SAP employees paid commissions to Gupta-related companies, to secure contracts at Transnet and Eskom. An investigation didn’t find any payments to government, Transnet or Eskom employees.
The company will institute disciplinary procedures against three of the employees suspended when the news first broke, while a fourth is believed not to have been involved, and will return to work.
An internal investigation by SAP found that, in respect of four contracts, SAP provided software and received revenue totalling approximately R660-million (about $48-million), and paid commissions to Gupta-related entities totalling approximately R94-million (about $6,8-million).
The amounts actually paid to the third parties totalled approximately R107-million (about $7,7-million) because, by contract, each commission payment included an amount of VAT for taxes due on the receipt of the funds.
In December 2016 and June 2017, SAP concluded two additional contracts to provide software and services to Eskom with the assistance of an entity currently understood to have been Gupta-related. However, no revenue has been received or commissions paid in connection therewith.
To date, the investigation has not revealed any evidence of a payment to a South African government official, including Transnet and Eskom employees.
SAP has voluntarily disclosed the situation in its South African business to US authorities responsible for enforcing the US Foreign Corrupt Practices Act. It has initiated disciplinary procedures against three employees and made significant changes to its global sales deal processes.
“As a global company with a commitment to integrity and compliance, the past three months have been humbling for us,” says 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 allegations of wrongdoing in our South African business have had a profound impact on our employees, customers and partners, and on the South African public — and we apologise wholeheartedly for this.”
Fox-Martin says SAP had initiated its voluntary disclosure on 13 July and that SAP has committed to full and complete cooperation with the US Department of Justice (DOJ) and the US Securities and Exchange Commission (SEC). She confirms that the investigation by the DOJ and SEC continues.
“We cannot emphasise enough how seriously the SAP Executive Board takes these allegations, or how committed we are to managing this process in a transparent, ethical and responsible way,” Fox-Martin adds.
The SAP Executive Board has also decided to eliminate sales commissions on all public sector deals in countries with a Corruption Perceptions Index (according to Transparency International) below 50, effective immediately. South Africa’s rating is 45.
The SAP Executive Board has also initiated — on a global basis — extensive additional controls and due diligence into relationships with sales agents and value-added resellers, including additional audit functions.
SAP will allocate additional legal compliance staff to the SAP Africa market unit. They will be based in South Africa and report into SAP’s Global Compliance organization. SAP will further strengthen its Compliance Committee in the SAP Africa region, consisting of local management, compliance and other corporate functions, to ensure individual deal sanity and integrity, and promote compliance generally.
In July, SAP promised to publish findings of the Baker McKenzie investigation once completed. Since the investigation is still ongoing, and in deference to ongoing investigations of the DOJ and the SEC, SAP cannot provide further details currently. It is SAP’s intention to release complete findings at the end of the investigation.