State capture costs software giant SAP nearly R3bn in South Africa

SAP’s restitution and repayments to SA show alternative dispute resolutions can help resolve state capture cases

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12/01/2024 04:35:33

Image: Shutterstock; SAP logo; compiled by OUTA  

State capture costs software giant SAP R2.2bn in South Africa

* This statement was updated on 18 January 2024

The Organisation Undoing Tax Abuse (OUTA) welcomes the resolution with restitution and reparation payments concluded by the National Prosecuting Authority (NPA) and the US authorities with international software giant SAP and its South African subsidiary, Systems Applications Products (SA), over SAP’s involvement in corruption.

“SAP’s conduct and direct involvement in corruption in South Africa was despicable and outrageous,” says Wayne Duvenage, OUTA CEO.

The alternative dispute resolution was announced by the NPA (see here) and the US Department of Justice (see here).

The corruption, between 2013 and 2017, with some negotiated through the Guptas, resulted in SAP contracts with the City of Johannesburg, the City of Tshwane, the Department of Water and Sanitation, Eskom, Transnet, SARS, Prasa and the Gauteng Department of Finance.

The US Department of Justice says SAP will pay over $220 million to resolve US investigations into corruption in South Africa and Indonesia, with “up to $55.1 million of the criminal penalty” going to South Africa towards the South African settlement. That $220 million is worth about R4.1 billion and the $55.1 million is worth about R1.03 billion at current exchange rates.

The NPA says SAP will end up paying R2.2 billion to South Africa: R1.489 billion in restitution, some already paid, and R750 million in punitive reparations. The punitive reparation payment goes into the government’s Criminal Assets Recovery Account. The NPA says this resolution “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”.

The resolution also requires SAP to cooperate with US and SA authorities in criminal investigations into the individuals involved in the corruption, including former SAP executives, the South African government body officials and the intermediaries.

“While the alternative dispute resolution process does help to bring these matters to a close and achieve some level of accountability, OUTA would like to see the individuals involved being held to account, including those who acted for SAP, the officials in the government bodies and the intermediaries,” says Duvenage.

“It’s all too easy for these wealthy companies to pay fines and change their processes to ensure this conduct is never repeated, but this doesn’t resolve the fact that the people who were directly involved are still walking the streets and enjoying the fruits of their ill-gotten gains. It is imperative that those involved are now rounded up, charged and imprisoned for their role in these nefarious activities.”

OUTA supports these alternative dispute resolutions as a speedier – and often more effective – means of achieving justice, particularly when they include a requirement that the company is obliged to cooperate with criminal prosecution of the individuals involved.

OUTA would like to see the R750 million which goes in the Criminal Asset Recovery Account being used to support the NPA in its efforts to prosecute state capture cases.

Addendum with further details from the NPA, 18 January 2024

SAP pays South Africa R2.239 billion under this settlement.

The restitution payments total R1.489 billion and are made up of: R500 million to Eskom; R344.784 million to the Department of Water and Sanitation; R214.350 million to Transnet; R200.316 million to the City of Johannesburg; R89.959 million to Prasa; R67.916 million to the City of Tshwane; R63.161 million to the Gauteng Department of Finance; and R8.605 million to SARS.

The punitive reparations payment is R750 million. 

The NPA says that the difference between the R750 million penalty paid in South Africa and the $55.1 million (R1.03 billion) credit referred to in the US statement is partly attributable to exchange rate fluctuations (the rand value of $55.1 million was calculated at a lower $/R exchange rate and came out at approximately R959 million) and because the terms of the settlement required SAP to disgorge the City of Joburg benefit (R200.316m) and SARS benefit (R8.605m) to the US Securities Exchange Commission (SEC).  So these two amounts were allowed to be credited against the US fine, over and above the R750 million penalty to the NPA.  That way, provision was made in the SA resolution for restitution to Joburg and SARS even though SAP had already disgorged the full amount of these benefits to the SEC in the US.

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