Schabir Shaik and Others v The State

The three appellants (Schabir Shaik and two companies, Nkobi Holdings and Nkobi Investments) were convicted of corruption in June 2005 for making corrupt payments to Jacob Zuma between October 1995 and September 2002. During this period, Zuma held senior public office, including as Deputy President. The payments were made to influence Zuma to use his name and political influence for the benefit of Shaik's business enterprises. Following the convictions, the state obtained a restraint order and then applied for a confiscation order under section 18 of the Prevention of Organised Crime Act (POCA). The state sought to confiscate three benefits: (1) Nkobi Investments' 25% shareholding in Thint (Pty) Ltd valued at over R21 million, (2) accumulated dividends from that shareholding (over R12 million), and (3) proceeds from the sale of 10% of the shares (R499,568). Nkobi Investments had purchased the Thint shares with a loan from a Mauritian company, which was secured by pledging the shares and dividends, and the loan was repaid using the dividends. The High Court granted a confiscation order for all three benefits. The Supreme Court of Appeal upheld the order except for the third benefit. The Constitutional Court granted leave to appeal only on the confiscation order.

• Whether the shareholding and dividends constituted 'proceeds of unlawful activities' within the meaning of section 18(1) of POCA
• Whether POCA permits confiscation of both the shareholding and the dividends (the 'double counting' or 'gross versus nett proceeds' argument)
• Whether the benefits arose from a pre-existing joint venture agreement rather than from the corrupt payments
• Whether the state must prove that Zuma intervened because of the bribes and that Thomson-CSF changed course because of Zuma's intervention
• What is the proper approach on appeal to the exercise of discretion by a trial court under section 18 of POCA
• Whether the confiscation order was disproportionate or disturbingly inappropriate

The appeal was dismissed. The confiscation order made by the High Court (as modified by the Supreme Court of Appeal regarding the third benefit) was upheld. No order as to costs was made.

Under section 18 of the Prevention of Organised Crime Act 121 of 1998, 'proceeds of unlawful activities' is defined broadly to include any property, advantage, or benefit derived, received or retained, directly or indirectly, in connection with or as a result of unlawful activity. This definition permits confiscation of both an asset acquired through criminal activity and income generated by that asset (not limited to 'nett proceeds'). Where benefits flow directly from criminal conduct (such as a shareholding and dividends obtained through corrupt intervention by a bribed public official), both may be confiscated as 'appropriate' under section 18(1). The primary purpose of Chapter 5 criminal confiscation is to ensure criminals do not benefit from their crimes, with secondary purposes of deterrence and prevention. An appellate court will only interfere with a confiscation order if the trial court acted unjudicially, misdirected itself, or the amount is disturbingly inappropriate, applying a test analogous to sentencing appeals. Corruption is a serious offence that undermines constitutional values and is closely linked to organised crime, warranting robust application of confiscation powers to achieve deterrence.

The Court made several non-binding observations: (1) English jurisprudence on confiscation (which characterizes it as partly punitive) is not directly applicable to South African law given the different constitutional frameworks, though it shows the legislation has counterparts in other open democracies. (2) The question of whether a binding joint venture agreement existed between the appellants and Thomson-CSF was left open, as even if it existed, Zuma's intervention provided a benefit by avoiding the need for costly litigation. (3) The definition of 'proceeds' is deliberately broad to prevent sophisticated criminals from evading confiscation through complex structures or 'camouflage'. (4) Where a shareholder commits a crime by which their company is enriched, they may benefit in two ways: increased share value and increased dividends. (5) The Court noted (without deciding) that the incidence of the onus of proof in confiscation proceedings was not determinative in this case. (6) The list of considerations relevant to exercising section 18 discretion (directness of connection, nature of crime, deterrent effect) was stated to be non-comprehensive. (7) The Court emphasized international recognition of the seriousness of corruption, citing UN and African Union conventions ratified by South Africa.

This is the first Constitutional Court judgment interpreting Chapter 5 of POCA (criminal confiscation orders). The judgment: (1) Clarifies that 'proceeds of unlawful activities' is broadly defined and includes both direct and indirect benefits. (2) Rejects the argument that only 'nett proceeds' may be confiscated - both the asset acquired through crime and income generated by that asset may be confiscated. (3) Establishes that the primary purpose of criminal confiscation is to prevent unjust enrichment from crime, not punishment, though it may have punitive effects. (4) Sets out the test for appellate review of confiscation orders: whether the trial court acted unjudicially, misdirected itself, or the amount is 'disturbingly inappropriate' (analogous to sentencing). (5) Identifies factors relevant to determining 'appropriate' confiscation amounts, including directness of connection to crime and nature of the offence. (6) Emphasizes that corruption is a serious crime that undermines constitutional values and is closely linked to organised crime, warranting robust use of confiscation powers. (7) Confirms that benefits obtained through intervention of a bribed public official constitute proceeds of the corruption offence. The case is significant in South African anti-corruption law and asset forfeiture jurisprudence.