A portion of the R2 million that former president Nelson Mandela donated to Jacob Zuma's RDP Education Trust was used to pull Schabir Shaik's Nkobi group out of debt, KPMG forensic director Johan van der Walt told the Durban High Court on Wednesday.

Van der Walt said that on October 2, 2000 Mandela endorsed to Zuma a cheque of R2 million so that R1 million could be paid to the RDP Education Trust and the remainder towards Development Africa. The back of the cheque was signed by Mandela and endorsed: "Pay the account of Zuma."

The paper trail that Van der Walt has followed shows that a day after Zuma paid R1 million into the trust, Shaik allegedly transferred R900 000 to Floryn Investments. The R900 000 was then transferred to the Nkobi group in a "series of transfers".

Van der Walt said the money was used by the Nkobi group to "reduce overdrawn bank balances by R718 131 and as an investment of R146 820".

The remaining R100 000 was used to pay Zuma's debts. Apparently Zuma was experiencing financial woes as a result of building his Nkandla homestead.

Evidence suggests that Zuma may not have been aware of the transfer, as two months later he wrote a R1 million cheque to Development Africa. A week later Shaik stopped the payment.

In his plea explanation, Shaik, who acted as Zuma's financial adviser, told the court that he knew of the R2 million donation but did not know what Development Africa was. Later, he learnt that it was money intended for "confidential ANC activities".

Shaik said he eventually learnt that the money was to fund the care and welfare of tribal leaders and the Zulu royal family.

Van der Walt said there was no evidence to suggest that Mandela knew the money was not used for its intended purpose.

He later indicated that the financial statements of the Nkobi group did not comply with Generally Accepted Accounting Practice. Van der Walt's team identified four main areas where Nkobi's annual financial statements were misrepresented:

Incorrect reflection of the sale of a workshare right amounting to R3,5 million for the financial year ending February 28, 1999;

Unjustified revaluation of the investment in Prodiba amounting to R3 million for that year;

Unjustified write-off of "development expenditure" amounting to R1 282 027,63. This so-called development expenditure is represented by loan account balances of Shaik and other group entities or related parties forming part of the Nkobi group; and

Unjustified revaluation of the investment in Prodiba amounting to R5 million for the financial year ended February 29, 2000.

According to the company's financial statements, the Nkobi group was technically insolvent as a result of payments for or on behalf of Zuma. Even the company's "daily cashflow analyses reflected instances of payments that were made or which were due in respect of and for Zuma".

While Shaik maintains he "loaned" money to Zuma as a friend, the state claims that the transactions were allegedly corrupt and fraudulent financial dealings, aimed at securing Zuma's influence in business dealings.

With acknowledgements to Nivashni Nair and The Natal Witness.