Software firm SAP ordered to repay more than R413m after water dept contracts set aside

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SAP's contracts with the Department of Water and Sanitation have been set aside.
SAP's contracts with the Department of Water and Sanitation have been set aside.
SAP SE
  • Global software giant SAP had two software licence and support agreement contracts with the Department of Water and Sanitation.
  • The Special Tribunal declared the contracts unconstitutional and invalid. 
  • SAP has been ordered to pay more than R260 million within five court days. 

Two multimillion-rand software and support contracts between the Department of Water and Sanitation (DWS) and global giant SAP have been set aside.

On Tuesday, the Special Tribunal declared the contracts, which were signed in 2015 and 2016 respectively, "constitutionally invalid" and set them aside.

READ | 'We alerted SIU to R474m malfeasance' - technology group EOH

Judge Lebogang Modiba ordered the DWS not to use any of the software licences under the agreements.

She ordered SAP to pay the DWS R413 121 283.40 in respect of both contracts. 

She added that within five court days of the date of the order, SAP has to pay the department R263 million.

READ| South Africa tries to recover over R400m from SAP for 'unlawful' contracts

In September 2018, a proclamation was published for the Special Investigating Unit (SIU) to probe allegations that the purchase of the SAP licences for more than R500 million was not necessary and they were procured without the correct tender process being followed.

There were also allegations that R35 million in kickbacks were paid after the DWS procured the SAP service on 26 July 2016.

The SIU began work in September 2018 and immediately "uplifted" computers and documentation from the department.

The unit found that the contract value was approximately R950 million, excluding value-added tax (VAT), consisting of R450 million for the SAP licence fees, plus maintenance over five years. 

It also found that no needs analysis was conducted and that there was no budget for the purchase of the SAP licences.

There was also no "virement" or approval of the payments to SAP. 

The State Information Technology Agency (SITA) was not consulted and, in fact, SITA had advised the department against proceeding with the contract, News24 previously reported.

The SIU also found evidence that the 2015 agreement with SAP was irregular and ought to have been set aside. 

The unit said it made "disciplinary referrals" to the department against two senior officials.

"The SIU was informed that [a disciplinary hearing] against one senior official has been concluded and judgment is expected within this week, while the DWS is considering disciplinary action against the other official. The SIU has also referred evidence pointing towards criminality to the NPA (National Prosecuting Authority), AFU (Asset Forfeiture Unit) and SARS. The referrals are in line with the SIU Act 74 of 1996," it said in a statement on Wednesday."


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