State prosecutor Billy Downer made a slide presentation to the Durban High Court on Wednesday showing the link between Schabir Shaik and Deputy President Jacob Zuma.

Shaik faces two counts of corruption and one of fraud relating to alleged payments to Zuma in return for support for his business interests, and what the National Prosecuting Authority says was a bribe related to South Africa's multi-billion rand arms deal.

Downer said the State would prove that R1,2 million given to Zuma was written off falsely and that both Shaik and Zuma stood to gain by making the money disappear from the books of Shaik's company Nkobi Investments.

Downer said Nkobi Investments had suffered as a result of the money paid to Zuma. The company had daily cash flow problems and was not able to fund shareholder loans.

Its overdraft had worsened, and it had a negative effect on the solvency of the overall Nkobi group.

Downer said the State would prove that there had been manipulation of creditor payments, and late issuing of audited financial statements.

Earlier on Wednesday Shaik pleaded not guilty to all charges against him.

His advocate, Francois van Zyl, read a 35-page explanation plea which confirmed that he had made a string of payments to, and on behalf of, Deputy President Jacob Zuma and members of his family.*

However, he insisted the payments were loans and that Zuma had intended to repay the money *.

In the plea explanation, Shaik outlined his friendship with Zuma and explained how he had acted as a banker for the African National Congress when the organisation was still banned in the apartheid years.

"Over the years, a close friendship had developed between Zuma and myself as well as between our respective families, which endures to this day," it read.

After the 1994 elections Zuma was appointed economic affairs MEC for kwaZulu-Natal and in that capacity asked Shaik to act as an adviser to him without remuneration.

He said that in October 1995 Zuma's late wife Kate phoned to ask him to "help her" with R3 500 as she was unable to contact her husband.

"I arranged for the amount to be transferred to her account," Shaik said. Mrs Zuma made a similar request in March 1996 for R2 500.

"I do not recall whether I ever mentioned these incidents to Zuma," Shaik said.

At about the end of 1996 Zuma confided to him that he had serious financial problems and was considering leaving politics.

Shaik said that as a close friend he was prepared to do what he could to assist Zuma.

"I undertook to look into his affairs, to restructure his debt and/or to make arrangements with his creditors for the settlement thereof and to put his children on a bursary scheme in my group of companies. He was, however, insistent that he would only accept my assistance on the understanding that whatever funds I may spend on his behalf, will be repaid to me.

"I reluctantly agreed that such moneys as I may expend on his behalf would be regarded as loans to him, on the clear understanding that no interest will be payable thereon due to my religious beliefs."

Later, a formal acknowledgement of debt was drawn up at Zuma's insistence.

This was later superseded by a loan agreement for a revolving loan up to R2 million.

"Despite my protestations, Zuma insisted that an interest clause should be inserted. I told him I will donate any interest that I may receive to charity."

As the slides were being presented, Shaik leaned forward and watched intently, occasionally making notes, with his brothers sitting nearby.

With acknowledgements to Wendy Jasson Da Costa, Ben Maclennan and Sapa.

* But mysteriously, Nkobi's internal accountants listed the loans in their books as "irrecoverable", while their external auditors mistakenly wrote off ("made disappear") the amount of R1,2 million after threatening to qualify the annual audit financial statements.

These naughty CAs should be reported to PAAB and struck from the roll.