Durban - Deputy president Jacob Zuma still owes more than R1m for costs incurred in the construction of his Nkandla traditional village in KwaZulu-Natal, Durban High Court heard on Wednesday.

Prosecutor Billy Downer told the Shaik corruption trial that Zuma owed at least R900 000 on the bond and R250 000 to the builder.

In addition he owed other amounts for loans he secured to fund the development.

Downer said evidence would be that "very, very recently" there had been some repayment of the R250 000.

He said the State would prove the source of the funding Zuma expected for Nkandla was a bribe from French arms company Thomson CSF.

The purpose of the R500 000 a year bribe was for protection against a probe into irregularities in the arms deal.

It also was for support for future projects involving the arms company and Shaik's Nkobi group of companies.

These envisaged projects included military deals, government contracts and the third cellular network.

Shaik faces two charges of corruption and one of fraud relating to alleged payments to Zuma.

Downer said the State would prove that R1.2m given to Zuma was written off falsely and that both Shaik, Zuma's financial adviser, 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 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 Shaik had made a string of payments to, and on behalf of, 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.

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 help Zuma.

"I reluctantly agreed that such moneys as I may expend on his behalf would be regarded as loans...."

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

With acknowledgements to Iaine Harper, Sapa and News24.