Today the Mail & Guardian reveals crucial evidence in the case against President Jacob Zuma — evidence that was kept hidden when the National Prosecuting Authority (NPA) abandoned its prosecution of him.
The M&G is publishing the key findings of the confidential September 2006 forensic report that auditors KPMG prepared for Zuma’s trial. In the public interest we are also placing the entire document online.
The report exposes the president as a “kept politician” — a financial freeloader who accepted money and favours on a routine and increasingly extravagant basis not only from his so-called financial adviser, Schabir Shaik, but also from other benefactors, including Nelson Mandela.
Running to about 500 pages, the “draft” report — although it is understood to be the final version — is based on tens of thousands of documents Scorpions investigators had seized from Shaik, Zuma and others.
The report contains dramatic new disclosures including:
- Former president Mandela came to Zuma’s rescue with a R1-million cheque on June 23 2005. This was just nine days after then-president Thabo Mbeki fired Zuma as his deputy and three days after the NPA announced it would charge Zuma.
The Mandela transfer, which has never been reported before, suggests that the retired elder statesman intervened directly in the battle between Mbeki and Zuma to back the latter in his hour of need. Before this, Zuma was more than R400 000 overdrawn on his various bank accounts;
- Payments ordered by Shaik continued, and in fact accelerated, long after the M&G revealed in November 2002 that the Scorpions were investigating Zuma and long after Shaik was put on trial in 2004.
- Payment even continued for a short period after Shaik’s conviction in June 2005, until Shaik resigned as Zuma’s financial adviser the following month.
- Altogether 783 payments from Shaik or his Nkobi group for Zuma’s benefit were identified, amounting to R4 072 500 — well beyond the figure of about R1.25-million known at the time of Shaik’s trial. Zuma appears to have repaid less than R500 000 of this by the end of February 2006;
- KPMG asserts that Zuma benefited from benefactors other than Shaik and Mandela to the value of at least another R3-million. They included politically connected businessperson Jürgen Kögl; Zuma’s friend, Nelspruit businessperson Nora Fakude-Nkuna; Durban mogul Vivian Reddy;
- Zuma’s nephew Khulubuse Zuma, who provided cash that was used to partially repay Reddy; Zuma attorney Julie Mahomed; some unknown benefactors; and French defence company Thomson-CSF;
- It was Thomson (later renamed Thales) that promised a payment of R500 000 a year for Zuma’s benefit in the notorious “encrypted fax”, although only R250 000 is known to have been paid (See “Of battleships and Nkandla”);
- It appears that Zuma may also have benefited from another arms deal company, Ferrostaal, which won the submarine contract; and
- Large commercial banks bent over backwards to accommodate Zuma because of his political position and accommodated Shaik because of his association with Zuma. This was despite the fact that Zuma had a terrible credit profile and defaulted regularly (see “Banks bent over backwards for Zuma”).
The KPMG report was prepared on the Scorpions’ instructions ahead of Zuma’s high court appearance in Pietermaritzburg in September 2006.
Prosecutors had applied for a postponement to formulate a new charge sheet based on additional material seized during the August 2005 raids that followed Shaik’s conviction — including, for the first time, raids on Zuma’s home and office.
They also asked for time to deal with Zuma’s challenge to the legality of those raids. Judge Herbert Msimang refused the postponement and the case was struck from the roll without the report being tabled.
It remained hidden throughout the protracted legal battles that saw the NPA clear the path to prosecution and until April 7 2009 when the then acting national director of public prosecutions, Mokotedi Mpshe, buried it by deciding to abandon the case just days before the national election that propelled Zuma to the presidency.
Against the views of the prosecuting team, Mpshe ruled that Zuma’s rights to a fair trial had been poisoned by perceived meddling revealed in the so-called Zuma spy tapes.
Now the M&G’s disclosure of the wealth of evidence available to the prosecution deepens the controversy surrounding Mpshe’s decision. It also raises the stakes for the Democratic Alliance bid to have that decision reviewed.
Finally, it lays bare in excruciating detail the ongoing recklessness of Zuma’s financial relationships. Those relationships not only lay the basis for the current Nkandla scandal, but expose fundamental questions about Zuma’s fitness for office. For instance:
- Payments in cash to Zuma — as opposed to the settling of bills and debts — increased annually from R10 000 during 2002 to payments amounting to R181 800 during 2005. Cash payments during the first four months of 2006 amounted to a staggering R305 500.
- Zuma blithely incurred large debts — for cars, property, loans, building his Nkandla homestead — without bothering to consider where the money would come from. There were times when not even the first payment due cleared the bank owing to insufficient funds in his account.
In the words of the report: “The financial position of Zuma deteriorated over time, mainly as a result of the fact of the shortage in daily funding required to fund his lifestyle … Zuma’s cash requirements by far exceeded his ability to fund such requirements from his salary …
“The predicament that Zuma found himself in from the early years did not result in reduced spending on his part. Shaik, as the claimed ‘financial adviser’, also did not reduce it. In fact, Shaik funded the shortfall … Spending continued …”
Sometimes this infuriated Shaik, such as in October 2000 when he ordered that construction cease on Nkandla’s first phase. Builder Eric Malengret told the Shaik trial that Shaik had exclaimed: “Does he [Zuma] think money grows on trees?”
But Zuma simply countermanded Shaik and told Malengret to carry on.
The report revives the spectre of the “mutually beneficial symbiosis” — the term Judge Hilary Squires used when he convicted Shaik in 2005.
Whatever struggle bonds Shaik shared with Zuma, the former could not fund Zuma’s spending from his own resources.
The report finds Shaik was able to fund no more than 13% of the funds that were made available to Zuma. The balance had to be funded from the Nkobi group.
This placed Shaik’s cash-starved companies under immense pressure.
KPMG says: “The general decline in the net cash resources for the group has a direct correlation with the amounts that we identified as having been paid for and on behalf of Zuma … As the cash balances of the Nkobi group decreased, the payments made for and on behalf of Zuma increased.”<
In return, Shaik made blatant and repeated use of his connection with Zuma. Says KPMG: “It is evident that at least Shaik considered the association with Zuma and his wider political connectivity as a key driver to the success of the business activities of the Nkobi group …
“We could not find any evidence in the documentation at our disposal of Shaik being advised or requested by Zuma not to engage in such activities, despite numerous examples indicating his [Shaik’s] approach.”
Shaik is often presented as the arch-manipulator in the relationship, but the scale of the payments to Zuma and the extent of the pressure this outlay placed on Shaik and his companies emerges very clearly from the report, raising questions about who was really using whom.
Road to riches
- 1994 Zuma appointed KwaZulu-Natal economic affairs MEC.
- 1995 Schabir Shaik founds Nkobi group of companies and Zuma receives first payment – R3 500.
- 1997 Thabo Mbeki and Zuma elected president and deputy president of the ANC.
- 1999 Mbeki and Zuma inaugurated president and deputy president of South Africa.
Arms deal main contracts entered.
- 2000 French arms firm Thomson-CSF’s ‘encrypted fax’ records details of Shaik’s R500 000-a-year bribe request for Zuma.
Development of Zuma’s Nkandla estate starts.
R2-million cheque from Nelson Mandela deposited into Zuma account. R1-million paid on to Zuma education charity; R900 000 taken by Shaik, seemingly to recoup money paid to Zuma.
- 2001 Thompson-CSF pays R250 000 first tranche to a Nkobi group company.
R1.19-million paid via UK attorneys’ account to Jurgen Kögl company Cay Nominees. Cay Nominees pays R183 000 for a Zuma Mercedes and R600 000 to bond for Zuma Killarney flat.
Scorpions search Shaik and Thomson-CSF premises in Durban, France, Mauritius.
- 2002 FNB grants R900 000 bond to Zuma for Nkandla, with Vivian Reddy signing surety. Reddy services instalments totalling R274 000 by May 2005.
- 2003 Shaik charged with fraud and corruption, including for allegedly bribing Zuma.
- 2005 June 2 Shaik sentenced to 15 years imprisonment.
Jun 14 Mbeki fires Zuma as deputy president.
Jun 20 NPA announces it will charge Zuma.
Jun 23 Mandela R1-million cheque paid to Zuma.
Jul 1 Final Shaik/Nkobi group payment for Zuma’s benefit, for a total of R4 072 500 since 1995.
July 11 Shaik resigns as Zuma’s financial adviser.
Aug Scorpions search 22 premises linked to Zuma.
- 2006 KPMG report finalised. Zuma court case struck off the roll.
- 2007 Zuma takes ANC presidency at Polokwane. NPA recharges Zuma and co-accused.
- 2008 Judge rules Zuma recharging was unlawful.
- 2009 Appeals court overturns judge’s ruling, clearing way for trial.
Apr Charges against Zuma dropped based on contents of spy tapes.
May Zuma inaugurated as president of South Africa.
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The M&G Centre for Investigative Journalism, a non-profit initiative to develop investigative journalism in the public interest, produced this story. All views are ours. See www.amabhungane.co.za for all our stories, activities and sources of funding.