SAP reports alleged misconduct in South Africa to US authorities

Fox-Martin says allegations of wrongdoing in the South African business have had a profound impact on SAP employees, customers and partners.

Business software giant SAP has reported alleged misconduct in its South African operation to US authorities responsible for enforcing the US Foreign Corrupt Practices Act and initiated disciplinary procedures against three of four suspended employees.

In addition, the business apps vendor has made significant changes to its global sales deal processes and decided to eliminate sales commissions on all public sector deals in countries with a Corruption Perceptions Index (according to Transparency International) below 50. South Africa's rating is 45.

"As a global company with a commitment to integrity and compliance, the past three months have been humbling for us," said Adaire Fox-Martin, member of the Executive Board of SAP SE, who leads SAP's business in Middle and Eastern Europe (MEE), Europe, Middle East, and Africa (EMEA), and Greater China. "The allegations of wrongdoing in our South African business have had a profound impact on our employees, customers and partners, and on the South African public - and we apologise wholeheartedly for this."

Fox-Martin said in a statement that SAP had initiated its voluntary disclosure on July 13, 2017, and that the company has committed to full and complete cooperation with the US Department of Justice (DOJ) and the US Securities and Exchange Commission (SEC). She confirmed that the investigation by the DOJ and SEC continues.

"We cannot emphasise 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," Fox-Martin said.

To date, the investigation has not revealed any evidence of a payment to a South African government official, including Transnet and Eskom employees. It has, however, uncovered indications of misconduct in issues relating to the management of Gupta-related third parties. To this end, SAP has instituted formal disciplinary proceedings, in accordance with South African labour law, against three employees who were placed on administrative leave at the beginning of the investigation. SAP has been clear from the outset that it will not tolerate misconduct or wrongdoing.

The investigation has found that the fourth employee placed on administrative leave had no material involvement with Gupta-related parties. The employee will return to work.

The SAP Executive Board has initiated - on a global basis - extensive additional controls and due diligence into relationships with sales agents and value-added resellers, including additional audit functions.

SAP said it will allocate additional legal compliance staff to the SAP Africa market unit. They will be based in South Africa and report into SAP's Global Compliance organisation.

SAP added that this will further strengthen its Compliance Committee in the SAP Africa region, consisting of local management, compliance and other corporate functions, to ensure individual deal sanity and integrity, and promote compliance generally.

In July, SAP promised to publish findings of the Baker McKenzie investigation once completed. Since the investigation is still ongoing, and in deference to ongoing investigations of the DOJ and the SEC, SAP cannot provide further details currently. It is SAP's intention to release complete findings at the end of the investigation.