SAP Faces U.S. Probe Into Work in South Africa

Investigation cites ‘misconduct’ with parties related to South Africa's Gupta family.

SAP said a probe into its South African business found misconduct in work related to the politically connected Gupta family and reported the matter to U.S. authorities.

While the German software company didn’t find evidence of payments to South African government officials or employees of state-owned companies Transnet SOC Ltd. and Eskom Holdings SOC Ltd., it “uncovered indications of misconduct,” the company said in a Thursday statement. As a result, it started disciplinary processes against three employees.

An investigation by the U.S. Department of Justice and the U.S. Securities and Exchange Commission is ongoing and the company will fully co-operate, SAP said. Its own probe was carried out by Baker & McKenzie.

SAP, along with auditors KPMG and consultant McKinsey & Co., has become entangled in allegations surrounding the Guptas, who are friends with President Jacob Zuma and have been in business with his son. They have been accused of using their connections to win lucrative state contracts and influence the appointment of ministers. They and Zuma deny wrongdoing.

“We cannot emphasize enough how seriously the SAP executive Board takes these allegations, or how committed we are to managing this process in a transparent, ethical and responsible way,” SAP executive board member Adaire Fox-Martin told reporters in Johannesburg.

SAP received revenue of about 660 million rand ($47 million) and paid commissions to Gupta-related entities, SAP said. It voluntarily disclosed the situation to U.S. authorities responsible for enforcing the U.S. Foreign Corrupt Practices Act.

South African Authorities

“We have reported misconduct to U.S. authorities, but we have not had any interaction with South African authorities,” Fox-Martin said. “We have not yet made a decision yet if we will approach South African authorities.”

SAP made changes to its business practice in light of the findings. The company will stop paying sales commissions on public sector deals in countries with a Corruption Perceptions Index below 50, it said. South Africa’s rating is 45.


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