Durban - Businessman Schabir Shaik was adamant that R1.2 million in loans written off as "development costs" in his company's books were expenses he incurred "to land contracts".

This was the evidence given yesterday by Ahmed Paruk, a chartered accountant and partner in the auditing firm David Strachan & Taylor.

Shaik has pleaded not guilty in the high court here to charges of corruption and fraud.

Paruk's evidence dealt with the fraud charge.

The state alleges Shaik is criminally responsible for the write-off of R1.2m in loans in his company's annual financial statements for 1999.

These allegedly included money paid to Deputy President Jacob Zuma. They also included the loan accounts of Floryn Investments, a company Shaik has said was a vehicle for paying donations to the ANC, and Clegton Investments, through which payments for a flat occupied by Zuma were made.

Paruk said he was a chartered accountant and became a partner in the auditing firm David Strachan & Taylor in 1999. He oversaw auditing of Nkobi's books for the 1999 financial year.

Paruk said he was alerted to the loan accounts Shaik, Floryn Investments and Clegton Investments had with Nkobi. His main concern was whether the debts could be recovered.

The court also heard from the assistant general manager of Armscor, Dawie Griesel, on the procedures followed during the 1997/1998 arms deal.

Griesel said there had been no procedure in place for "acquisitions of that nature". Shaik's brother Chippy, then defence force chief of acquisitions, had made the procedure up as they went along.

"Chippy Shaik decided what the next step would be. He was driving the process."

While being cross-examined, Griesel was shown a letter saying Chippy Shaik had withdrawn from deliberations because of his "family connections" to African Defence Systems. Griesel said Shaik had not recused himself.

With acknowledgements to Estelle Ellis and the Cape Times.