Durban : Businessman Schabir Shaik's payments to Deputy President Jacob Zuma were nothing less than bribery, and he used fabrications in the financial statements of the Nkobi group of companies to hide them, a former Nkobi employee told the Durban High Court yesterday.

Former Nkobi financial manager Celia Bester took the stand, giving the first insider's view of the way the Nkobi group's finances were handled.

Her testimony follows three weeks on the stand by KPMG forensic accountant Johan van der Walt, who testified that the R1,2m paid to and on behalf of Zuma effectively plunged Nkobi into the red.

Bester added considerable weight to this view, telling the court that she had been agitated and aggravated by the unethical treatment of the Zuma payments in the financial statements of the Nkobi group for the 1998-99 financial year.

She referred to a series of internal memorandums she wrote to Shaik, drawing his attention to the group's severe cashflow problems, and the fact that it was juggling its creditors and overdrafts while Shaik continued to insist on payments being made on behalf of Zuma. These included payments on a bond and a car.

The state alleges that Shaik funded Zuma's extravagant lifestyle in return for favours in the multibillion-rand arms deal, and committed fraud when the payments were written off as development costs for Prodiba, a company in which Nkobi Holdings had a significant stake.

Shaik has denied the charges.

Bester testified that the accounting and corporate governance irregularities at Nkobi were so severe that they contributed to her decision to resign at the end of 1999.

"Our overdraft was just going up and up and up," she said.

The state handed in as evidence an emotional letter Bester wrote to Shaik just before she left Nkobi in December 1999.

"I have been warning you about the cash flow since June, and I even resigned as I told you that I disagree with the management of the company and the way funds are spent. You show no interest in the (cash-flow) forecasts, and I am beginning to wonder if you understand them," Bester said in the letter.

Bester told the court how she kept asking Shaik how she should account for a R508000 debit balance on his director's loan account, since it was not acceptable for this account to be in the red when the company was deep in overdraft, but she had received no guidance.

Eventually the 1998-99 financial statements were signed off by Shaik and auditors David Strachan & Taylor, and "they were very different from my original set" *1.

The debit balance on Shaik's directors account as well as those for Nkobi companies Floryn Investments and Clegton had been written off as development costs for Prodiba against a credit created on the balance sheet in the form of a nondistributable reserve, Bester told the court.

This had the accounting effect of losing the debit balance, Bester said.

Prodiba's only costs were to pay staff members, and they were no set-up fees or prototypes.

The nature of Nkobi's investment in Prodiba meant that there were no development costs whatsoever, she said.

"Mr Shaik knew what my reaction would be, and that is why I think I never got to see the accounts," she said.

"A lot of payments were made to ministers that were not here (in the financial statements), and they were not development costs. In my mind I saw it purely as bribery."

To make matters worse, an additional R170000 was debited to Shaik's loan account when his R20000 monthly salary was reversed on the books in a move that had the effect of increasing Nkobi's income.

"It was just a fabrication a whole year later," Bester said.

With acknowledgements to Kevin O'Grady, Nicola Jenvey and the Business Day.