Software giant SAP pays more than R2.2 billion in restitution and punitive reparations for its role in Gupta-linked corrupt contracts

11 January 2024

The National Prosecuting Authority (NPA) has concluded a landmark Corporate Alternative Dispute Resolution (Resolution) with the global software giant SAP SE (SAP Global), and its South African subsidiary, Systems Applications Products (South Africa) (Pty) Ltd (SAP South Africa). SAP Global is a leading company in business software, with a presence in more than 130 countries. It started operating in South Africa in 1982.

The Resolution follows SAP’s voluntary self-reporting which triggered investigations and legal action taken by the United States Department of Justice (US DOJ) and the United States Securities and Exchange Commission (US SEC). Through international cooperation between the NPA and the US DOJ, the Resolution was coordinated with US criminal justice processes that resulted in a settlement agreement confirmed yesterday by a US Federal Court.

In terms of the Resolution, SAP Global, admits to the criminal actions of certain former executives and managers of SAP South Africa in corruption and related offences. As a result of these actions, SAP South Africa entered into tainted contracts with Transnet, Eskom, SARS, PRASA, the Department of Water and Sanitation (DWS) and the Gauteng Department of Finance, among others.

Several of these tainted contracts were intermediated by the Gupta family companies CAD House (Pty) Ltd, Global Softech Solutions (Pty) Ltd and Lejara Global Solutions (Pty) Ltd to whom SAP paid aggregate amounts of more than R100 million to secure contracts at Transnet, Eskom and SARS.

Parallel action of the Special Investigating Unit (SIU) has also been co-ordinated with the NPA’s processes relating to this Resolution. The total amount of R2.2 billion is made up of a number of amounts which SAP has voluntarily agreed to repay to a number of SOEs and government departments including Eskom, Transnet, and the Cities of Johannesburg and Tshwane, the Gauteng Department of Finance, SARS and PRASA. SAP has already repaid the Department of Water and Sanitation under agreements concluded with the SIU.

Over and above these restitution payments, SAP will pay an amount of R750 million into South Africa’s Criminal Assets Recovery Account as punitive reparation payments, in recognition of the social and economic harm caused by its conduct in South Africa. This R750 million punitive payment will be credited against a total fine of $118.8 million (R2.218 billion at current exchange rates) to be paid by SAP in the US under the co-ordinated US Resolution.

In addition to these commitments to monetary reparation, SAP South Africa and SAP Global have committed themselves to provide full co-operation to the South African authorities to assist their criminal investigations into the former SAP executives and employees, their intermediaries, and the public officials whose corrupt conduct was responsible for the tainted contracts between SAP and organs of state. SAP has already conducted its own thorough investigations into the corruption involving its South African executives and shared the fruits of that investigation with the NPA.

The NPA’s Asset Forfeiture Unit (AFU) has played a key role in facilitating the finalisation of the resolution. Asset Forfeiture Unit Head, Deputy National Director of Public Prosecutions, Ouma Rabaji-Rasethaba, has welcomed the resolution:

“The Resolution is a bold new step that takes South Africa forward in fighting crime. The NPA is committed not only to prosecuting criminals but also contributing to the economic recovery of the country through restitution of the proceeds of crime. Corporate alternative dispute resolutions address both of these mandates of the NPA. 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 South African courts have ever imposed on a company as a criminal sentence.”

In addition to the repayment, disclosure, and cooperation provisions, the Resolution obliges SAP to commit to a local and international corporate compliance programme to prevent future corrupt practices.

The NPA has already reviewed and approved SAP’s corporate compliance programme, the implementation of which will be monitored going forward. Based on the enhancements which

SAP has put in place since the time the misconduct was detected and reported, the NPA has found the program to contain a number of components which are detailed in an addendum to the agreement, and which the NPA views as offering a model for corporate compliance practices going forward. These include adoption of risk-based controls and data analytics, increasing headcount and investing more resources in compliance, and foregrounding compliance in internal training, messaging, and company policies.

To ensure fulfilment of these commitments, the Resolution permits the NPA to reopen its investigation of SAP, should SAP fail to implement that programme, fail to provide the necessary cooperation with the ongoing South African investigations into the relevant conduct referred to in the Resolution, or in the event that it provides materially false, incomplete or misleading information to the NPA.

South Africa joins a growing list of countries that employ alternative dispute resolution mechanisms to combat foreign bribery and corruption. These include the United States, United Kingdom, Germany, France, Kenya, Malaysia, Singapore, Mexico and Canada. These mechanisms are considered a vital instrument in combatting corruption and are recommended by the United Nations Convention Against Corruption, and endorsed by the Organisation for Economic Development (OECD).

One of the key recommendations of the Zondo Commission of Enquiry into State Capture was that a framework for such non-trial resolutions be enacted in South Africa. To this end, the South African Law Reform Commission is reviewing the Criminal Procedure Act to include such legislative reform. In the interim, the NPA, in its commitment to fighting state capture, has relied on its mandated powers to initiate such a framework. The NPA’s Corporate Alternative Dispute Resolution policy directive has been in development for two years and has top-level approval.

Rabaji-Rasethaba says:

“The NPA lends its full support to such resolutions, where appropriate, as it seeks to grow our corruption fighting arsenal. Where there is non-compliance, we will take the necessary action.”

In advance of finalisation of the Resolution, SAP has already pro-actively reported information about the corrupt deals to the US DOJ and the NPA. Information, including names of individuals, businesses, details of payment transactions and texts and emails evidencing criminal intent has been made available by SAP to the NPA. The ID, working together with DPCI and SIU, is considering the evidence. This Resolution has greatly assisted in moving the matter forward for decisions to be made regarding any prosecutions.

The NPA also acknowledges the role of South Africa’s excellent investigative journalists for their role in initially bringing this matter to the attention of the South African public and ultimately that of SAP.

Issued by Mthunzi Mhaga, NPA Spokesperson, 11 January 2024