Durban - Businessman Schabir Shaik has acknowledged he bankrolled Deputy President Jacob Zuma, claiming that he did so to enable Zuma to stay in politics.

In an embarrassing insight into the deputy president's financial predicament, court papers yesterday suggested that Zuma's pre-2002 financial status was "parlous", with earnings topping R3,8m compared with expenses of more than R4,3m.

The deputy president's financial position meant creditors had come knocking on his door.

State prosecutor Billy Downer said the deputy president was facing sequestration, legal action, lawyers and bankers' letters, motor vehicle repossession, bouncing cheques and bond defaults.

Shaik, through advocate Francois van Zyl SC, was responding for the first time to two counts of corruption and one of fraud. He outlined in his plea a 20-year friendship with Zuma that later culminated in business dealings.

He pleaded not guilty to all the charges. Shaik acknowledged that he had baled Zuma out of financial difficulties when the politician was still the KwaZulu-Natal economic affairs and tourism MEC.

Their friendship was a backdrop to the anti-apartheid struggle, with Shaik becoming a go-between for his brother Mo Shaik, an African National Congress intelligence officer, and Zuma, who was in exile in Lusaka.

Shaik claimed Zuma had often offered financial support during these years and that his payments to Zuma from 1996 were either loans or extended in the same hand of friendship.

Shaik said that Zuma's financial position was so dire he was "considering leaving politics". The businessman compassionately undertook to restructure Zuma's debt, investigate his financial affairs and make provisions for Zuma's children's education.

"I was concerned that such a move on his part may adversely affect the relative peace (KwaZulu-Natal) was experiencing … as a close friend I was also prepared to do what I could to assist him."

Shaik acknowledged making almost all of the hundreds of payments to Zuma over a five year period that the state claims were part of a pattern of corruption in which Zuma was essentially "on retainer".

"I also have pointed out that during the period that Zuma was an MEC in KwaZulu-Natal, my companies tendered for a number of contracts in this province, including for his department," Shaik said.

"Apart from one contract for the department of housing, which fell under MEC Peter Miller, an Inkatha Freedom Party member of the legislature, we were unsuccessful with all our tenders."

According to Downer, the payments totalled R1249224,91. Furthermore, he said that these payments were separate from the R500000 annual bribes demanded of French arms company Thales, then called Thomson CFS.

In reply to the charge of corruption involving the R500000 annual bribe, Shaik said: "I specifically deny that any of the accused agreed or offered to give or gave anything to Zuma, with the intention to influence (him) to commit any act as alleged."

However, he acknowledged that Thales did make one payment of R250000. in February 2001. He went on to say the company "failed to make any further payments and terminated the agreement".

The state's case relies on an amount of money written off by Shaik and a host of companies within his network. In his submission, Shaik said that "during 2002 I was informed that part of the amount written off was incorrectly written off and that the entry in respect of this amount should be reversed as a fundamental error".

Of the R1,28m written off, the state alleges that R293451,16 was given to Zuma and expensed as "development costs".

Introducing some modern technology to an Edwardian court room, Downer used a PowerPoint presentation replete with cartoon characters and flow charts to illustrate the state's case.

One slide showed the total cash balances of Shaik's many companies over the period, which suggested the group was progressively cash negative. Downer claimed this was caused largely by the payments to Zuma. He claimed the state would prove Zuma still owes more the R1m for his Nkandla rural village in northern KwaZulu-Natal.

The state will argue that Zuma anticipated the settlement of this debt via the Thales bribe. The bribe would assist with future projects that Thales and Nkobi had in the pipeline. These included work on the Durban airport, an identity card contract, upgrades to the national road network, the third cellular telephone network and further military and government contracts.

With acknowledgements to Nicola Jenvey, Tim Cohen and the Business Day.