JOHANNESBURG — Gupta-cursed global software giant, SAP SE, has released the final results of its probe into SOE-linked corruption in South Africa. SAP says that while its own staff weren’t found guilty of directly paying bribes to Transnet or Eskom staff for state contracts, it did uncover “indications of misconduct in issues relating to the management of Gupta-related third parties”. SAP is subsequently tightening up its legal team in SA and the way it handles state-linked contracts in countries perceived to have a high corruption index. Three SA managers implicated in SAP’s Gupta graft probe also all quit after facing disciplinary proceedings. (These managers are still officially unnamed by SAP) – Gareth van Zyl
LISTEN TO THE PRESS CONFERENCE: ON THE RECORD: SAP says its Gupta corruption saga was an ‘inflection point’
SAP SE (NYSE: SAP) today announced final results of its investigation into software contracts with South African state-owned enterprises (SOE) Transnet SOC Ltd. and Eskom. 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. The investigation also confirms that there is no evidence of any payment or attempted payment made to any South African government official or any employee of an SOE in connection with the Transnet and Eskom transactions. A summary of the investigation findings can be found here.
SAP has been clear from the outset that it will not tolerate misconduct or wrongdoing. 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. 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.
Further to the announcement in October 2017 that SAP made significant changes to its global compliance processes, the company has allocated additional legal compliance staff to the SAP Africa market 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. This includes the certification of SAP’s Code of Business Conduct, with anti-bribery rules.
All South African partners are going through revised due diligence processes. In addition, SAP continues to investigate the public sector business in South Africa going back to 2010. If SAP identifies any further matters of concern, it will address them with the same attention and robustness as the Transnet and Eskom investigations.
Cooperation with authorities
In November 2017, SAP notified the national head of the Directorate for Priority Crime and Investigation (Hawks) of its willingness to cooperate with any investigation they may undertake. SAP also continues to cooperate with the U.S. Department of Justice and the U.S. Securities and Exchange Commission, and remains committed to sharing all findings with both local and international authorities.
As a private company, SAP is committed to uncovering and addressing any wrongdoing. SAP has been able to implement sweeping improvements to its internal compliance processes; however, there are limitations to what SAP can achieve in a complex investigation without having the investigative powers of government authorities. Consequently, SAP is fully committed to continue cooperating with both local and international authorities that do have comprehensive legal investigative powers across borders.
SAP’s continued commitment to South Africa
“This journey has taught us profound lessons and provided us with reasons to reflect on our business, our processes and our responsibility towards our employees, customers, partners and the South African public,” said Adaire Fox-Martin, member of the Executive Board of SAP SE, who leads SAP’s business in Middle and Eastern Europe (MEE); Europe, the Middle East and Africa (EMEA); and Greater China. “The investigation has confirmed that even strong compliance systems are vulnerable, and therefore require eternal vigilance. 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. We remain committed to this country and the rest of the continent, and to growing our business and investment here.”
SAP has launched a new go-to-market plan in Africa to maintain business continuity across the continent. In addition, SAP recently announced the opening of an SAP Leonardo Center location in Johannesburg in the third quarter of 2018. SAP will also announce a new SAP Africa managing director next week.
SAP paid $11 million to Gupta-linked companies for contracts
(Bloomberg) – SAP SE said it paid R128.6 million ($11 million) to companies linked to South Africa’s Gupta family, which is headed by three brothers accused of using their friendship with former President Jacob Zuma to defraud state-owned entities.
The findings represent the first time that an international company has given details on specific payments made to Gupta entities. Other global businesses to become embroiled in the corruption allegations include U.S. consultancy McKinsey & Co. Inc., which said last year it had made “several errors of judgment” while working for state utility Eskom Holdings SOC Ltd., and KPMG LLP, which audited Gupta companies and has said the work fell below its usual standards.
SAP said a probe by law firm Baker McKenzie found that the German software giant made the payments to third parties as commissions on contracts with Eskom and ports and rail operator Transnet SOC Ltd. Three senior executives who were suspended last year have now quit and the Walldorf-based company is co-operating with ongoing investigations by U.S. and South African authorities.
“We have left no stone unturned in our investigation,” Adaire Fox-Martin, an executive board member, said on a call with reporters Thursday. The commissions were between 10 percent and 14.9 percent of the value of the contracts, just below the level that would have triggered an internal investigation, she said.
The Guptas, who are in business with one of Zuma’s sons, are accused of using their political connections to win state contracts and influence ministerial appointments. They and the Zumas deny wrongdoing. On the same day Zuma resigned last month, police arrested five serving and former heads of Gupta-linked companies on charges of fraud and theft. Ajay, the oldest brother, has as-yet-undisclosed charges pending against him and has been declared a fugitive.
SAP reiterated that while it transferred money to Gupta associate Santosh Choubey for contracts won between December 2014 and June 2017, the German company found no evidence of payments to South African government officials or employees at Transnet and Eskom. The company has bolstered its legal and compliance teams in Africa, and is re-doing due diligence on some partners.
Eskom plans to undertake its own investigation of contracts with SAP “to ensure compliance with the company’s procedures and policies,” the utility said in a statement.
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. The shares fell 0.5 percent to 87.07 euros as of 2:59 p.m. in Frankfurt.
“Beginning in the middle of 2014, representatives of the Guptas began to associate themselves with multiple small parties that had experience in the South African IT industry,” Fox-Martin said. “It would appear from the evidence that we have that they approached SAP in South Africa.”