SAP agrees to pay back R81.5m to Department of Water Affairs and Sanitation

Special Tribunal Judge Lebogang Modiba confirmed the settlement agreement entered into between System Applications Products (SAP) and the Department of Water Affairs and Sanitation (DWS) on Thursday, 29 September 2022. The settlement was made by order of the court.

Prior to the agreement, the Special Tribunal also declared the software licence and support agreements concluded between the DWS and SAP unconstitutional and invalid and ordered that it be set aside.

The matter stems from an investigation by the Special Investigating Unit (SIU) which revealed that the DWS irregularly concluded software licence and support agreements on 22 December 2015 and 26 July 2016 with SAP, a multinational software company.

Papers before court indicated that neither agreements complied with the provisions of Section 217 of the Constitution, the Public Finance Management Act, Treasury regulations and the department’s supply chain management policies.

The SIU probe found that following the 2015 and 2016 agreements, the DWS paid an amount of R413,121,283.40 to SAP. The SIU’s investigation also revealed that the conclusion of the agreements emanated from an elaborate scheme devised by the employees of SAP, the erstwhile employees of the department and the sale commission partners, while they were fully aware that the 2012 agreement was in place and there was no need for the 2015 and 2016 agreements.

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SIU spokesperson Kaizer Kganyago in March this year confirmed that the Special Tribunal ordered that SAP repay DWS the amount of R413-million of the software licence contracts. The R413-million represents the total amount paid by DWS to SAP pursuant to the 2015 and 2016 software licence and support contracts.

However, also in March 2022, the parties agreed that SAP would pay an amount of R263,220,173 and the remainder of the amount that was in dispute — R81,502,073 — would be determined.

Special Tribunal spokesperson Selby Makgotho said initially the parties had settled the remaining dispute in respect of the R81.5-million on the basis that SAP will retain a credit note in this amount in the department’s favour. When the department desires to procure productions and services from SAP in the future, the cost of such products and services will be debited against the amount.

But during the case management meeting which preceded the order granted on Thursday, the Special Tribunal rejected the agreed terms on the basis that the agreement circumvents the procurement process.

The judge, Makgotho said, urged the parties to ensure that the settlement agreement is legally competent. It was on this basis that the settlement agreement was accepted and granted on Thursday.

“SAP has since agreed to pay the full outstanding amount R81,502,073.62 within five court days of the order to the department. Consequently, the agreement will be extinguished between the parties and matter will be finalised,” Makgotho said. DM