The Schabir Shaik trial was an important court trial in post-apartheid South Africa. The case, tried in the Durban and Coast Local Division of the High Court before Judge Hilary Squires, established a fraudulent and corrupt relationship between Durban-based businessman Schabir Shaik and former South African leader Jacob Zuma.
Shaik's writing off of Zuma's significant personal loans in 1999 had raised suspicions about their financial activities. After Shaik's brother, Chippy Shaik, was suspended from the Department of Defence for his involvement in the 1999 Arms Deal, Schabir Shaik was arrested in 2001 for the possession of secret documents, after which investigators found that he was involved in corrupt dealings with Zuma as well as fraud. He was brought to trial in October 2004, pleading not guilty. After Shaik's petition of appeal to the Supreme Court of Appeal failed he started to serve his sentence of 15 years on 9 November 2006.
Shaik's trial was the subject of intense media attention due to the involvement of several high-profile members of the South African government. Though Shaik claimed that his financial dealings were legitimate, on 30 May 2005, the Durban High Court handed down its final judgment. He was pronounced guilty of corruption for paying Zuma 1.2 million Rand (US$185,000) to further their relationship and for soliciting a bribe from the French arms company Thomson-CSF, now Thales, as well as guilty of fraud for writing off more than R1 million (US$154,000) of Zuma's unpaid debts.
Judge Squires sentenced Shaik to two terms of 15 years for corruption and one term of 3 years for fraud, to be served concurrently. Following the decision, Zuma stepped down from his seat in Parliament, though he remained deputy president of the African National Congress at that time. Thabo Mbeki, the standing President, sacked Zuma as his deputy. Zuma was later elected as the president of the ANC.
Shaik then attempted an appeal at the Supreme Court of Appeal. However, all five judges under President Craig Howie unanimously rejected his appeal, and agreed the correct sentence had been given over a year prior.
Zuma's return from exile When apartheid ended, many former exiled African National Congress (ANC) leaders returned home to financially ruined lives, such as Jacob Zuma, one of the most important Zulu ANC members. Appointed MEC for Economic Affairs and Tourism in KwaZulu-Natal in May 1994 by the new ANC government, he thought that he needed much more than his salary from that position to make up for the time he spent fighting.
Schabir Shaik, a member of the wealthy and important Shaik family of Durban, proved to be important in reestablishing Zuma's life. They had a profitable and discreet business relationship, which was only visible in a few unusual and incomplete documents and contracts, most of which were undated, and some were signed in the wrong places. Almost every document dealt with interest-free loans with no specified date of repayment. In 1999, Shaik wrote all the loans off without any explanation.
Shaik, who was Zuma's financial advisor at the time, knew that Zuma could never afford to repay the sum of the loans on his salary. He also knew, since he had access to all of Zuma's financial records, about unpaid home loans, an overdraft of 66,500 Rand (US$10,200) in an account with Nedbank, one of South Africa's largest banks, another debt owed to Wesbank, and more money borrowed but not owed yet to Permanent Bank and Standard Bank. He knew that every month Zuma spent more money than his salary, and that he was writing bad cheques and failing to meet debit card payments. Shaik did not expect to be paid back, however, as he was buying influence with Zuma, which was used to win government contracts for his company, Nkobi Holdings.
Through a series of share transactions, Nkobi Holdings merged with the French company Thomson-CSF, one of the largest arms companies in the world. On 21 May 1996, Thomson Holdings, the name of the newly merged corporations and now a South African company, was established. The first joint ventures Thomson made bids for were not for arms: instead, they made bids for an upgrade to Durban International Airport, a new ID Card for South African citizens, expansions to the N3 and N4, a new mobile phone network, and new smart card technologies.
Arms deal Thomson Holdings, through its South African subsidiary, was seeking influence in government circles in this period, as the change from the National Party government to the ANC government had left it with few influential friends. To get an arms contract, it would need strong political backing. Fortunately for Shaik, his brother, Chippy, was in charge of arms acquisition at the Department of Defence. Chippy indicated that he would facilitate matters for Thomson Holdings if its 'position' regarding Chippy and his friends proved acceptable. Otherwise, he would make things difficult.
The international end of the company also invested in the arms deal by buying shares of African Defence Systems, a bidder for one of the lucrative contracts in the arms deal. This bid excluded Nkobi Holdings, which was a shareholder of Thomson-CSF in South Africa—to Shaik's great consternation. In June 1996, Shaik held a meeting to tell his directors that they must gear up to bid for the electronic defence system needed to guide and protect South Africa's newly acquired corvettes. Shaik said that he would use his political connections to facilitate the contracts and tenders, because at that point both Shaik and Zuma were confident that Zuma would be made Deputy President in the post-Mandela government. Zuma was given more loans to facilitate the deal for Shaik and to help Nkobi receive more government contracts.
The first newspaper article hinting at the relationship between Zuma and Shaik appeared at this time; however, it was insignificant. Published in the Cape Times, it was squeezed in between a report about a gangster gunned down in Cape Town and a car accident that claimed the lives of three people. Later, this article was considered the first mention of the case, although in January 1997 it was a brief news story:
'The police are investigating the circumstances surrounding the theft of classified military documents during an armed robbery at the home of Shamin 'Chippy' Shaik, which were in his car. The suspects were reported to have fled with Shaik's wallet, watch, and briefcase, which contained the documents. Shaik was not injured. Nobody was arrested.'
Meanwhile, Shaik and Zuma wanted to establish a new venture, Nkobi Bank, to act as financial advisor to a bidding consortium on any large-scale public- or private-sector project. The bank would also compete for government and various ministry budgets as a deposit taker. Zuma was appointed as Deputy President in June 1999, and he began consolidating his assets, influence, and bank accounts.
He started by developing his traditional residential village estate at Nkandla in Zululand in the rural northern part of KwaZulu-Natal. A contractor estimated the construction on the estate at R2.4 million (US$370,000), excluding VAT. Zuma negotiated with the contractor, and the final price was reduced to R1.3 million (US$200,000). Zuma was promised that construction would take six months, but it took nine. The money for the construction was not paid by Zuma himself; instead it was paid in installments by Bohlabela Wheels, Fakude PZN, and some in cash by Durban businessman Vivien Reddy, both in person by him and on one of his company's cheques.
Nkandla development and selling influence To finance the continued construction on his estate, Zuma took out a bond, which "Reddy signed as … guarantor for R400,000 [US$60,000]." To continue his influence on Zuma, Reddy also paid the instalments on the bond, which came to nearly R12,000 (US$1,800) a month. Despite the regular monetary inflow, Zuma's financial troubles continued due to unforeseen costs in the Nkandla development. Zuma decided, therefore, to sell his political influence. Alan Thétard, then one of Thomson-CSF's directors, met with Schabir Shaik in Durban on 30 September 1999, during the course of which it was agreed that Thétard would give Shaik money to cover Zuma's debts in exchange for Zuma's protection from the commission investigating the arms deal, and ongoing support for any future Thomson-CSF deals with the South African government.
During subsequent negotiations over the latter part of 1999, Shaik and Thétard agreed to a bribe amount of R1 million (US$154,000), and at a meeting in March 2000, Thétard, Shaik, and Zuma finalised the exchange. At this point, Zuma was in desperate need for money as the bribe was going to cover the continued construction of his Nkandla development, yet Thétard has not transferred any money to Shaik thus far. Shaik demanded an immediate response to this "extremely delicate matter" from Thétard, but Thétard failed to respond and by 19 October, Shaik in his role as Zuma's financial advisor, attempted to stop all construction on Nkandla, prompting Zuma to tell his contractors to ignore Shaik's orders. Zuma wrote a cheque for R1 million to his contractors, the payment of which was stopped by Shaik.
By late 2000, Shaik knew that the South African Revenue Service (SARS) and the Scorpions would be watching all financial transactions made between him and Zuma, so the international division of Thomson-CSF sent an encrypted fax to Nkobi Holdings detailing a "service provider agreement" which updated the contract signed between Nkobi Holdings and Thomson-CSF for the delivery of the Corvettes. This agreement was used to disguise the payment of the bribe. The fax, which was later obtained in a raid on Shaik's office by the Scorpions, contained a non-bribery clause next to which Shaik wrote "conflicts with intention", yet despite the careful set-up, Thomson-CSF did not transfer any money to Shaik. Subsequently, Zuma went to meet with Thétard in Paris, following which R250,000 (US$38,000) was transferred by Thomson-CSF to the "Jacob Zuma Education Fund".
As the year progressed, the relationship between Shaik and Zuma had attracted more attention, and by October 2000, South Africa's leading corruption prosecutor, Judge Willem Heath, formally asked President Thabo Mbeki for a proclamation allowing him to investigate the arms deal. Zuma immediately attacked the petition by writing a letter to Gavin Woods, the chairperson of the Parliamentary Standing Committee on Public Accounts (Scopa). This letter, written in Zuma's capacity as "Leader of Government Business" in Parliament states that:
Trial
Schabir Shaik's trial started amid intense media circus in the Durban High Court. Shaik pleaded not guilty to charges of corruption and fraud on 10 October 2004. He asserted in his plea explanation that the State had misunderstood his dealings with Zuma. He agreed that there was a financial relationship between Zuma and him, but that it was not a corrupt one as the payments he made to Zuma were loans made in friendship. He did not ask for any interest in the loans because it "offended his religious convictions". The loans had been made on a revolving credit agreement. He also denied allegations of fraud, saying money was mistakenly written off in his company's books, but that this was later fixed. To allegations that he was involved in soliciting a bribe for Zuma, he replied that he knew nothing.
In lead prosecutor Billy Downer's opening address, he said his case would be based on facts and patterns and that "we will principally be talking of the arms deal." The first charge against Shaik was one of general corruption. In their efforts to prove this charge, the State led a number of witnesses to show, as explained by Downer, that Zuma was "on retainer for Shaik."
First charge: Corruption