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SAP ordered to pay back R263m over invalid govt tender

Samuel Mungadze
By Samuel Mungadze
Johannesburg, 16 Mar 2022

The software licence and support agreement between the Department of Water and Sanitation and German software company SAP has been declared constitutionally invalid and set aside.

The Special Tribunal SA – mandated to recover public funds syphoned from the fiscus through corruption, fraud and illicit money flows – announced the development yesterday.

It said consequently, upon the setting aside of the 2015 and 2016 licence agreements, it is ordered that the department may not use any of the software licensed under the 2015 and 2016 licence agreements.

SAP now has five days to pay the department R263 million.

This development is a result of a Special Investigation Unit (SIU) investigation, authorised by president Cyril Ramaphosa in 2018.

Ramaphosa sanctioned the investigation on the contract, citing allegations that public money was spent unlawfully.

SAP is one of several foreign firms to suffer reputational damage in SA after becoming entangled in corruption scandals under Ramaphosa’s predecessor, Jacob Zuma.

Pay back the money

Consequently, the Special Tribunal of SA announced the final outcome of the probe, saying: “SAP will pay the department an amount of R413 121 383.40 (which represents the total amount received pursuant to the 2015 and 2016 licence agreements) less R68 337 036 (being the yearly maintenance due under the software licence and support agreement entered into between the department and SAP on or about 9 January 2012 for the six-year period from 2016 to 2021 (R11 389 506 x six years), and any further amount determined by the Special Tribunal.”

The statement adds: “Within five court days of the date of the order, SAP will pay the department an amount of R263 282 173.78 (which represents the undisputed amount due).

“Interest, at the mora interest rate, which will begin to run and be payable on all amounts not paid within five court days of the date of the order, including in respect of any further amount payable pursuant to the Special Tribunal's determination in terms of the above orders.”

Furthermore, it says: “For the avoidance of doubt, if the Special Tribunal determines that SAP is required to pay the department more than R263 282 173.78 because the Special Tribunal determines that SAP may not make some or all of the deductions that it submits it is entitled to make, then that further amount will be payable, together with interest running from the date of this order.”

According the Special Tribunal, the only remaining issues in dispute between the parties is whether in terms of the no-profit principle, “SAP is entitled to deduct the payments it made to third-party software companies from the amount recorded in this order, as well as the costs of determining whether this deduction should be allowed”.

To enable the Special Tribunal to determine the issues, it says “SAP will, within 15 court days of this order, file an affidavit solely dealing with the payments made to third-party software companies and the factual basis for its contention that these expenses ought to be deducted from the amount to be paid to the Department of Water and Sanitation.

“Within 10 court days of receipt of the SAP's affidavit, the SIU and Department of Water and Sanitation will file their affidavits in answer thereto and should it deem it necessary, SAP shall file its replying affidavit within five court days of expiry of the period alluded to above.”

Adherence is the norm

Commenting on the matter, SAP says: “Following a comprehensive investigation relating to the sale of SAP software licences to the South African Department of Water and Sanitation (DWS), the SIU, the DWS and SAP have together reached a settlement.

“DWS remains an SAP customer and SAP continues supplying and maintaining DWS’s software investment, working towards improved billing and better service delivery.

“SAP remains committed to maintaining a robust, world-class compliance programme so that, together with its global network of customers, partners, employees and thought leaders, we can help the world run better and improve people’s lives.”