SAP ordered to pay $26.4M in South Africa energy firm dispute

SA Special Investigating Unit orders payment within 7 days following alleged breach of public finance laws

A Special Tribunal in South Africa has ordered the German software giant SAP to pay a R500 million ($26.4 million, £20.9 million) settlement within a week following a long-running investigation into compliance with public finance laws.

According to a statement from South Africa's anti-corruption Special Investigation Unit, the payment results from an agreement reached by SIU and SAP on the validity of two contracts awarded by Eskom, the energy firm. The agreement was upheld by the Special Tribunal, the SIU said.

Between 2013 and 2016, Eskom and SAP agreed two cloud services contracts for around R1.1 billion ($58 million, £46 million).

The order stems from the SIU investigation and its effort to recover financial losses suffered by South African state institutions due to "negligence or corruption." The settlement agreement does not absolve SAP or any implicated party from possible prosecution, the SUI said.

The SIU's investigation found the Enabling Agreement for cloud services with SAP did not comply with the Public Finance Management Act, which resulted in Eskom incurring "fruitless and wasteful expenditures in respect of the agreements". Eskom and SAP also signed an agreement for Cloud services at a contract value of R21.7 million ($1.1 million, £0.9 million).

The Special Tribunal order (dated 20 March 2024) has also declared that the two contacts are constitutionally invalid and set them aside.

In January, SAP said it had entered into final settlement agreements with the US Department of Justice (DOJ), US Securities & Exchange Commission (SEC), and South Africa’s National Prosecuting Authority (NPA).

It welcomed the conclusion of these matters and will fully comply with the terms of the agreements.

It said it had conducted an investigation into historical misconduct and fully cooperated with the authorities. SAP said it had separated from all responsible parties more than five years ago and has since significantly enhanced its global compliance program and related internal controls.

"SAP has zero tolerance for those who do not adhere to the company’s compliance policies and procedures. SAP remains vigilant in maintaining the highest standards of ethics and compliance so that, together with a global network of customers, partners, suppliers, employees, and thought leaders, SAP can help the world run better and improve people’s lives," it said in a statement.

In response to the March settlement, an SAP spokesperson said: “SAP is aware of recent media reports outlining an amount payable, by SAP, to the SIU for contracts deemed invalid. This forms part of the same settlement announced in January this year, including civil disgorgement amounts previously agreed with the DOJ, SEC and NPA.”

In March 2018, SAP announced it had launched its own corruption probe into separate deals with South African transport company Transnet and Eskom.

Led by law firm Baker McKenzie, the investigation started in July 2017 after public allegations that SAP's subsidiary used shell companies to buy help to win government tech contracts. The focus was the relationship between SAP and businesses related to the influential Gupta family, known to have strong links to former president Jacob Zuma.

Separately, Eskom has had a difficult relationship with Oracle. In 2021, Big Red pulled support for its software, saying the energy firm should pay its "pending dues" for licenses. The state-owned firm said it had contingency plans in place as was conducting an "urgent" procurement for third-party support. ®

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