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SAP tightens up global channel commissions amidst 'kickback' scandal

SAP is tightening up its channel commissions regime globally as part of the fall-out from the alleged kickback scandal around government contracts in South Africa.

SAP said it would 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, but other countries below this rating include Brazil, China, India, Russia, Mexico and Italy.

In addition, “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,” said the business software vendor.

In July, South African media reported that SAP paid alleged kickbacks in the form of sales commissions to a firm "linked" to the politically connected Gupta family, who are known to be close friends of South African president Jacob Zuma. SAP has also admitted it is now the subject of an investigation by US authorities responsible for enforcing the US Foreign Corrupt Practices Act as a result of the alleged South African corruption, involving the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). SAP has so far initiated disciplinary procedures against three employees in South Africa linked to the scandal there.

“As a global company with a commitment to integrity and compliance, the past three months have been humbling for us,” said Adaire Fox-Martin, a member of the SAP executive board, and who leads SAP’s business in Middle and Eastern Europe (MEE), 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 - we apologise wholeheartedly for this.”

To date, the SAP investigation has not revealed any evidence of a payment to a South African government official in connection with the sale of software to Transnet or Eskom, the two public sector organisations implicated. 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 against the three.

So far, SAP has declared it provided software to Transnet and Eskom worth around $48m, and paid commissions to entities “currently understood to be Gupta-related” totalling about $7.7m.