SAP ordered to pay SIU R500m over shady Eskom deals

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 27 Mar 2024
The SIU states the settlement agreement does not absolve SAP or any implicated party from possible prosecution.
The SIU states the settlement agreement does not absolve SAP or any implicated party from possible prosecution.

German software giant SAP says the R500 million fine imposed on it by South Africa’s Special Tribunal is part of a settlement agreement it reached with the US Department of Justice in January.

The payment relates to illegal contracts that SAP entered with state-owned company Eskom at the height of state capture.

This week, the Special Tribunal ordered SAP to pay the Special Investigating Unit (SIU) R500 million within seven days over the deals.

The order stems from a settlement agreement reached by SIU and SAP on the validity of two contracts awarded by Eskom, which was upheld by the Special Tribunal.

According to the SIU, between 2013 and 2016, Eskom and SAP entered into two contracts for an enabling agreement and cloud services agreement worth approximately R1.1 billion.

It adds that the Special Tribunal order – dated 20 March 2024 – has declared that the two contacts are constitutionally invalid and therefore set aside.

The order of the Special Tribunal is part of the implementation of the SIU investigation outcomes and consequence management to recover financial losses suffered by state institutions due to negligence or corruption.

The SIU states that the settlement agreement does not absolve SAP or any implicated party from possible prosecution.

The SIU’s investigation found Eskom entered into an enabling agreement contract with SAP for licences, maintenance, support and ad hoc services at a contract value of R1 037 045 965.50.

Thereafter, the crime-busting unit says SAP entered into a sale commission agreement with CAD House, a Gupta-linked company.

Furthermore, it notes, Eskom and SAP signed an agreement for cloud services at a contract value of R21 712 514.82. Following payments from Eskom to SAP, CAD House received funds from SAP.

SIU findings revealed the enabling agreement and the cloud services agreement did not comply with the Public Finance Management Act, which resulted in Eskom incurring fruitless and wasteful expenditures in respect of the agreements.

The SIU was, in terms of Proclamation R.11 of 2018, authorised by president Cyril Ramaphosa to investigate allegations of corruption, malpractice and maladministration in Eskom’s affairs.

In a statement to ITWeb, SAP says: “SAP is aware of recent media reports outlining an amount payable, by SAP, to the Special Investigations Unit 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 [Department of Justice], SEC [Securities and Exchange Commission] and NPA [National Prosecuting Authority].”

In January, SAP agreed to pay a criminal fine of over $220 million (R4.1 billion) to the US, following investigations into corruption committed in seven countries, including South Africa.

According to the US Justice Department, SAP and its co-conspirators made bribe payments and provided other things of value intended for the benefit of South African and Indonesian foreign officials, delivering money in the form of cash payments, political contributions, and wire and other electronic transfers, along with luxury goods purchased during shopping trips.

Specifically, with respect to South Africa, between 2013 and 2017, SAP, through certain of its agents, engaged in a scheme to bribe South African officials and to falsify SAP’s books, records and accounts, all with the goal of obtaining improper advantages for SAP in connection with various contracts with South African departments, agencies and instrumentalities, including the City of Johannesburg, City of Tshwane, Department of Water and Sanitation, and Eskom.

In 2022, ITWeb reported that SAP was fined R263 million by the Special Tribunal, which was mandated to recover public funds syphoned from the fiscus through the software company’s corruption, fraud and illicit money flows in SA.

This, after the software licence and support agreement between the Department of Water and Sanitation (DWS) and SAP was declared constitutionally invalid and set aside.

Last year, the DWS fired a senior official following an internal investigation of the SAP contract.