South Africa to Investigate Water Department Deals With SAP

(Bloomberg) -- South African President Cyril Ramaphosa called for a probe into whether the Department of Water & Sanitation acted fairly in awarding IT-services work to SAP SE, dragging the German company back into allegations of corruption at state-owned companies.

The investigation comes six months after Walldorf-based SAP said it paid 128.6 million rand ($8.4 million) to firms linked to South Africa’s Gupta family to win contracts with state companies. The Guptas are accused of using their friendship with former President Jacob Zuma to defraud government-owned entities, and are at the center of an ongoing hearing into so-called state capture, as the practice is known locally.

SAP is one of a number of international companies to have been caught up in graft accusations that plagued Zuma’s presidency. Bain & Co. became the latest earlier this week, when it started an internal probe into work done for South Africa’s tax agency. Other firms that have been embroiled in the allegations include McKinsey & Co. and KPMG LLP.

“The Special Investigating Unit will look into allegations that the procurement of information technology-related services from SAP had not been fair, competitive, transparent, equitable or cost-effective, and that legislation, guidelines or policies had been flouted,” the presidency said in an emailed statement on Thursday.

The water department contract is part of SAP’s own investigation into South African public-sector work dating back to 2010, the company said in an emailed response to questions. SAP is co-operating with South African authorities.

Ramaphosa has pledged to fight corruption since replacing Zuma in February. Bad governance and mismanagement of state companies have been highlighted by credit-rating agencies as a chief cause of concern as they consider whether to downgrade the country, which unexpectedly slipped into a recession in the second quarter.

The investigation into SAP will focus on the period since January 2015 to date.

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