Africa: 'Guptagate' Hits Businesses Across Africa, China, India

Transparency International's latest report shows that the vast majority of African nations rank below 50 on its Corruption Perceptions Index. The report - for 2016 - says only Botswana, Cape Verde, Mauritius, Rwanda and Namibia score above 50 on a scale of one to 100.
27 October 2017

The corruption scandal engulfing South Africa's state-owned companies has triggered a ban by one of the world's leading software companies on the payment of commissions on contracts with government agencies in all but five African countries.

The ban was announced on Thursday by the German-based multinational, SAP, as part of the clean-up of its business practices arising from the payment of $7.7 million to a company associated with President Jacob Zuma's friends, the Gupta family of Johannesburg.

SAP said its board will "eliminate sales commissions on all public sector deals in countries with a Corruption Perceptions Index (according to Transparency International) below 50."

This rules out commissions on deals in all African countries other than Botswana, Cape Verde, Mauritius, Rwanda and Namibia. It would also stop commission payments in India and China. Apart from Mauritius and Namibia, SAP advertises that it has offices in Egypt, Kenya, Morocco, Nigeria and South Africa.

Last year, the U.S. Securities and Exchange Commission fined SAP $3.9 million arising out of its business practices in Panama. Reuters reported that the company failed to implement internal controls which would have prevented a bribery scheme by a former sales executive who secured deals with the country's government.

In July this year, reporters from South African journalism's leading investigative unit, amaBhungane (Zulu for "the dung beetles"), uncovered a "sales commission agreement" signed in 2015 between SAP in South Africa and CAD House, a small Gupta-associated company which sold 3D printers. The agreement provided that SAP would pay a 10 percent commission to CAD House on deals it secured with the massive state-owned company which operates South Africa's railways, ports and fuel pipelines.

AmaBhungane said SAP claimed CAD House had the requisite skills needed to promote its business but the reporters found no evidence that the Gupta company had any experience marketing or selling SAP software.

It emerged from SAP's announcement on Thursday that two days after the amaBhungane report appeared, the company "voluntarily disclosed the situation in its South Africa business" to the Securities and Exchange Commission and the U.S. Department of Justice (DoJ), which enforce the U.S. Foreign Corrupt Practices Act.

SAP said the U.S. agencies were still investigating the matter and that it "has committed to full and complete cooperation" with the investigations.

In an announcement made in Washington – also in July but in connection with a completely separate probe into bribery allegations against Nigeria's former Minister for Petroleum Resources, Diezani Alison-Madueke – the DoJ spelled out U.S. government policy in these terms:

"Corrupt foreign officials and business executives should make no mistake: if illicit funds are within the reach of the United States, we will seek to forfeit them and to return them to the victims from whom they were stolen."

SAP said in its Thursday announcement that its board is implementing "extensive additional controls and due diligence into relationships with sales agents and value-added resellers" across the world.

In Africa, it will allocate "additional legal compliance staff" to its operations and strengthen a "compliance committee ... consisting of local management, compliance and other corporate functions, to ensure individual deal sanity and integrity, and promote compliance generally."

In South Africa it has begun formal disciplinary proceedings against three suspended employees.

SAP said a law firm it has retained is probing its public sector business in South Africa since 2010. The firm has so far found that the company concluded four contracts "with the assistance of an entity currently understood to have been Gupta-related" – two with the state transport company, Transnet, and two with the electricity utility, Eskom – which is also mired in widespread allegations of corruption.

The four contracts had generated about $48 million in revenue and about $7.7 million in commission payments, including value-added tax, to "entities currently understood to be Gupta-related."

See What Everyone is Watching

More From: allAfrica

Don't Miss

AllAfrica publishes around 800 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.