Durban - Schabir Shaik's lawyers yesterday produced a document in the Durban High Court outlining a revolving R2m loan agreement entered into between their client and Deputy President Jacob Zuma in 1999.

Defence counsel Francois van Zyl spent most of yesterday trying to prove that the R1,2m the state alleges was paid by Shaik to fund Zuma's expenses had, in fact, been part of a loan agreement between the two.

The state alleges the Durban businessman paid R1,2m to or on behalf of Zuma, as well as solicited a R500000 annual bribe for the deputy president from French arms company Thomson-CSF in exchange for protection during the investigation into arms irregularities and in future projects.

A key element of the state's case against Shaik is that his Zuma-linked payments were not loans, but rather constituted bribes in return for political and business favours for his Nkobi group of companies.

Van Zyl presented a copy of the loan agreement, faxed from Zuma's office on August 23 this year. It was dated May 16, 1999.

The original allegedly resides in the confidential registration section of members' interests in Parliament.

In term of the agreement, Zuma was expected to repay the loan in five years with an interest rate of prime plus 2%. The loan has already been extended.

Neither KPMG forensic auditor Johan van der Walt, who is currently undergoing cross-examination, nor state prosecutor Billy Downer had prior knowledge of the document.

Van der Walt's final report acknowledged Zuma prematurely cashed in a Southern Life policy, depositing R38563,16 into the bank account of Nkobi subsidiary Proconsult in 1997 and made two R10000 payments to Shaik in September 1998 and January 1999.

In the light of the loan agreement, Van Zyl asked whether Van der Walt still stood by his statement that the investigating team "could not find any evidence of the Nkobi group's or Shaik's attempts to recover debts to (from) Zuma".

Van der Walt conceded that "some amounts were repaid", but these were "limited" and not at regular intervals. "I did not find evidence in letters requesting payments or making arrangements for payments other than the open acknowledgement of debt."

However, the forensic auditor would not concede Van Zyl's point that Nkobi accountant Colin Isaacs had attempted to keep track of Shaik's payments for Zuma.

Isaacs submitted a three-page collation of the payments made during Van der Walt's investigation period, but this accounted for only R874000 against the R1,2m the investigators uncovered.

He accused Isaacs of "poor accounting practice", particularly given that the Nkobi books did not record the debt as an opening balance for the new financial year but rather as a journal entry during the period. Van der Walt has testified that Shaik laundered the R1,2m to Zuma by writing it off the Nkobi books as "development costs".

He said that even if Zuma repaid the money via the loan agreement, Nkobi could not recover the debt as it was written off.

With acknowledgements to Nicola Jenvey and the Business Day.