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SAP admits payment of R128.6m to Gupta-linked companies for contracts

Mar 08 2018 19:51
Paul Burkhardt, Bloomberg

Johannesburg - SAP said it paid R128.6m to companies linked to the 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 US consultancy McKinsey & Co, which said last year it had made “several errors of judgement” while working for state utility Eskom, and KPMG, 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. Three senior executives who were suspended last year have now quit and the Walldorf-based company is cooperating with ongoing investigations by US 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% and 14.9% of the value of the contracts, just below the level that would have triggered an internal investigation, she said.

Corruption allegations

SAP said last year it’s being probed by the US Department of Justice and the US Securities and Exchange Commission over how it won contracts with South African state businesses.

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 redoing 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 Service related to contraventions of the Companies Act, Fox-Martin said. The shares fell 0.5% to €87.07 as of 14:59 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.”

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