Soccer team in a huddle

SAP Provides Update on Ongoing Investigation into Its South Africa Business

Press Release | October 26, 2017 by SAP News

WALLDORF SAP SE (NYSE: SAP) has voluntarily disclosed the situation in its South Africa business to U.S. authorities responsible for enforcing the U.S. Foreign Corrupt Practices Act.

It has initiated disciplinary procedures against three employees and made significant changes to its global sales deal processes.


  • Discloses situation in its South Africa business to U.S. authorities
  • Initiates disciplinary procedures against three employees
  • Removes commission on public sector deals in higher-risk countries, including South Africa

“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, the 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 apologize wholeheartedly for this.”

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

“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,” Fox-Martin said.

Disciplinary Measures

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 labor 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.

Process Changes

The SAP Executive Board has decided to eliminate sales commissions on all public sector deals in countries with a Corruption Perceptions Index (according to Transparency International) below 50, effective immediately. South Africa’s rating is 45.

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 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 organization.

SAP 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.

APPENDIX (Status of the Baker McKenzie Investigation)

Baker McKenzie initially focused its investigation on SAP’s contracts with Transnet and Eskom, and this part of the investigation will conclude by the end of 2017. Following a data analytics search of 8.4 million documents, the law firm has completed a first-level review of 131,609 documents, and a second level review of 52,985 documents. Baker McKenzie has conducted numerous interviews. SAP has also invoked its third-party audit rights with entities understood to be Gupta-related – and these audits are in the early stages.

Baker McKenzie has been contracted by SAP to continue to investigate the public-sector business in South Africa going back to 2010. To date the investigation has determined that, between December 2014 and November 2016, SAP concluded two contracts for the sale of software to Transnet and two contracts for the sale of software to Eskom, each with the assistance of an entity currently understood to have been Gupta-related.

In connection with these four contracts, SAP provided software and received revenue totaling approximately ZAR 660 million (approximately USD 48 million), and paid commissions to entities currently understood to be Gupta-related totaling approximately ZAR 94 million (approximately USD 6.8 million). The amounts actually paid to the third parties totaled approximately ZAR 107 million (approximately USD 7.7 million) because, by contract, each commission payment included an amount of VAT for taxes due on the receipt of the funds.

In December 2016 and June 2017, SAP concluded two additional contracts to provide software and services to Eskom with the assistance of an entity currently understood to have been Gupta-related. No revenue has been received or commissions paid in connection therewith.

After SAP’s initial voluntary disclosure, Baker McKenzie has spoken on SAP’s behalf with prosecutors at both the DOJ and SEC, and has started the process of sharing documents and information.

For more information, visit the SAP News Center. Follow SAP on Twitter at @sapnews.

About SAP

As market leader in enterprise application software, SAP (NYSE: SAP) helps companies of all sizes and industries run better. From back office to boardroom, warehouse to storefront, desktop to mobile device – SAP empowers people and organizations to work together more efficiently and use business insight more effectively to stay ahead of the competition. SAP applications and services enable more than 365,000 business and public sector customers to operate profitably, adapt continuously, and grow sustainably. For more information, visit www.sap.com.

Note to editors:
To preview and download broadcast-standard stock footage and press photos digitally, please visit www.sap.com/photos. On this platform, you can find high resolution material for your media channels. To view video stories on diverse topics, visit www.sap-tv.com. From this site, you can embed videos into your own Web pages, share video via email links, and subscribe to RSS feeds from SAP TV.

For customers interested in learning more about SAP products:
Global Customer Center: +49 180 534-34-24
United States Only: 1 (800) 872-1SAP (1-800-872-1727)

For more information, press only:
Nicola Leske, +49 (6227) 750852, nicola.leske@sap.com, CET
Rajiv Sekhri, +49 (6227) 774871, rajiv.sekhri@sap.com, CET
Ansophie Strydom, +27 (11) 2356070, a.strydom@sap.com, CET
SAP News Center press room; press@sap.com

Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “predict,” “should” and “will” and similar expressions as they relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP’s future financial results are discussed more fully in SAP’s filings with the U.S. Securities and Exchange Commission (“SEC”), including SAP’s most recent Annual Report on Form 20-F filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates.
© 2017 SAP SE. All rights reserved.
SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE in Germany and other countries. Please see http://www.sap.com/corporate-en/legal/copyright/index.epx#trademark for additional trademark information and notices.

Tags: ,

Leave a Reply