hot water, this time with East African state deals

JOHANNESBURG — German-headquartered enterprise software giant SAP finds itself, once again, caught up in a graft scandal on the African continent – this time in Kenya and Tanzania. It was only 2017 that the company was exposed in the Gupta Leaks, in South Africa, for its dubious relationship with the family’s companies. During that scandal, SAP moved swiftly and several local executives quit. The company also flew out its top global executives to try to quell the crisis that was engulfing it at the time. This latest scandal, though, will be interesting to watch especially as it stretches over key nations in the East African bloc. – Gareth van Zyl

By John Bowker

(Bloomberg) – SAP SE has been accused of “improper conduct” linked to state contracts in Kenya and Tanzania, a claim that could plunge the German software giant into a second African corruption scandal in as many years.

The graft allegations, which are being investigated by US authorities, relate to deals in 2014 and 2015, the Walldorf-based company said in an emailed statement on Thursday. SAP and Twenty Third Century Systems, a partner across Africa and the Middle East, have since made management changes and strengthened compliance, SAP said.

The news comes a year after SAP said it paid R128.6m ($9.2m) to companies linked to South Africa’s Gupta family, who are accused of numerous cases of state-related corruption. The US Department of Justice and the US Securities and Exchange Commission are investigating the company in relation to those deals as well.

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“Our policy is, and always will be, to carry out all company activities in accordance with the letter and spirit of applicable laws,” SAP said.

The fresh allegations were first reported by South African website TechCentral, which said TTCS allegedly bribed officials at the Tanzania Ports Authority with $800,000 to win a $6.6m contract. The claims were made by a whistleblower and lodged in the US, according to the website.

Earlier troubles

SAP’s partner, TTCS, is 49 percent owned by EOH Holdings Ltd., a Johannesburg-based IT firm that’s already embroiled in allegations of corruption regarding South African government contracts. The latest claims relate to a time before its investment in TTCS, and EOH was unaware of them when agreeing to the deal, an EOH spokeswoman said.

“It was before our time and we have provided SAP with any information we have on the matter,” she said.

Read also: John Mulcahy: How SA should deal with KPMG, McKinsey, SAP. Then chuck them out.

In 2015, another South African company, Standard Bank Group Ltd., ran into trouble in Tanzania when UK-based unit ICBC Standard Bank Plc was asked to pay about $33m to resolve an investigation into bribery at its former Tanzanian unit. The deferred prosecution agreement related to a $6m payment by former sister company of Standard Bank, Stanbic Bank Tanzania, in March 2013. The payment was intended to encourage Tanzania’s government to favour the bank in a private placement.

SAP shares closed 0.4% higher at €94.20 at the close in Frankfurt, valuing the company at €115bn. EOH declined 1.2% to R16.20, with the stock having dropped 47% this year, making it the second-worst performing share on Johannesburg’s benchmark index since the start of January.