A sum of R2 million which former president Nelson Mandela gave to Deputy President Jacob Zuma in October 2000 was used to pay the debts of Zuma and Schabir Shaik's Nkobi Holdings, the Durban High Court heard on Wednesday.

The State says Mandela's money was intended for the kwaZulu-Natal RDP Education Trust Fund.

The court also heard how money was later deposited into Mandela's account from an unknown source.

According to the findings of a forensic audit by Johan van der Walt of auditing firm KPMG, only R1 million rand was paid into the trust account for the benefit of the Jacob Zuma Education Trust and later transferred to an unknown beneficiary.

Shaik who was Zuma's financial adviser at the time then sent a fax to Absa Bank with instructions to transfer R900 000 from Zuma's cheque account to a one-month fixed deposit account.

This account was in the name of Floryn Investments, a Nkobi subsidiary.

van der Walt told the court it was evident the money was later used to "reduce overdrawn bank balances" of Nkobi subsidiaries.

The remaining R100 000 in Zuma's account was then used to pay his debts.

At that stage Zuma was in huge financial problems especially regarding his Nkandla traditional village project.

Not knowing that Shaik had used R900 000 from his account, he asked for a cheque of the same value to be handed to the Nkandla contractor.

Shaik who thought the project had been stopped after advising Zuma against continuing with it because he would be paying too much, told the bank not to go ahead with the payment.

R1 million was transferred from the RDP account to an unknown account on October 25, 2000, with the bank statement reading "settlement".

van der Walt said that on 5 January 2001, R1,4 million was transferred from one Mandela Nedbank account to another and that a further cheque deposit of US$300 000 was made into the same account.

"The source of these funds is not known," Van der Walt said.

He said the initial balance of R1,3 million was transferred out of that account on 26 April 2001.

Meanwhile Shaik's brother, Mo*, has questioned why the State used Mandela's name in court, saying it alluded to irregularities in Mandela's source of income.

He said it was "part of the particularly venomous nature of this case."

Spokesman for the National Prosecuting Authority Sipho Ngwema said the State wanted to show "how the money was eventually used".

He said funds from Mandela to Zuma were "not for personal purposes" but for the RDP project.

With acknowledgement to Sapa.

* It was Mo who said it.