Strange circumstances allowed Zuma loan
Court evidence reveals the unusual circumstances that allowed President Jacob Zuma to get a R1 million home loan to finance the original construction of his controversial Nkandla compound.
On Sunday, City Press reported that there was no bond registered over Zuma’s property after the president told Parliament he was still paying off a bond on the “first phase” of his development.
The story was based on:
» Extensive searches of the Deeds Office database, which shows no bond was ever registered over portion 27 of reserve 19 of farm number 15 839 – the stand on which Zuma’s compound was built; and
» On-the-record interviews with Belinda Benson, the property manager for the Ingonyama Trust, which owns the tribal land on which Zuma’s compound was built.
City Press gave Zuma’s spokesperson Mac Maharaj two days to clarify or explain the president’s statement to Parliament – which he failed to do.
Only on Tuesday – four days after we asked Maharaj to clarify Zuma’s statement – did the Presidency confirm Zuma had a bond from “one of the national banks”.
Maharaj refused to provide further details of the bond or to explain why the bond does not appear to reflect in official deed records.
But evidence in the fraud and corruption trial of Zuma’s former financial advisor, Schabir Shaik contains extensive detail of a transaction with First National Bank (FNB), probed by Scorpions investigators who presented evidence of the corrupt relationship between Shaik and Zuma.
A further twist in the Nkandla saga came with a statement released by FNB today, which created more confusion about the exact nature of the president’s transaction.
While not specifically referring to Zuma’s loan because of client confidentiality, FNB’s CEO for home loans, Jan Kleynhans, said: “FNB does not grant mortgage loans to individual applicants for residential properties that are developed on tribal land, as the individual properties are not held under separate title.”
The volumes of court documents from the Shaik trial include, among others, Zuma’s finance application form, internal emails by FNB officials, certificates and other material relating to the Nkandla property.
The documents also put Vivian Reddy, the Durban construction and casino tycoon, at the heart of the deal – which he alluded to in a interview with The Mercury earlier in the week, but which he now says he is not prepared to say more on.
The unusual aspects of the Zuma loan, according to the evidence, include:
» Reddy’s bank account being provided as the account from which the monthly loan repayments were to be debited from (he paid Zuma’s monthly instalment of about R12 000 for at least two years);
» A hand-written note by a bank official questioning whether FNB could actually provide a bond on tribal land;
» The loan was secured a year after the buildings had already been built;
» The original loan application was for R650 000 but later increased to R900 000 – despite the bank’s valuation of the buildings only being worth R650 000;
» An additional R180 000 was later added to the loan amount for “contingencies”, and
» Two certificates of “permission to occupy” being granted to Zuma by the KwaZulu-Natal government – after he applied for finance and which were then ceded to the bank to secure the loan.
The bank loan using the “permission to occupy” as security, while not unprecedented, was unusual for a commercial bank.
In fact, the “permission to occupy” right was viewed as so problematic as security for bank financing that the right was scrapped in 2004 in favour of formal leases, which allowed applicants to more easily secure financing from financial institutions.
FNB’s Kleynhans, said: “Legally, people who currently live on land owned by a tribal authority have no claim to ownership of the land but only rights of occupation.”
He said “in principle” the bank granted “several types of loans” secured in various ways including “rights of cession and traditional mortgage loans”.
“Only on exceptional grounds does the bank grant such loans which are not secured by a traditional mortgage bond and where there is an adequate form of security on the loan. These loans are reviewed on a case by case basis and granted based on low risk and minimal exposure to the bank,” he said.
FNB was asked how many bonds it issued using “permission to occupy” certificates as security in KwaZulu-Natal but had not yet responded.
The Shaik documents include correspondence from a legal firm which reflects Reddy acting as Zuma’s “agent” and asking him to authorise FNB to pay R1.15 million to the builders who did the
Reddy stood surety for R400 000 of the bond – but he and Zuma later entered into an agreement indemnifying Reddy from any “loss or damage or claim” resulting from Zuma’s loan with FNB.
The State claimed further in the trial that payments from Shaik for Zuma were paid to Development Africa, a trust set up by Reddy, as a “scheme to disguise the payment of the money due to Zuma in terms of the agreement to bribe him”.
Reddy paid the instalments for Zuma’s loan through 2003 and into 2004.
Zuma did not declare this benefit in the public part of the 2004 register of interests.
Reddy could not be reached for comment yesterday.
The loan for Zuma was approved and increased to R900 000 – even before Zuma signed over his “permission to occupy” as security for the loan. The additional R180 000 was included later.
A transcript of an interview with the bank official who processed the loan application, Ingrid Havemann, recalled the meetings with Zuma and Reddy and how it initially seemed they wanted R1.4 million.
“Our evaluation eventually came back at R650, so maximum, we should, would normally have gone to is 100% on that, which was R650 and then, oh, there were so many changes to it, R850, but it eventually was R900 … but it was up to our credit department to decide what the final figure would be,” she was reflected saying.