* Public Protector investigating water ministry contract
* SAP admitted misconduct in separate South African deals
* German company investigating its government contracts
JOHANNESBURG, March 26 (Reuters) - South Africa's anti-corruption agency is investigating a 671 million rand ($60 million) government contract with German software firm SAP , which has admitted misconduct in separate deals involving friends of ousted president Jacob Zuma.
The Public Protector, an independent watchdog mandated by the constitution, said it had received an anonymous letter alleging due process was not followed in the award of a contract to SAP in 2016 to provide IT and support services to the Department of Water and Sanitation (DWS).
The investigation comes at a time the DWS is under growing pressure from opposition politicians who blame it for failing to avert a chronic drought in Cape Town and as parliament prepares to investigate mismanagement at the department.
Since replacing Zuma in February, President Cyril Ramaphosa has pledged to crack down on corruption after a string of scandals. Several investigations into government and private companies have since moved forward.
"The Public Protector is investigating the SAP licences," a spokesman for the agency, Oupa Segalwe, said. "The allegation is that SAP licences for both the department and water boards were purchased without following due process."
The Public Protector has carried out several influential investigations, including one in 2014 that was instrumental in making Zuma repay more than $600,000 of state-funded security upgrades to his private home.
In 2016, the watchdog revealed details about the undue influence Zuma's friends, the Guptas, had over the awarding of state tenders and the role played by global firms.
SAP declined to comment on the agency's inquiry or give details about the contract but said it was conducting a review of all its deals with the South African government back to 2010.
"SAP is aware of this contract which forms part of the broader ongoing SAP South Africa investigation," SAP spokesman Rajiv Sekhri said. "If we identify any matters of concern we will address and manage them vigorously and comprehensively."
The anonymous letter received by the anti-graft agency also alleged the contract was unnecessary because existing DWS licences with SAP covered the same services.
A DWS spokesman said the ministry was not aware of the Public Protector's investigation and denied any wrongdoing.
"No evidence of corruption exists as the procurement followed a full process," Sputnik Ratau said.
MINISTRY UNDER FIRE
The SAP contract has already been mentioned by lawmakers looking into mismanagement at the water department, as well as in an Auditor-General report last year that concluded the ministry had been guilty of wasteful and fruitless spending.
Mlungisi Johnson, chair of parliament's Portfolio Committee on Water and Sanitation, said lawmakers had asked DWS officials about the SAP contract but received contradictory information.
"We invited them to parliament and gave them an opportunity to explain themselves clearly. They didn't take it and now they will face an inquiry," Johnson told Reuters.
He said the committee would meet on Tuesday with the Auditor-General, Treasury and an investigative unit that reports to the presidency to finalise the scope of the parliamentary inquiry into DWS.
The DWS spokesman did not respond in detail to allegations of mismanagement although he said there were lessons to be learned from the drought in South Africa, which has been declared a national disaster.
The Auditor-General said DWS signed a deal with SAP to provide five years of IT products for 450 million rand and two years of support services for 221 million rand. The Auditor-General's report said it believed the cost was "high".
It said 285 million rand had already been paid to SAP.
The German company declined to comment on the Auditor-General's report or the parliamentary inquiry into the DWS.
SAP said this month an internal inquiry found it acted improperly by paying more than $9 million in commissions to companies controlled by the Gupta family to win contracts with state power firm Eskom and rail company Transnet.
However, the German company said there was no evidence of direct payments to South African government officials.
Three Gupta brothers are under investigation over accusations of corrupt links to Zuma. One of the brothers, Ajay, was declared a fugitive from justice hours before Zuma was forced out of office and has left South Africa. ($1 = 11.7353 rand) (Reporting by Alexander Winning and Joe Brock editing by David Clarke)