Hundreds of thousands of people in Giyani, Limpopo, and 55 surrounding villages have to go without water because multinational software giant SAP is in effect double-billing the water and sanitation department by hundreds of millions of rands.
The vanity project, signed by the department under its former minister Nomvula Mokonyane in 2016, saw the state buying R950m in “unlimited” SAP software licences for itself, all nine water boards and the Trans-Caledon Tunnel Authority (TCTA).
The R950m covered an upfront payment, annual renewal of licences and support and maintenance for the department, the water boards and the TCTA. The agreement was valid for five years.
But this week, the water boards and the TCTA said they were contracted to different software companies and were paying their own licences, maintenance and support fees. Some do use SAP.
Last year, the German software giant investigated allegations that the company had paid Gupta front companies about R130m to secure contracts at Transnet and Eskom.
Now, according to internal memos, emails and other documents City Press obtained, in June 2016 the chief financial officer of the department’s water trading entity, Mpho Mofokeng, argued against paying for SAP licences. This was contained in his letter to the water department’s former director-general, Margaret-Ann Diedricks, and infrastructure deputy director-general Zandile Mathe. The water trading entity manages water sales and rights.
In his letter, Mofokeng argued:
- The department had already acquired “unlimited” SAP licences for R178m in 2013 and didn’t need more;
- The water trading entity had not been consulted;
- Water boards had not been asked about the move even though they could be using different software packages;
- Money to pay for the SAP licences was simply not available; and
- The procurement of the licences had not been planned for.
Two senior executives in the department said this week that the R178m five-year licence deal would have lapsed this year. The department would have only needed to pay about the same amount to have them renewed for another five years.
This meant the department wasted R772m, the difference between R950m and R178m.
City Press reported last year that the department’s former legal adviser, Puseletso Loselo, and the State Information Technology Agency had warned the department not to sign the SAP contract.
The two executives in the department said Mokonyane and Mathe pressured Mofokeng to sign the contract.
Documents show that in October 2016, Mofokeng eventually signed the first invoice of R285m “on condition that budget availability concern is addressed and the recoverability of the licence fees from the water boards is initiated as soon as possible”.
Last year, City Press reported the department was broke, had racked up a R2.9bn overdraft and was unable to pay contractors working on a multibillion-rand project to provide water to Giyani and surrounding villages.
In a series of presentations to Parliament between October and last month, Auditor-General Kimi Makwetu singled out the SAP contract for having contributed to the department’s overdraft and irregular expenditure of over R700m.
Mofokeng refused to comment and referred all queries to the department.
This week, TCTA spokesperson Wanda Mkutshulwa said they use Oracle E-Business Suite and treasury system FTI Star, which they bought for about R30m in 2015 and 2016. The entity was aware of water and sanitation’s SAP licences. She said the department informed them of the opportunity to use SAP as an operating system, but they were already contracted to Oracle and FTI Star.
Rand Water’s Justice Mohale said they use a number of software systems, including SAP.
“Rand Water has had, and continues to have, a separate software licence agreement with SAP. Rand Water pays the annual software licence fees to SAP, as software manufacturer, in line with the existing software licence agreement.”
He said the department had informed the water board about the SAP arrangement. Rand Water wrote back asking for clarity about the implementation of the arrangement, but got no response. Subsequently, Rand Water did not participate in the department’s SAP arrangement.
Mhlathuze Water’s acting chief executive Mthokozisi Duze said he was not aware of the department’s deal with SAP. “We use different software,” he said.
A senior executive at Lepelle Northern Water in Polokwane said they use SAP and pay their own licence, maintenance and support fees.
A SAP spokesman said: “While SAP’s investigation into the Transnet and Eskom contracts is complete, our review of all other public sector contracts dating back to 2010 is ongoing and includes contracts with the department of water and sanitation.
“It is our intention and duty, not only to our employees, customers and partners, but also to the South African people, to get to the bottom of these matters, and we intend to keep that promise.
“We want South Africa to know that we are pursuing this process as quickly and thoroughly as possible.”
SAP welcomed the Public Protector and Special Investigation Unit’s investigations of the contract.
The department’s spokesperson, Sputnik Ratau, did not respond to questions sent on Thursday. They needed Mathe’s attention, but she was away on sick leave, he said.