'Friendship at all costs' led to crisis

Schabir Shaik and his companies were "stretched to their limits" financially with an overdraft of more than R500 000 in August 1999.

His financial manager was pleading with him to cut costs, to look at legal fees, cars, travel and salaries and to "watch expenses for the ANC".

And yet, according to forensic auditor Johan van der Walt, Shaik and his companies were still making payments to and on behalf of Deputy President Jacob Zuma.

In August that year, these payments amounted to more than R600 000, van der Walt told Durban High Court judge Hilary Squires yesterday.

In total, the state claims, Shaik paid Zuma R1.2 million in what the state says was a generally corrupt relationship between them.

Shaik is also accused of securing a bribe for the senior politician from arms bidder Thomson-CSF and is charged with fraud relating to the writing off of R1,2 million in his books - part of which was used to make payments to Zuma.

Dealing with the cash flows of Shaik's Nkobi group of companies through "factual information" from bankers Absa, van der Walt said the companies had been in overdraft between 1999 and 2001.

"The general decline in the net cash resources has a direct correlation with the amounts we identified as having been paid for and on behalf of Zuma.

"The payments had a fundamental effect on the business. As the cash balances decreased so the payments increased.

"If it were not for these payments - or if Zuma had repaid them - then the group would have remained cash-positive.

"The group did not have sufficient funds to provide these loans without the overdrafts and they endangered the very existence of the businesses," the auditor said.

Dealing with documents which he said were internal memoranda and correspondence with the bank, Van der Walt said:

In March 1999, Nkobi's overdraft was more than R352 000.

At that time, it had made payments to Zuma of almost R485 000.

In May that year, after negotiations with the bank, the overdraft limit was increased from R275 000 to R450 000.

The actual overdraft was just more than R384 000. The cumulative payments to Zuma by then were R528 000.

In June that year, group financial manager Marcia Muiznieks reported to Shaik that the group had a "cashflow crisis".

It owed R776 000 to the taxman and R676 000 to sundry creditors.

It only had R323 785 available in overdraft. And yet the payments to Zuma had reached a cumulative R534 000.

In August, when the company was facing an overdraft of R441 000 and was "stretched to its limits", Muiznieks had written again to Shaik, imploring him to cut costs.

By then the payments to Zuma amounted to more than R600 000.

Van der Walt will give evidence this morning that by May 2001 the company had an overdraft of more than R1 million - which was well over the authorised limit of R750 000 at that time.

Absa instructed Nkobi to "rectify the position within seven days" and also instructed that no further cheques be issued.

By this time Zuma had been paid more than R1 million.

Shaik has admitted to making most of these payments but has claimed that they were made out of friendship with Zuma and as "contributions" to the ANC.

van der Walt is winding up his 250-page report and, later today, is expected to put into evidence details of the payments made to Zuma.

With acknowledgements to Tania Broughton and the Daily News.