Publication: The Star Issued: Date: 2004-10-26 Reporter: Estelle Ellis

Shaik Trial : Letters Reveal Sinister Threat



The Star

Date 2004-10-26


Estelle Ellis

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From references to a "challenging game of golf" to a note that Schabir Shaik "definitely seems to have the sulks", the correspondence detailing the business dealings of Nkobi Holdings between 1995 and 2002 have very few dull moments.

There are threats to have a director of a French arms company removed from the country and demands for a gift in exchange for political connectivity.

But at this stage, as forensic auditor Johan van der Walt is still giving evidence-in-chief, there is only silence from Shaik's side. His advocate, Francois van Zyl SC, has indicated there will be a dispute as to whether the Scorpions had the right to seize some of the documents placed before court.

One of the most tumultuous chapters, however, started in 1996, when the South African government entered into negotiations with arms dealers to upgrade the country's military equipment. One of the programmes for which they invited tenders was for the country's corvettes. The total cost of the programme was R6-billion.

The corvette bid was won by the German Frigate Consortium. One of the partners in this consortium was the French arms group Thomson. And one of the shareholders in the South African subsidiary of the Thomson-group was Nkobi Holdings, headed by Shaik.

By his own admission, Deputy President Jacob Zuma, then the KwaZulu Natal MEC for tourism and economic affairs, was one of his best friends.

Soon after the post-1994 government came to power, it became very clear to international companies bidding for government contracts that their chances would improve vastly if they had a black economic empowerment (BEE) partner.

To place itself in a better position to bid for the arms deal, Thomson then decided to buy African Defence Systems (ADS). In September 1997 it managed to buy 50 percent of the shares in ADS. But because it decided to invest in ADS directly and not through its South African company, it managed to exclude the Nkobi group.

This, according to the forensic report compiled by Van der Walt, made the chairperson of the Nkobi group very angry. It is stated in the report that he said he was both surprised and dissatisfied by this and accused the French company of prejudicing its shareholders.

After months of negotiations, which took Van der Walt several pages and about two hours to explain, it was eventually agreed that Nkobi could have 20 percent of Thomson's shares in ADS.

By July 1998 it seemed that the BEE problem in ADS had still not been solved. By now, another BEE company, Futuristic Business Solutions (FBS), had a direct shareholding in ADS of 20 percent.

It was around this time that the South African director of Thomson, Pierre Moynot, ended one of his letters to Paris with a note that Shaik "definitely seems to have the sulks".

On November 18, 1998, there was a meeting at Nkobi with Thomson. It was the same day that the cabinet took its final decision about the preferred arms dealers. "JZ" (his name was changed to Minister JZ in the typed minutes of this meeting) was also there.

The BEE matter was eventually sorted out and, through a complex and involved financing scheme, paid for and settled. By the end of it, FBS held 20% of ADS directly.

Nkobi, according to Shaik, preferred to hold its shares indirectly because "political relationships made the strategy necessary to avoid speculation", Van der Walt's report stated. Then ADS won the lucrative combat-suite contract, worth more than R1-billion.

According to the report, by April 2000, Shaik demanded to become a direct shareholder in ADS. According to documentation found by the Scorpions, Shaik "threatened to withdraw from the local Thomson companies if his demands were not met".

"This never materialised," Van der Walt said.

Shaik reminded Thomson that they would not have known about ADS or the South African arms industry were it not for him. It was, after all, Shaik who in 1996 had first made contact with Peter Watt of Altron, in whose group of companies ADS then was.

According to a letter before court, Shaik thanked him for a meeting that was held "on common grounds" and for a "challenging game of golf". He also said decisions were made on a political rather than a business level.

Around this time, Nkobi proposed that the name of Thomson-CSF be changed to Thomson-CSF Kobi Holdings. This did not happen.

According to the report before court, Shaik said next that he was unhappy with the fact that the dividends paid by ADS would not allow him to repay the loan the Thomson group had made to his company (during the complex share-selling agreement) without paying out some cash.

He requested that Thomson should make a gift to him of the shares that he already held in exchange for his political support in order to grow the business, or consider a postponed repayment of the loan.

At the same meeting, Shaik said it was unacceptable that FBS had obtained R12-million in contracts, and he had nothing. Shaik felt he had been treated like a pawn and made threats about the repercussions his treatment would have on ADS.

Shaik threatened to leave the country and said he would do everything in his power to get Moynot out of the country, using "whatever means were at his disposal".

One of Moynot's colleagues wrote a note that, even though he did not know what power Shaik had, it was better to be careful.

"You cannot continue believing that this situation would go unnoticed by the other shareholder," he said in a letter to Thomson.

"It appears that all we are good for in Thomson-CSF is to hand out money for donations. All Thomson needs is for a Black Empowerment partner to land the deal through its connectivity, thereafter we are required to step aside and be at the mercy of Thomson's poor management of the deal," a letter before court, written by Shaik in March 2000, stated.

With acknowledgements to Estelle Ellis and The Star.