UPDATE: SAP SE has subsequently moved to suspend South Africa’s management team while launching a high-profile probe. Read more: Gupta kickback scandal: SAP suspends SA management, launches probe
By Gareth van Zyl
Revelations about alleged corruption at SAP South Africa should theoretically spark some kind of rational reaction from the company.
But not for SAP South Africa’s office, who issued a statement on Tuesday that vehemently defended their deal with a Gupta-linked company without providing a full rebuttal.
The story details how SAP South Africa, in August 2015, agreed to pay a 10% “sales commission” to Gupta-linked CAD House in return for Transnet deals.
Red flags are all over the deal. The 10% success fee is above the industry norm of 2-3% and CAD House obscurely specialises in 3D printing (with little track record in the space). The CAD House website also currently draws up a 404 error on its home page (see below).
Moreover, Neotel, in mid-2015, had just become embroiled in the Gupta-linked Homix letterbox scandal regarding Transnet kickbacks. And, to repeat, CAD House is linked to the Guptas, practically treated like a division of Sahara — that on its own is a red flag that for some obscure reason wasn’t picked up by SAP’s unnamed third-party assessors. The fact that several banks in South Africa and across the globe have also closed the Guptas’ bank accounts should have become a warning sign at some point to SAP to reconsider its dealings.
Nevertheless, SAP pushed ahead with CAD House as AmaBhungane revealed that R99.9m in SAP payments flowed to the Gupta-linked company.
Just as quickly as the money came into CAD House, it flew out to the likes of Gupta controlled Sahara Computers. Only R5.7-million remained in the CAD House account.
McKinsey has found itself embroiled in similar Gupta-linked drama with Trillian, but McKinsey has taken some kind of action by suspending staff and launching an investigation.
Pravin Gordhan famously said it’s time to start “joining the dots” around the Zuptas. Here then is my reading between the lines of SAP South Africa’s Tuesday statement. My notes are in italics, SAP spokesperson Brett Parker’s statements are in normal font and bolded:
By Brett Parker*
SAP strongly rejects allegations of kickbacks recently made by some South Africa-based media.
With due respect Mr Parker, what else would you call a 10% commission fee in this case other than a kickback, especially as it is higher than the industry norm as reported by AmaBhungane? Also, your company hasn’t denied entering a deal with CAD House. What makes CAD House’s “specialisation” in 3D printing relevant to your company winning a deal with Transnet? What is CAD House’s track record with 3D printing modelling in particular and why do they deserve such a huge success fee. Their expertise must be amazing to pay them almost R100m. Criticising the media is part of your democratic right, but if you do so, why not then explain why you think the media is wrong? The media is also just doing its job with little reward, trying to ensure that companies such as SAP can operate in a fairer South African environment where unjust dealings are exposed.
The accusations made around the use and payment of subcontractors are unfounded and unsubstantiated.
Please explain further to the media and South Africa why you think the reports are “unfounded”? Also, AmaBhungane did a good job in substantiating and investigating how your business unit got involved with CAD House, so I have to rebut your use of the word “unsubstantiated”.
SAP is dedicated to conducting every aspect of our business responsibly and in accordance with the highest global compliance and legal standards.
Yes, your company is beholden to German and US legislation, some of the toughest regulations in the world, especially when it comes to anti-corruption efforts. But SAP has strayed in recent times. The SEC has put your company on a watch following a kickback scandal in Panama. And surely, seeing as the Gupta bank accounts have been closed in SA, wouldn’t that have prompted your company at some stage to ask questions about whether you may forgo your own compliance standards by doing business with the controversial family? Red flags were all over the show with your deal with CAD House, but your staff seemingly ignored it because a deal with a state-owned entity like Transnet is obviously too good to let go.
As part of its day to day business, SAP South Africa engages various subcontractors, SMEs and partners and it has always been and will continue to be SAP’s policy to partner with a wide pool of organisations that qualify for our partner programme, if those organisations successfully meet the exacting criteria of our global due diligence and certification processes.
Again, how can a company controlled by the Guptas — who have been increasingly shunned by banks in South Africa, China and even India — meet your due diligence standards? Added to that, who is the unnamed third party company who carried out due diligence on CAD Systems? Please tell us.
SAP has taken strong exception to the reports issued in the media today and is investigating possible action.
Quite the way to end a 126-word statement. Again, it’s your right to take issue with what the media reports, but we’re still waiting to hear what your full rebuttal is exactly. The AmaBhungane report — which bases itself on the Gupta email leaks — is comprehensive, running into well over 1000 words. You’ll need to explain your side of the story in a comprehensive way if you want South Africans to believe you. At the moment, I don’t think anybody can take your statement and denial seriously.