Inside SAP’s network of bribery
The confession to US authorities by German software giant SAP of its corrupt activities in SA has laid bare the extent of the impunity its officials enjoyed as they bribed their way to lucrative state contracts in one of SA’s biggest post-apartheid scandals.
The German-based software company will pay more than R4bn to settle corruption and bribery charges involving government officials around the world, including in SA.
The company, which specialises in systems that are used to manage business operations, entered into final settlement agreements with the US department of justice, US Securities and Exchange Commission (SEC) and SA’s National Prosecuting Authority (NPA).
According to the NPA, R2.2bn of the total is made up of amounts which SAP has voluntarily agreed to repay to stateowned enterprises (SOEs) and government departments, including Eskom, Transnet, the cities of Johannesburg and Tshwane, the Gauteng department of finance, the SA Revenue Service (Sars) and the Passenger Rail Agency SA.
The case centres on dealings with the infamous Gupta family, who used their friendship with former president Jacob Zuma to engage in immense corruption, which gutted once world-class institutions such as Sars and left Eskom and Transnet running on fumes. Court documents show that the company has also been implicated in Malawi, Tanzania, Ghana, Kenya, Indonesia and Azerbaijan.
But it is in SA that the group’s corrupt activities seem to have run deep. SAP is one of the few prominent international companies that became ensnared in the state capture project. Consultancy houses McKinsey and Bain have apologised for their involvement in the scandal.
SAP admitted that the $4.4m 2014 contract awarded to it by Transnet was awarded corruptly and that it paid an intermediary linked to the Gupta family 10% commission for the deal to go through.
In 2015, the company was awarded another contract by Transnet worth $6.5m with the assistance of another entity linked to the Guptas, which was paid a $1m commission.
SAP also admitted to having paid bribes to obtain a contract with the City of Johannesburg in 2015 valued at $13.16m. A R2.2m bribe was paid to win this contract, with the company also paying for trips to New York for government officials in May and September 2015, “including the officials’ meals and golf outings”.
SAP in 2016 closed a deal with Eskom to renew software licences for about $28.58m, paying $5.18m in kickbacks hidden as “consulting fees”.
The company was also corruptly awarded $35.4m worth of contracts with the department of water & sanitation in December 2015 and July 2016.
“The local business partners were paid at a 14.9% commission rate, the maximum allowed under SAP policy without approval from the board,” court documents show.
“SAP SA employees engaged both BDPs [business development partners] at the highest commission percentage allowed, staying under the 15% commission rate so as to avoid the need to obtain higher-level approvals, and authorised the payment despite the local partners ’ failure to meet deliverables relating to the [department of water & sanitation] transaction.”
Ouma Rabaji-Rasethaba of the NPA said: The present resolution
obliges “SAP to return all benefits that it received under the corrupt contracts that it concluded. It also subjects SAP to punitive reparation payments that far exceed any fine that the SA courts have ever imposed on a company as a criminal sentence.”
SAP has committed to a local and international corporate compliance programme to prevent future corrupt practices.
As part of its enforcement, the NPA is allowed to reopen its investigation into SAP if the company fails to implement that programme.
In November 2022, the special tribunal of the Special Investigating Unit (SIU) ordered the company to repay more than R81m to the department of water & sanitation, the proceeds from a contract found by the SIU to have been unlawful and irregular. This was in addition to an order in March for the company to pay back R413m, the total amount paid by the department to the company over two years.
SAP, whose home country prides itself on a reputation of rectitude, said it “conducted a thorough and extensive investigation into historical misconduct and fully co-operated with the authorities ” .
According to the court papers, the SAP SA unit retained multiple third-party consultants to engage in pay-to-play political patronage at the expense of the SA people, nearly 20-million of whom live in extreme poverty.
“SAP SA 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,” the court filings show.
Elsewhere, a Zimbabwebased SAP reseller was found to have engaged in bid-rigging and arranged corrupt payments to government officials in connection with SAP Africa deals in Malawi, Tanzania, Ghana and Kenya in 2014-18.
In Azerbaijan, an SAP employee provided “improper gifts” to government officials in connection with a May 2022 deal with the state oil company valued at $1.6m.
SAP says it “separated from all responsible parties more than five years ago. The past conduct of certain former colleagues and former partners does not reflect SAP’s values or our commitment to ethical behaviour.
“SAP has made significant enhancements to our compliance programme and internal controls over the past few years. Indeed, both the US and SA authorities specifically highlighted SAP’s strong remediation, robust controls, and compliance enhancements.”