The Department of Transport has sought legal advice on whether its contract with one of convicted fraudster Schabir Shaik's companies should be cancelled.

An announcement is expected next week on the contract Prodiba has had since 1998 to manufacture the credit-card format driver's licences, the SABC reports.

Although Shaik has resigned as director of his Nkobi group of companies, one of the subsidiaries in which he continues to have an interest holds shares in Prodiba.

Under the Public Finance Management Act, government departments may not do business with convicted criminals.

Transport Director-General Mpumi Mpofu told parliament's Standing Committee on Public Accounts (Scopa): "We (have) been doing a … lot of work with respect to this matter, particularly the state law advisers, on how we proceed ... and we have firm opinion on how we should do that."

Asked by Scopa chairman Themba Godi what course of action was likely to be taken, Mpofu said: "We will be acting on that legal advice and this committee will be duly informed … I can't say more than that."

Prodiba stands to lose a large sum of money.

It was paid R260 million for the first phase of the contract.

A decision on Shaik's staying in St Augustine's Hospital, Durban, is also expected soon.

The Department of Correctional Services is studying a medical report from an independent specialist. If Shaik is found to be fit, he could go back to jail.

His medical aid is to decide tomorrow whether to pay his hospital bill.

With acknowledgements to Sapa and Cape Times.