SAP opens probe into South African unit kickback reports

South African media reported allegations on Tuesday that SAP paid kickbacks in the form of sales commissions to a firm linked to the politically connected Gupta family, helping SAP clinch a deal.

FRANKFURT: Europe's top technology company, SAP, has put four senior managers in South Africa on leave and begun a probe into reports that have dragged the company into an influence peddling scandal involving friends of President Jacob Zuma. 

South African media reported allegations on Tuesday that SAP paid kickbacks in the form of sales commissions to a firm linked to the politically connected Gupta family, helping SAP clinch a deal worth 1bil rand (RM326mil) with rail and logistics company Transnet and other state-owned firms.

AmaBhungane, a non-profit investigative reporting group that has a strong record of exposing corruption, named SAP in a story based on leaked e-mails and documents that it says show how the Gupta family unduly influences the awarding of government contracts worth hundreds of millions of dollars.

The ruling African National Congress party has been damaged by leaked e-mails appearing to show fraud in the awarding of state contracts.

"We've obviously seen the claims in the media. And we're taking these extremely, very, very seriously." Adaire Fox-Martin, SAP co-president for global customer operations, told Reuters in an exclusive interview on Wednesday.

Fox-Martin said SAP was putting the executives on administrative leave, pending the outcome of internal and external investigations that the company has initiated.

The German company has hired an independent international law firm based in the United States to conduct an external investigation and also will run its own, internal probe using SAP's compliance organisation, she said.

SAP declined to name the four management-level employees, or their job titles.

Reuters has not been able to independently verify the allegations.

The Guptas, Indian-born South Africans, and Zuma have previously denied wrongdoing. Seeking response to the fresh allegations involving SAP, a Gupta family spokesman and Zuma's spokesman did not respond to calls and e-mails for comment.

Transnet said in a statement that it has been an SAP customer since 2000 but that it was unaware of the parties reportedly involved in SAP sales to the company. "All queries related to our suppliers and any third parties should be raised with them directly," the company said, referring to SAP.

Fox-Martin, who was named to SAP's global executive board two months ago and is the executive in charge of overseeing sales and customers service operation across Africa, Greater China, Europe and the Middle East, is travelling to South Africa to meet with customers and employees.

"As a company we're initiating a very thorough and very vigorous investigation," she said.


SAP, the world's largest supplier of business planning software that multinationals use to manage far-flung operations, is acting quickly to limit reputational damage for a company that is a leading supplier of compliance software and services, among its many products.

It also must ward off repercussions from regulators for possible US foreign corrupt practise violations after it was hit last year with a US$3.9mil (RM16.7mil) fine by the Securities and Exchange Commission.

The company, whose stock is dual-listed in Frankfurt and New York, was found by the SEC to have failed to maintain sufficient internal controls to prevent a bribery scheme by a former sales executive who won lucrative contracts with the Panamanian government.

 "We feel that a fast reaction to this, indicating that we are working to get to the bottom of this, will actually indicate the seriousness with which SAP takes these allegations and our intention to conduct a fully transparent investigation on this," Fox-Martin said.

She said the results of the investigation will be made public.

Carmaker Volkswagen of Germany, embroiled in an emissions-test cheating affair for almost two years, also commissioned an independent lawyers' investigation but did not publish the results as it had indicated it would.

German industrial giant Siemens – which battled its own foreign bribery scandal a decade ago - has been swept up in a fresh scandal in which two of its gas turbines sold for use in Russia turned up in Crimea in violation of European Union sanctions.

Siemens filed a suit on Tuesday against a Russian state firm, saying the Russian company had moved the turbines "against its will".

On Wednesday, South African Deputy President Cyril Ramaphosa criticised corruption he said had damaged his ruling party under Zuma, opening a divide in the African National Congress ahead of a leadership contest set for later this year.

Zuma's business friends, the Guptas, have been accused by ANC politicians and the opposition of using their close relationship with Zuma and his allies to influence the awarding of government contracts worth hundreds of millions of dollars.

Ramaphosa called for a judicial inquiry into the allegations. — Reuters

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